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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

|(Mark One)                                  |                                                                                               
|------------------------------------------- | ----------------------------------------------------------------------------------------------
|o                                           | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR                                         
|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For the fiscal year ended December 31, 2002
|OR                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      
|For the transition period from
 to         

Commission file number 000-30716

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

England
and Wales
(Jurisdiction of incorporation or organization)

Cambridge
Business Park,
Cowley Rd, Cambridge CB4 0WZ
(Address of principal executive offices)

Securities
registered or to be registered pursuant to Section 12(b) of the Act: None

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Securities
registered or to be registered pursuant to Section 12(g) of the Act: American Depositary Shares, each representing five ordinary shares, nominal value
1/3p per share.

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Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

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The
number of outstanding shares of each of the issuer's classes of capital or common stock as of December 31, 2002: 122,609,095 ordinary shares, nominal value 1/3p
per share.

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
ý        No o        Not Applicable o

Indicate
by check mark which financial statement item the registrant has elected to follow.

Item
17 o        Item 18 ý

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TABLE OF CONTENTS

|PART I                                                                                   |  | 1  
|---------------------------------------------------------------------------------------- |  | ---
|Item 1.    Identity of Directors, Senior Management and Advisers                         |  | 1  
|Item 2.    Offer Statistics and Expected Timetable                                       |  | 1  
|Item 3.    Key Information                                                               |  | 2  
|Item 4.    Information on the Company                                                    |  | 19 
|Item 5.    Operating and Financial Review and Prospects                                  |  | 28 
|Item 6.    Directors, Senior Management and Employees                                    |  | 38 
|Item 7.    Major Shareholders and Related Party Transactions                             |  | 44 
|Item 8.    Financial Information                                                         |  | 47 
|Item 9.    The Offer and Listing                                                         |  | 48 
|Item 10.    Additional Information                                                       |  | 50 
|Item 11.    Quantitative and Qualitative Disclosures About Market Risk                   |  | 57 
|Item 12.    Description of Securities Other than Equity Securities                       |  | 57 
|PART II                                                                                  |  | 58 
|Item 13.    Defaults, Dividend Arrearages and Delinquencies                              |  | 58 
|Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 58 
|Item 15.    Controls and Procedures                                                      |  | 58 
|Item 16A.    Audit Committee Financial Expert                                            |  | 59 
|Item 16B.    Code of Ethics                                                              |  | 59 
|PART III                                                                                 |  | 59 
|Item 17.                                                                                 |  | 59 
|Item 18.    Financial Statements                                                         |  | 59 
|Item 19.    Exhibits                                                                     |  | 60 
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                               |  | F-1

FORWARD LOOKING STATEMENTS MAY NOT BE ACCURATE

This Annual Report on Form 20-F contains forward-looking statements. These forward-looking statements are not historical facts, but rather are
based on our current expectations, estimates and projections about our industry, our beliefs and assumptions. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks,"
"estimates" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this Annual Report. We caution you not to place undue reliance on these forward-looking statements, which reflect our
management's view only as of the date of this Annual Report. The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made.

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PART I

Item 1.    Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.    Offer Statistics and Expected Timetable

Not applicable.

1

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Item 3.    Key Information

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statement of operations data for the years ended December 31, 1998, 1999, 2000, 2001 and 2002, and the consolidated
balance sheet data as of December 31, 1998, 1999, 2000, 2001 and 2002 are derived from our consolidated financial statements and the related notes, which have been prepared in accordance with
U.S. GAAP. The financial statements for 1998, 1999, 2000 and 2001 were audited by Arthur Andersen, independent auditors, and the financial statements for 2002 have been audited by Ernst & Young
LLP, independent auditors. This financial data should be read in conjunction with Item 5: Operating and Financial Review and Prospects and the consolidated financial statements and related
notes included in this Annual Report.

|                                                                                                |                                     | Year Ended December 31,  |        
|----------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------ | -------
|
|
|Consolidated Statement of Operations Data:                                                      |                                     |                          |        
|Revenues                                                                                        |                                     | $                        | 50,961 
|Cost of revenues                                                                                |                                     |                          | (934   
|                                                                                                |                                     |                          |        
|                                                                                                | Gross profit                        |                          |        
|                                                                                                |                                     |                          |        
|Operating expenses:                                                                             |                                     |                          |        
|                                                                                                | General and administrative expenses |                          |        
|                                                                                                | Sales and marketing expenses        |                          |        
|                                                                                                | Provision for doubtful accounts     |                          |        
|                                                                                                | Research and development            |                          |        
|                                                                                                | Gain (loss) on foreign exchange     |                          |        
|                                                                                                |                                     |                          |        
|                                                                                                |                                     | Total operating expenses |        
|                                                                                                |                                     |                          |        
|Profit (loss) from operations                                                                   |                                     |                          | 3,341  
|Interest income (net)                                                                           |                                     |                          | 5,120  
|Impairment of equity investments                                                                |                                     |                          | (1,943 
|                                                                                                |                                     |                          |        
|Profit (loss) before income taxes and share of loss of associated company and minority interest |                                     |                          | 6,518  
|Benefit (provision) for income taxes                                                            |                                     |                          | 243    
|Share of loss of associated company and minority interest                                       |                                     |                          | (634   
|                                                                                                |                                     |                          |        
|Net profit (loss)                                                                               |                                     | $                        | 6,127  
|                                                                                                |                                     |                          |        
|Basic earnings (loss) per share                                                                 |                                     | $                        | 0.05   
|                                                                                                |                                     |                          |        
|Diluted earnings (loss) per share                                                               |                                     | $                        | 0.05   
|                                                                                                |                                     |                          |        
|Weighted average number of ordinary shares outstanding                                          |                                     |                          | 126,716
|                                                                                                |                                     |                          |        
|Weighted average number of ordinary shares, assuming dilution                                   |                                     |                          | 127,610
|                                                                                                |                                     |                          |        

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|                                           |  | As of December 31,
|------------------------------------------ |  | ------------------
|
|
|Consolidated Balance Sheet Data:           |  |                   
|Cash and cash equivalents                  |  | $                 
|Total Assets                               |  |                   
|Net assets                                 |  |                   
|Shareholders' equity                       |  |                   
|Total liabilities and shareholders' equity |  | $                 
|Number of shares issued                    |  |                   
|Dividends                                  |  |                   

EXCHANGE RATE INFORMATION

We present our consolidated financial statements in U.S. dollars. Fluctuations in the exchange rate between pounds sterling and the U.S. dollar will affect the
U.S. dollar amounts received by owners of ADSs on conversion of dividends, if any, paid in pounds sterling on the shares and may affect the U.S. dollar price of the ADSs on the Nasdaq National Market.

The
following table sets forth, for the periods and dates indicated, information concerning the Noon Buying Rates for pounds sterling expressed in U.S. dollars per pound sterling. We do
not use these rates in the preparation of our financial statements. In accordance with SFAS 52, our monetary assets and liabilities in our financial statements are translated at exchange rates in
effect at the end of the reporting period, and our net revenues and expenses in our financial statements are translated at the average exchange rate during the period using the Noon Buying Rate on the
last business day of each month (or shorter applicable period) during the period indicated.

Average exchange rates of U.S. dollars per U.K. Pound Sterling

|                             |  | Average
|---------------------------- |  | -------
|Year Ended December 31, 1998 |  | 1.6602 
|Year Ended December 31, 1999 |  | 1.6146 
|Year Ended December 31, 2000 |  | 1.5125 
|Year Ended December 31, 2001 |  | 1.4382 
|Year Ended December 31, 2002 |  | 1.5025 

The
table below shows the high and low exchange rate of U.S. dollars per British pound sterling for each month from August 2002 through January 2003:

Selected exchange rates of U.S. dollars per U.K. Pound Sterling

|               |  | High   |  | Low   
|-------------- |  | ------ |  | ------
|September 2002 |  | 1.5700 |  | 1.5343
|October 2002   |  | 1.5708 |  | 1.5418
|November 2002  |  | 1.5915 |  | 1.5440
|December 2002  |  | 1.6095 |  | 1.5555
|January 2003   |  | 1.6482 |  | 1.5975
|February 2003  |  | 1.6480 |  | 1.5737

The
Noon Buying Rate for U.K. pound sterling on December 31, 2002 was £1.00 = $1.6095. The Noon Buying Rate on February 28, 2003, the latest practicable
date before filing this Annual Report, was £1.00 = $1.5737.

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RISK FACTORS

Any investment in our ordinary shares or ADSs involves a high degree of risk. The risks and uncertainties described below are not the only
risks and uncertainties we face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may impair our business operations. If any of the following
risks actually occurs, our business, operating results or financial condition could be materially adversely affected. In that case, the trading price of our ordinary shares and ADSs could decline and
you could lose all or part of your investment. The discussion below and elsewhere in this report also includes forward-looking statements, and our actual results may differ substantially from those
discussed in these forward-looking statements as a result of the risks discussed below.

Risks Related to Our Business and Financial Condition

Our business depends on our core technology

Our strategy has been, and for the foreseeable future will continue to be, to concentrate our efforts on developing and marketing software based on our
proprietary technology. As a result, to date we have derived substantially all of our revenues from licensing our core technology through sales of our products and licenses to OEMs. These
products are expected to continue to account for substantially all of our revenues for the foreseeable future. If we are unable to maintain and enhance the competitive value of our core technology,
our business will be adversely affected.

Our limited operating history and the rapid evolution of the markets we serve make evaluating our business prospects difficult

We were incorporated on March 21, 1996, and began shipping products in July 1996. Because of our limited operating history, we believe making
predictions regarding our future operating results is difficult. As an investor in our ordinary shares or ADSs, you should consider the risks and difficulties that we face as a relatively young
company in a new and rapidly evolving market. Our ability to address these risks depends on a number of factors, which include our ability to:



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We have sustained quarterly and annual operating losses in the past, we expect our expenditures to increase and we may not be able to sustain or increase profitability in the
future

We
incurred operating losses in each quarter since we commenced operations in 1996 through the year ended December 31, 1999, and we have experienced a decrease in net profits from
$14.5 million in 2000 to $6.1 million in 2002. We may not be able to sustain or increase our profitability in the future. We currently expect that our operating expenditures will
increase in the future, not withstanding a decrease (without giving effect to foreign exchange gains and losses) during 2002. In the future, our revenues may decline, remain flat, or grow at a rate
slower than our operating expenditures, especially in light of the current economic environment, and we may not be able to adjust spending in a timely manner to respond to any unanticipated decline in
revenues. We incurred net losses of $3.1 million in 1997, $5.2 million in 1998 and $4.9 million in 1999.

Our future revenue and operating results may not meet analysts' expectations which could adversely affect our stock price

We believe that period-to-period comparisons of our operating results cannot be relied upon as an indicator of our future performance. Our
revenue and operating results have in the past and may in the future be below the expectations of some public market analysts or investors. If this occurs, the prices of our ordinary shares and ADSs
would likely decrease.

Our revenue and operating results may vary from period to period, which may adversely affect our stock price

Our revenue and operating results are likely to fluctuate significantly in the future on both a quarterly and an annual basis due to a number of factors, many of
which are outside our control. As a result, we believe that period-to-period comparisons of our revenue and operating results are not necessarily meaningful and should not be
relied upon as any indication of future performance. In addition, any adverse fluctuations in our revenue and operating results could have an adverse effect on our stock price. Factors that could
cause our revenue and operating results to fluctuate include:



Any
of the factors, some of which are discussed in more detail below, could materially and adversely impact our operations and financial results, and consequently our stock price.

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Our expenditures are tied to anticipated revenues, and therefore imprecise forecasts may result in poor operating results

Predicting quarterly results is difficult due to the relatively low number of quarterly sales transactions and difficulties in forecasting. If specific sales are
for whatever reason delayed from one quarter to the next, or if specific forecasted sales fail to occur, our revenue and operating results could be adversely affected. We may not be able to adjust
expenses to compensate for any unexpected revenue shortfall. If there is any significant shortfall of demand for our products in comparison to our expectations, this shortfall could have an immediate
adverse impact on our business. In addition, we expect our operating expenses to increase as a result of higher levels of research and development, increasing our sales and marketing operations,
developing new distribution channels and broadening our customer support capabilities. If these expenses are not accompanied by increased revenues, we could incur increased operating losses which
could cause our business to suffer.

In
the past, we have experienced fluctuations in revenue and operating results. For example, our revenues decreased from $65.4 million in 2000 to $51.0 million in 2002, and
profits decreased from $14.5 million in 2000 to $6.1 million in 2002, primarily due to general changes in the economic climate affecting most software companies. Further, our sales and
marketing expenses have fluctuated due to the timing and magnitude of our advertising and promotional programs.

The average selling prices of our products could decrease rapidly, which may negatively impact revenues and gross margins

We may experience substantial period-to-period fluctuations in future revenues due to the erosion of our average selling prices. The
average selling prices of our products could decrease in the future in response to competitive pricing pressures, general market conditions, increased sales discounts, new product introductions by us
or our competitors or other factors. We may not be able to increase sales sufficiently to prevent our operating and gross margins from declining.

Demand for our products may be adversely affected if unfavorable economic and market conditions do not improve or continue to decline

Adverse economic conditions worldwide have contributed to slowdowns in the software Information Technology spending environment and have impacted our business
over the past two years, resulting in reduced demand for our products as a result of a decrease in capital spending by our customers, increased price competition for our products and higher overhead
costs as a percentage of revenues. These trends may continued. Continued decreased demand for our products would result in decreased revenues, which could harm our operating results and cause the
price of our common stock to fall.

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If we do not expand or enhance our product offerings or respond effectively to technological change, our business may not grow

Our future performance will depend on the successful development, introduction and market acceptance of new and enhanced products that address customer
requirements in a cost effective manner. We cannot assure you that our technological approach will achieve broad market acceptance or that other technologies or solutions will not supplant our
approach. Our markets are characterized by rapid technological change, frequent introduction of new products, changes in customer requirements and evolving industry standards. The introduction of new
products, market acceptance of products based on new or alternative technologies, or the emergence of new industry standards could render our existing products obsolete or make it easier for other
products to compete with our products. Alternative technologies could achieve widespread market acceptance. Our future success will depend in large part upon our ability to:



Our reliance on sales of our products by others makes it difficult to predict our revenues, cash flow and operating results

The timing of our revenues is difficult to predict because of our reliance on indirect sales channels and the variability of our sales cycle. If revenues
forecasted in a particular quarter do not occur in that quarter, our operating results for that quarter could be adversely affected. Our sales cycle varies substantially depending upon the size of the
order, the experience of the distributor and the distribution channel through which our products are sold to end users. Sales from our value added resellers, or VARs, and systems integrators to end
users typically take three to four months to complete. Further, we are likely to have difficulties in predicting revenues from OEM customers because we are unable to forecast unit sales of their
products which incorporate our technology.

Our
cash flow is affected by the timing of payments, including OEM customers. Late payments or defaults by indirect sellers, their end customers or other customers, due to factors that
may be beyond our control, will decrease our available cash.

Furthermore,
our expense levels are based on our expectations as to future revenue and cash flow and to a large extent are fixed in the short term. Our revenues and operating results
could be harmed by a substantial reduction or delay in sales of our products or the loss of any significant indirect seller, or a delay in cash collections, each of which could require us to reduce
our operations.

Developing and maintaining strong OEM relationships is, and will continue to be, time and resource intensive and may not result in the successful deployment of our technology
and products

A
key aspect of our sales strategy is to develop relationships with OEMs that will license our technology and incorporate it into their products. If we are not successful in
entering into suitable OEM relationships, our ability to successfully deploy our software and build brand awareness would be harmed. The development of OEM relationships generally involves a
considerable amount of management time and company resources as potential OEMs evaluate the viability of integrating our technology. We cannot assure you that potential OEMs will enter
into a relationship with us after we have expended these efforts and costs.

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Even
if we are successful in entering into an OEM relationship, we cannot assure you that our current or future OEMs will be able to integrate our technology into commercially
viable products on a timely basis. The normal process of integrating technology and releasing products can often involve lengthy periods of development and preparation by the OEM after the
commencement of our relationship with the OEM. Furthermore, our OEMs may focus on their other products or develop competitive products and decide to terminate or minimize their relationship
with us.

Our OEM partners may not dedicate resources to developing and marketing products using our technology and we may develop conflicts with them that could make collecting payments
more difficult. If either of these occurs, we will earn less or no revenue from our agreements with them

Our
agreements with our OEM partners are non-exclusive; they are not required to use only our technology as a basis for their products. Furthermore, they are not obliged to
dedicate resources to developing and marketing products using our technology. Our OEM partners may choose to develop or promote competitive products based on other technologies or pursue other
opportunities. If our OEM partners do not commit resources to developing and marketing products using our technology or focus on other products and product areas, we will earn less or no revenue from
our agreements with them.

In
addition, we may have disagreements with our OEM partners over royalty payments due to us and may have difficulty in collecting these. We depend on our OEM partners to inform us when
they develop products using our technology and the level of sales. If our OEM partners fail to keep us adequately informed, we may not learn of payments to which we would be entitled. We could also
incur significant expenses in collecting payments or, in certain instances, we may not succeed in collecting payments at all.

Our future success is dependent on our ability to expand sales through indirect sellers

Our distribution strategy is to pursue sales through multiple distribution channels with an emphasis on indirect sales. Our inability to recruit and retain
resellers who can successfully penetrate their respective market segments could adversely affect our business. We have historically sold our products through direct sales, indirect sales, including
distributors, value added resellers, system integrators and OEMs. We cannot assure you that we will be able to attract and retain resellers that will be able to sell our products effectively.
In addition, our agreements typically do not restrict resellers from distributing competing products.

We have previously accepted, and may accept in the future, equity interests in lieu of cash payments for sales made and we cannot ensure you that their value will not decline

Since our inception, we have accepted equity interests in lieu of cash for approximately $3.2 million of revenues generated from licenses of our
technology. In the future we may continue to accept equity interests or enter into strategic alliances with certain customers. While we consider carefully the value of equity interests that we accept,
we cannot ensure that the value of those that we retain will not decrease in the future. If the value of these equity interests were to decrease our operating results would be adversely affected
through a decrease in our net asset value.

We depend upon the services of Dr. Lynch and Mr. Gaunt, and if they leave or are unable to fulfil their roles our business may be materially adversely affected

Our success depends to a significant extent upon a limited number of key employees, including Dr. Lynch, the developer of the DRE and our managing director
and CEO, and Mr. Gaunt, our technical director and CTO. The loss of the services of one or more key employees could materially adversely affect our growth. We do not currently hold life
insurance policies for either Dr. Lynch or Mr. Gaunt.

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There are potential conflicts of interest between Autonomy and companies controlled by our Chief Executive Officer and the employer of one of our Directors due to the similar
nature of our businesses

Dr. Lynch, our managing director, CEO and majority shareholder, and Apax Funds Nominees Limited, the employer of John McMonigall, who is one of our
directors, control other companies with technology similar to ours. In some instances, their efforts on behalf of these other companies will involve activities that are related to our interests.
Competition from the Neurodynamics companies that results in a loss of a corporate opportunity by Autonomy, or engagement by the Neurodynamics companies in activities similar to our businesses, could
materially adversely affect our business or shareholders. Dr. Lynch, Mr. Gaunt and Apax are likely to manage, invest or otherwise be involved with other technology-related business
ventures apart from our company.

Neurodynamics
Limited is a company controlled by Dr. Lynch and Apax. Neurodynamics Limited owns Cambridge Neurodynamics Limited, a company engaged in the application of pattern
recognition concepts to biometrics, video surveillance and images, and NeuraScript Limited, a company engaged in the application of intelligent character recognition. Dr. Lynch and Apax also
control Nholdings Limited, the sole shareholder of NCorp Limited, a company engaged in adding intelligence to the searching of structured data, and which formerly was a wholly-owned subsidiary of
Neurodynamics Limited. Richard Gaunt, one of our directors and our Chief Technical Officer, holds options to purchase shares of each of Neurodynamics Limited and Nholdings Limited. These substantial
equity interests in the Neurodynamics companies may present Dr. Lynch, Mr. Gaunt or Apax with incentives which could cause them to take actions that could harm or impede our growth.

Each
of these companies engages in businesses into which we could potentially expand or which are based on technologies generally related to our core technology. For example, we
purchased our core technology, the DRE, from Cambridge Neurodynamics, and Cambridge Neurodynamics currently licenses the DRE from us to develop and market products for use in connection with security,
defense, law enforcement and anti-fraud activities. Cambridge Neurodynamics has also acted as one of our value added resellers for the sale of software to U.K. police forces. In
March 2000, NCorp announced its intention to market products based on the intelligent management of e-commerce and has also acted as one of our value added resellers since
June 2000. We cannot assure you that the Neurodynamics companies will not usurp our opportunities to pursue our business goals and objectives or to enter into markets which are important to our
business.

We share some of our key executives and board members with companies controlled by our Chief Executive Officer and conflicts of interest may arise

Some of our key executives and board members are shared with the companies outside of our group controlled by Dr. Lynch and Apax. Conflicts may arise if a
board member or key executive breaches his duties to us.

We
have an agreement with Cambridge Neurodynamics which allows Dr. Lynch and Mr. Gaunt to work for the Neurodynamics companies for up to one quarter of each of their
respective total monthly hours. We cannot assure you that the division of their time between Autonomy and the Neurodynamics companies will continue to be sufficient for our purposes as our business
evolves. In addition, we have other arrangements with Neurodynamics including a license of the DRE and a sublease for office space at our headquarters in Cambridge, England. Conflicts, or the
appearance of conflicts, may arise through the breach of these agreements.

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Three
of our five directors, Dr. Lynch and Messrs. Gaunt and McMonigall, are also directors of Neurodynamics Limited and Nholdings Limited. Our other two directors,
Messrs. Ariko and Perle have no affiliation with or responsibility to the Neurodynamics companies. Service as a director or officer of Autonomy and as a director or officer of other affiliated
companies could create or appear to create potential conflicts of interest when that director is faced with decisions that could have different implications for Autonomy and those other companies.
Such decisions may relate to corporate opportunities, corporate strategies, potential acquisitions of businesses, intercompany agreements, competition and other matters.

If we are unable to hire and retain qualified personnel, we will not have sufficient resources to compete and grow our revenues, which could significantly interrupt our
business operations

We believe that hiring and retaining qualified individuals at all levels is essential to our success, and we cannot assure you that we will be successful in
attracting and retaining the necessary personnel. In addition, we are highly dependent on our direct sales force for sales of our products as we have limited distribution channels. Continuity of
technical personnel is an important factor in the successful completion of development projects, and any turnover of our research and development personnel could harm our development and marketing
efforts.

Our
future success also depends on our continuing ability to identify, hire, train and retain other highly qualified sales, technical and managerial personnel. Competition for this type
of personnel is intense, and we cannot assure you that we will be able to attract, assimilate or retain other highly qualified technical and managerial personnel in the future. The inability to
attract, hire or retain the necessary sales, technical and managerial personnel could harm our business. If we lose key personnel, or are unable to attract additional qualified personnel, our ability
to conduct and grow our business will be impaired.

If we are unable to effectively manage our growth, our business may suffer

Our expansion will place significant demands on our management, engineering, support, operations, legal, accounting, sales and marketing personnel and other
resources. If we are unable to manage our growth effectively, our business and financial results will suffer. We have, since our commencement of trading in July 1996, experienced growth that
has placed, and continues to place, a significant strain upon our management, systems and resources. We rapidly and significantly expanded our operations from 1996 through 2000, and anticipate that
further significant expansion will be required to address potential growth in our customer base and market opportunities. We have grown from 62 employees as of December 31, 1998, to
approximately 180 employees as of December 31, 2000, and to approximately 200 employees as of December 31, 2002. Our current expansion plans call for additional staff in the U.K., the
U.S., Asia and Latin America. We have and are planning to continue to expand our business geographically. We cannot assure you that our personnel, systems, procedures or controls will be adequate to
support the anticipated growth in our operations.

We will face additional operational and financial risks as we continue to expand our international operations, any one of which could harm our international market share and
revenues

Historically, our foreign operations and export sales account for a significant portion of our annual revenues. As we expand our international operations, we will
face a number of additional challenges associated with the conduct of business overseas. If we fail to effectively meet these challenges our international market share and revenue could be reduced.
For example:



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In
particular, the management of our sales personnel across offices in multiple countries has presented logistical and management difficulties. This geographic dispersion has also at
times resulted in inconsistent pricing and sales messages. Further, we have and expect to continue to experience significant reductions in business activities in Europe in the summer months.
Overlapping tax structures have also affected our operating results as operating losses in some jurisdictions often cannot be offset against passive profits in the U.K., the result of which is a tax
liability in a period without operating profits. We expect that we will continue to experience these challenges and may experience the risks discussed above.

Our business is subject to currency fluctuations that can adversely affect our operating results

Due to our multinational operations, our business is subject to fluctuations based upon changes in the exchange rates between the currencies in which we collect
revenues and pay expenses, which could affect our operating results. Our expenses are not necessarily incurred in the currency in which revenue is generated, and, as a result, we are required from
time to time to convert currencies to meet our obligations. These currency conversions are subject to exchange rate fluctuations, and changes to the value of the pound sterling relative to other
currencies could adversely affect our business and results of operations.

In
addition, our consolidated financial statements are prepared in pounds sterling and translated into U.S. dollars for U.S. reporting purposes. As a result, even when foreign currency
expenses substantially offset revenues in the same currency, our net income may be diminished, or our net loss increased, when reported in U.S. dollars in our financial statements. In particular, if a
significant percentage of our cash balances are held by our U.K. parent company in U.S. dollars, as they have been at times in the past, movements in the value of the U.S. dollar against the pound
sterling impact our operating results due to the translation of these U.S. dollar cash balances into pounds sterling in connection with the preparation of our consolidated financial statements and the
translation back into U.S. dollars for U.S. reporting purposes. For example, gain on foreign exchange was $0.1 million in 2002, a decrease of $5.0 million or 98.0% from
$5.1 million in 2001. This decrease was primarily due to conversion of substantially all of our dollar denominated cash deposits into sterling in May 2001, to ameliorate this effect, and
the relative weakening of the U.S. dollar versus other currencies.

We
do not currently undertake currency hedging transactions to cover our transaction or translation exposures, but we may choose to hedge a portion of these exposures in the future. Any
losses incurred in connection with currency hedging transactions would adversely affect our operating results.

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Our products have lengthy sales and implementation cycles, which could adversely affect our business

Sales of our software products often require us to engage in a lengthy sales effort, and these lengthy periods or delays in customer deployment of a product could
materially adversely affect our operating results or financial condition. Our sales efforts often include significant education of prospective customers regarding the use and benefits of our products.
As a result, the sales cycle for our products varies and can be as long as two to six months. In addition, the implementation of our products often involves a significant commitment of resources by
customers over an extended period of time. Our sales and customer implementation cycles are subject to a number of potential delays. These include delays related to product implementation as well as
delays over which we have little or no control, including:



An
increase in the average sales size of transactions would also be likely to result in a longer sales cycle as the licenses of our software products become more of an
enterprise-wide decision by prospective customers requiring a significant commitment of resources.

Our
operating results for a quarter could be materially and adversely affected if one or more large orders are either not received or are delayed or deferred by customers. A significant
portion of our revenues in recent quarters has been derived from these relatively large sales to a limited number of customers, and we currently anticipate that future quarters will continue to
reflect this trend. Sales cycles for these customers can be up to nine months or longer. In addition, customer order deferrals in anticipation of new products may cause our operating results to
fluctuate. Like many software companies, we have generally recognized a substantial portion of our revenues in the last month of each quarter, with these revenues concentrated in the last weeks of the
quarter. Accordingly, the cancellation or deferral of even a small number of purchases of our products could harm our business in any particular quarter. In addition, to the extent that the
significant sales occur earlier than expected, operating results for subsequent quarters may fail to keep pace or even decline.

We grant customers lengthy credit terms, which exposes us to the risk of uncollected accounts as our business grows

We grant lengthy credit terms to selected customers, and an increase in bad debts could materially adversely impact our operating results. For example, provision
for doubtful accounts was $2.0 million in 2002, an increase of $1.0 million or 100.0% from $1.0 million in 2001. Provision for doubtful accounts represented 3.9% of revenues in
2002, as compared to 1.9% in 2001. This increase as a percentage of revenues was primarily due to the insolvency of two customers during the year. Our standard terms range from 30 to 90 days,
but have extended as far as one year. We also operate in an industry where some of our customers, including indirect resellers and OEMs, are relatively undercapitalized. Resellers' ability to pay us
may be dependent on their ability to collect funds from their customers. We cannot assure you that the allowances we make for bad debts will be sufficient.

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Our products may have errors or defects, which could negatively affect our revenues and the market acceptance of our products and increase our costs

Our software products are complex, and may contain undetected defects, errors or failures. These occurrences could result in the loss of or delay in market
acceptance of our products, which could harm our business. The occurrence of defects, errors or failures could also result in delays in installation, product returns and other losses to us or to our
customers or end users. While we have in the past encountered errors in our products, to date these errors have not materially adversely affected us. As a result, we would have limited experience
responding to new problems that could arise with any new products that we introduce.

We
may also be subject to liability claims for damages related to product errors. We do not carry insurance policies covering this type of liability.

Any acquisitions we make could result in dilution, unfavorable accounting charges and difficulties in successfully managing our business

We continually evaluate strategic acquisitions of other businesses, although we currently have no active commitments or agreements with respect to any material
acquisition. In May 2000, we acquired a majority interest in SoftSound Limited, a leading speech recognition company, and in October 2000 acquired all outstanding equity in Autonomy
Nordic AS, one of our value added resellers. As a result of these, and any other acquisitions, we may be subject to a number of risks, including the following:



We
may not successfully overcome problems encountered in connection with potential acquisitions. In addition, acquisitions may also cause us to:



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Failure to adequately protect our intellectual property would result in significant harm to our business

Our future success will depend in part on our ability to protect our proprietary rights and the technologies used in our principal products. Disputes concerning
the ownership or rights to use intellectual property could be costly and time consuming, may distract management from other tasks related to our business and may result in our loss of significant
rights or the loss of our right to operate our business.

Our
means of protecting our proprietary rights in the U.S. or abroad may not be adequate or competitors may independently develop similar technologies. Effective patent, copyright,
trademark and trade secret protection may be unavailable or limited in some jurisdictions. Policing unauthorized use of our products is difficult. The steps we take to protect our intellectual
property may not prevent misappropriation of our technology and our licenses and other agreements may not be enforceable. Despite our efforts to protect our proprietary rights and technologies,
unauthorized parties may attempt to copy aspects of our products or to obtain and use trade secrets or other information that we regard as proprietary.

We
have filed patent applications with the United States Patent and Trademark Office, with similar applications under various international patent applications. Nevertheless, all our
applications remain pending, and we currently do not have any granted patent on our core technology that would preclude or inhibit competitors from entering our markets. We cannot be certain that any
pending or future patent applications will be granted, that any future patent will not be challenged, invalidated or circumvented, or that rights granted under any patent that may be issued will
provide us with any competitive advantages.

We
enter into confidentiality and/or license agreements with our employees, consultants, vendors and customers. We have instituted systems and procedures to control access to and
distribution of our software, documentation and other proprietary information. In licensing our products to resellers, we rely on written software license and distribution agreements. In licensing our
products to end-users, we generally rely on written software license agreements. Otherwise, we rely on standard licenses included with the software which are intended to be binding on the
end-user upon purchase but are not signed by the end-user. We cannot assure you that any of our standard licenses will be enforceable in all jurisdictions. We cannot assure you
that contractual provisions we put in place will prevent the misuse of our proprietary information or the infringement of our intellectual property rights.

Legal
proceedings to enforce our intellectual property rights could be burdensome and expensive and could involve a high degree of uncertainty. These legal proceedings may also divert
management's attention from growing our business. In addition, the laws of some foreign countries do not protect our proprietary rights as fully as do the laws of the U.K. and the U.S. If we do not
enforce and protect our intellectual property, our business will suffer substantial harm.

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We
cannot assure you that we will prevail in enforcing any of our registered rights or that any of our applications or registrations will not be challenged or that we will be able to
continue using our relevant marks in these jurisdictions. We are aware of one other party using the name "Autonomy" as part of an Internet address in connection with its computer software business and
that another third party is using "Kenjin" as part of a domain name in association with a business unrelated to our business. We cannot assure you that there has not been any prior use of our marks by
an unrelated party with respect to the same or similar products or services as those offered by us which may give rise to priority rights.

Claims by others that we infringe on their intellectual property rights could be costly to defend and could harm our business

We may be subject to claims by others that our products or brands infringe on or misappropriate their intellectual property or other property rights. These
claims, whether or not valid, could require us to spend significant sums in litigation, distract management attention from the business, pay damages, delay or cancel product shipments,
re-brand or reengineer our products or acquire licenses to third-party intellectual property. In the event that we need to acquire a third party license, we may not be able to secure it on
commercially reasonable terms, or at all. We expect that we will increasingly be subject to infringement claims as the number of products and competitors in our markets grows and the functionality of
products overlaps.

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Risks Related to Our Markets

The markets for our products have only recently begun to develop which makes it difficult to predict future growth rates

The market for our software is relatively new and is rapidly evolving. An increasing number of competitors are introducing or developing products and services for
the handling of unstructured information in different environments. Therefore, demand and market acceptance for recently introduced products and services are subject to a high level of uncertainty.
The segments of the software industry in which we operate are young and have few proven products. While we believe that our software products offer advantages over existing alternative products, we
cannot assure you that present or future competitors will not develop competitive software. Our products are highly complex and we cannot assure you that they will become widely adopted.

Our
products are new and evolving and it is difficult to predict the future growth rates, if any, and size of these markets. We cannot assure you that the markets for our products will
develop or that our products will be adopted in the market. If the markets do not develop, develop more slowly than expected or become saturated with competitors, or if our products do not achieve
market acceptance, our business, operating results and financial condition could be adversely affected.

There is substantial competition in our markets which could adversely affect us

While the markets for our products are comparatively new, these markets are intensely competitive, rapidly evolving and subject to rapid technological change. We
expect competition to persist, intensify and increase in the future. There are no substantial barriers to entry into these markets.

We
believe that our ability to compete is dependent upon many factors within and beyond our control, including:



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We
may not be able to continue to compete successfully against current and potential competitors, especially those with significantly greater financial, marketing, service, support,
technical and other resources. If any technology that is competing with ours is or becomes more reliable, higher performing, less expensive or has other advantages over our technology, then the demand
for our products would decrease, which would harm our business. Competitors may be able to respond more rapidly to new or emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than we can. We have encountered, and expect to encounter, customers who are extremely confident in, and committed to, our
competitors' products. Furthermore, some of our competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties to increase their ability to
rapidly gain market share by addressing the needs of our prospective customers. These competitors may enter our existing or future markets with solutions that may be less expensive, provide higher
performance or additional features or be introduced earlier than our solutions. Given the opportunities in our markets, we also expect that other companies may enter our markets with alternative
products and technologies, which could reduce the sales or market acceptance of our products, perpetuate intense price competition or make our products obsolete. Increased competition could also
result in price reductions, reduced gross margins and loss of market share.

We
believe that, at present, eHNC, Inc. is the only company to have developed technology with complete performance characteristics similar to our technology. To date, eHNC has no
products which compete completely with our products or our core technology. We also face significant competition from other established software companies, such as Microsoft, IBM, SAP and Oracle, who
from time to time announce broad software product initiatives.

Although
we believe that our products and technologies compete favorably with competitive products, we cannot assure you that we will be able to compete successfully against our current
or future competitors or that competition will not harm our business.

Our licenses of technology to OEM customers may lead to competition from those OEM customers in our end-user product markets

As part of our sales strategy, we license our technology to OEM customers for incorporation into their products. As a result, we expect our OEM customers to offer
products that will be directly competitive with our end-user products. This competition could result in price reductions, reduced gross margins and loss of market share for our
end-user products in the short to medium term. This competition could directly adversely impact our end-user product revenues, or otherwise materially adversely effect our
business, operating results or financial condition. While our business plan contemplates that this potentially negative impact will be offset by increased OEM sales over time, we cannot assure you
that this will occur or that any benefits obtained through our OEM licensing strategy will outweigh the negative impact associated with increased competition for our end-user products.

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Downturns in the software market may decrease our revenue and margins

The market for our products depends on economic conditions affecting the broader software market. Downturns in the economy may cause businesses and governments to
delay or cancel specific projects, reduce their overall information technology budgets or reduce or cancel orders for our products. In this environment, customers may experience financial difficulty,
and as a result fail to or defer the budget for the purchase of our products or cease operations altogether. This, in turn, may lead to longer sales cycles, delays in payment and collection, and price
pressures, causing us to realize lower revenues and margins. In particular, capital spending in the information technology sector generally has decreased in the past two year, and many of our
customers and potential customers have experienced declines in their revenues and operations. If capital spending in our markets declines, it may be necessary for us to gain significant market share
from our competitors in order to achieve our financial goals and achieve and maintain profitability.

Risks Related to the Financial Markets

The prices of our ordinary shares and ADSs are likely to be highly volatile

The prices at which our ordinary shares and ADSs trade are highly volatile and may continue to fluctuate substantially. In addition, stock markets in recent
periods and from time to time experienced significant price and volume fluctuations that have affected the market prices for the securities of technology companies, and which may be unrelated to our
operating performance or prospects. Furthermore, our operating results and prospects from time to time may be below the expectations of market analysts and investors. Moreover, if our ordinary shares
or ADSs are added to or deleted from existing third party share indices, such as the FTSE 350 Index, our share price could be positively or negatively affected. Any of these events could result in a
material decline in the prices of our ordinary shares and ADSs.

We are at risk of future securities class action litigation due to our past and expected stock price volatility

In the past, securities class action litigation has often been brought against companies following a decline in the market price of their securities. Because we
expect the prices of our ordinary shares and ADSs to continue to fluctuate significantly, we may be the target of litigation in the future. Securities litigation could result in substantial costs and
divert management's attention and resources, and could seriously harm our business.

Shares eligible for public sale could adversely affect the price of our ordinary shares and ADSs

The market prices of our ordinary shares and ADSs could decline as a result of sales by our existing shareholders of ordinary shares or ADSs in the market, or the
perception that these sales could occur. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

We have never paid any dividends and we do not intend to pay dividends in the foreseeable future

Companies organized under English law cannot pay dividends unless they have distributable profits as defined in the Companies Act. To date, we have not declared
or paid any cash dividends on our stock and currently intend to retain any future earnings for funding growth. We do not anticipate paying any dividends in the foreseeable future.

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Your rights as a shareholder will be governed by English law and differ from the rights of shareholders under U.S. law

Autonomy Corporation plc is a public limited company incorporated under the laws of England and Wales. Therefore, the rights of holders of ordinary shares and
many of the rights of ADS holders are governed by English law and by our Memorandum and Articles of Association. These rights differ from the typical rights of shareholders in U.S. corporations. In
particular, a majority of our directors and executive officers and some of the experts named in this prospectus are residents of countries other than the United States. Furthermore, all or a
substantial portion of their assets and our assets are located outside the United States. As a result, it may not be possible for you to:



You
also may have difficulties enforcing, in original actions brought in courts in jurisdictions located outside the United States, liabilities under the United States securities laws.
We have been advised by Brobeck Hale and Dorr, our English legal counsel, that there is doubt as to the enforceability of liabilities against these persons in the United Kingdom in original actions or
in actions for the enforcement of judgments of U.S. courts predicated upon the federal securities laws of the United States.

Item 4.    Information on the Company

Overview

We are a leading provider of infrastructure technology for automating the management, processing and delivery of unstructured information from and to sources
across the Internet, the extended enterprise and other digital domains such as third generation mobile phones. Unstructured information is electronic content, such as Web pages, e-mails,
word processing documents, speech and video, that has not been organized in a relational manner. Our proprietary Dynamic Reasoning Engine, or DRE, applies sophisticated pattern-recognition algorithms
to information, analyzing the information and then automatically performing operations on this information. This provides an infrastructure platform upon which our own products operate, and serves as
the infrastructure for a variety of applications developed by third party OEMs.

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Industry Background

The growth of an electronic business environment and the Internet has led to a dramatic increase in the amount of unstructured electronic information available to
and created by corporate and individual users. In the corporate environment, unstructured information is primarily text based and can include a variety of forms such as customer and internal
correspondence, descriptions of products on a corporation's website and even advertising, as well as voicemails, other recorded speech and video. For individuals, such information can include web
pages and e-mails, broadcast speech and video. The growth of Internet content and the number of users has led to an increase in available unstructured information as an environment has
developed in which users of information are increasingly also producers of information in unstructured form. The form of unstructured information, however, is inherently arbitrary and this information
can only be managed and used effectively by analyzing and understanding its content. This need, coupled with the growth of such information, is a fundamental inhibitor of the effective and efficient
use of information by enterprises and individuals.

Most
existing approaches to managing unstructured information do not ensure that the right information is delivered to the right person at the right time in a cost-effective
and efficient manner. Most approaches are largely manual and, therefore, are neither effective nor scalable while providing for the timely and accurate delivery of information. These manual processes
are either in the back-end processing and organization of information, or on the part of users trying to find the information through basic search techniques. Most current
back-end solutions are largely based on attempting to structure unstructured data through the labor and time intensive processes of reading and subsequently tagging and categorizing
information, using methods such as extensible Markup Language, or XML, the universal form for structured documents and data on the Internet. These approaches are difficult to scale efficiently as an
increase in information often requires a corresponding increase in resources. These methods often produce inconsistent results due to the differing approaches and levels of expertise of the
individuals involved in the tagging and categorizing process. While current applications such as knowledge management systems based on keyword methods may provide a measure of automation, generally
they involve a manual process of updating rules, relationships and filters to deliver an effective solution. Even where this is done, these approaches often deliver inaccurate results, require active
user participation and are effective only for a limited set of predefined subjects. In addition, none of the current approaches have the ability to adapt to a user's evolving interests completely
automatically.

We
believe that an effective comprehensive solution to the management and timely delivery of unstructured information requires technologies that can automatically:



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The Autonomy Solution

We develop, market and sell infrastructure technology that automatically organizes unstructured information into personally-relevant content in a
real-time and efficient manner. Our core technology provides a platform for the automatic searching, categorizing, tagging, linking, and profiling of all forms of unstructured information
regardless of repository, thereby enabling the automatic delivery of large volumes of personalized information. Because our technology is easily adaptable to different sources of unstructured
information, we are able to provide fundamental capabilities in a wide range of software markets, through our own products and those of our OEM customers. In addition to automating the management of
the information itself, our products build an understanding of each user's interests and can therefore provide improved delivery of relevant information. As such, products using our technology can
both create cost savings by reducing the need for manual processing of information and provide opportunities for increasing revenue by generating demand.

The
DRE, our core enabling technology, combines innovative pattern-matching algorithms with sophisticated contextual analysis and concept extraction. Using the DRE, our products automate
the process of getting the right information to the right people at the right time by applying sophisticated concept-matching techniques to the problems of information access and distribution.

Our
technology is able to analyze any digital document independent of its language, as well as speech and video in multiple languages, and identify and prioritize the main concepts
within that piece of content. As a result, customers using products that embed our core technology can automate a broad range of otherwise labor-intensive, iterative tasks. These tasks range from
categorizing information by subject matter, to inserting hypertext links to related material, to profiling users based on ideas in the text they read or write, to delivering information to those users
most likely to be interested. This automation improves the efficiency of information management and enables the dynamic personalization of content.

Our
technology can be applied both to the back-end production and front-end consumption of information. For example, customer service departments can
automatically process, categorize and distribute customer e-mails without manual intervention, increasing customer relationship responsiveness. Additionally, our technology's ability to
profile users by tracking the information they consume allows the automatic recommendation of individually relevant products on a website. Our technology can provide enterprises with varied
opportunities to enhance revenue by understanding individual users and the information they consume.

The
fundamental capabilities of the DRE allow it to be embedded in a wide range of applications and facilitate the management of information and decision making process.

Strategy and History

Our objective is for our technology to become established as a universal independent data operating layer, automatically performing operations across all forms of
unstructured applications, delivered to the end-user regardless of software application. We plan to achieve this by continuing to embed our DRE platform in a wide range of OEM products as
well as our own products. We expect to take advantage of our technological leadership, strategic relationships, broad-based direct and indirect sales and marketing efforts and scalable business model
to establish our products and technology as essential elements of information management.

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Products

To achieve our objective of establishing our technology as a universal independent data operating layer, we have developed end-user application
products targeted at broad end-user markets. In addition, we have established, and seek to extend, relationships with third party OEMs that embed our technology in a wide variety of
applications. By incorporating our technology into a wide range of products offered by us and by OEMs, we believe that we can establish the Autonomy platform as the standard solution for the
management and automatic delivery of unstructured information.

We
address the needs of our end-user customers through products which include our Intelligent Data Operating Layer, or IDOL, the core of all of our other products, as well as
additional functionality designed for the needs of users in specific markets. We license our Autonomy Application Builder to OEMs and end users to create products that accomplish a variety of
tasks built on IDOL, such as automated customer relationship management, e-mail routing, document management, marketing and sales automation and business intelligence.

Through
a dedicated team, we are modifying our products to address the limitations of wireless information delivery. Current problems include small screens and limited memory in handheld
devices such as mobile phones, pagers and personal digital assistants. Many of our products, including Portal-in-a-Box and Autonomy Update, are now available with
WAP, I-Mode, Palm and 3G compliant interface modules.

Our
products targeted at end-users, all built on our Intelligent Data Operating Layer, include the following:

Portal-in-a-Box, our flagship product, is an off-the-shelf solution that
enables online publishers and enterprises to easily create and automatically maintain an easy-to-navigate customized portal site or enterprise information portal. This product
removes the need for manual labour in the process of categorizing and hypertext linking large amounts of information. In addition, Portal-in-a-Box offers
sophisticated personalization features, including profiling and interests monitoring so that, for instance, opening pages can be automatically personalized for each site visitor. More advanced
versions of Portal-in-a-Box provide more extensive per-user customization, and allow easier expansion, third party integration and migration to new web
technologies. Additional modules available for Portal-in-a-Box include the following, allowing end-users to develop their solutions based only on the
modules they need:

|Hyperlinking:   |  | Automatically generates dynamic hypertext links to content                                                                                                                                            
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Summarization:  |  | Automatically generates conceptual and contextual summary                                                                                                                                             
|Retrieval:      |  | Allows users to find what they need quickly, using full natural language, conceptual or keyword search, and "More Like This" feature                                                                  
|User Profiling: |  | Automatically builds user profiles based on their browsing and content consumption, eliminating production costs while enhancing the user experience without forms, questionnaires or privacy concerns
|Recommendation: |  | Automatic content recommendations based on users' profiles                                                                                                                                            
|Agents:         |  | Monitors a customer-configurable list of Internet and Intranet sites, as well as newsfeeds, chat streams and internal repositories                                                                    
|Alerting:       |  | Automatic alerting to new content based on user's interests via email                                                                                                                                 
|Community:      |  | Automatically creates virtual communities by matching users' interest profiles, allowing users with similar interests to find each other                                                              
|Categorization: |  | Automatically categorizes documents                                                                                                                                                                   

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Autonomy Application Builder.Autonomy Application Builder, built on the core functionality toolkit provided by IDOL,
consists of multiple modules, each of which can be purchased individually, to allow developers easy customization. Modules include functionality available in
Portal-in-a-Box, as well as specific modules designed for easy integration, including:



Active Windows Extensionbrings relevant background information to employees as they work. As an employee goes about reading or writing a
document or e-mail message or creating a presentation, Active Windows Extension conducts a real-time analysis of the ideas involved in the document and provides links to
relevant internal and external information. These recommended links may include news articles from news-feeds or Web sites, Lotus Notes documents, email messages, word processing files and
even the contact information for colleagues working in a similar area.

Categorizerautomates the accurate categorization and tagging of large volumes of both internal and external information. The only
administration required is to identify examples of documents to defined categories. The Categorizer will determine how and where new documents will best fit, and then categorize them accordingly. All
of this is done automatically and in real time.

Autonomy Answerautomatically responds to common e-mail enquiries, allowing help desk staff to focus on questions requiring a
manually generated response. Autonomy Answer is able to match new and earlier questions to present a set of potential answers, or a further set of related questions, and provides automatic feedback to
continually update new responses.

AXEautomatically inserts XML tags and links into documents, based on the concepts contained in the information, thereby eliminating all
manual cost. AXE enables XML applications to understand conceptual information, independent of variations in tagging schemas or the variety of applications in use. This means, for example, that legacy
data from disparate sources, tagged using different schemas, can be automatically reconciled and operated upon.

Voice Suiteadds to Autonomy's IDOL infrastructure the ability to handle multimedia content, such as video new archives, broadcast
content, audio archives and voicemails. Autonomy's Voice Suite works alongside other Autonomy products, treating multimedia content in the same manner as textual information.

New
products released during the year ended December 31, 2002, include:

Autonomy's Collaboration and Expertise Networksenables organizations of any size and complexity to automatically discover, visualize and
effectively manage a cohesive community, by forming a contextual understanding of people's interests, behaviour and on-going interaction with any type of information, regardless of format,
location or device.

Autonomy's Legacy Compatibility Moduleprovides a fast track from manually intensive legacy keyword systems to a fully automated Autonomy
infrastructure, displacing existing legacy systems, while maintaining existing system workflow.

OEM Customers

We actively seek to license our technology for integration into applications developed by third party OEMs. Our Autonomy Content Infrastructure (ACI)
program is an essential foundation of our OEM marketing strategy. ACI automates operations on unstructured information for cross-enterprise applications. ACI-compliant applications are
compatible through their common understanding of unstructured information. These arrangements allow us to address more rapidly a broader range of vertical end-user markets and generate
more sales than we would be able to achieve through licensing of end-user products only. We also believe that OEM relationships will be essential in establishing our technology as the
standard solution for managing unstructured information.

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End-User Customers

We have developed end-user applications for selected markets where we believe the demand for our technology is most immediate and where we believe we
are best suited to create and offer the application to the market. Our products are horizontal applicable, and have been implemented globally in almost every type of industry to address a wide range
of automation requirements. As of December 31, 2002, we have sold our products to over 575 customers across multiple vertical markets, including:

|Consulting                                                                                                          |  | E-Commerce                                                                                         |  | Financial                                                                                                                 |  | Government/Investigative                                                                            
|------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|Butler Group
Cap Gemini E&Y
Cluster Consulting
Pink Rokkade
KPMG                                                    |  | Safeway
Tesco
Torget
Telia
Yatack                                                                  |  | Bank of Montreal
Deutsche Bank
Dresdner Kleinwort
HSBC Investment
Lloyds TSB
Nationwide
RoyalSunAlliance
Zurich Financial |  | US DIA
DTI
NASA
Securicor
UK Police Forces
US Army
US Dept. Of Defense
US Dept. of Homeland Security
|Corporate                                                                                                           |  | Legal                                                                                              |  |                                                                                                                           |  |                                                                                                     
|BP
Ingersoll-rand
Nestlé
Philips                                                                                    |  | Addleshaw Booth
Butterworths
Freshfields
U.K. Law Society                                          |  |                                                                                                                           |  |                                                                                                     
|Manufacturing                                                                                                       |  | Media                                                                                              |  | Pharmaceutical                                                                                                            |  | Technology                                                                                          
|BAE Systems
Daimler Chrysler
Ford Motor Company
Fujitsu
General Motors
Halliburton
Philip Morris
Skanska
Volkswagen |  | BBC
BostonHerald
BskyB
Internet.com
Knightridder
LineOne
McGraw Hill
Reed Elsevier
Reuters
SF Gate |  | Astra Zeneca
GlaxoSmithkline
LocusMedicus
Merck
Novartis
Pfizer                                                           |  | BEA
Compaq
EMC Corporation
HP
IBM
Intel
Oracle
Seagate
Sun
Sybase
Unisys
Vignette                   

Sales, Marketing and Strategic Relationships

We
sell our products through our value added resellers, OEMs, our direct sales force and other distributors. As of December 31, 2002, we employed approximately 95 people in our
sales and marketing departments. Approximately 40% of our sales and marketing force is located in the United States, with the remainder in the U.K., Europe and the rest of the world. A portion of the
sales force is dedicated to developing OEM relationships, and all of the sales force is tasked with developing indirect selling arrangements.

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A
key to our success is building brand awareness and commanding recognition of our leadership in the marketplace. We employ a number of marketing vehicles to promote our brand, including
advertising, our "Powered by Autonomy" co-branding program, participation in market research studies, industry analyst product and strategy updates, trade shows and industry seminars. In
addition, once we begin to recognize significant sales within an industry, we develop a marketing plan for promotion of our products within that industry using initial customers as references.

Strategic
relationships and partnerships are a fundamental part of our overall marketing strategy, in addition to sales through our other channels. Through our Autonomy Advantage
Partners Program we facilitate new product development, collaborative marketing initiatives and joint sales efforts with a select group of OEMs, value added resellers, systems integrators, consultants
and developers.

Competition

We believe that the principal competitive factors affecting our markets are:



Since
our technology is applicable to a broad range of applications and industries, we face different competition depending on the use and application of our products. Accordingly, our
principal competitors today include developers and vendors of:



We
also face significant competition from other established software companies who from time to time announce broad software product initiatives, such as Microsoft, Oracle, SAP and IBM.

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Technology

Our products use the DRE's algorithms to extract conceptual profiles from text and speech to match them to conceptual profiles of users. The "concepts" matched
are based on recurring patterns within the information. The concepts extracted by our products are probabilistic patterns recognized and indexed by the DRE. The DRE is able to identify key concepts
within a body of unstructured information through an analysis of the occurrence of, and relationships between, terms that correlate with meaning. These patterns can be employed to approximate, and to
differentiate between, meanings contained within information. We believe this ability to automatically extract concepts from a body of unstructured information and match them with other concepts,
rather than simply take account of the presence or absence of individual keywords, is a significant advance over currently available alternative technologies. Once conceptual profiles of the content
and the users of that content are derived in this manner, a number of operations are then made possible based on the resultant infrastructure.

The
DRE is a scalable process which performs automatic importing and conceptual profiling of content, testing of relevance, delivery of results and interaction with other components.
Once configured for a particular installation, the DRE operates automatically to receive new content and perform the tasks required to profile this content and match it with user interests. Similarly,
the DRE can import and deliver profiles of users' interests and expertise, making them another derived source of information for the organization. This enables the DRE to inform users about relevant
information when it arises and to put them in contact with other users with similar interests. The DRE was developed in C, and works across multiple hardware and operating system platforms ranging
from personal computers running Microsoft Windows to multiprocessor Unix platforms.

Intellectual Property and Proprietary Rights

We purchased our core DRE technology outright from Neurodynamics in July 1998 for $4.0 million. Prior to this we licensed the DRE from Neurodynamics
in exchange for a percentage of our net sales.

Our
success and ability to compete are dependent to a significant degree on our proprietary technology. We rely on a combination of copyright, trademark, service mark, trade secret laws
and contractual restrictions to protect our proprietary rights in products and services.

We
have undertaken a patent program to aggressively seek patent protection, in addition to our other forms of intellectual property protection. We have filed multiple patent applications
with the United States Patent and Trademark Office with respect to portions of our core technology, with similar applications under various international patent applications, all of which are pending.
SoftSound has been issued two patents in the United States with respect to speech recognition and analysis techniques. However, we currently do not have any granted patent on our core technology that
would preclude or inhibit competitors from entering our markets.

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We
have registered our two logos, "Autonomy and circle of dots" and "A in a circle of dots" and our core marks "Autonomy", "DRE", "Dynamic Reasoning Engine" and
"Portal-in-a-Box" in the majority of countries in which we operate, including the U.S., the U.K., Canada, Japan and via a Community application for the European
Union. We have also applied to protect additional marks with a U.S., U.K. and Community application, including the following: "ACI", "Autonomy XML Engine", "AXE", "ActiveKnowlegde", "Autonomy Answer",
"Autonomy Application Builder", "Autonomy Commerce Application Builder", "Autonomy Content Infrastructure", "Autonomy Server", "Autonomy Update", "Autonomy Voice Suite", "VeryLite",
"i-wap", "Clusteriser", "IDOL" and "Omnifetch". We have also registered or applied for protection for some of these marks and logos in other countries, such as South Africa,
Australia, Hong Kong, Switzerland, Norway and Singapore. We are aware of one other party using the name "Autonomy" as part of an Internet address in connection with its computer software business and
that another third party is using "Kenjin" as part of a domain name in association with a business unrelated to our business. We do not believe that these unrelated entities compete with us because
they operate in different business markets.

Research and Development

We have made substantial investments in research and development through both internal development, acquisition of the DRE from Neurodynamics in July 1998
and the acquisition of SoftSound in May 2000. Although we plan to continue to evaluate externally developed technologies for integration into our product lines, we expect that most enhancements
to existing and new products will be developed internally.

The
majority of our internal research and development activity has been directed towards improvements of our underlying pattern recognition algorithms, voice recognition, video
recognition and the development of advanced tools for application-building on our core product set. We also seek to continue to broaden the applicability of our core technology to other types of
information, such as other speech patterns and images. On a limited basis, we fund university research into new mathematical approaches.

We
maintain ongoing research and development efforts at our Cambridge, England facility, with additional product definition and development conducted in San Francisco, California. Our
research and development expenditures for 2002, 2001 and 2000 were approximately $9.2 million, $8.3 million and $6.5 million, respectively. We expect that our research and
development expenditures will grow on an absolute basis in the future. See "Item 5: Operating and Financial Review and Prospects."

Facilities

Our headquarters are located at Cambridge Business Park, Cowley Road, Cambridge CB4 0WZ, United Kingdom, where we lease an approximately 42,000 square foot
building, for rent of approximately £934,000 (approximately $1.4 million) per annum. The term of the lease commenced on February 28, 2001 and expires on February 27,
2015, with rent reviews on the fifth and tenth anniversaries of the completion of the building. We sublease approximately two-thirds of the building to other tenants. We sublease a portion
of this space to Cambridge Neurodynamics Limited and Ant Limited. Our main U.S. office is located at 301 Howard Street, San Francisco, California 94105, where we lease approximately 9,500 square feet
of office space. The initial term of this lease commenced on April 17, 1999 and expires on April 17, 2004. We lease approximately 3,500 square feet of office space in Reston, Virginia,
under a lease which commenced on November 1, 2000, and expires on October 31, 2007. We lease small amounts of office space in Oslo, Norway, and Stockholm, Sweden, under leases which
commenced on March 8, 1999, and April 2, 2000, respectively, and expire on March 7, 2004, and September 30, 2003, respectively. We also use serviced office facilities and
home offices throughout North America, Europe and Asia. We believe that, if needed, alternative locations for each of these facilities can be secured on acceptable terms and within a reasonable time.

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General

We were incorporated under the laws of England and Wales on March 21, 1996, and are registered as a public company limited by shares under the name
Autonomy Corporation plc. Our principal place of business and registered office is located at Cambridge Business Park, Cowley Road, Cambridge CB4 0WZ, United Kingdom, and our phone number at that
address is +44 (0)1223 448 000.

Autonomy
Corporation plc is the ultimate holding company of the Autonomy group. Autonomy's significant subsidiaries include Autonomy Systems Limited, a limited company organized and
existing under the laws of England and Wales, and Autonomy, Inc., a New Jersey corporation. Both of these subsidiaries are wholly-owned.

Item 5.    Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations includes certain financial information extracted without adjustment from our
consolidated financial statements prepared in accordance with U.S. GAAP. This financial information is a summary and you should read the entire Annual Report on Form 20-F carefully.
This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially
from those anticipated in those forward-looking statements as a result of risk factors, including those set forth under "Risk Factors" and elsewhere in this Annual Report.

Overview

We were incorporated on March 21, 1996, and commenced commercial operations in July 1996. We delivered our software products to our first customer
in November 1996. We established our U.S. operations, which are conducted through Autonomy, Inc., in 1996. From inception through the year ended December 31, 1999, we incurred
significant losses.

Revenues

Substantially all of our revenues currently are derived from:



Our
primary source of revenue is derived from licensing our core technology through direct and indirect sales of our own products, and through indirect licenses to our OEM customers. In
the year ended December 31, 2002, our average sales price was approximately $380,000 per license.

We
expect that in the future, our licensing revenues will continue to include increased royalty payments from unit sales of OEM products that incorporate our proprietary technology. For
the year ended December 31, 2002, we received approximately $5.1 million in royalty revenues from existing OEM contracts in addition to prepaid royalties received in connection with the
execution of new OEM agreements. Prepaid royalties are recognized as revenue in accordance with our policy described below. OEM agreements generally have three to five year terms.

Indirect
sales methods include sales by value added resellers, distributors, systems integrators and OEMs. We have increasingly placed an emphasis on developing indirect sales
channels such as resellers and systems integrators. To facilitate worldwide market penetration, we continue to emphasize these indirect sales channels. Revenue for products sold through indirect sales
channels is recognized net of commissions. We use indirect channels to extend the reach of our sales force to obtain worldwide coverage. Our sales force and marketing efforts are used to develop brand
awareness and support our indirect channels, as well as to generate direct sales.

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At
times we have accepted, and expect to continue to accept, equity interests in private companies as partial consideration for a portion of license revenues, including in lieu of
approximately $0.8 million of license revenues for the year ended December 31, 2002. We have also in the past entered into cooperative marketing and promotional arrangements with
customers. Cooperative marketing and promotional commitments are valued based on published market rates for these services.

We
recognize license revenue under SOP 97-2 "Software revenue recognition" issued by the American Institute of Certified Public Accountants. Under the terms of SOP
97-2, where an arrangement to deliver software does not require significant production, modification or customization, we recognize license revenue under the residual method when all of
the following criteria are met:



If
an acceptance period is required, revenues are recognized upon the earlier of customer acceptance or the expiration of the acceptance period. If significant post-delivery
obligations exist or if a product is subject to customer acceptance, revenues are deferred until no significant obligations remain or acceptance has occurred. We have granted customers lengthy credit
terms, although not in excess of one year. Revenues from services have, to date, consisted primarily of customer support revenues and, to a lesser extent, training revenues. We also enter into
reseller arrangements that typically provide for sub-license fees payable based on contractually established revenue royalty rates. Royalties are recognized as reported by the reseller in
re-licensing our products to end-users. Advance royalties are recognized upon the initial sale if all products subject to sub-licensing are shipped in the current
period, no rights of return policy exists, collection is probable and the fee is fixed or determinable. If these conditions are not met, we do not recognize advance royalties until reported by the
reseller in re-licensing our products to end-users. We consider the need to make allowance for returns; however, to date we have not considered any such provision to be
necessary.

Customer
support and maintenance agreements are generally entered into in connection with licenses of our technology. Fees are established as a percentage of the software license price,
typically 15% to 18% per year for first-line support and maintenance, and are generally paid annually. Support and maintenance is provided through a weekday working hours "helpline",
staffed by our regular technical staff and dedicated support employees. We also offer extended hours support for an additional charge. We also provide additional assistance in connection with initial
installation. Renewal of support and maintenance agreements is at the option of the licensee. We recognize revenue related to customer support and maintenance fees ratably over the life of the
agreement.

Each
license includes update rights for matters such as error correction if the customer enters into a support and maintenance agreement. We do not grant customers software version
upgrade rights. Substantially all of our license agreements are on a platform-specific basis and do not confer rights on the customer to run a product on a different operating system or platform
without an extra charge.

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Service
revenues are primarily comprised of implementation, consulting, training and other support services delivered in connection with licenses of our technology. Service revenues are
recognized as services are performed. If a transaction includes both license and service elements, the license fee revenue is recognized upon shipment of the software, provided services do not include
significant customization or modification of the base product and the payment terms for licenses are not subject to acceptance criteria. In cases where license fee payments are contingent upon the
acceptance of services, revenues from both the license and the service elements are deferred until the acceptance criteria are met. We do not place a strategic emphasis on growing our service revenues
either in absolute dollar terms or as a percentage of our revenues.

While
we publish price lists for our products, prices for our products vary on a case-by-case basis, taking into account variables such as the features licensed,
the customer's use of the product and the number of users licensed to use the product within the customer's organization.

The
following table illustrates our revenues by customer location for 2002, 2001 and 2000 (in thousands):

|                  |  | Year Ended December 31,
|----------------- |  | -----------------------
|
|United Kingdom    |  | $                      
|United States     |  |                        
|Rest of Europe    |  |                        
|Rest of the world |  |                        
|                  |  |                        
|Total             |  | $                      
|                  |  |                        

Cost of Revenues

Our cost of revenues primarily consists of shipping, software documentation, third-party labor, third-party license fees and other costs associated with the
delivery of software products from which license revenue is derived and the cost of providing after-sale support and maintenance services to customers. Our internal labor costs of
providing after-sales support and maintenance are recorded as research and development costs. Cost of revenues decreased in absolute terms and as a percentage of revenues in each of the years ended
December 31, 2002, 2001 and 2000, primarily due to decreased costs relating to our core technology.

Operating Expenses

General and administrative expenses consist primarily of salaries and related personnel expenses for executive, accounting and administrative personnel,
professional fees and other general corporate expenses. As we add personnel and incur additional costs related to the growth of our business, we expect that general and administrative expenses will
also increase.

Sales
and marketing expenses consist primarily of costs of marketing programs, including advertising, trade show, public relations and promotional expenses, and salaries, commissions and
related personnel expenses for our direct sales force and marketing staff. We expect that sales and marketing expenses will increase over the next 12 months as we hire additional sales and
marketing personnel, increase spending on advertising and marketing programs and establish additional international locations.

Provision
for doubtful accounts is made for accounts receivable where ultimate collection becomes less than probable after the date the sale is made. Where collectability of sales
revenue is not considered probable at the time a sale is made, revenue is recognized when the cash is collected.

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Amortization
of share-based compensation results from the granting of stock options to employees and consultants with exercise prices per share determined for financial purposes to be
below the deemed fair value per share of our ordinary shares on the dates of grant. Share-based compensation is amortized to expense in accordance with APB Opinion No. 25 over the vesting
period of the individual options, generally four years. We recorded share-based compensation (credit) expense of $Nil, $(0.1) million and $0.1 million in the years ended December 31,
2002, 2001 and 2000, respectively.

Research
and development expenses consist primarily of salaries and related personnel expenses, consultant fees and expenses related to the design, development, testing and enhancement
of our family of products. These include expenses for technical support we provide to customers in connection with the implementation of our products.

Historically,
the impact of changes in foreign exchange rates has had a significant effect on our reported results. Our results are reported in pounds sterling for U.K. reporting
purposes and in U.S. dollars for U.S. reporting purposes. The major component of foreign exchange gains and losses reported through our income statement has been the result of translating our U.S.
dollar-denominated cash balances that are held by our U.K. parent company into pounds sterling.

Net profit

Although we have achieved net profitability for the last three years, ended December 31, 2002, 2001 and 2000, we expect to continue to incur significant
product development, sales and marketing and administrative expenses. As a result, we will need to generate significant quarterly revenues to sustain and increase profitability on a quarterly basis
and to achieve and maintain profitability on an annual basis.

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Results of Operations

The information set out in the following table is derived from our consolidated financial statements and notes thereto, which are included elsewhere in this
document. You should read the whole of this document and not just rely on key or summarized information.

|                                                                                                                 |                                  | Year Ended December 31,      |    
|---------------------------------------------------------------------------------------------------------------- | -------------------------------- | ---------------------------- | ---
|
|Revenues                                                                                                         |                                  | 100                          | %  
|Cost of revenues                                                                                                 |                                  | (2                           | )  
|                                                                                                                 |                                  |                              |    
|                                                                                                                 | Gross profit                     |                              | 98 
|                                                                                                                 |                                  |                              |    
|Operating expenses:                                                                                              |                                  |                              |    
|                                                                                                                 | General and administrative       |                              | (13
|                                                                                                                 | Sales and marketing              |                              | (57
|                                                                                                                 | Provision for doubtful accounts  |                              | (3 
|                                                                                                                 | Research and development         |                              | (18
|                                                                                                                 | Gain (loss) on foreign exchange  |                              |   
|                                                                                                                 |                                  |                              |    
|                                                                                                                 |                                  | Total operating expenses     |    
|                                                                                                                 |                                  |                              |    
|Profit from operations                                                                                           |                                  | 7                            |    
|Other income (expense):                                                                                          |                                  |                             |    
|                                                                                                                 | Interest income                  |                              | 10 
|                                                                                                                 | Impairment of equity investments |                              | (4 
|                                                                                                                 |                                  |                              |    
|                                                                                                                 |                                  | Total other income (expense) |    
|                                                                                                                 |                                  |                              |    
|Profit before benefit (provision) for income taxes and share of loss of associated company and minority interest |                                  | 13                           |    
|Benefit (provision) for income taxes                                                                             |                                  |                             |    
|Share of loss of associated company and minority interest                                                        |                                  | (1                           | )  
|                                                                                                                 |                                  |                              |    
|Net profit (loss)                                                                                                |                                  | 12                           | %  
|                                                                                                                 |                                  |                              |    

Years ended December 31, 2002 and 2001

Revenues.Revenues were $51.0 million in 2002, a decrease of approximately $1.6 million or 3.0% from
$52.6 million in 2001. This decrease was primarily the result of a continued general worldwide slowdown in the macro-economic environment which affected IT spending patterns including, in
particular, the lengthening of purchasing cycles. We are unable to forecast changes in the economic environment that may have an impact on our future business.

Cost of revenues.Cost of revenues was $0.9 million in 2002, a decrease of approximately $1.0 million or 52.6%
from $1.9 million in 2001. This decrease was primarily due to lower hardware expenditures, third party licenses and appointing third parties for training, implementation and other services. We
expect cost of revenues to remain stable or slightly increase in the foreseeable future, dependent on unknown customer needs relating to specific emerging technology platforms.

Gross profit.Gross profit was $50.0 million in 2002, a decrease of $0.7 million or 1.4% from
$50.7 million in 2001. Gross profit margin was 98% in 2002, an increase of approximately 2.0% from 96% in 2001.

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General and administrative.General and administrative expenses, which principally comprise staff and office costs, were
$6.5 million in 2002, a decrease of $1.1 million or 14.5% from $7.6 million in 2001. This decreases was primarily due to lower staff and office costs, and lower costs of
third-party suppliers. We believe that general and administrative costs will remain relatively flat in absolute dollar terms in the foreseeable future.

Sales and marketing.Sales and marketing expenses were $29.2 million in 2002, a decrease of $2.5 million or
7.9% from $31.7 million in 2001. The decrease was due to a number of factors, including a decrease in advertising, promotion, marketing and public relations rates, and a decrease in sales
commissions as a result of reduced revenues. We anticipate, however, that we will continue to make significant investments in sales and marketing expenditures, and that our quarterly sales and
marketing expenses will increase in absolute dollars together with a general increase in advertising, promotion, marketing and public relations rates.

Provision for doubtful accounts.Provision for doubtful accounts was $2.0 million in 2002, an increase of
$1.0 million or 100.0% from $1.0 million in 2002. Provision for doubtful accounts represented 3.9% of revenues in 2002, as compared to 1.9% in 2001. This increase as a percentage of
revenues was primarily due to the insolvency of two customers during the year.

Share-based compensation.Amortization of share-based compensation was $Nil in 2002, compared to a credit of
$0.2 million in 2001. Amortization of share-based compensation is included in the operating expense to which it relates.

Research and development.Research and development expenses were $9.2 million in 2002, an increase of
$0.9 million or 10.8% from $8.3 million in 2001. The increase in research and development expenses was due to an increase in technical personnel and the development and implementation of
new products, including the Autonomy's Collaboration and Expertise Networks, Legacy Compatibility Modules and the new development of PODs. We believe that research and development expenses will
continue to increase in absolute dollars in the future primarily due to the introduction of new products and other anticipated product development efforts.

Gain on foreign exchange.Gain on foreign exchange was $0.1 million in 2002, a decrease of $5.0 million or
98.0% from $5.1 million in 2001. This decrease was primarily due to conversion of substantially of our dollar denominated cash deposits into sterling in May 2001, and the relative
weakening of the U.S. dollar versus other currencies. We converted substantially all of our dollar denominated cash deposits into sterling in May 2001.

Other income (expense).Other income (expense) in 2002 consisted of interest income and write-downs against certain
investments. Other income (expense) was $3.2 million in 2002, a decrease of $3.0 million or 47.5% from $6.2 million in 2001. Interest income was $5.1 million in 2002, a
decrease of $1.3 million or 20.3% from $6.4 million in 2001. The decrease was primarily due to the decreases in interest rates and lower average cash balances as a result of our share
repurchase program. Following a deterioration of the financial status of certain fixed asset investments, we have written down the value of these investments in 2002 by $1.9 million, compared
to $0.3 million in 2001.

Profit before benefit (provision) for income taxes and share of loss of associated company and minority interest.As a result
of the above factors, we reported a profit before taxes and share of loss of associated company and minority interest of $6.5 million and net profit of $6.1 million in 2002, as compared
to a profit before taxes and share of loss of associated company and minority interest of $13.3 million and net profit of $9.4 million in 2001. This decease is primarily attributable to
a decrease of gain on foreign exchange of $5.0 million or 98.0% from 2001 to 2002.

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Income taxes.We provided for a benefit from income taxes of $0.2 million in 2002 compared to a provision of
$3.9 million in 2001. Our effective group tax rate fell from 29% in 2001 to a benefit of 4% in 2002. A valuation allowance was recorded against net deferred tax assets to reduce the amount of
such assets to that which is more likely than not to be realized.

Share of loss of associated company and minority interest.Share of loss of associated company and minority interest in 2002
and 2001 primarily consisted of the retained losses of Dremedia Limited and SoftSound Limited. Share of loss of associated company and minority interest was $0.6 million in 2002, an increase of
$0.5 million, from $0.1 million in 2001. The increase in share of losses was primarily due to the inclusion of 12 months of operations of Dremedia in 2002 compared to six months
in 2001, and increased investment by SoftSound.

Years ended December 31, 2001 and 2000

Revenues.Revenues were $52.6 million in 2001, a decrease of approximately $12.8 million or 19.6% from
$65.4 million in 2000. This decrease was primarily the result of a general worldwide slowdown in the macro-economic environment which affected IT spending patterns including, in particular, the
lengthening of purchasing cycles.

Cost of revenues.Cost of revenues was $1.9 million in 2001, a decrease of approximately $2.0 million or 51.3%
from $3.9 million in 2000. This decrease was primarily due to lower hardware expenditures, third party licenses and the appointing third parties for training, implementation and other services.

Gross profit.Gross profit was $50.7 million in 2001, a decrease of $10.8 million or 17.6% from
$61.5 million in 2000. Gross profit margin was 96% in 2001, an increase of approximately 2% from 94% in 2000.



General and administrative.General and administrative expenses, which principally comprise staff and office costs, were
$7.6 million in 2001, a decrease of $0.1 million or 1% from $7.7 million in 2000.

Sales and marketing.Sales and marketing expenses were $31.7 million in 2001, a decrease of $2.0 million or
5.9% from $33.7 million in 2000. The decrease was due to a number of factors, including a decrease in advertising, promotion, marketing and public relations rates, and a decrease in sales
commissions as a result of reduced revenues.

Provision for doubtful accounts.Provision for doubtful accounts was $1.0 million in 2001, a decrease of
$0.6 million or 37.5% from $1.6 million in 2000. Provision for doubtful accounts represented 1.9% of revenues in 2001, as compared to 2.4% in 2000. This decrease as a percentage of
revenues was primarily due to better monitoring and improved collection practices.

Share-based compensation.Amortization of share-based compensation was a credit of $0.2 million in 2001, compared to
an expense of $0.1 million in 2000. Amortization of share-based compensation is included in the operating expense to which it relates.

Research and development.Research and development expenses were $8.3 million in 2001, an increase of
$1.8 million or 27.7% from $6.5 million in 2000. The increase in research and development expenses was due to an increase in technical personnel and the development and implementation of
new products, including the completion of the IDOL platform, the Autonomy XML Engine and the new development of PODs.

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Gain on foreign exchange.Gain on foreign exchange was $5.1 million in 2001, an increase of $1.8 million or
54.6% from $3.3 million in 2000. This increase was primarily due to increased U.S. dollar-denominated deposits as a result of our May 2000 public offering, and the subsequent
appreciation of the U.S. dollar against the pound sterling, which affected the value of our U.S. dollar-denominated cash balances. We converted substantially all of our dollar denominated cash
deposits into sterling in May 2001.

Other income (expense).Other income (expense) in 2001 consisted of interest income (net) and write-downs against certain
investments. Other income (expense) was $6.1 million in 2001, an increase of $0.7 million or 13.0% from $5.4 million in 2000. Interest income (net) was $6.4 million in
2001, an increase of $0.8 million or 14.3% from $5.6 million in 2000. The increase was primarily due to the inclusion in 2001 of twelve months of bank interest on the proceeds of the
May 2000 public offering of our ordinary shares, offset by decreases in interest rates. Following a deterioration of the financial status of certain fixed asset investments, we have written
down the value of these investments in 2001 by $0.3 million, compared to $0.2 million in 2000.

Profit before benefit (provision) for income taxes and share of loss of associated company and minority interest.As a result
of the above factors, we reported a profit before benefit (provision) for income taxes and share of loss of associated company and minority interest of $13.3 million and net profit of
$9.4 million in 2001, as compared to a profit before benefit (provision) for income taxes and share of loss of associated company and minority interest of $20.8 million and net profit of
$14.5 million in 2000.

Income Taxes.We provided for income taxes of $3.9 million in 2001 and $6.1 million in 2000. Our effective
group tax rate fell slightly from 30% in 2000 to 29% in 2001. A valuation allowance was recorded against net deferred tax assets to reduce the amount of such assets to that which is more likely than
not to be realized.

Share of loss of associated company and minority interest.Share of loss of associated company and minority interest in 2001
primarily consisted of the retained losses of Dremedia Limited and SoftSound Limited, and in 2000 primarily consisted of the minority interest in SoftSound. Share of loss of associated company and
minority interest was $0.1 million in 2001 and 2000.

Liquidity and Capital Resources

Cash and cash equivalents totaled $147.5 million at December 31, 2002, compared to a balance of $143.6 million at December 31, 2001.

We
funded our operations since inception primarily through equity capital from outside investors. In June 1996, we raised approximately $10.7 million from a private
placement of ordinary shares. In July 1998, we completed an initial public offering of our ordinary shares on EASDAQ (now Nasdaq Europe), raising approximately $34.1 million in net
proceeds after commissions and expenses. In May 2000, we completed a public offering of our ordinary shares, raising approximately $99.7 million in net proceeds after commissions and
expenses. In connection with the May 2000 offering, trading in our ADSs representing our ordinary shares commenced on the Nasdaq National Market.

Our
capital requirements depend on a variety of factors, including market acceptance of our products, the resources we devote to developing, marketing, selling and supporting our
products and the timing and extent of establishing international operations. We expect to continue to devote substantial capital resources to hire staff and expand our sales, support, marketing and
product development activities, to expand marketing programs, to establish additional facilities world-wide and for other general corporate activities including potential acquisitions. In
our opinion, our working capital is sufficient for our present requirements.

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Net
cash provided by operating activities was $3.3 million, $6.4 million and $13.0 million for the years ended December 31, 2002, 2001 and 2000, respectively.
The decrease from 2001 to 2002 and from 2000 to 2001 was due to fluctuating revenues combined with comparatively stable operating expenses.

Net
cash used in investing activities was $1.4 million in 2002, a decrease of $0.8 million or 65.0% from $2.2 million in 2001. Net cash used in investing activities
was $1.4 million in the year ended December 31, 2000. Cash was used during these periods to acquire office equipment and software licenses and to purchase investments. We currently do
not have significant capital spending or short-term purchase commitments, but expect to continue to engage in capital spending in the ordinary course of business.

Net
cash used in financing activities was $12.1 million in 2002, compared to net cash provided by financing activities of $0.7 million in 2001. Net cash provided by
financing activities in the year ended December 31, 2000 was $103.7 million. Net cash used in financing activities in 2002 was primarily due to the commencement of a share repurchase
program during 2002. During 2002, we purchased for cancellation 4,980,286 shares at an average price of £1.52 (approximately $2.45) per share.

Net
cash provided by financing activities in 2001 was primarily due to the exercise of options to purchase ordinary shares. Net cash provided by financing activities in 2000 primarily
represented the proceeds of our initial public offerings on the Nasdaq National Market.

We
expect to experience growth in our working capital needs for the foreseeable future in order to execute our business plan. We anticipate that operating activities, as well as planned
capital expenditures, will constitute a material use of our cash resources. In addition, we may utilize cash resources to fund acquisitions or investments in complementary businesses, technologies or
products. We believe that our current cash and cash equivalents and cash generated from operations will be sufficient to meet our anticipated cash requirements for working capital and capital
expenditures for at least the next 12 months. We do not maintain a line of credit or overdraft facility.

We
do not have any indebtedness. Our annual contractual commitment under operating leases is $2.7 million.

Trends

During 2002, a slowdown in the macro-economic environment continued to affect worldwide IT spending patterns. This slowdown began affecting us in the United
States in late 2000 and throughout Europe in the first quarter of 2001. In our observations, economic activity and sentiment did begin to improve in the U.S. and much of Europe in
mid-2001, but was unexpectedly interrupted by the terrorist attacks of September 11, 2001. Economic activity and uncertainty continued throughout 2002. Nevertheless, we experienced
improved revenues in the fourth quarter of 2001, leading to flat revenues and improved operating profits for the whole of 2002, without giving effect to foreign exchange gains or losses. During the
period costs remained comparatively stable, although marketing costs declined primarily as a result reduced rates for advertising. Our average selling prices remained consistent with recent historical
trends. Absent any change in the general economic sentiment, we would expect economic patterns to remain the same throughout 2003.

Critical Accounting Policies

The preparation of our financial statements requires us to make estimates and judgements that affect the reported amount of net assets at the date of our
financial statements and the reported amounts of revenues and expenses during the period.

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Critical
accounting policies are those that have a significant impact on our results and require the most difficult, subjective or complex judgements by management. A full description of
our accounting policies is set forth in note 3 to the audited accounts included elsewhere in this Annual Report. Our critical accounting policies include the following:

Revenue recognition.Our primary source of revenue is derived from the licensing of software. We make judgments about the
likelihood of collection before recognizing revenue. This involves reviewing the creditworthiness of customers and reviewing our collection history. We also make judgments whether sell through has
taken place before recognizing revenue through a reseller. Where contracts contain multiple elements such as licence, support and maintenance and other services, we make judgments on the amount of
revenue which is allocated to each element. We also estimate the amount of uncollectible receivables each period and record valuation allowances based on the age of unpaid amounts and information
about the credit worthiness of customers. Estimates of uncollectible accounts are revised each period and changes recorded in the period they become known.

Intangible assets and investments.We record an impairment charge in goodwill and investments when we believe that there has
been a decline in value that is other than temporary. Future adverse changes in market conditions or poor operating results of the underlying subsidiaries or investments could result in losses or an
inability to recover the carrying value of the assets. In assessing the recoverability of these assets we must make assumptions regarding estimated cash flows and factors to determine the fair value
of the respective assets. If these estimates or related assumptions change in the future, we may be required to record impairment charges for these assets.

Recently Issued Accounting Pronouncements

SFAS No. 146.In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." This standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant
closing, or other exit or disposal activity. The provisions of this Statement are effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier
adoption encouraged.

The
adoption of SFAS No. 146 is not expected to have a material impact on the financial position or the results of operations of the Company.

European Economic and Monetary Union

Within Europe, the European Economic and Monetary Union introduced the euro on January 1, 1999. On January 1, 1999, the participating countries
adopted the euro as their local currency, initially available for currency trading on currency exchanges and non-cash transactions such as banking, and later available in bills and coins
for cash transactions.

Our
transactions are recorded in both U.S. dollars and foreign currencies, including the euro. We have not incurred and do not expect to incur significant costs from the continued
implementation of the euro. However, the currency risk of the euro could harm our business.

37

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Item 6.    Directors, Senior Management and Employees

Directors and key employees

The following table sets forth the name, age and position of each of our directors and key employees as of December 31, 2002:

|Name                      |  | Age |  | Position                                       
|------------------------- |  | --- |  | -----------------------------------------------
|Directors                 |  |     |  |                                                
|Michael R. Lynch, Ph.D    |  | 37  |  | Managing Director and Chief Executive Officer  
|Richard G. Gaunt          |  | 35  |  | Technical Director and Chief Technology Officer
|Barry M. Ariko*(1)(2)     |  | 57  |  | Director                                       
|John P. McMonigall*(1)(2) |  | 59  |  | Director                                       
|Richard N. Perle*(1)      |  | 61  |  | Director                                       
|Key Group Employees       |  |     |  |                                                
|Sushovan Hussain          |  | 38  |  | Chief Financial Officer                        
|Andrew M. Kanter          |  | 33  |  | Chief Operating Officer                        

---

Michael R. Lynch, Ph.D, co-founder of Autonomy, has served as our Managing Director and Chief Executive Officer since our inception in
March 1996. Prior to founding Autonomy, Dr. Lynch founded Neurodynamics Limited in 1990. Dr. Lynch is also a director and Managing Director of Neurodynamics Limited, Cambridge
Neurodynamics Limited and Nholdings Limited, and a non-executive director of Paradigm Media and Avocet Capital Management. Dr. Lynch holds an M.A. in electrical and information
sciences, a Ph.D in adaptive techniques in signal processing and connectionist models and held a research fellowship in adaptive pattern recognition from Cambridge University.

Richard
G. Gaunt, co-founder of Autonomy, has served as Technical Director and Chief Technology Officer of Autonomy since our inception in March 1996. Mr. Gaunt
has served as Technical Director of Cambridge Neurodynamics Limited since 1991, where he contributed to the development of our DRE technology. He also serves as a director of Neurodynamics Limited,
Cambridge Neurodynamics Limited and Nholdings Limited. Mr. Gaunt holds a BSc in electronic engineering and an MSc from the University of Natal in Durban.

Barry
M. Ariko has served as a non-executive director of Autonomy since January 2000. From January, 2000, until it was acquired by Peregrine Systems in May, 2001, he
was Chairman, CEO and President of Extricity, Inc., a provider of software for the management of inter-company transactions and workflow. Prior to Extricity he was Senior Vice President of AOL,
which had acquired Netscape Communications Corp., where he was Executive Vice President and Chief Operating Officer with primary responsibility for the enterprise software business since August, 1998.
From April 1994 to August 1998, Mr. Ariko was Executive Vice President in charge of the Americas operations for Oracle Corp. Mr. Ariko also serves as a director of Incyte
Genomics and Aspect Communications. Mr. Ariko holds a B.S. in Management from Golden Gate University in San Francisco and in 1992 completed the Advanced Executive Program at Northwestern
University's J. L. Kellogg Graduate School of Management.

38

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John
P. McMonigall has served as a non-executive director of Autonomy since July 1998. Since April 1990, Mr. McMonigall has been a director of Apax
Partners & Co Ventures Ltd, a venture capital firm, where he is responsible for Apax' investments in private companies in telecommunications, software and related fields. From 1986 to
1990, Mr. McMonigall held a variety of positions at British Telecom where he served as a member of the Management Board. He currently serves on the boards of Dialog Semiconductor GmbH.
Mr. McMonigall also serves on the boards of several privately owned companies, including Neurodynamics Limited and Nholdings Limited.

Richard
N. Perle has served as a non-executive director of Autonomy since February 2000. Mr. Perle has served as Resident Fellow of the American Enterprise
Institute for Public Policy Research since 1987. Since January 1994, Mr. Perle has also served as a consultant on general business, markets and strategy to corporate clients. He was the
Assistant Secretary for the United States Department of Defense, International Security Policy from 1981 to 1988. Mr. Perle is Chief Executive Officer and Chairman of the Board of Directors of
Hollinger Digital Inc. and a Director of Morgan Crucible plc, where he serves on the remuneration committee, Hollinger International and AppNet, Inc., where he serves on the audit and
remuneration committees. Mr. Perle is a member of the International Advisory Board of Hollinger Inc. Mr. Perle holds an M.A. from Princeton University and an A.B. from the
University of Southern California.

Sushovan
Hussain has served as our Chief Financial Officer since June 2001. Prior to joining Autonomy, Mr. Hussain worked for LASMO plc, one of the world's largest
independent oil and gas exploration companies which was acquired by Eni in early 2001, where he held a number of senior international financial positions, including three years in the Corporate
Development department, charged with acquisitions and divestments. Mr. Hussain received his BA in Economics from Cambridge University, England, and became a qualified Chartered Accountant while
employed at Ernst & Young in London.

Andrew
M. Kanter joined Autonomy in August 2000 as Vice President, International Operations and Legal Affairs, and has served as our Chief Operating Officer since 2001. Prior to
joining Autonomy, from July 1999 through July 2000, Mr. Kanter was an associate attorney with Brobeck Hale and Dorr, primarily engaged in international mergers and acquisitions
and corporate finance. From May 1997 through June 1999, Mr. Kanter was an associate attorney in the Business & Technology group of Brobeck, Phleger & Harrison in San
Francisco, CA, and prior to that was an associate attorney with Shearman & Sterling, San Francisco, CA. Mr. Kanter holds a juris doctor from the University of Southern California Law
Center and a B.A. from Johns Hopkins University, and also studied at Kansai University of Foreign Studies, Osaka, Japan.

39

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Compensation of Directors

Compensation, excluding the issue of share options, paid to our directors (5 persons) for the year ended December 31, 2002, was as follows:

|                               |  | Salary  |  | Benefits
in Kind |  | Bonuses |  | Total 2002 |  | Total
2001
|------------------------------ |  | ------- |  | ---------------- |  | ------- |  | ---------- |  | ----------
|Executive Directors (in £)     |  |         |  |                  |  |         |  |            |  |           
|Dr. Michael R. Lynch           |  | 100,000 |  | 6,118            |  |        |  | 106,118    |  | 106,118   
|Richard G. Gaunt               |  | 90,000  |  | 4,499            |  |        |  | 94,499     |  | 94,499    
|Non-executive Directors (in £) |  |         |  |                  |  |         |  |            |  |           
|Barry M. Ariko(1)              |  | 15,895  |  |                 |  |        |  | 15,895     |  | 17,364    
|John P. McMonigall             |  | 10,000  |  |                 |  |        |  | 10,000     |  | 10,000    
|Richard N. Perle               |  |        |  |                 |  |        |  |           |  |          
|                               |  |         |  |                  |  |         |  |            |  |           
|                               |  | 215,895 |  | 10,617           |  |        |  | 226,512    |  | 227,981   
|                               |  |         |  |                  |  |         |  |            |  |           

---

Amounts paid include salary, pension, retirement and similar benefits. Non-executive directors are reimbursed for their reasonable
out-of-pocket expenses incurred in attending the meetings of our board of directors and committees thereof.

Board Practices

Officers serve at the discretion of the board of directors. Our Memorandum and Articles of Association authorizes between two and ten directors. Our board
currently consists of five directors divided into three classes, with each class serving for a term of three years. At each annual meeting of shareholders, directors are elected by the holders of our
ordinary shares to succeed the directors whose terms are expiring. The members of each class of directors are determined by including first any directors who do not wish to stand for
re-election and then the directors who have been in office longest since their last appointment or election. Dr. Lynch and Mr. Gaunt were re-elected as directors
in July 2001, and each of their offices expires in July 2004. Mr. Perle was re-elected as a director in July 2000, and his offices expires in July 2003.
Messrs. McMonigall and Ariko were re-elected as directors in June 2002, and each of their offices expires in June 2005.

Employment Agreements

We are a party to employment agreements with each of Dr. Lynch and Mr. Gaunt.

Dr. Lynch's
agreement, dated July 9, 1998, provides for his employment as Managing Director and Chief Executive Officer, at a salary of £100,000 per annum.
Mr. Gaunt's agreement, dated July 9, 1998, provides for his employment as our Technical Director and Chief Technology Officer, at a salary of £90,000. Each are also entitled
to current benefits generally made available to all employees and any fees or remuneration he is entitled to as a director of Autonomy. Each of these agreements has no fixed term and can be terminated
by either party on not less than six months notice. For 12 months following the termination of employment, Dr. Lynch and Mr. Gaunt are prohibited from soliciting our clients,
customers and employees and from competing with us in a similar geographic area.

40

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Under
the terms of Dr. Lynch's and Mr. Gaunt's agreements, each may provide services on a part-time basis to Cambridge Neurodynamics Limited, a company
controlled by Dr. Lynch and Apax, or any companies affiliated with Neurodynamics, at such times as are agreed to by the employee, Neurodynamics and Autonomy after good-faith
consultation. Such good faith consultations occur with our non-executive directors from time to time as and when services are requested by Cambridge Neurodynamics Limited or any companies
affiliated with Neurodynamics. Such services performed for all Neurodynamics companies may not exceed 25% of either of Dr. Lynch's or Mr. Gaunt's total working time in any month. As
compensation for such services, Neurodynamics pays us a monthly fee of up to 25% of Dr. Lynch and Mr. Gaunt's salaries, plus applicable taxes.

Messrs. Ariko,
McMonigall and Perle serve as our directors under appointment letters with us dated January 7, 2000, July 2, 1998 and February 23, 2000,
respectively. Under these letters, Mr. Ariko is paid an annual fee of $25,000, and Apax Partners & Co. Ventures Ltd., on behalf of Mr. McMonigall, is paid an annual fee of
£10,000, for his services as a director. We have granted options to purchase 75,000 ordinary shares to each of Messrs. Ariko and Perle under their letters. Of these options, 25% of
Mr. Ariko's vested on January 7, 2001, and 25% of Mr. Perle's vested on February 23, 2001, with the remainder for each vesting quarterly over the next three years subject
to continued service as a director. Each have been granted additional options, set forth below under "Item 6. Directors, Senior Management and EmployeesShare Ownership." Either party to
each of these letters may terminate the appointment upon three months notice.

Corporate Governance

Our board of directors has established an audit committee and a remuneration committee.

Remuneration Committee.The remuneration committee is primarily responsible for reviewing and approving our general
compensation policies and setting compensation levels for our executive officers. The committee also administers our incentive compensation plans. The committee currently consists of
Messrs. Ariko and McMonigall.

Audit Committee.The audit committee is primarily responsible for approving the services performed by our independent
auditors and reviewing our accounting practices and systems of internal accounting controls. The committee currently consists of Messrs. Ariko, McMonigall and Perle, all of whom are
independent. The ultimate responsibility for reviewing and approving our annual statutory accounts remains with our Board as required by English law.

Employees

The following table sets out the number of our employees by function at the periods indicated:

|                                        |  | As of December 31,
|--------------------------------------- |  | ------------------
|
|Technology and research and development |  | 77                
|Sales                                   |  | 78                
|Marketing                               |  | 20                
|Administrative                          |  | 24                
|                                        |  |                   
|Total Employees                         |  | 199               
|                                        |  |                   

As of December 31, 2002, we had 199 employees, 86 of whom were located at our headquarters in Cambridge, England, 71 were located in the
United States, and the remainder of which were located at our other offices.

41

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We
have never had a work stoppage, and no employees are represented under collective bargaining agreements. We consider our relations with our employees to be good.

Options

As of February 28, 2003, there were outstanding options to purchase a total of 1,039,019 shares that had been granted by Autonomy to our directors, executive
officers and key group employees. Details of these outstanding options are set out below:

|Name             |  | Option Plan        |  | Number  |  | Exercise Price
Per Share |  | Grant Date         |  | Exercise Period                         
|---------------- |  | ------------------ |  | ------- |  | ------------------------ |  | ------------------ |  | ----------------------------------------
|Barry M. Ariko   |  | U.S. Option Plan   |  | 75,000  |  | $ 15.88                  |  | January 7, 2000    |  | January 7, 2001 to January 7, 2010      
|Barry M. Ariko   |  | U.S. Option Plan   |  | 10,000  |  | £ 2.24                   |  | September 25, 2001 |  | September 25, 2002 to September 25, 2006
|Richard N. Perle |  | U.S. Option Plan   |  | 75,000  |  | $ 39.00                  |  | February 23, 2000  |  | February 23, 2001 to February 23, 2010  
|Richard N. Perle |  | U.S. Option Plan   |  | 37,500  |  | £ 3.01                   |  | April 12, 2001     |  | April 12, 2002 to April 11, 2008        
|Richard N. Perle |  | U.S. Option Plan   |  | 10,000  |  | £ 2.24                   |  | September 25, 2001 |  | September 25, 2002 to September 25, 2008
|Sushovan Hussain |  | U.K. Option Scheme |  | 50,000  |  | £ 2.93                   |  | July 30, 2001      |  | July 30, 2002 to July 30, 2008          
|Sushovan Hussain |  | U.K. Option Scheme |  | 10,000  |  | £ 2.81                   |  | November 1, 2001   |  | November 1, 2002 to November 1, 2008    
|Sushovan Hussain |  | U.K. Option Scheme |  | 10,000  |  | £ 4.04                   |  | March 15, 2002     |  | March 15, 2003 to March 14, 2009        
|Sushovan Hussain |  | U.K. Option Scheme |  | 25,000  |  | £ 3.42                   |  | May 2, 2002        |  | May 2, 2003 to May 1, 2009              
|Sushovan Hussain |  | U.K. Option Scheme |  | 5,000   |  | £ 1.21                   |  | July 11, 2002      |  | July 11, 2003 to July 10, 2009          
|Sushovan Hussain |  | U.K. Option Scheme |  | 100,000 |  | £ 1.35                   |  | July 19, 2002      |  | July 19, 2003 to July 18, 2009          
|Sushovan Hussain |  | U.K. Option Scheme |  | 70,000  |  | £ 1.31                   |  | February 6, 2003   |  | February 6, 2004 to February 5, 2010    
|Andrew M. Kanter |  | U.K. Option Scheme |  | 300,000 |  | $ 41.00                  |  | July 7, 2000       |  | July 7, 2001 to July 7, 2007            
|Andrew M. Kanter |  | U.K. Option Scheme |  | 26,582  |  | £ 35.81                  |  | November 9, 2000   |  | November 9, 2001 to November 8, 2007    
|Andrew M. Kanter |  | U.K. Option Scheme |  | 169,937 |  | £ 3.01                   |  | April 12, 2001     |  | April 12, 2002 to April 11, 2008        
|Andrew M. Kanter |  | U.K. Option Scheme |  | 10,000  |  | £ 2.24                   |  | September 25, 2001 |  | September 25, 2002 to September 25, 2008
|Andrew M. Kanter |  | U.K. Option Scheme |  | 25,000  |  | £ 3.42                   |  | May 2, 2002        |  | May 2, 2003 to May 1, 2009              
|Andrew M. Kanter |  | U.K. Option Scheme |  | 30,000  |  | £ 1.31                   |  | February 6, 2003   |  | February 6, 2004 to February 5, 2010    

Share Option Plans

We
have adopted two share option plans: the 1996 U.K. Discretionary Option Scheme and the 1998 U.S. Share Option Plan. The total number of ordinary shares which may be subject at any
time to outstanding options under the U.K. Option Scheme may not, when aggregated with the number of options granted over the immediately preceding five years under the U.K. Option Scheme, the U.S.
Option Plan and any other option plans, exceed 10% of the total number of ordinary shares outstanding at the time. Options granted during the 5-year period are not included in the
aggregate number to the extent those options expired or terminated unexercised. In no event may more than 18,000,000 ordinary shares be issued under the U.S. Option Plan.

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1996 U.K. Discretionary Option Scheme

Our U.K. Option Scheme was adopted by our board on December 4, 1996. Our board has complete discretion to determine which eligible individuals receive
option grants, the time or times when the grants are to be made, the number of ordinary shares subject to each grant, the vesting schedule to be in effect for the grant and the maximum term for which
each option grant may remain outstanding. As of December 31, 2002, options to purchase an aggregate of 2,677,888 ordinary shares were outstanding, and 1,512,647 ordinary shares had been issued
pursuant to option exercises under the U.K. Option Scheme.

The
exercise price for each granted option is determined by our board at the time of the grant. No option grant may have a term in excess of seven years. The option vests in one or more
instalments over the optionee's period of employment and will be subject to earlier termination in connection with the optionee's cessation of employment. The exercise price for ordinary shares
purchased under the U.K. Option Scheme may be paid in cash or by check. The option may also be exercised through the same day sale of a portion of the purchased shares, with the proceeds applied to
the payment of the exercise price, or through the delivery of a full recourse, interest bearing promissory note.

In
the event we are acquired or undergo a change in control, each outstanding option may be exchanged for a new option which is the economic equivalent of the exchange option but which
relates to shares of the successor corporation or other affiliated entity. Any options which are not so exchanged will terminate upon the consummation of the transaction.

Our
board may amend or modify the U.K. Option Scheme at any time subject to any required shareholder approval. The board may also terminate the U.K. Option Scheme at any time, provided
such termination does not adversely affect the rights of outstanding option holders.

1998 U.S. Share Option Plan

The 1998 U.S. Share Option Plan was adopted by our board in June 1998 and was approved by the shareholders in July 1998 in order to provide equity
incentives through option grants to employees residing in the United States. 18,000,000 ordinary shares have been authorized for issuance under the U.S. Option Plan. As of December 31, 2002,
options to purchase an aggregate of 1,768,042 ordinary shares were outstanding and 2,842,510 ordinary shares had been issued pursuant to option exercises under the U.S. Option Plan.

The
U.S. Option Plan currently is administered by the board, but the board may delegate its role as plan administrator to a committee of the board. The plan administrator determines
which eligible individuals are to receive option grants, the time or times when the grants are to be made, the number of shares subject to each grant, the status of any granted option as either an
incentive stock option or a non-statutory stock option under the U.S. tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which
any granted option is to remain outstanding.

Options
granted under the U.S. Option Plan may have a term of up to ten years and must have an exercise price of at least 85% of the fair market value of our ordinary shares on the date
of grant. Options are exercisable in one or more instalments over the optionee's period of employment and are subject to earlier termination in connection with the optionee's cessation of employment.
The exercise price for ordinary shares purchased under the U.S. Option Plan may be paid in cash, by check or in ordinary shares valued at the fair market value on the exercise date. The options may
also be exercised through the same day sale of a portion of the purchased shares, with the proceeds applied to the payment of the exercise price, or through the delivery of a full recourse, interest
bearing promissory note.

The
plan administrator has the authority, with the consent of affected option holders, to cancel outstanding options under the U.S. Option Plan in return for the grant of new options for
the same or a different number of option shares with an exercise price per share based upon the fair market value of our ordinary shares on the new grant date.

In
the event that we are acquired or undergo a change in control, each outstanding option may be exchanged for a new option which is the economic equivalent of the exchanged option but
which relates to shares of the successor corporation or other affiliated entity. Options which are not so exchanged will terminate. Our board has the discretion to accelerate the vesting of
outstanding options under the U.S. Option Plan in connection with changes in control, whether or not those options are to be exchanged in the transaction.

The
board may amend or modify the U.S. Option Plan at any time, subject to shareholder approval. The U.S. Option Plan will terminate no later than June 2008.

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Item 7.    Major Shareholders and Related Party Transactions

Major Shareholders

The following table sets forth information with respect to the beneficial ownership of our shares as of February 28, 2003 by each of our directors, executive
officers and key group employees and each shareholder who is known by us to be interested, directly or indirectly, or to own beneficially more than three percent (3%) of our outstanding shares. The
percent of beneficial ownership for each shareholder is based on 117,304,058 shares outstanding as of February 28, 2003.

|Name of Beneficial Owner                                     |  | Number     |  | Percentage |  
|------------------------------------------------------------ |  | ---------- |  | ---------- | -
|Directors, Named Executive Officers and Key Group Employees: |  |            |  |            |  
|Michael Lynch(1)                                             |  | 22,407,357 |  | 18.5       | %
|Richard G. Gaunt(2)                                          |  | 4,114,240  |  | 3.4        |  
|Barry M. Ariko                                               |  |           |  | *          |  
|Richard N. Perle                                             |  |           |  | *          |  
|John McMonigall(3)                                           |  | 528,415    |  | *          |  
|Sushovan Hussain                                             |  |           |  | *          |  
|Andrew M. Kanter                                             |  |           |  | *          |  
|All directors and executive officers as a group (7 persons)  |  | 22,935,772 |  | 19.0       |  
|Other 3% Shareholders:                                       |  |            |  |            |  
|The Capital Group Companies, Inc.                            |  | 11,126,650 |  | 9.2        |  
|Lazard Asset Management                                      |  | 8,650,210  |  | 7.2        |  
|Fidelity International Limited                               |  | 5,266,618  |  | 4.4        |  
|Legal & General Investment Management Limited                |  | 3,848,507  |  | 3.2        |  
|CGNU plc                                                     |  | 3,719,625  |  | 3.1        |  
|AXA S.A.                                                     |  | 3,627,643  |  | 3.0        |  

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As of February 28, 2003, to our knowledge we had approximately nine record holders of ADRs and ordinary shares in the United States,
representing less than 1% of our outstanding shares. The foregoing may not represent actual location of ownership of our shares as under applicable English law, shares are generally registered in the
name of the nominee holder.

The
company's major shareholders do not have different voting rights from other holders of our ordinary shares. We are not directly or indirectly owned or controlled by another
corporation, by any foreign government or by any other natural or legal persons severally or jointly. We are not aware of any arrangements which may at a subsequent date result in a change in control
of the company.

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The
percentage ownership of three of our major shareholders has changed since our initial public offering on the Nasdaq National Market in May 2000 as a result of sales by these
shareholders in conjunction with our public offering on the London Stock Exchange in November 2000. In particular, Apax Funds Nominees Limited, which was one of our 3% shareholders at the time
of our initial public offering, sold 2,640,000 shares in the May 2000 offering, 4,735,649 shares in the November 2000 offering and 8,928,197 shares in February 2001 in a private
placement, and now holds less than 1% of our outstanding shares. Dr. Michael Lynch, one of our officers and directors, sold 943,140 shares in the May 2000 offering and 1,446,525 shares
in the November 2000 offering. Richard Gaunt, one of our officers and directors, sold 376,860 shares in the May 2000 offering and 440,000 shares in the November 2000 offering. In
addition, each of the Capital Group Companies, Fidelity International Limited, Deutsche Bank AG, Lazard Asset Management and CGNU have from time to time during the past three years increased and
decreased their share holdings.

Related Party Transactions

Related companies

Some of our executive officers and non-executive directors have relationships with a group of companies not affiliated with our company.



Neurodynamics Limited is a holding company controlled by Dr. Lynch, our founder, Managing Director and Chief Executive Officer, and Apax Funds Nominees
Limited, the nominee shareholder for certain funds managed by Apax Partners & Co. Ventures Limited. Mr. McMonigal is a director of Apax, and Apax owns less than 1% of our ordinary
shares. Dr. Lynch owns approximately 51% of Neurodynamics Limited's shares, and Apax owns the balance. Dr. Lynch has granted to Mr. Gaunt, one of our directors and our Chief
Technical Officer, options to purchase an aggregate of approximately 5% of Neurodynamics Limited's outstanding shares.

Neurodynamics
Limited owns Cambridge Neurodynamics Limited and NeuraScript Limited. Cambridge Neurodynamics Limited is engaged in the application of pattern recognition technologies to
biometrics and digital video surveillance. Biometric identification encrypts an image of a part of the body into a digital code which is transmitted to a server where the image is decoded and compared
with the enrolled image. Cambridge Neurodynamics Limited markets solutions for fingerprint recognition and verification, three-dimensional facial recognition, digital video surveillance and
numberplate recognition systems. NeuraScript Limited is engaged in the application of intelligent character recognition (such as letters and numbers) for high volume document processing and markets
products which recognise characters such as Intelli-Form and which provides for accurate data extraction from large volumes of hand-written forms.

Dr. Lynch
and Apax also control Nholdings Limited, the sole shareholder of NCorp Limited, a company engaged in adding intelligence to the searching of structured data, and which
formerly was a wholly-owned subsidiary of Neurodynamics Limited. NCorp Limited is engaged in adding intelligence to the searching of structured data. NCorp's products provide a solution to navigating
relational database content. For e-commerce companies, NCorp's products can be used to search databases such as holiday packages and motorbike engine components. NCorp's products are used
by a wide range of enterprises, from e-commerce customers to corporate knowledge workers. Dr. Lynch owns approximately 43.7% of Nholdings Limited's voting shares and Apax owns the
balance. Dr. Lynch has granted to Mr. Gaunt options to purchase an aggregate of approximately 4.3% of Nholdings Limited's outstanding shares.

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Our core technology, the DRE, was originally developed by Cambridge Neurodynamics Limited. We purchased the DRE in July 1998 for $4.0 million from
Cambridge Neurodynamics Limited. We have granted to Neurodynamics Limited an irrevocable, exclusive, perpetual, worldwide, royalty-free license to use or modify the DRE solely for the sale
of software or software-based services directly to end users involved in or dealing with security, defense, law enforcement or anti-fraud activities to be used by them in connection with
these activities.

During
the years ended December 31, 2002, 2001 and 2000, we incurred expenses of $0.6 million, $0.2 million and $0.3 million respectively for management and
software development services from Cambridge Neurodynamics Limited and made sales, rent charges and recharges of other expenses to Cambridge Neurodynamics Limited of $0.1 million,
$0.1 million and $0.02 million in the years ended December 31, 2002, 2001 and 2000 respectively. We owed Cambridge Neurodynamics Limited $0.1 million, $0.4 million
and $Nil at December 2002, 2001 and 2000 respectively.

During
the years ended December 31, 2002, 2001 and 2000, we incurred expenses of $0.9 million, $1.1 million and $Nil respectively from NCorp Limited and made sales
to NCorp Limited of $0.3 million, $0.2 million and $0.4 million. At December 31, 2002, 2001 and 2000, NCorp Limited owed us $Nil, $0.03 million and
$0.5 million. At December 31, 2002, 2001 and 2000, we owed NCorp $0.9 million, $1.1 million and $Nil.

We
have entered into other corporate and trading arrangements with the Neurodynamics companies. While we believe that the transactions with the Neurodynamics companies have largely been
on an arms-length basis, the presence of cross-directorships and shareholdings creates, and will continue to create, the potential for conflicts of interest to arise. To limit such
conflicts and the appearance of such conflicts, our employment agreements with Dr. Lynch and Mr. Gaunt restrict the amount of time they may spend on matters related to the Neurodynamics
companies and provide that while they are employed by Autonomy they will not do anything which is, or which in the reasonable opinion of the Board is, or is likely to be, damaging or prejudicial to
our business. Furthermore, our articles of association provide that directors are prohibited from voting on any contract or any arrangement or any other kind of proposal in which he or a person
connected with him has a material interest.

We
acquired 49% of the ordinary shares of Dremedia Limited on July 2, 2001. During the years ended December 31, 2002 and 2001, we made sales to Dremedia of
$0.4 million and $0.3 million, and we made loans to Dremedia of $1.0 million and $0.6 million. As of December 31, 2002 and 2001, Dremedia owed the Company
$1.6 million and $0.9 million, and the Company owed Dremedia $Nil and $0.4 million. There are no relationships between the employees of Dremedia and our employees, other than
Andrew Kanter, our Chief Operating Officer, who serves as a Director of Dremedia without additional compensation.



We have an agreement with Neurodynamics Limited which allows Dr. Lynch and Mr. Gaunt to work for the Neurodynamics companies for up to one quarter
of each of their respective total monthly hours. Under Dr. Lynch's and Mr. Gaunt's employment agreements with Neurodynamics, under which they are employed as Managing Director and
Technical Director, respectively, inventions created, discovered, invented, developed and devised in the provision of services for Neurodynamics will belong to Neurodynamics and not to Autonomy. We
have attempted in these agreements to reduce the potential conflict of interest that could arise in the future between Autonomy and the Neurodynamics companies. However, conflicts or the appearance of
conflicts may arise through the breach of these agreements. These conflicts may adversely affect our business, operating results or financial condition.

46

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Three
of our five directors, Dr. Lynch and Messrs. Gaunt and McMonigall, are also directors of Neurodynamics Limited, Cambridge Neurodynamics Limited and Nholdings Limited.
Two of our directors, Messrs. Ariko and Perle have no affiliation with or responsibility to the Neurodynamics companies.

Options to purchase our shares held by Mr. Gaunt

In December 1996, Dr. Lynch and Apax Funds Nominees Limited granted to Mr. Gaunt options to purchase from them 4,035,825 and 1,345,275 of our
ordinary shares, respectively, for an exercise price of 1/3p per share. The options are exercisable only during Mr. Gaunt's service to Autonomy as a director or employee, or
longer in the case of his death or disability or a change of control of Autonomy. The options have a term of seven years. 1,266,860 of these options were exercised and 4,114,240 remain outstanding and
exercisable at December 31, 2002.

On
November 21, 2001, we loaned £200,000 (approximately $321,000) to an executive officer. The loan is repayable on November 20, 2004, only if the executive
receives or is entitled to receive, bonuses, commissions or otherwise above base salary equal to three times the amount due. The loan bears interest at market rates of Barclays Base Rate plus 0.60%,
which throughout 2002 totalled 4.60%. As of December 31, 2002, £210,208 was outstanding under the loan, which was the highest amount outstanding during 2002. We are amortizing the
loan over its life of three years.

Item 8.    Financial Information

See "Item 18. Financial Statements" and pages F-1 through F-27.

No
significant change has occurred since the date of the annual financial statements included in this Annual Report on Form 20-F.

Legal Proceedings

Since our inception, we have not been involved in any legal or arbitration proceedings, including any such proceedings which are pending or threatened of which we
are aware, that have had, or the results of which may have, a significant effect on our financial position. We are not aware of any threatened or potential legal or arbitration proceedings which could
have a significant effect on our financial position.

Dividends

Under English law, dividends are payable on shares only out of profits available for distribution, as determined in accordance with accounting principles
generally accepted in the United Kingdom and by the Companies Act. Holders of our shares are entitled to receive such dividends as may be recommended by our board of directors and declared by the
shareholders in general meeting.

Our
board of directors may pay shareholders such interim dividends as appear to them to be justified by our financial position. If authorized by an ordinary resolution of the
shareholders, the board of directors may also offer shareholders the right to elect to receive share dividends by way of scrip dividend instead of cash.

We
have not paid dividends on our shares since our incorporation. It is our present policy to retain all earnings for use in our business. Accordingly, we do not anticipate that
dividends will be paid in the foreseeable future.

47

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Our
board of directors may, with an ordinary resolution of our shareholders, capitalize any sum standing to the credit of any of our reserve accounts or our profit and loss account. Such
capitalization shall be effected in accordance with the rights attached to any share, either by appropriating such sum to pay up in full any of our share capital which has not been issued and
distributing the same to our shareholders in proportion to the number of shares which they hold, or by using it to pay some, or all, of any amount on any issued shares held by holders of shares which
has not already been called up or paid in advance, if the Companies Act and other laws and regulations relating to us allow. We may also retain any dividends payable on any shares on which we have a
lien, and may apply such amount to the satisfaction of the debts or liabilities in respect of which the lien exists.

Any
dividend unclaimed after 12 years from the date the dividend was declared, or became due for payment, will be forfeited and will revert to us.

Item 9.    The Offer and Listing

Offer and Listing Details; Markets

General

The principal trading market for our ordinary shares is the London Stock Exchange. Our ordinary shares also trade on Nasdaq Europe (formerly EASDAQ). American
Depositary Shares, or ADSs, each representing five ordinary shares, are listed on the Nasdaq National Market and trade under the symbol "AUTN". The Nasdaq National Market is our principal trading
market outside of our host market. The depositary for the ADSs is the Bankers Trust Company.

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Trading History

Our ordinary shares have been trading on Nasdaq Europe (formerly EASDAQ) under the symbol "AUTN" since July 10, 1998, and on the London Stock Exchange
under the symbol "AU." since November 1, 2000. Our ADSs have been trading on the Nasdaq National Market under the symbol "AUTN" since May 8, 2000. The table below sets forth the high and
low bid prices of our ordinary shares on Nasdaaq Europe and the London Stock Exchange, and of our ADSs as reported by the Nasdaq National Market, for the periods indicated. All information gives
effect to a 3-for-1 stock split effective August 1, 2000.

|                   |  | Nasdaq Europe |  | London Stock Exchange |  | Nasdaq National Market |  |      
|------------------ |  | ------------- |  | --------------------- |  | ---------------------- |  | -----
|
|
|Year ended Dec. 31 |  |               |  |                       |  |                        |  |      
|1998(3)            |  | 0.84          |  | 0.40                  |  |                       |  |     
|1999               |  | 11.10         |  | 0.72                  |  |                       |  |     
|2000(4)(5)         |  | 46.26         |  | 9.71                  |  | 41.00                  |  | 18.77
|2001               |  | 24.35         |  | 1.70                  |  | 24.15                  |  | 1.95 
|2002               |  | 4.30          |  | 0.93                  |  | 4.40                   |  | 0.90 
|Quarter ended      |  |               |  |                       |  |                        |  |      
|March 31, 2001     |  | 24.35         |  | 6.85                  |  | 24.15                  |  | 6.67 
|June 30, 2001      |  | 7.35          |  | 2.98                  |  | 7.44                   |  | 2.95 
|Sept. 30, 2001     |  | 4.31          |  | 1.70                  |  | 4.34                   |  | 1.97 
|Dec. 31, 2001      |  | 4.25          |  | 1.80                  |  | 4.23                   |  | 1.95 
|March 31, 2002     |  | 4.30          |  | 2.85                  |  | 4.40                   |  | 2.89 
|June 30, 2002      |  | 4.15          |  | 2.25                  |  | 4.12                   |  | 2.50 
|Sept. 30, 2002     |  | 2.52          |  | 0.93                  |  | 2.56                   |  | 0.99 
|Dec. 31, 2002      |  | 1.94          |  | 0.93                  |  | 1.99                   |  | 0.90 
|Month ended        |  |               |  |                       |  |                        |  |      
|Sept. 30, 2002     |  | 1.33          |  | 0.93                  |  | 1.32                   |  | 0.99 
|Oct. 31, 2002      |  | 1.53          |  | 0.93                  |  | 0.90                   |  | 1.60 
|Nov. 30, 2002      |  | 1.75          |  | 1.40                  |  | 1.45                   |  | 1.84 
|Dec. 31, 2002      |  | 1.94          |  | 1.50                  |  | 1.66                   |  | 1.99 
|Jan. 31, 2003      |  | 1.63          |  | 1.25                  |  | 1.80                   |  | 1.26 
|Feb. 28, 2003      |  | 1.50          |  | 1.10                  |  | 1.58                   |  | 1.24 

---

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Item 10.    Additional Information

Memorandum and Articles of Association

A description of the material rights of holders of our ordinary shares under English law and the material provisions of our Memorandum and Articles of Association
may be found in our registration statement on Form F-1 dated and filed with the Securities and Exchange Commission on October 16, 2000, under the headings "Description of
Share Capital" and "Description of American Depositary Receipts." Copies of our Memorandum and Articles of Association were filed as exhibits to that registration statement and are incorporated into
this Annual Report on Form 20-F by reference to the registration statement.

Exchange controls and other limitations affecting shareholders

There are currently no foreign exchange control restrictions imposed by English law on the import or export of capital, including the availability of cash and
cash equivalents for our use; or on our ability to pay dividends, interest or other payments to non-resident holders of our ordinary shares or ADSs; or on the conduct of our operations.

Taxation

The following discussion generally summarizes certain material United States federal tax consequences and United Kingdom tax consequences of the acquisition,
ownership and disposition of shares, including shares represented by ADSs. This summary applies to you only if you are a beneficial owner of shares or ADSs and you are, for United States federal
income tax purposes:



If
you are a beneficial owner of shares or ADSs and you are in one of the above categories, then you are a U.S. holder.

This
summary applies only to U.S. holders that will hold ADSs or shares as capital assets for United States tax purposes. This summary also does not address tax consequences
arising under the laws of any state, locality or other taxing jurisdiction other than the United States or the United Kingdom.

The
statements of U.S. and U.K. tax law set out below are based:



50

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The
following summary is of a general nature only and does not address all of the tax consequences that may be relevant to you in light of your particular situation. In particular, this
discussion deals with holders that hold shares or ADSs as capital assets, as that term is defined in the Internal Revenue Code, and does not address the tax considerations relevant to
U.S. holders that may be subject to special rules, such as:



In
addition, the summary of U.K. tax considerations does not, except where indicated otherwise, apply to you if:



You
should consult your own tax advisers as to the particular tax consequences to you under U.K., U.S. federal, state and local and other foreign laws, of the acquisition,
ownership and disposition of ADSs or shares. For U.S. federal income tax purposes, U.S. holders of ADSs will be treated as owners of the underlying shares attributable thereto and this
discussion of U.S. federal tax consequences to U.S. holders of ADSs applies as well to U.S. holders of shares.

Taxation of dividends



Subject to the discussion below under "Passive Foreign Investment Company considerations," for U.S. federal income tax purposes, the gross amount of any
distribution, other than a mere pro rata distribution of shares, made out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes:



51

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Such
demands will not be eligible for a dividends received deduction generally allowed to corporations. If dividends paid by Autonomy were to exceed our current and accumulated earnings
and profits as determined for U.S. federal income tax purposes, any excess would be treated as a non-taxable return of capital to the extent of the U.S. holder's adjusted
basis in the ADSs or shares, and thereafter as capital gain.

Dividends
generally will be paid in pounds sterling. You should determine the U.S. dollar amount includible in your income by reference to the spot exchange rate in effect on the
date of receipt by the depositary in the case of ADSs or the date of receipt by you if you are a U.S. holder of shares. If you convert payments into dollars on the day you receive them, you
should not be required to recognize foreign currency gain or loss. Any gain or loss recognized upon a subsequent sale or conversion of the pounds sterling will be U.S. source ordinary income or
loss. A U.S. holder entitled to the benefits of the U.K.-U.S. income tax treaty will be entitled to a U.K. tax credit equal to the amount of the tax credit that
U.K. resident individuals can claim against U.K. tax imposed on the dividend. The tax credit will be subject to a U.K. withholding tax equal to the lesser of 15% of the sum of the
dividend and the tax credit or the amount of the tax credit. Under present law, the U.K. withholding tax generally will equal the tax credit. If you claim a foreign tax credit, you should file a
completed U.S. Internal Revenue Service Form 8833 with your federal income tax return for the relevant year. The rules relating to the determination of the foreign tax credit are complex and
you should consult your own tax advisors to determine whether and to what extent a credit would be available. In lieu of claiming a credit, you may claim a deduction of foreign taxes paid in the
taxable year. A deduction generally does not reduce U.S. tax on a dollar-for-dollar basis like a tax credit.



Under current U.K. tax legislation, no tax will be withheld from cash dividends paid by us. Under current U.K. tax legislation and the
U.K.-U.S. income tax treaty, U.S. holders of shares or ADSs will not receive any payment from the U.K. Inland Revenue in respect of any tax credit on cash dividends paid by
us. This is because the U.K.-U.S. income tax treaty provides that the tax credit which is currently 10% to which an individual resident in the U.K. would have been entitled had he received
the dividend will, in the case of U.S. holders, be subject to a notional U.K. withholding tax at the rate of 15% of the aggregate of the cash dividend paid and the tax credit.

Taxation of capital gains



Upon the sale or disposition of an ADS or share, you will recognize a gain or a loss for U.S. federal income tax purposes in an amount equal to the difference
between the amount realized and your adjusted tax basis in the ADS or share. Subject to the discussion below under "Passive Foreign Investment Company considerations," such gain or loss will generally
be a capital gain or loss. If you are an individual, any such capital gain will generally be subject to U.S. federal income tax at preferential rates if specified minimum holding periods are
met.

Generally,
any capital gain realized by an individual will be subject to a maximum tax rate of 20% for ADSs or shares held for more than one year. Gains on the sale of ADSs or shares
held for one year or less will be treated as short-term capital gain and taxed as ordinary income at the U.S. holder's marginal income tax rate. Capital gains arising on the sale or
disposition of ADSs or shares will be U.S. source gains and losses for purposes of the U.S. foreign tax credit limitations. Capital losses may only be used to offset capital gains except that
U.S. individuals may deduct up to $3,000 of net capital losses against ordinary income. Prospective U.S. investors should consult their own tax advisors regarding the availability of this offset.

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A
U.S. holder that is liable for both U.K. and U.S. tax on a gain on the disposal of shares or ADSs should generally be entitled, pursuant to the
U.K-U.S. income tax treaty and subject to certain limitations, to credit the amount of U.K. capital gains or corporation tax, as the case may be, paid in respect of such gain
against such U.S. holder's U.S. federal income tax liability in respect of such gain. However, U.K. tax rates may be higher than U.S. tax rates.

U.S. holders
should consult their own tax advisers to determine their entitlement to credit U.K. tax against their U.S. federal income tax liability.



Subject to the comments below, you will not normally be liable for U.K. tax on capital gains realized on the disposal of a share or ADS unless, at the time
of the disposal, you carry on a trade, including a profession or vocation, in the U.K. through a branch or agency and such share or ADS is, or has been, used, held or acquired for the purposes
of such trade or branch or agency.

A
holder of shares or ADSs who is an individual and who has on or after March 17, 1998, ceased to be resident or ordinarily resident for tax purposes in the U.K. but who again
becomes resident or ordinarily resident in the U.K. within a period of less than five complete tax years and who disposes of shares or ADSs during that period which were acquired while resident
or ordinarily resident in the U.K. may still be liable to U.K. tax on capital gains on return to the U.K., notwithstanding that he or she is not resident or ordinarily resident in
the U.K. at the time of the disposal.

Passive Foreign Investment Company considerations

We believe that we will not be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our current taxable year
ending December 31, 2002, or for future taxable years. In addition, we intend to manage our business so as not to become a PFIC. However, an actual determination of PFIC status is
fundamentally factual in nature and will depend on, among other things, a valuation of our assets, including goodwill and other intangible assets. No assurance can be given regarding our PFIC status
in future years.

We
will be classified as a PFIC in a particular taxable year if either:



If
we are classified as a PFIC, generally any gain recognized by a U.S. holder upon the sale or disposition of our ADSs or shares, or the receipt of certain distributions, would
be treated as ordinary income. In this case, this income would be allocated over the holding period of the U.S. holder and an interest charge would be imposed on the amount of deferred tax on
such income allocated to prior taxable years.

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If
we were determined to be a PFIC, however, a U.S holder could elect to treat his or her ADSs or shares as an interest in a qualified electing fund, by making a "QEF
Election," in which case, the U.S. holder would be required to include in income his or her proportionate share of Autonomy's income and net capital gain in years in which we were
a PFIC, but any gain subsequently recognized upon the sale by such U.S. holder of the ADSs or shares would generally be taxed as a capital gain. Alternatively, if our stock were treated as
marketable stock for PFIC purposes a U.S. holder could make a "Mark-to-Market Election", pursuant to which the U.S. holder would be required to include as
ordinary income annually the excess of the fair market value of the ADSs or shares over the U.S. holder's basis therein. Any gain subsequently recognized upon the disposition by such
U.S. holder of the ADSs or shares would also be taxed as ordinary income in the year of the disposition. Your basis in the shares or ADSs will be adjusted to reflect any such income amounts.

We
will continue to monitor our status in relation to our being considered a PFIC, and we will, promptly following the end of each taxable year, notify U.S. holders if we
believe we are properly classified as a PFIC for that taxable year to enable U.S. holders to consider whether or not to make a QEF Election or make a
Mark-to-Market Election. In addition, we intend to comply with the applicable information reporting requirements so that U.S. holders are able to make a QEF Election.

You
should consult with your own tax advisers regarding the eligibility, manner and advisability of making the QEF Election or Mark-to-Market Election if we are
treated as a PFIC.

United Kingdom inheritance tax

Subject to the discussion of the Estate and Gift Tax Convention in the next paragraph, a share, or possible an ADS, beneficially owned by an individual may be
subject to U.K. inheritance tax on the death of the individual or, in some circumstances, if the shares or ADSs are the subject of a lifetime gift, including a transfer at less than full market value.
Inheritance tax is not generally chargeable on gifts to individuals or to some types of settlement made more than seven years before the death of the donor. Special rules apply to shares or ADSs held
in a settlement.

An
ADS or share beneficially owned by an individual U.S. holder who is domiciled in the United States for the purposes of the Estate and Gift Tax Convention, and not also domiciled or
deemed domiciled in the U.K. and not a U.K. national, is not subject to U.K. inheritance tax on the individual's death or on a gift made by the individual during his lifetime, except where the
ADS or share:



The
Estate and Gift Tax Convention generally provides a credit against U.S. federal tax liability for the amount of any tax paid in the U.K. in a case where the share or ADS is
subject to both U.K. inheritance tax and to U.S. federal estate or gift tax.

United States gift and estate taxes

An individual U.S. holder will be subject to U.S. gift and estate taxes with respect to the ADSs and shares in the same manner and to the same extent as with
respect to other types of personal property.

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United Kingdom Stamp Duty and Stamp Duty Reserve Tax (SDRT)

The acquisition or transfer of shares other than by gift or on death is generally subject to U.K. stamp duty at 0.5 percent of the amount or value
of the consideration rounded up to the nearest £5.00. There is also a charge to SDRT at 0.5 percent of the amount or value of the consideration on an unconditional agreement to
transfer shares but a refund of SDRT may be obtained if an instrument to transfer the shares is executed and stamp duty is paid within six years of the date of the unconditional agreement or, in the
case of a conditional agreement, within six years of when the condition is satisfied. Stamp duty and SDRT is generally payable by the purchaser.

Stamp
duty or SDRT at 1.5 percent of the amount or value of the consideration price arises upon the issue or transfer of shares with the custodian of a depositary (or certain
persons providing clearance services) or their nominees or agents, but no SDRT will be payable if stamp duty equal to the SDRT liability is paid. This would include transfers of ordinary shares in
registered form to the custodian for deposits under the deposit agreement. In accordance with the terms of the deposit agreement, any tax or duty payable by the custodian on any such transfer of
ordinary shares in registered form will be charged by the custodian to the party to whom ADRs are delivered against such transfers.

There
is no U.K. stamp duty on the acquisition or transfer of an ADS, provided that any instrument of transfer or any agreement to transfer the ADS is executed and retained
outside the United Kingdom. An agreement to transfer an ADS will not give rise to any SDRT. The transfer of shares by the custodian of the depositary or its nominee or agent to the ADS holder will
attract a fixed stamp duty of £5.00, provided the ADS holder is not transferring beneficial ownership.

Interest
at a variable rate which is fixed by U.K. regulations is payable on stamp duty due on any instrument which is not paid within 30 days of execution of the instrument. This
will also apply to instruments executed outside the United Kingdom, if they are later brought into the United Kingdom, thereby becoming liable to stamp duty, in which case interest on unpaid stamp
duty will accrue by reference to the date of execution. Penalties may also become chargeable in respect of stamp duty not paid by the due date. Equivalent rules are in force to charge interest and
penalties in respect of SDRT that is not paid by the seventh day of the calendar month following the month in which the instrument was executed, wherever execution takes place.

United States information reporting and backup withholding

Dividend payments with respect to ADSs or shares and proceeds from the sale, exchange or redemption of ADSs or shares may be subject to information reporting to
the IRS and possible U.S. backup withholding (currently at a 30% rate). Backup withholding will not apply to you, however, if you furnish a correct taxpayer identification number or certificate of
foreign status and make any other required certification or if you are otherwise exempt from backup withholding. If you are required to establish your exempt status, you generally must provide such
certification on IRS Form W-9 in the case of U.S. persons and on IRS Form W-8BEN in the case of non-U.S. persons.

Amounts
withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup
withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information.

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Documents on Display

We are subject to the information requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements, we file reports and
other information with the Securities and Exchange Commission. Materials, including this Annual Report and the exhibits hereto, filed subsequent to November 2002, may be inspected on the SEC's
EDGAR system at www.sec.gov. Materials filed prior to November 2002 may be inspected and copied at the public reference facilities of the Commission located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at the Commission's regional offices. Please call the Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. You may also obtain copies of materials filed prior to November 2002, upon payment of a duplication fee, from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549.

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Item 11.    Quantitative and Qualitative Disclosures About Market Risk

The following discussion of our risk-management activities includes "forward-looking" statements that involve risks and uncertainties. Actual results
could differ materially from those projected in the forward-looking statements.

This
analysis presents the hypothetical loss in earnings, cash flows or fair values of the financial instruments which were held by us at December 31, 2002, 2001 and 2000, and
which were sensitive to changes in interest rates and foreign exchange rates.

Short-term investments

Our exposure to market risk for changes in interest rates relates primarily to the return we will receive on our cash equivalents and short-term
investments. We do not use derivative financial instruments in our investment portfolio. We are averse to principal loss and manage the safety and preservation of our invested funds by limiting
default and market risks by investing with high rated financial institutions. Our portfolio is comprised entirely of cash and cash equivalents.

As
of December 31, 2002, we had cash equivalents of $147.5 million with a weighted average interest rate of 3.47%. A hypothetical increase or decrease of 10% in the
December 31, 2002 weighted average interest rate to 3.82% or 3.12%, respectively, would cause the fair value of these investments to change by an insignificant amount. As of December 31,
2001, we had cash equivalents of $143.6 million with a weighted average interest rate of 4.58%. A hypothetical increase or decrease of 10% in the December 31, 2001 weighted average
interest rate to 5.04% or 4.12%, respectively, would cause the fair value of these investments to change by an insignificant amount.

Impact of foreign currency rate changes

We invoice all of our customers from our U.S. operations in U.S. dollars and all these revenues are collected in U.S. dollars. Revenues related to sales from our
U.K. operations are generally invoiced in either pounds sterling or the local currency of the licensee (generally the euro). Revenues related to sales from our European operations are generally
invoice in euros. Revenues related to sales from our other operations, such as Singapore and Japan, are generally invoiced and collected in U.S. dollars, although from time to time we do invoice and
collect in local currencies such as the Singapore Dollar. We have significant cash balances in both U.S. dollars and pounds sterling, but do not have significant cash balances denominated in other
currencies. Because we hold U.S. dollar-denominated cash balances in the U.K., currency fluctuations can have an impact on our results. We do not engage in foreign currency hedging activities
currently, but we may do so in the future.

As
of December 31, 2002, a hypothetical increase or decrease in the rate of exchange between the U.S. dollar and the pound sterling would effect the carrying value of the pound
sterling deposits but would have no profit impact as exchange differences are taken through accumulated other comprehensive income. In addition there would be no material profit impact due to foreign
currency transaction exposure.

Item 12.    Description of Securities Other than Equity Securities

Not applicable.

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PART II

Item 13.    Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.    Material Modifications to the Rights of Security Holders and Use of Proceeds

USE OF PROCEEDS

In May 2000, we successfully completed a public offering of our securities, our initial public offering in the United States. The shares to be sold in the
U.S. portion of the offering were registered under the U.S. Securities Act of 1933 on Registration Statement on Form F-1, Registration no. 333-11804. The
registration statement was publicly filed with the SEC on April 10, 2000, and declared effective by the SEC on May 8, 2000. The portion of the public offering conducted in the United
States closed on May 12, 2000, and terminated on that date. Deutsche Banc Alex. Brown acted as managing underwriter for this offering.

The
registration statement registered 7,590,000 of our ordinary shares, nominal value 1/3p per share after giving effect to a 3-for-1 stock split
effective August 1, 2000, of which 2,640,000 were registered on our behalf and 4,950,000 were registered on behalf of selling shareholders, at a proposed maximum aggregate offering price of
$374.4 million. A total of 6,600,000 shares were sold at an aggregate offering price of $272.8 million, including 2,640,000 on our behalf and 3,960,000 on behalf of selling shareholders.
No distinction was made between the shares registered for sale by our company and shares registered for sale by certain private shareholders as selling shareholders. The shares registered on the
registration statement included shares that were to be offered outside the United States in transactions not subject to registration under the U.S. Securities Act but that might be resold from time to
time in the United States in transactions subject to registration under that Act.

In
connection with the offering, we paid underwriters' discounts and commissions of $5.7 million, underwriters' and other expenses of $3.7 million, for total expenses of
$9.4 million. These amounts consisted entirely of payment to persons other than our directors and officers, major shareholders and affiliates.

The
net proceeds to us from the offering, after deduction of the expenses listed above, totalled approximately $99.7 million, including the proceeds of shares sold offshore in
transactions not subject to registration under the U.S. Securities Act by virtue of Regulation S thereunder.

Proceeds
have been used for general working capital, although less than 5% of the net proceeds have been used for all purposes.

Item 15.    Controls and Procedures

(a)Evaluation of disclosure controls and procedures.    Our Chief Executive Officer and our Chief Financial
Officer, after evaluating the effectiveness of Autonomy's "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and
15-d-14(c)) as of a date within 90 days before the filing date of this Annual Report, have concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by Autonomy in reports that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including our Chief
Executive Officer and our Chief Financial officer, to allow timely decisions regarding required disclosure, and (ii) is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

58

---

(b)Changes in internal controls.    There were no significant changes in our internal controls or to our knowledge
in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore there were no
corrective actions taken.

It
should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and we cannot assure investors that any design will succeed in achieving its stated goals under all potential future conditions. Because of
the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 16A.    Audit Committee Financial Expert

Not applicable.

Item 16B.    Code of Ethics

Not applicable.

PART III

Item 17.

Not applicable.

Item 18.    Financial Statements

The following financial statements and related reports of independent auditors are filed as part of this Annual Report:

|                                                                                                                |  | Page
|--------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Auditors                                                                                  |  | F-2 
|Consent of Independent Auditors                                                                                 |  | F-3 
|Report of Independent Auditors                                                                                  |  | F-4 
|Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002                      |  | F-5 
|Consolidated Balance Sheets as of December 31, 2000, 2001 and 2002                                              |  | F-6 
|Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2000, 2001 and 2002 |  | F-7 
|Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002                      |  | F-8 
|Notes to the Consolidated Financial Statements                                                                  |  | F-9 

59

---

Item 19.    Exhibits

|Exhibit Number |  | Exhibit                                                                                                                                                     
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1            |  | Memorandum of Association of the Registrant(1)                                                                                                              
|1.2            |  | Articles of Association of the Registrant(1)                                                                                                                
|2.1            |  | Specimen ordinary share certificate(1)                                                                                                                      
|2.2            |  | Form of Deposit Agreement(3)                                                                                                                                
|2.3            |  | Form of American Depositary Receipt(1)                                                                                                                      
|4.1            |  | Employment Agreement, dated July 9, 1998, between the Registrant and Michael Lynch(1)                                                                       
|4.2            |  | Amendment to Employment Agreement, dated December 28, 1999, between the Registrant and Michael Lynch(2)                                                     
|4.3            |  | Employment Agreement, dated July 9, 1998, between the Registrant and Richard Gaunt(1)                                                                       
|4.4            |  | Amendment to Employment Agreement, dated December 28, 1999, between the Registrant and Richard Gaunt(2)                                                     
|4.8            |  | Employment Agreement, dated July 7, 2000, between the Registrant and Andrew M. Kanter(2)                                                                    
|4.9            |  | Non-executive Director's Appointment Letter, dated January 7, 2000, between the Registrant and Barry Ariko(1)                                               
|4.10           |  | Non-executive Director's Appointment Letter, dated July 2, 1998, between the Registrant and John McMonigall(1)                                              
|4.11           |  | Non-executive Director's Appointment Letter, dated February 23, 2000, between the Registrant and Richard Perle(1)                                           
|4.12           |  | Letter Agreement, dated July 9, 1998, among the Registrant, Cambridge Neurodynamics Limited and Michael Lynch(1)                                            
|4.13           |  | Letter Agreement, dated July 9, 1998, among the Registrant, Cambridge Neurodynamics Limited and Richard Gaunt(1)                                            
|4.14           |  | Amendment to Letter Agreement, dated December 28, 1999, among the Registrant, Cambridge Neurodynamics Limited, Michael Lynch and Richard Gaunt(2)           
|4.16           |  | 1996 U.K. Discretionary Option Scheme(1)                                                                                                                    
|4.17           |  | 1998 U.S. Share Option Plan(1)                                                                                                                              
|4.19           |  | Office Lease Agreement, dated December 1, 1998, between EOP-301 Howard Street, L.L.C. and Autonomy, Inc., and the First Amendment, dated November 8, 1999(2)
|4.20           |  | Agreement for Lease, dated September 18, 2000, between the Registrant and The Crown Estate Commissioners(2)                                                 
|               |  |                                                                                                                                                             

60

---

|4.21 |  | Shareholders Agreement, dated May 17, 2000, among Anthony John Robinson, Aidan Richard Paul, Cambridge University Technical Services Limited, Autonomy Corporation plc and SoftSound Limited(2)
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.22 |  | Form of Indemnification Agreements, dated October 10, 2000, between the Registrant and each of Richard Gaunt, Barry Ariko and John McMonigall(2)                                               
|4.23 |  | Form of Indemnification Agreement, dated October 3, 2000, between the Registrant and Andrew Kanter(2)                                                                                          
|4.24 |  | Employment Agreement, dated June 29, 2001, between the Registrant and Sushovan Hussain(3)                                                                                                      
|8.1  |  | List of subsidiaries of the Registrant                                                                                                                                                         
|10.1 |  | Sarbanes-Oxley CEO and CFO Certifications                                                                                                                                                      
|99.1 |  | Letter to Securities and Exchange Commission re. Arthur Andersen(3)                                                                                                                            

---

61

---

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report on its behalf.

|Date: March 13, 2003 |  | AUTONOMY CORPORATION PLC
|-------------------- |  | ------------------------
|                     |  |                         
|                     |  | Name:
Title:            
|                     |  |                         
|                     |  | Name:
Title:            

---

INDEX TO EXHIBITS

|Exhibit Number |  | Exhibit                                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1            |  | Memorandum of Association of the Registrant(1)                                                                                                                                                 
|1.2            |  | Articles of Association of the Registrant(1)                                                                                                                                                   
|2.1            |  | Specimen ordinary share certificate(1)                                                                                                                                                         
|2.2            |  | Form of Deposit Agreement(3)                                                                                                                                                                   
|2.3            |  | Form of American Depositary Receipt(1)                                                                                                                                                         
|4.1            |  | Employment Agreement, dated July 9, 1998, between the Registrant and Michael Lynch(1)                                                                                                          
|4.2            |  | Amendment to Employment Agreement, dated December 28, 1999, between the Registrant and Michael Lynch(2)                                                                                        
|4.3            |  | Employment Agreement, dated July 9, 1998, between the Registrant and Richard Gaunt(1)                                                                                                          
|4.4            |  | Amendment to Employment Agreement, dated December 28, 1999, between the Registrant and Richard Gaunt(2)                                                                                        
|4.8            |  | Employment Agreement, dated July 7, 2000, between the Registrant and Andrew M. Kanter(2)                                                                                                       
|4.9            |  | Non-executive Director's Appointment Letter, dated January 7, 2000, between the Registrant and Barry Ariko(1)                                                                                  
|4.10           |  | Non-executive Director's Appointment Letter, dated July 2, 1998, between the Registrant and John McMonigall(1)                                                                                 
|4.11           |  | Non-executive Director's Appointment Letter, dated February 23, 2000, between the Registrant and Richard Perle(1)                                                                              
|4.12           |  | Letter Agreement, dated July 9, 1998, among the Registrant, Cambridge Neurodynamics Limited and Michael Lynch(1)                                                                               
|4.13           |  | Letter Agreement, dated July 9, 1998, among the Registrant, Cambridge Neurodynamics Limited and Richard Gaunt(1)                                                                               
|4.14           |  | Amendment to Letter Agreement, dated December 28, 1999, among the Registrant, Cambridge Neurodynamics Limited, Michael Lynch and Richard Gaunt(2)                                              
|4.16           |  | 1996 U.K. Discretionary Option Scheme(1)                                                                                                                                                       
|4.17           |  | 1998 U.S. Share Option Plan(1)                                                                                                                                                                 
|4.19           |  | Office Lease Agreement, dated December 1, 1998, between EOP-301 Howard Street, L.L.C. and Autonomy, Inc., and the First Amendment, dated November 8, 1999(2)                                   
|4.20           |  | Agreement for Lease, dated September 18, 2000, between the Registrant and The Crown Estate Commissioners(2)                                                                                    
|4.21           |  | Shareholders Agreement, dated May 17, 2000, among Anthony John Robinson, Aidan Richard Paul, Cambridge University Technical Services Limited, Autonomy Corporation plc and SoftSound Limited(2)
|4.22           |  | Form of Indemnification Agreements, dated October 10, 2000, between he Registrant and each of Richard Gaunt, Barry Ariko and John McMonigall(2)                                                
|4.23           |  | Form of Indemnification Agreement, dated October 3, 2000, between the Registrant and Andrew Kanter(2)                                                                                          
|               |  |                                                                                                                                                                                                

---

|4.24 |  | Employment Agreement, dated June 29, 2001, between the Registrant and Sushovan Hussain(3)
|---- |  | -----------------------------------------------------------------------------------------
|8.1  |  | List of subsidiaries of the Registrant                                                   
|10.1 |  | Sarbanes-Oxley CEO and CFO Certifications                                                
|99.1 |  | Letter to Securities and Exchange Commission re. Arthur Andersen(3)                      

---

---

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F of Autonomy Corporation plc (the "Company") for the period ended December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Dr. Michael R. Lynch, Chief Executive Officer of the Company, hereby certifies, pursuant to
18 U.S.C. Section 1350, that:

| |  | By: | /s/DR. MICHAEL R. LYNCHDr. Michael R. Lynch Chief Executive Officer
| |  | --- | -------------------------------------------------------------------

Dated:
March 13, 2003

---

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,  AS ADOPTED PURSUANT TO  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 20-F of Autonomy Corporation plc (the "Company") for the period ended December 31, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Sushovan Hussain, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C.
Section 1350, that:

| |  | By: | /s/SUSHOVAN HUSSAINSushovan Hussain Chief Financial
Officer
| |  | --- | -----------------------------------------------------------

Dated:
March 13, 2003

---



AUTONOMY CORPORATION PLC    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                |  | Page
|--------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Auditors                                                                                  |  | F-2 
|Consent of Independent Auditors                                                                                 |  | F-3 
|Report of Independent Auditors                                                                                  |  | F-4 
|Consolidated Statements of Operations for the years ended December 31, 2000, 2001 and 2002                      |  | F-5 
|Consolidated Balance Sheets as of December 31, 2000, 2001 and 2002                                              |  | F-6 
|Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 2000, 2001 and 2002 |  | F-7 
|Consolidated Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002                      |  | F-8 
|Notes to the Consolidated Financial Statements                                                                  |  | F-9 

F-1

---



AUTONOMY CORPORATION PLC    REPORT OF INDEPENDENT AUDITORS

2105065

To the Shareholders and the Board of Directors of Autonomy Corporation plc:

We have audited the accompanying consolidated balance sheet of Autonomy Corporation plc as of December 31, 2002, and the related consolidated
statements of operations, changes in shareholders' equity and cash flows for the year ended December 31, 2002. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of Autonomy Corporation plc as of
December 31, 2001 and 2000, and for each of the two years in the period ended December 31, 2001, were audited by other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements in their report dated February 15, 2002.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Autonomy Corporation plc at
December 31, 2002, and the consolidated results of its operations and its consolidated cash flows for the year ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States.

As
discussed above, the financial statements of Autonomy Corporation plc as of December 31, 2001 and 2000, and for each of the two years in the period ended December 31,
2001, were audited by other auditors who have ceased operations. As described in Note 7 these financial statements have been revised to include the transitional disclosures required by
Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. Our audit procedures with respect to
the disclosures in Note 7 with respect to 2001 and 2000 included (a) agreeing the previously reported net profit to the previously issued financial statements and the adjustments to
reported net profit representing amortization expense (including any related tax effects) recognized in those periods related to goodwill and intangible assets that are no longer being amortized, to
the Company's underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net profit to reported net profit. In our opinion, the
disclosures for 2001 and 2000 in Note 7 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial
statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the Company's 2001 and 2000
financial statements taken as a whole.

ERNST
& YOUNG LLP
Cambridge, England

February 17,
2003

F-2

---



AUTONOMY CORPORATION PLC    CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-12018) pertaining to the
Autonomy Corporation plc 1998 U.S. Share Option Plan, 1996 U.K. Discretionary Option Scheme and Options Granted to Certain Individuals Pursuant to written Compensation agreements of our report dated
February 17, 2003, with respect to the consolidated financial statements of Autonomy Corporation plc included in the Annual Report (Form 20-F) for the year ended
December 31, 2002.

ERNST &
YOUNG LLP
Cambridge, England

March 13,
2003

F-3

---



AUTONOMY CORPORATION PLC    REPORT OF INDEPENDENT AUDITORS

The following report was issued by Arthur Andersen on February 15, 2002 to the Directors and shareholders of Autonomy Corporation plc and included in the Company's
Annual Report on Form 20-F in respect of the year ended December 31, 2001 which was filed with the United States Securities and Exchange Commission. Arthur Andersen ceased
trading on August 31, 2002, and hence it is not possible to obtain a resigned opinion.

To the Board of Directors and Shareholders of Autonomy Corporation plc:

We have audited the financial statements of Autonomy Corporation plc for the years ended December 31, 2001, 2000 and 1999 which comprise the statement of
operations, balance sheet, statement of changes in shareholders' equity, statement of cash flows, and the related notes numbered 1 to 17.

Respective responsibilities of directors and auditors

These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on
our audits.

Basis of audit opinion

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

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Autonomy Corporation plc as of
December 31, 2001, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.

Arthur
Andersen
Chartered Accountants
Cambridge, England

February 15,
2002

F-4

---



AUTONOMY CORPORATION PLC    CONSOLIDATED STATEMENTS OF OPERATIONS  (in thousands of US dollars, except per share data)

|                                                                                                                 |                                     | Year Ended December 31,  |        
|---------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------ | -------
|
|Revenues                                                                                                         |                                     | $                        | 50,961 
|Cost of revenues                                                                                                 |                                     |                          | (934   
|                                                                                                                 |                                     |                          |        
|                                                                                                                 | Gross profit                        |                          |        
|                                                                                                                 |                                     |                          |        
|Operating expenses:                                                                                              |                                     |                          |        
|                                                                                                                 | General and administrative expenses |                          |        
|                                                                                                                 | Sales and marketing expenses        |                          |        
|                                                                                                                 | Provision for doubtful accounts     |                          |        
|                                                                                                                 | Research and development expenses   |                          |        
|                                                                                                                 | Gain on foreign exchange            |                          |        
|                                                                                                                 |                                     |                          |        
|                                                                                                                 |                                     | Total operating expenses |        
|                                                                                                                 |                                     |                          |        
|Profit from operations                                                                                           |                                     |                          | 3,341  
|Interest income                                                                                                  |                                     |                          | 5,120  
|Impairment of equity investments                                                                                 |                                     |                          | (1,943 
|                                                                                                                 |                                     |                          |        
|Profit before benefit (provision) for income taxes and share of loss of associated company and minority interest |                                     |                          | 6,518  
|Benefit (provision) for income taxes                                                                             |                                     |                          | 243    
|Share of loss of associated company and minority interest                                                        |                                     |                          | (634   
|                                                                                                                 |                                     |                          |        
|Net profit                                                                                                       |                                     | $                        | 6,127  
|                                                                                                                 |                                     |                          |        
|Basic earnings per share                                                                                         |                                     | $                        | 0.05   
|Diluted earnings per share                                                                                       |                                     | $                        | 0.05   
|Weighted average number of ordinary shares outstanding (thousands)                                               |                                     |                          | 126,716
|Weighted average number of ordinary shares outstanding, assuming dilution (thousands)                            |                                     |                          | 127,610
|                                                                                                                 |                                     |                          |        

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

F-5

---

AUTONOMY CORPORATION PLC    CONSOLIDATED BALANCE SHEETS  (in thousands of US dollars, except share data)

|                                     |                                                                                                                                                                                                             | As of December 31,        |      
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | -----
|
|ASSETS                               |                                                                                                                                                                                                             |                           |      
|Current assets                       |                                                                                                                                                                                                             |                           |      
|                                     | Cash and cash equivalents                                                                                                                                                                                   |                           | $    
|                                     | Accounts receivable, net of allowances for doubtful accounts of $3,218, $2,833 and $3,175 as of December 31, 2002, 2001 and 2000 respectively                                                               |                           |      
|                                     | Prepaid expenses and other current assets                                                                                                                                                                   |                           |      
|                                     | Deferred tax                                                                                                                                                                                                |                           |      
|                                     |                                                                                                                                                                                                             |                           |      
|                                     |                                                                                                                                                                                                             | Total current assets      |      
|Non-current assets                   |                                                                                                                                                                                                             |                           |      
|Plant and equipment, net             |                                                                                                                                                                                                             |                           | 2,082
|Goodwill, net                        |                                                                                                                                                                                                             |                           | 4,849
|Intangible assets, net               |                                                                                                                                                                                                             |                           | 836  
|Equity and other investments, net    |                                                                                                                                                                                                             |                           | 1,398
|Deferred tax                         |                                                                                                                                                                                                             |                           | 386  
|                                     |                                                                                                                                                                                                             |                           |      
|                                     | Total assets                                                                                                                                                                                                |                           | $    
|                                     |                                                                                                                                                                                                             |                           |      
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                                                                                                                                                                                             |                           |      
|Current liabilities                  |                                                                                                                                                                                                             |                           |      
|                                     | Accounts payable                                                                                                                                                                                            |                           | $    
|                                     | Taxes payable, including corporation tax                                                                                                                                                                    |                           |      
|                                     | Accrued expenses                                                                                                                                                                                            |                           |      
|                                     | Deferred revenue                                                                                                                                                                                            |                           |      
|                                     |                                                                                                                                                                                                             |                           |      
|                                     |                                                                                                                                                                                                             | Total current liabilities |      
|                                     |                                                                                                                                                                                                             |                           |      
|Shareholders' equity                 |                                                                                                                                                                                                             |                           |      
|                                     | Ordinary shares: 600,000,000 ordinary shares of nominal value 1/3p authorized, 122,609,095, 127,254,612 and 126,912,051 issued and outstanding at December 31, 2002, 2001 and 2000, respectively
(note 11). |                           |      
|                                     | Additional paid-in capital                                                                                                                                                                                  |                           |      
|                                     | Treasury stock, at cost                                                                                                                                                                                     |                           |      
|                                     | Retained earnings (deficit)                                                                                                                                                                                 |                           |      
|                                     | Accumulated other comprehensive income (loss)                                                                                                                                                               |                           |      
|                                     |                                                                                                                                                                                                             |                           |      
|                                     | Total shareholders' equity                                                                                                                                                                                  |                           |      
|                                     |                                                                                                                                                                                                             |                           |      
|                                     | Total liabilities and shareholders' equity                                                                                                                                                                  |                           | $    
|                                     |                                                                                                                                                                                                             |                           |      

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

F-6

---



AUTONOMY CORPORATION PLC    CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY  (in thousands of US dollars, except share data)

|                                                   |  | Ordinary shares of 1/3p |   |   |     |   |   |         |   |   |        |   |   |         |  
|-------------------------------------------------- |  | ----------------------- | - | - | --- | - | - | ------- | - | - | ------ | - | - | ------- | -
|
|
|Balance at January 1, 2000                         |  | 122,170,875             |   | $ | 635 |   | $ | 49,673  |   |   |        |   | $ | (20,197 | )
|Share options exercised                            |  | 2,018,303               |   |   | 10  |   |   | 3,375   |   |   |        |   |   |        |  
|Public offering on May 8, 2000                     |  | 2,640,000               |   |   | 14  |   |   | 99,704  |   |   |        |   |   |        |  
|Share based compensation                           |  |                        |   |   |    |   |   | 105     |   |   |        |   |   |        |  
|Currency translation adjustments                   |  |                        |   |   |    |   |   |        |   |   |        |   |   |        |  
|Acquisition of remaining 66.66% interest in Nordic |  | 82,873                  |   |   |    |   |   | 4,423   |   |   |        |   |   |        |  
|Net profit                                         |  |                        |   |   |    |   |   |        |   |   |        |   |   | 14,545  |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|Comprehensive income                               |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|Balance at December 31, 2000                       |  | 126,912,051             |   |   | 659 |   |   | 157,280 |   |   |        |   |   | (5,652  | )
|Share options exercised                            |  | 342,561                 |   |   | 2   |   |   | 727     |   |   |        |   |   |        |  
|Share based compensation                           |  |                        |   |   |    |   |   | (197    | ) |   |        |   |   |        |  
|Employee benefit trust                             |  |                        |   |   |    |   |   | 677     |   |   |        |   |   | (519    | )
|Currency translation adjustments                   |  |                        |   |   |    |   |   |        |   |   |        |   |   |        |  
|Net profit                                         |  |                        |   |   |    |   |   |        |   |   |        |   |   | 9,366   |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|Comprehensive income                               |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|Balance at December 31, 2001                       |  | 127,254,612             |   |   | 661 |   |   | 158,487 |   |   |        |   |   | 3,195   |  
|Share options exercised                            |  | 334,769                 |   |   | 2   |   |   | 992     |   |   |        |   |   |        |  
|Employee benefit trust                             |  |                        |   |   |    |   |   | 30      |   |   |        |   |   |        |  
|Shares repurchased and cancelled                   |  | (4,980,286              | ) |   | (26 | ) |   | (11,852 | ) |   |        |   |   |        |  
|Treasury stock purchased                           |  |                        |   |   |    |   |   |        |   | $ | (1,290 | ) |   |        |  
|Currency translation adjustments                   |  |                        |   |   |    |   |   |        |   |   |        |   |   |        |  
|Net profit                                         |  |                        |   |   |    |   |   |        |   |   |        |   |   | 6,127   |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|Comprehensive income                               |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  
|Balance at December 31, 2002                       |  | 122,609,095             |   | $ | 637 |   | $ | 147,657 |   | $ | (1,290 | ) | $ | 9,322   |  
|                                                   |  |                         |   |   |     |   |   |         |   |   |        |   |   |         |  

---

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

F-7

---

AUTONOMY CORPORATION PLC    CONSOLIDATED STATEMENTS OF CASH FLOWS  (in thousands of US dollars)

|                                                                                  |                                                           | Year Ended December 31, |        
|--------------------------------------------------------------------------------- | --------------------------------------------------------- | ----------------------- | -------
|
|Cash flows from operating activities:                                             |                                                           |                         |        
|Net profit                                                                        |                                                           | $                       | 6,127  
|Adjustments to reconcile net profit to net cash provided by operating activities: |                                                           |                         |        
|                                                                                  | Depreciation and amortization                             |                         |        
|                                                                                  | Impairment of equity investments                          |                         |        
|                                                                                  | Revenue in exchange for equity investments                |                         |        
|                                                                                  | Increase in allowance for doubtful accounts               |                         |        
|                                                                                  | Deferred tax                                              |                         |        
|                                                                                  | Share-based compensation                                  |                         |        
|                                                                                  | Foreign currency movements                                |                         |        
|                                                                                  | Share of loss of associated company and minority interest |                         |        
|Changes in operating assets and liabilities                                       |                                                           |                         |        
|                                                                                  | Accounts receivable                                       |                         |        
|                                                                                  | Prepaid expenses and other current assets                 |                         |        
|                                                                                  | Deferred revenues                                         |                         |        
|                                                                                  | Accounts payable and taxes payable                        |                         |        
|                                                                                  | Accrued expenses and other liabilities                    |                         |        
|                                                                                  |                                                           |                         |        
|Net cash provided by operating activities                                         |                                                           |                         | 3,272  
|                                                                                  |                                                           |                         |        
|Cash flows from investing activities:                                             |                                                           |                         |        
|                                                                                  | Purchase of equipment                                     |                         |        
|                                                                                  | Cash from acquisitions                                    |                         |        
|                                                                                  | Purchase of intangibles                                   |                         |        
|                                                                                  | Purchase of investments                                   |                         |        
|                                                                                  |                                                           |                         |        
|Net cash used in investing activities                                             |                                                           |                         | (1,425 
|                                                                                  |                                                           |                         |        
|Cash flows from financing activities:                                             |                                                           |                         |        
|                                                                                  | Proceeds from issuance of shares, net of issuance costs   |                         |        
|                                                                                  | Purchase of company shares                                |                         |        
|                                                                                  |                                                           |                         |        
|Net cash provided by (used in) financing activities                               |                                                           |                         | (12,144
|                                                                                  |                                                           |                         |        
|Effect of foreign exchange on cash and cash equivalents                           |                                                           |                         | 14,165 
|Net increase in cash and cash equivalents                                         |                                                           |                         | 3,868  
|Beginning cash and cash equivalents                                               |                                                           |                         | 143,604
|                                                                                  |                                                           |                         |        
|Ending cash and cash equivalents                                                  |                                                           | $                       | 147,472
|                                                                                  |                                                           |                         |        
|Supplemental disclosure of cash flow information:                                 |                                                           |                         |        
|Income taxes paid                                                                |                                                           | $                       | (2,144 
|                                                                                  |                                                           |                         |        
|Supplemental disclosure of noncash investing and financing activities:            |                                                           |                         |        
|Issuance of ordinary shares for business acquisition                             |                                                           | $                       |       
|                                                                                  |                                                           |                         |        

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

F-8

---



AUTONOMY CORPORATION PLC    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1      The Company

Business of the Company

The Company develops and markets software products that are used in automating the management, processing and delivery of unstructured information sources across
the Internet and the extended enterprise. Unstructured information is data, such as Web pages, e-mails and word processing documents, that has not been organized and stored in specific
forms, such as relational databases. The Company's proprietary Dynamic Reasoning Engine, or DRE, applies sophisticated algorithms to analyze information, enabling operations to be performed
automatically on this information. This provides a platform for the Company's own products aimed at applications in new media, enterprise and e-commerce markets and increasingly a variety
of applications developed by third party OEMs.

The
Company is a holding company which principally operates through four trading subsidiaries, Autonomy Systems Limited and SoftSound Limited, based in Cambridge, England, Autonomy
Nordic AS, based in Oslo, Norway, and Autonomy, Inc., a New Jersey Corporation having its offices in San Francisco, California. The Company has also established a wholly-owned
subsidiary, Agentworld Inc., a New Jersey Corporation which to date has not traded. The Company owns 49% of Dremedia Limited, a company which extends Autonomy's infrastructure technology to
automating unstructured content such as video for interactive television and broadcast purposes. Autonomy Systems Limited and Autonomy Inc. were established in May 1995 and
March 1996 respectively. The Company acquired 33.34% of the ordinary shares of Autonomy Nordic AS on March 8, 1999 and the remaining 66.66% of the ordinary shares in
October 2000. On May 17, 2000 the Company acquired 60% of SoftSound Limited for cash consideration (see note 7Goodwill). On July 2, 2001, the Company acquired
49% of Dremedia Limited for a cash consideration of approximately $450,000.

Incorporation and History

The Company was incorporated in England and Wales as a public limited company on March 21, 1996.

Technological Changes

The market for the Company's products and services is characterized by rapid technological developments, frequent new product introductions and evolving industry
standards. These changes require the Company to continually improve the performance, features and reliability of its products, particularly in response to competition. There can be no assurance that
the Company will be successful in responding sufficiently to these developments, or that competitors will not introduce superior or more cost-effective technological improvements. In
addition, new products and enhancements could entail substantial development costs and could contain design flaws or other defects that could require costly modifications or lead to loss of customer
confidence. Any of these developments could have a material adverse effect on the Company's business, financial condition or operating results.

F-9

---

Dependence on Proprietary Technology

The Company's success is heavily dependent upon its proprietary technologies. The Company depends upon a combination of trade secrets, copyright and trademark
laws, license agreements, nondisclosure and other contractual provisions and various security measures to protect its technology rights. The Company currently has no patents filed. There can be no
assurance that any necessary patents relating to any of the Company's products will be issued. There can be no assurance that the Company will be able legally to prevent others from copying its
technology or producing compatible competing products. If others were to sell Autonomy-compatible products, the Company's sales and gross margins would be materially adversely affected.

Furthermore,
there can be no assurance that the Company's protective efforts will prevent others from misappropriating its technology or from independently developing similar or superior
technology. Any infringement of the Company's proprietary technology could have a material adverse effect on the Company.

Dependence on Key Individuals

The success of the Company depends to a significant extent upon a limited number of key employees including Dr. Michael R. Lynch, the developer of
the Company's proprietary Dynamic Reasoning Engine and managing director and chief executive officer, and Richard G. Gaunt, technical director and chief technical officer. The loss of either
Dr. Lynch or Mr. Gaunt or any other executive officer may have a material adverse effect on the business, operating results or financial condition of the Company.

Need for New Products

Substantially all of the Company's revenue is derived from sales of the current suite of products, which are expected to account for the majority of revenue for
the foreseeable future. As a result of this dependence on a single suite of products, a decline in pricing of, or market acceptance of, the products, due to competition, technological change or
otherwise, would have a material adverse effect on the Company's business, financial condition and results of operations. Because the market for information management products is characterized by
changing technology and periodic new product introductions, future financial performance will depend in part on the successful development and customer acceptance of new and enhanced versions of the
suite of products and other products on a timely basis. There can be no assurance that the Company will continue to be successful in marketing its current suite of products or any other new or
enhanced products.

2      Basis of Financial Statements

Basis of Presentation

The accompanying financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles ("US GAAP").

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ from these estimates.

Reclassifications

Certain reclassifications have been made to amounts reported in the prior years to conform to the current year presentation. These reclassifications have no
impact on net profit or shareholders' equity.

F-10

---

Companies Act 1985

These financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles and do not comprise the statutory accounts
of the Company within the meaning of Section 240 of the Companies Act 1985, as amended, of Great Britain (the "Companies Act"). The Company's statutory accounts are prepared in accordance with
accounting principles generally accepted in the United Kingdom ("UK GAAP"), in compliance with the Companies Act and are presented in pounds sterling. Statutory accounts for the years ended
December 31, 2001 and 2000, have been delivered to the Registrar of Companies for England and Wales. The auditors of those statutory accounts have given unqualified audit opinions thereon which
did not contain statements under Section 237(2) or (3) of the Companies Act. Statutory accounts for the year ended December 31, 2002, have been prepared and the auditors of those
statutory accounts have given an unqualified audit opinion thereon which did not contain statements under Section 237(2) or (3) of the Companies Act. Those accounts will be delivered to
the Registrar of Companies for England and Wales following required shareholder approval.

3      Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (together the "Group"). The Company's principal
trading subsidiaries, all of which have been consolidated in these financial statements, are Autonomy Systems Limited, Autonomy Inc., Autonomy Nordic AS, Autonomy Sweden AS and
SoftSound Limited. Until October 3, 2000, Autonomy Nordic AS, was accounted for in accordance with the equity method from the date of acquisition, being March 8, 1999, and after
October 3, 2000 Autonomy Nordic has been fully consolidated. On January 3, 2000, Autonomy Sweden AS was incorporated as a wholly owned subsidiary of Autonomy Nordic AS. All
intercompany transactions and balances between the companies have been eliminated on consolidation. The Company acquired a 49% stake in Dremedia on July 2, 2001, which has been accounted for in
accordance with the equity method.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid instruments with original maturities of less than or equal to three months from the date of purchase.

Intangible Assets

Software licenses are capitalized at cost and are amortized on a straight-line basis over a period of three years, which is their estimated useful
economic life. The Company follows the provisions of SFAS No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets", also implemented in 2002, for assessing whether
an impairment has occurred.

Goodwill

The Company capitalized goodwill, representing the excess of the fair value of the consideration given over the fair value of the identifiable assets and
liabilities acquired, on the acquisitions of SoftSound Limited and Autonomy Nordic AS (see Note 7). On January 1, 2002, the Company adopted the provisions of SFAS No. 142,
"Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill ceased to be amortized as of January 1, 2002, and is tested for impairment annually or whenever indicators of
impairment arise. Prior to the adoption of SFAS No. 142, goodwill arising from these acquisitions was amortized on a straight-line basis over the estimated useful economic life,
which was considered to be three years and ten years respectively.

F-11

---

Plant and Equipment

Plant and equipment is stated at historical cost. Depreciation is calculated using the straight-line method based on estimated useful lives of the
assets, as follows:

Fixtures, fittings and equipment

5 yearsComputer equipment

3 yearsLeasehold improvements

3 years


Other Investments

Other investments represent minority shareholdings in non-publicly traded companies and are stated at historical cost, less any provision for
impairment. The investments in non-publicly traded companies are considered impaired when a review of the investee's financial status, operations and other indicators of impairment
indicate that the carrying value of the investment is not likely to be recoverable.

Equity Method of Accounting

The Company's initial 33.34% investment in the ordinary shares of Autonomy Nordic AS, one of its value added resellers, was accounted for by the equity method of
accounting whereby the investment was carried at cost of acquisition, adjusted for the Company's share of undistributed earnings or losses since acquisition. The goodwill arising represents the
difference between the cost of the investment and the Company's proportionate share of the fair value of the net assets at the date of acquisition.

In
October 2000, the Company acquired the remaining 66.66% of Autonomy Nordic AS for aggregate consideration of $4.3 million in the form of 82,873 of the Company's
ordinary shares. As a result of the acquisition, Autonomy Nordic AS has become a wholly owned subsidiary of Autonomy Corporation plc. The net goodwill arising from this and the original
purchase is approximately $4.5 million.

With
the implementation of SFAS No. 142, amortization of goodwill recorded on the acquisition of Autonomy Nordic AS ceased on January 1, 2002.

The
Company acquired a 49% stake in Dremedia on July 2, 2001, for cash consideration of approximately $450,000, and which has been accounted for in accordance with the equity
method.

Share-based Compensation

The Company has adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting for
Stock-Based CompensationTransition and Disclosure." As permitted by the provisions of SFAS No. 123, the Company applies Accounting Principles Board Opinion 25 and related
interpretations in accounting for its employee share option plans using the intrinsic value method. As a result compensation expense related to options granted is measured based on the intrinsic value
of the underlying ordinary shares. See Note 11 for a summary of the pro-forma effects on reported net profit and earnings per share for fiscal periods 2002, 2001 and 2000 based on
the fair value of options and shares granted as prescribed by SFAS No. 123.

F-12

---

Income Taxes

The Company follows SFAS No. 109,"Accounting for Income Taxes." Under the asset and liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets are recognized in full subject to a valuation allowance to reduce the carrying amount of the asset to that which is more likely than not to be realized.

Revenue Recognition

The Company generates revenues from licensing the rights to use its software products directly to end-users and indirectly through resellers. The
Company also generates revenues from sales of consulting, customer support and training services performed for customers that license its products. To date, revenues from consultancy, customer support
and training have been less than 10% of total revenues and have not been separately analyzed.

Revenues
from software license agreements are recognized where there is persuasive evidence of an agreement with a customer, delivery of the software has taken place, collectability is
probable and the fee is fixed and determinable. If an acceptance period is required, revenues are recognized upon the earlier of customer acceptance or the expiration of the acceptance period. Revenue
is recognized on contracts with extended credit terms of up to one year providing the customer passes defined credit worthiness checks. If significant post-delivery obligations exist or if
a sale is subject to customer acceptance, revenues are deferred until no significant obligations remain or acceptance has occurred. Sales through resellers are recognized only where an end user is
identified.

The
Company also enters into reseller arrangements that typically provide for royalties payable to the Company based on agreed rates. Royalties are generally recognized as reported by
the reseller in re-licensing the Company's products to end-users. In certain circumstances, advance royalties are recognized upon the initial sale if all products subject to
sub-licensing are delivered in the current period, no right of return policy exists, collection is probable and the fee is fixed and determinable. If these conditions are not met, the
Company does not recognize advance royalties until reported by the reseller in re-licensing the Company's products to end-users.

Revenues
from customer support services are recognized ratably over the term of the support period. If customer support services are included free or at a discount in a license
agreement, these amounts are allocated out of the license fee at their fair market value based on the value established by independent sale of the customer support services to customers. Consulting
revenues are primarily related to implementation services performed on a time and materials basis under separable service arrangements related to the installation of the Company's software products.
Revenues from consulting and training services are recognized as services are performed. If a transaction includes both license and service elements, license fee revenue is recognized upon shipment of
the software, provided services do not include significant customisation or modification of the base product and the payment terms for licenses are not subject to acceptance criteria. In cases where
license fee payments are contingent upon the acceptance of services, revenues from both the license and the service elements are deferred until the acceptance criteria are met. Cost of license
revenues includes the cost of royalties due on third-party licenses, cost of product media, product duplication and manuals. Deferred revenues primarily relate to customer support fees, which have
been paid by the customers prior to the performance of these services. Deferred revenue is generally recognized over a period of one to three years.

Major Customers

In 2002, 2001 and 2000, no customer accounted for 10% or more of total revenues.

Geographical Analysis of Sales

A geographical analysis of sale is set out in note 15.

F-13

---

Software Development Costs

The Company capitalizes internally generated software development costs under the provision of SFAS No. 86, "Accounting for Costs of Computer Software to
be Sold, Leased or Otherwise Marketed." Capitalization of computer software development costs begins upon the establishment of technological feasibility, which the Company has defined as completion of
a working model. Thereafter all software production costs are capitalized and subsequently reported at the lower of cost or net realizable value. Capitalized costs are amortized based on current and
future revenue for each product with an annual minimum amortization charge equal to the straight-line amortization over the remaining estimated economic life of the product. Amounts that
could have been capitalized under this statement after consideration of the above factors were immaterial and, therefore, no software development costs have been capitalized by the Company to date.

Research and Development

Expenditure on research and development is expensed to operations in the year in which it is incurred.

Advertising

Advertising costs are expensed as incurred. During the years ended December 31, 2002, 2001 and 2000, advertising expenses were approximately
$3,992,000, $6,294,000 and $9,044,000, respectively.

Operating Leases

Costs in respect of operating leases are charged on a straight-line basis over the lease term even if the payments are not made on such a basis.

Foreign Currency

The functional currency of the Company and its UK subsidiaries is the pound sterling. The functional currencies of the other subsidiaries are their local
currencies.

In
accordance with SFAS No. 52 "Foreign Currency Translation," transactions in currencies other than the local currency are recorded at the rate of exchange ruling at the date of
the transaction. Monetary assets and liabilities denominated in currencies other than the local currency are translated at the exchange rates prevailing at the balance sheet dates.

On
consolidation, in accordance with SFAS No. 52, non-UK subsidiaries' assets and liabilities are translated to pounds sterling at the exchange rates prevailing at the
balance sheet dates and the statements of operations and cash flows are translated at the average exchange rates for the relevant periods. Exchange differences arising from the retranslation of the
opening net assets of non-UK subsidiaries, together with the differences arising between the statements of operations translated at the average exchange rates and the rates prevailing at
the balance sheet dates for the relevant periods, are recorded in a separate component of shareholders' equity.

All
other exchange gains and losses are recorded in the statements of operations.

These
financial statements are presented in U.S. dollars in accordance with SFAS No. 52, using the principles set out above to translate the pounds sterling consolidated
financial statements.

F-14

---

Comprehensive Income

The Company accounts for comprehensive income in accordance with SFAS No. 130 "Reporting Comprehensive Income" which requires companies to report all
changes in equity during a period, except those resulting from investment by owners and distribution to owners, in a financial statement for the period in which they are recognized. The Company has
chosen to disclose Comprehensive Income, which encompasses net income and foreign currency translation adjustments, in the Consolidated Statement of Changes in Shareholders' Equity.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash investments and trade receivables. The
Company has cash investment policies that limit investments to investment grade securities with credit worthy financial institutions. Accounts receivable are typically unsecured. The Company performs
ongoing credit evaluations of its customers' financial positions and maintains provisions for potential bad debt losses.

Accounting Pronouncements Issued But Not Yet Adopted

SFAS No. 146.    In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities." This standard requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit
or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant
closing, or other exit or disposal activity. The provisions of this Statement are effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier
adoption encouraged.

The
adoption of SFAS No. 146 is not expected to have a material impact on the financial position or the results of operations of the Company.

4      Share-based compensation expense

The amortization of share-based compensation expense (benefit) is summarized as follows (in thousands):

|                                  |  | Year Ended December 31,
|--------------------------------- |  | -----------------------
|
|Sales and marketing expenses      |  | $                      
|Research and development expenses |  |                        
|                                  |  |                        
|                                  |  | $                      
|                                  |  |                        

F-15

---

5      Plant and equipment

Plant and equipment consists of the following at December 31, 2002, 2001 and 2000 (in thousands):

|                                 |  | December 31, |       
|-------------------------------- |  | ------------ | ------
|
|Fixtures, fittings and equipment |  | $            | 615   
|Computer equipment               |  |              | 2,963 
|Leasehold improvements           |  |              | 1,201 
|                                 |  |              |       
|                                 |  |              | 4,779 
|Less accumulated depreciation    |  |              | (2,697
|                                 |  |              |       
|Net plant and equipment          |  | $            | 2,082 
|                                 |  |              |       

The depreciation expense for the years ended December 31, 2002, 2001 and 2000, respectively, was $844,000, $741,000
and $582,000.

6      Intangible assets

Intangible assets consists of the following at December 31, 2002, 2001 and 2000 (in thousands):

|                              |  | December 31, |       
|----------------------------- |  | ------------ | ------
|
|Software technology rights    |  | $            | 5,867 
|Less accumulated depreciation |  |              | (5,031
|                              |  |              |       
|Net intangible assets         |  | $            | 836   
|                              |  |              |       

The amortization expense of software technology rights for the years ended December 31, 2002, 2001 and 2000 respectively was
$303,000, $806,000 and $1,643,000. Software technology rights include the cost of software licenses to use third parties' software.

Estimated
aggregate amortization expense for each of the next five years is as follows (in thousands):

Year Ended December 31,2003

$
3672004


3202005


1492006


2007





7      Goodwill

December 31,2001

2000(in thousands)Goodwill, cost

$
5,226

$
5,329Less accumulated amortization


(837
)

(182
)Goodwill, net

$
4,389

$
5,147


F-16

---

Following adoption of SFAS 142, the net amount of goodwill brought forward of $4,389,000 becomes the cost of goodwill and is no longer
amortized.

On
May 17, 2000, the Company acquired 60% of SoftSound Limited for cash consideration of $908,000 with goodwill arising of $898,000. The acquisition was accounted for using the
purchase method. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed, based on their fair values at the date of acquisition.

In
October 2000, the Company acquired the remaining 66.66% of Autonomy Nordic AS, one of its value added resellers, for aggregate consideration of $4.3 million in
the form of 82,873 of the Company's ordinary shares. The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to the assets acquired and liabilities
assumed, based on their fair values at the date of acquisition. Autonomy Nordic AS results have been consolidated since October 2000. As a result of the acquisition, Autonomy
Nordic AS become a wholly owned subsidiary of Autonomy Corporation plc. The net goodwill arising from this and the original purchase was approximately $4,500,000.

Due
to the adoption of SFAS No. 142 on January 1, 2002, goodwill arising on the acquisitions of SoftSound Limited and Autonomy Nordic AS, which was previously being
amortized over periods of three and ten years, respectively, has ceased to be amortized. Had the provisions of SFAS No. 142 been applied to prior years presented, the net income and earnings
per share for the years ended December 31, 2002, 2001 and 2000 would have been as follows (in thousands, other than per share data):

|                                       |  | December 31,
|-------------------------------------- |  | ------------
|
|Net profit as reported                 |  | $           
|Adjustment for amortization            |  |             
|                                       |  |             
|Adjusted net profit                    |  | $           
|                                       |  |             
|Basic earnings per share as reported   |  | $           
|Adjustment for amortization            |  |             
|                                       |  |             
|Adjusted basic earnings per share      |  | $           
|                                       |  |             
|Diluted earnings per share as reported |  | $           
|Adjustment for amortization            |  |             
|                                       |  |             
|Adjusted diluted earnings per share    |  | $           
|                                       |  |             

8      Accrued expenses

Accrued expenses consisted of the following at December 31, 2002, 2001 and 2000 (in thousands):

|                               |  | Year Ended December 31,
|------------------------------ |  | -----------------------
|
|Employee compensation          |  | $                      
|Amounts due to related parties |  |                        
|Sales taxes                    |  |                        
|Employment tax                 |  |                        
|Professional fees              |  |                        
|General accruals               |  |                        
|                               |  |                        
|                               |  | $                      
|                               |  |                        

F-17

---

9      Equity and other investments

Equity and other investments include investments representing minority shareholdings in non-publicly traded companies and investments in associates.

The
Company acquired 33.34% of the ordinary shares of Autonomy Nordic AS on March 8, 1999. This investment was accounted for under the equity method. On acquisition,
consideration of $565,000 was paid, with goodwill of approximately $524,000 arising. Such goodwill was amortized over a seven-year useful life up to October 2000 resulting in an
amortization expense of $52,000 for the year ended December 31, 2000.

The
Company acquired 49% of the ordinary shares of Dremedia Limited on July 2, 2001, for cash consideration of approximately $450,000. This investment has been accounted for under
the equity method.

The
Company acquired 19.9% of the ordinary shares of Okana Systems Limited on November 1, 2001, for a cash consideration of approximately $300,000. During the year ended
December 31, 2002, the Company acquired minority shareholdings in two non-publicly traded companies for non-cash consideration of approximately $975,000.

10    Commitments and operating lease obligations

The Company leases its facilities, cars and certain office equipment under non-cancelable operating leases, which have expiration dates ranging from
2003 through 2015. Minimum future lease payments under non-cancelable operating leases as of December 31, 2002 are summarized as follows (in thousands):

|                        |            |                             
|----------------------- | ---------- | ----------------------------
|Year Ended December 31, |            |                             
|2003                    |            | $                           
|2004                    |            |                             
|2005                    |            |                             
|2006                    |            |                             
|2007                    |            |                             
|                        | Thereafter |                             
|                        |            |                             
|                        |            | Total minimum lease payments
|                        |            |                             

Rental expenses under operating leases totalled $3,308,000, $2,570,000 and $1,316,000 for the years ended December 31, 2002, 2001 and 2000,
respectively.

11    Shareholders' equity

Share split

On August 1, 2000, the Company undertook a share split whereby each ordinary share of nominal value £0.01 was divided into three ordinary
shares of nominal value 1/3p. All share data contained within these financial statements have been adjusted to reflect the share split.

Ordinary Shares

In May 2000 the Company issued 2,640,000 ordinary shares of 1/3p at $41.33 per share in connection with an initial public offering of
ordinary shares in the United States. The Company raised net proceeds of $99.7 million after deducting expenses of $9.4 million.

F-18

---

Share Repurchases and Treasury Stock

During 2002, the Company purchased for cancellation 4,980,286 shares at an average price of £1.52 per share, and its Employee Benefit Trust purchased
697,073 shares at an average price of £1.10 per share to be held within the trust for the meeting of option exercises held by the Employee Benefit Trust.

Currency of Dividends

In the event that the Company was to declare a dividend, such dividend will be declared in pounds sterling. The payment of dividends is restricted to available
distributable reserves as defined by the Companies Act 1985.

Share Option Plans

The Company has two unapproved option plans to provide employees and executives with the opportunity to acquire a proprietary interest in the Company as an
incentive to attract and retain the services of employees. The two plans are the UK Discretionary Option Scheme 1996 (the "UK Scheme") and the 1998 US Share Option Plan (the "US Plan").
Under the terms of these plans, options are generally granted with exercise prices not less than the fair market value of the Company's shares, become exercisable as established by the Board of
Directors (generally ratably over 4 years), and generally expire seven years from the date of grant.

The
number of ordinary shares allocated under the UK Scheme may not on any date, when aggregated with the number of ordinary shares already allocated under the UK Scheme, the US Plan or
any other share plan of the Company over the previous five years, exceed 10% of the issued and outstanding share capital of the Company on that date.

UK Discretionary Option Scheme 1996

Under the UK Scheme, the Board of Directors may grant to any eligible employee (which may include directors) options over ordinary shares. Such options are
personal and may not be transferred.

1998 US Share Option Plan

The Company's 1998 US Share Option Plan (the "US Plan") was adopted by the Board on June 23, 1998, and a resolution adopting the US Plan was passed by
shareholders at an Extraordinary General Meeting of the Company held on July 2, 1998.

Options
over a maximum of 18,000,000 ordinary shares of the Company may be allocated under the US Plan. However, the number of ordinary shares allocated under the US Plan may not on any
date, when aggregated with the number of ordinary shares allocated under the US Plan, the UK Scheme or any other share scheme of the Company over the previous five years, exceed 10% of the issued
share capital of the Company on that date.

F-19

---

The
following table summarizes the share option plans activity:

|                             |  | Number of
Shares Under
Option |   | Weighted
Average
Exercise Price
|---------------------------- |  | ----------------------------- | - | -------------------------------
|Balance at January 1, 2000   |  | 6,111,168                     |   | $                              
|Granted                      |  | 2,726,000                     |   | $                              
|Exercised                    |  | (2,022,616                    | ) | $                              
|Forfeited                    |  | (1,079,376                    | ) | $                              
|                             |  |                               |   |                                
|Balance at December 31, 2000 |  | 5,735,176                     |   | $                              
|Granted                      |  | 2,376,420                     |   | $                              
|Exercised                    |  | (342,561                      | ) | $                              
|Forfeited                    |  | (3,190,070                    | ) | $                              
|                             |  |                               |   |                                
|Balance at December 31, 2001 |  | 4,578,965                     |   | $                              
|Granted                      |  | 1,132,500                     |   | $                              
|Exercised                    |  | (334,769                      | ) | $                              
|Forfeited                    |  | (930,766                      | ) | $                              
|                             |  |                               |   |                                
|Balance at December 31, 2002 |  | 4,445,930                     |   | $                              
|                             |  |                               |   |                                

As of December 31, 2002, the Company had the authority to issue 7,903,878 ordinary shares upon the exercise of both outstanding and
unallocated options. The range of exercise prices for all options outstanding at December 31, 2002 was $0.53 to $70.00, with a weighted average exercise price of $14.84 and a weighted average
remaining contractual life of 4.92 years.

The
following table summarizes information about options outstanding at December 31, 2002.

|Range of
Exercise Price
($) |  | Number
Outstanding as
of December 31,
2002 |  | Weighted
Average
Remaining
Contractual Life
(years) |  | Weighted
Average
Exercise Price
($) |  | Number
Exercisable as of
December 31,
2002 |  | Weighted
Average
Exercise Price of
Exercisable
Options ($)
|--------------------------- |  | ------------------------------------------ |  | --------------------------------------------------- |  | ----------------------------------- |  | ------------------------------------------ |  | ----------------------------------------------------------
|0.532.17                   |  | 808,176                                    |  | 3.91                                                |  | 1.35                                |  | 541,050                                    |  | 1.09                                                      
|2.174.51                   |  | 689,307                                    |  | 5.69                                                |  | 2.71                                |  | 172,149                                    |  | 3.00                                                      
|4.515.13                   |  | 685,094                                    |  | 5.33                                                |  | 4.81                                |  | 248,644                                    |  | 4.81                                                      
|5.1313.20                  |  | 606,935                                    |  | 5.91                                                |  | 6.13                                |  | 95,026                                     |  | 6.75                                                      
|13.2031.21                 |  | 825,625                                    |  | 4.56                                                |  | 23.29                               |  | 509,583                                    |  | 24.48                                                     
|31.2141.67                 |  | 565,500                                    |  | 4.58                                                |  | 39.68                               |  | 233,500                                    |  | 39.42                                                     
|41.6770.00                 |  | 265,293                                    |  | 4.58                                                |  | 54.00                               |  | 197,234                                    |  | 53.65                                                     
|                            |  |                                            |  |                                                     |  |                                     |  |                                            |  |                                                           
|                            |  | 4,445,930                                  |  | 4.92                                                |  | 14.84                               |  | 1,997,186                                  |  | 17.63                                                     
|                            |  |                                            |  |                                                     |  |                                     |  |                                            |  |                                                           

---

All
share and per share data reflect a 3-for-1 share split effective from August 1, 2000.

In addition to the above, in 1996, 5,391,100 options were granted to Richard G. Gaunt by two principal shareholders, Dr. Michael R. Lynch
and Apax Fund Nominees Limited, over issued ordinary shares held by them. These options had an exercise price of 1/3p and all became exercisable on July 10, 1998, following the
admission of the Company's shares to EASDAQ (now Nasdaq Europe). Nil, Nil and 816,860 of these options were exercised during the twelve months ended December 31, 2002, 2001 and 2000
respectively, and 4,114,240 remain outstanding and exercisable at December 31, 2002, with a remaining contractual life of 0.9 years.

F-20

---

Accounting for Share-Based Compensation

As permitted under SFAS No. 123, the Company has elected to follow Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB No. 25") in accounting for share-based awards to employees, for options granted under the Share Option Plans. The compensation charge arising is calculated by fixed plan
accounting. Accordingly, for the years ended December 31, 2002, 2001 and 2000, compensation (income) expense of $Nil, $(197,000) and $105,000, respectively, were recognized for options granted
under these plans.

Following
the Company's admission to EASDAQ (now Nasdaq Europe) on July 10, 1998 options have been granted with an exercise price equal to current market value at the date of
grant. No compensation expense is recognized with respect to such awards.

Pro-forma
information regarding net profit (loss) and net profit (loss) per share is required by SFAS No. 123 and has been determined as if the Company had accounted
for its employee share options and the options granted by shareholders under the fair value method consistent with the method prescribed by SFAS No. 123. The fair value of these options was
estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for December 31, 2002:



The
following table summarizes information about the weighted average fair value of options granted, calculated using the Black-Scholes option pricing model, for the years ended
December 31, 2002, 2001 and 2000.

|                          |  | Year ended December 31, 2002 |  | Year ended December 31, 2001
|------------------------- |  | ---------------------------- |  | ----------------------------
|
|Exercise price to market: |  |                              |  |                             
|Equals                    |  | 2.51                         |  | 3.55                        
|All options               |  | 2.51                         |  | 3.55                        
|                          |  |                              |  |                             

---

All
share and per share data reflect a 3-for-1 share split effective from August 1, 2000.

|                          |  | Year ended December 31, 2000
|------------------------- |  | ----------------------------
|
|Exercise price to market: |  |                             
|Equals                    |  | 21.84                       
|All options               |  | 21.84                       
|                          |  |                             

---

All
share and per share data reflect a 3-for-1 share split effective from August 1, 2000.

F-21

---

For purposes of pro-forma disclosures, the estimated fair value of the options is amortized over the options' vesting period, which is generally four years. At
December 31, 2002, the Company has stock-based compensation plans, which are described more fully in this note. The Company accounts for those plans under the recognition and measurement
principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. The following table illustrates the effect on net profits and earnings per share if
the Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation.

|                                                                                                                                            |                     | Year ended December 31, |       
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ----------------------- | ------
|
|
|Net profit, as reported                                                                                                                     |                     | $                       | 6,127 
|Add: Stock-based employee compensation expense (benefit) included in reported net profit, net of related tax effects                        |                     |                         |      
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |                     |                         | (6,382
|                                                                                                                                            |                     |                         |       
|Pro forma net loss                                                                                                                          |                     | $                       | (255  
|                                                                                                                                            |                     |                         |       
|Earnings (loss) per share:                                                                                                                  |                     |                         |       
|                                                                                                                                            | Basicas reported   |                         | $     
|                                                                                                                                            | Basicpro forma     |                         | $     
|                                                                                                                                            | Dilutedas reported |                         | $     
|                                                                                                                                            | Dilutedpro forma   |                         | $     

---

All share and per share data reflect a 3-for-1 share split effective from August 1, 2000.

12    Income taxes

The (benefit) provision for income taxes are as follows (in thousands):

|                              |                           | December 31,
|----------------------------- | ------------------------- | ------------
|
|UKincome taxes               |                           | $           
|UKdeferred taxes             |                           |             
|Rest of Europeincome taxes   |                           |             
|Rest of Europedeferred taxes |                           |             
|USincome taxes               |                           |             
|USdeferred taxes             |                           |             
|                              |                           |             
|                              | Total (benefit) provision |             
|                              |                           |             

Analysis of taxable profit (losses) by jurisdiction are as follows (in thousands):

|               |  | December 31,
|-------------- |  | ------------
|
|UK             |  | $           
|Rest of Europe |  |             
|US             |  |             
|               |  |             
|               |  | $           
|               |  |             

F-22

---

The net deferred taxes are analyzed as follows (in thousands):

|                          |                                                     | December 31,           |        
|------------------------- | --------------------------------------------------- | ---------------------- | -------
|
|Deferred tax assets:      |                                                     |                        |        
|                          | Losses carried forward                              |                        | $      
|                          | Excess of tax value over book value of fixed assets |                        |        
|                          | Other short term differences                        |                        |        
|                          | Tax credits                                         |                        |        
|                          |                                                     |                        |        
|                          |                                                     |                        | 30,949 
|Valuation allowance       |                                                     |                        | (29,376
|                          |                                                     |                        |        
|                          |                                                     | Net deferred tax asset |        
|Deferred tax liabilities: |                                                     |                        |        
|                          | Other short term timing differences                 |                        |        
|                          |                                                     |                        |        
|                          |                                                     | Net deferred taxes     |        
|                          |                                                     |                        |        

A reconciliation of the (benefit) provision for income taxes with the amount computed by applying the statutory income tax rate of 30% to profit
before income taxes is as follows (in thousands):

|                                                         |  | December 31, |       
|-------------------------------------------------------- |  | ------------ | ------
|
|Income tax expense computed at statutory income tax rate |  | $            | 1,765 
|Differences in statutory income tax rates                |  |              | 293   
|Goodwill amortization                                    |  |              |      
|Share based compensation                                 |  |              |      
|State tax                                                |  |              | 363   
|Interest refund                                          |  |              | (308  
|Other                                                    |  |              | (164  
|Change in valuation allowance                            |  |              | (2,192
|                                                         |  |              |       
|(Benefit) provision for income taxes                     |  | $            | (243  
|                                                         |  |              |       

A valuation allowance has been recorded for certain deferred tax assets of Autonomy, Inc. and Autonomy Nordic AS as it is more likely than
not that the deferred tax assets will not be realized. With respect to Autonomy, Inc. as of December 31, 2002, the Company has approximately $77.3 million of federal net operating
loss carry-forwards, and $234,000 in research and development tax credits available to reduce future federal income taxes. The net operating loss carry-forwards and tax credits expire at various dates
through fiscal year 2022. The Company also has approximately $53.4 million of state net operating loss carry-forwards, which expire at various dates through fiscal year 2012, and $Nil in
research and development tax credits available to reduce future California state income taxes. With respect to Autonomy Nordic AS, as of December 31, 2002, the Company has approximately
$1.2 million operating loss carry-forwards.

Deferred
tax assets of approximately $28 million pertain to certain net operating loss and credit carry-forwards resulting from the exercise of stock options. When recognized, the
tax benefit of these losses will be accounted for as a credit to additional paid-in capital rather than a reduction of the income tax provision.

F-23

---

13    Related Party Transactions

During the years ended December 31, 2002, 2001 and 2000 the Company incurred expenses of $602,000, $239,008 and $336,000 respectively for management
and software development services from Cambridge Neurodynamics Limited and made sales, rent charges and recharges of other expenses to Cambridge Neurodynamics Limited of $88,000, $149,000 and $23,000
in the years ended December 31, 2002, 2001 and 2000 respectively. The Company owed Cambridge Neurodynamics Limited $90,000, $379,000 and $Nil at December 2002, 2001 and
2000 respectively.

During
the years ended December 31, 2002, 2001 and 2000 the Company incurred expenses of $993,000, $1,102,000 and $Nil respectively from NCorp Limited and made sales
to NCorp Limited of $266,000, $160,000 and $412,000. At December 31, 2002, 2001 and 2000, NCorp Limited owed the Company $Nil, $34,000 and $463,000. At December 31, 2002, 2001
and 2000, the Company owed NCorp $851,000, $1,111,000 and $Nil, respectively. Cambridge Neurodynamics Limited and NCorp Limited are companies controlled by Dr. Lynch. Management
believes that all related party transactions are conducted on a normal commercial basis.

The
Company acquired 49% of the ordinary shares of Dremedia Limited on July 2, 2001. During the years ended December 31, 2002 and 2001, the Company made sales to
Dremedia of $427,000 and $340,000, and the Company made loans to Dremedia of $968,000 and $564,000, respectively. As of December 31, 2002 and 2001, Dremedia owed the Company $1,617,000
and $912,000, and the Company owed Dremedia $Nil and $436,000, respectively.

On
November 21, 2001, the Company loaned £200,000 (approximately $321,000) to an executive officer. The loan is repayable on November 20, 2004, only if the
executive receives or is entitled to receive, bonuses, commissions or otherwise above base salary equal to three times the amount due. The loan bears interest at market rates of Barclays
Bank plc Base Rate plus 0.60%, which throughout 2002 totalled 4.60%. As of December 31, 2002, £210,208 was outstanding under the loan. The Company is amortizing the loan over
its life of three years.

F-24

---

14    Earnings (loss) per share

SFAS No. 128, "Earnings per Share," requires companies to compute net earnings per share under two different methods, basic and diluted, for all periods
for which a statement of operations is presented. Basic earnings or loss per share is computed by dividing the net earnings or loss by the weighted average number of ordinary shares outstanding for
all periods. Diluted earnings per share reflects the potential dilution that could occur if the earnings were divided by the weighted average number of ordinary and ordinary share equivalents
outstanding during the period. Diluted earnings per share is computed by dividing the net income by the weighted average number of ordinary shares and ordinary share equivalents from outstanding share
options unless they would have an anti-dilutive effect. Ordinary share equivalents are calculated using the treasury stock method and represent incremental shares issuable upon exercise of
the Company's outstanding options. The following table provides a reconciliation of the numerators and denominators used in calculating basic and diluted earnings per share for the years ended
December 31, 2002, 2001 and 2000.

|                                                                         |  | Year ended December 31,
|------------------------------------------------------------------------ |  | -----------------------
|
|
|Net profit                                                               |  | $                      
|Basic and diluted earnings per share available to ordinary shareholders: |  |                        
|Profit available to ordinary shareholders                                |  | $                      
|                                                                         |  |                        
|Weighted average ordinary shares outstanding                             |  |                        
|Effect of dilutive share options                                         |  |                        
|                                                                         |  |                        
|Weighted average ordinary shares outstanding assuming dilution           |  |                        
|                                                                         |  |                        
|Basic earnings per share                                                 |  | $                      
|                                                                         |  |                        
|Diluted earnings per share                                               |  | $                      
|                                                                         |  |                        

---

All share and per share data reflect a 3-for-1 share split effective from August 1, 2000.

Approximately
3,552,000, 5,572,000 and 239,000 weighted average share options at December 31, 2002, 2001 and 2000, respectively, have been excluded from the computation of diluted
earnings per share due to the options being anti-dilutive.

15    Segment information

The Company reports segment information in accordance with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." Operating
segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers, or decision making
group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision-making group is the executive committee, which is comprised of the chief executive
officer, the chief operating officer and various senior officers of the Company.

The
Company is organized geographically but in the opinion of the directors, there is only one distinct reportable segment, on the basis that the geographical operations have
characteristics so similar that they can be expected to have essentially the same future prospects.

F-25

---

Analysis
of sales by geographical area determined by customer location is as follows (in thousands):

|               |  | Year ended December 31,
|-------------- |  | -----------------------
|
|UK             |  | $                      
|Rest of Europe |  |                        
|US             |  |                        
|Other          |  |                        
|               |  |                        
|               |  | $                      
|               |  |                        

Long Term assets are geographically located as shown below (in thousands):

|                             |  | As of December 31, 2002
|---------------------------- |  | -----------------------
|
|Plant and equipment, net     |  | $                      
|Goodwill, net                |  |                        
|Intangible assets, net       |  |                        
|Equity and other investments |  |                        
|                             |  |                        
|                             |  | $                      
|                             |  |                        

|                             |  | As of December 31, 2001
|---------------------------- |  | -----------------------
|
|Plant and equipment, net     |  | $                      
|Goodwill, net                |  |                        
|Intangible assets, net       |  |                        
|Equity and other investments |  |                        
|                             |  |                        
|                             |  | $                      
|                             |  |                        

|                             |  | As of December 31, 2000
|---------------------------- |  | -----------------------
|
|Plant and equipment, net     |  | $                      
|Goodwill, net                |  |                        
|Intangible assets, net       |  |                        
|Equity and other investments |  |                        
|                             |  |                        
|                             |  | $                      
|                             |  |                        

F-26

---

16    Valuation and qualifying accounts

An analysis of the allowance for uncollectable accounts is set out below (in thousands):

|                         |  | Balance at
beginning of
period |       | Charged to
expenses |   | Utilized |  | Balance at
end of period
|------------------------ |  | ------------------------------ | ----- | ------------------- | - | -------- |  | ------------------------
|Year ending December 31, |  |                                |       |                     |   |          |  |                         
|2000                     |  | $                              | 2,197 |                     | $ | 1,575    |  | $                       
|2001                     |  | $                              | 3,175 |                     | $ | 1,005    |  | $                       
|2002                     |  | $                              | 2,833 |                     | $ | 1,969    |  | $                       
|                         |  |                                |       |                     |   |          |  |                         

17    Fair values of financial instruments

The following information is presented in compliance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The
carrying amounts and fair values of the material financial instruments are shown below (in thousands):

|                          |  | December 31, 2002 |         | December 31, 2001 |   | December 31, 2000
|------------------------- |  | ----------------- | ------- | ----------------- | - | -----------------
|
|Cash and cash equivalents |  | $                 | 147,472 |                   | $ | 147,472          
|Other investments         |  | $                 | 1,398   |                   | $ | 1,398            

The fair values of financial instruments, which principally comprise cash and cash equivalents, are considered to be equivalent to their carrying
values.

18    Employee Benefit Plans

The Company sponsors a 401(k) plan that allows all U.S. employees that have completed 30 days of service to contribute up to 15% of their compensation,
limited to $11,000 in 2002. Employee contributions and earnings thereon vest immediately. Although the Company may make discretionary matching contributions to the 401(k) plan, none have been made to
date.

19    Non-monetary transactions

The Company's customers include a number of its suppliers and on occasion, the Company has purchased goods or services for the Company's operations from these
vendors at or about the same time the Company has licensed its software to these organizations. These transactions are separately negotiated, settled in cash, and recorded at terms the Company
considers as a normal commercial basis. During the year ended December 31, 2002, the Company recognized approximately $240,000 of software license revenues from transactions with vendors where
the Company purchased goods or services from those vendors at or about the same time as the software license transactions.

The
Company has also entered into joint marketing arrangements with some of its OEM partners in order to facilitate promotion of the joint products in the marketplace and enhance ongoing
royalty generating capacity. The Company recorded these transactions by recording revenue and marketing expense based on actual expenditure of its OEM partner. During the year ended
December 31, 2002, the Company funded approximately $400,000 into joint marketing arrangements with OEM customers.

The
Company accepted shares in two of its customers in settlement of outstanding debtor obligations in the amount of approximately $975,000. The investments are accounted for under the
cost method and are included in equity and other investments on the balance sheet.

F-27

---

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