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

                                    FORM 10-K


[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For the fiscal year ended June 30, 2001
                                           -------------
                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 For the transition period from ____ to ____

Commission File Number 000-26867
                       ---------


                               PIVOTAL CORPORATION
             (Exact Name of Registrant as Specified in its Charter)

   British Columbia, Canada                           Not Applicable
 (State or other Jurisdiction of           (IRS Employer Identification Number)
 Incorporation or Organization)


                             300-224 West Esplanade
                        North Vancouver, British Columbia
                                     Canada
                                     V7M 3M6
                    (Address of Principal Executive Offices)
                                   (Zip Code)

                                 (604) 988-9982
                         (Registrant's Telephone Number,
                              Including Area Code)
           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


                                                     NAME OF EACH EXCHANGE
        TITLE OF EACH CLASS                           ON WHICH REGISTERED
        -------------------                           -------------------
              N/A                                            N/A

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                  Common Shares
--------------------------------------------------------------------------------
                                (Title of Class)

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 THE
FILING  REQUIREMENTS FOR THE PAST 90 DAYS: Yes [X] No [ ]

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT  FILERS  PURSUANT TO ITEM 405
OF REGULATION  S-K IS NOT CONTAINED  HEREIN,  AND WILL NOT BE CONTAINED,  TO THE
BEST OF REGISTRANT'S  KNOWLEDGE,  IN DEFINITIVE PROXY OR INFORMATION  STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K: [ ]


<PAGE>


The aggregate  market value of the voting shares held by  non-affiliates  of the
registrant, based on the closing sale price of the common shares on September 4,
2001 as  reported on the Nasdaq  National  Market was  approximately  U.S.$5.44.
Common  shares held by each current  executive  officer and director and by each
person  who is  known  by the  Registrant  to own 5% or more of the  outstanding
common shares have been excluded from this  computation in that such persons may
be deemed to be affiliates of the Registrant.  This  determination  of affiliate
status is not a conclusive determination for other purposes.

AS OF  SEPTEMBER  1,  2001,  23,996,235  COMMON  SHARES OF THE  REGISTRANT  WERE
OUTSTANDING.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                 Not Applicable.



<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                           <C>
      PART I                                                                                   1

      ITEM 1.    BUSINESS...................................................................   1

      ITEM 2.    PROPERTIES.................................................................   30

      ITEM 3.    LEGAL PROCEEDINGS..........................................................   30

      ITEM 4.    SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.........................    30

      PART II                                                                                  30

      ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS......   31

      ITEM 6.    SELECTED FINANCIAL DATA....................................................   36

      ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                 OPERATIONS.................................................................   38

      ITEM 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................   53

      ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                 DISCLOSURE.................................................................   80

      PART III                                                                                 80

      ITEM 10.   DIRECTORS AND OFFICERS OF THE REGISTRANT...................................   80

      ITEM 11.   EXECUTIVE COMPENSATION.....................................................   82

      ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.............   86

      ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................   87

      PART IV                                                                                  87

      ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K............   87
</TABLE>




<PAGE>



FORWARD-LOOKING STATEMENTS

Statements  in this  filing  about  our  future  results,  levels  of  activity,
performance,   goals  or   achievements   or  other  future  events   constitute
forward-looking  statements.  These statements  involve known and unknown risks,
uncertainties  and other  factors  that may cause  actual  results  or events to
differ  materially  from those  anticipated in our  forward-looking  statements.
These factors  include,  among others,  those  described in connection  with the
forward-looking   statements,  and  the  factors  described  under  the  heading
"Important  factors that may affect our business,  our results of operations and
our  stock  price"  in Item 1 and in  Item 7 to this  report,  which  is  hereby
incorporated by reference in this report.

In some cases, you can identify  forward-looking  statements by our use of words
such  as  "may,"  "will,"   "should,"   "could,"   "expect,"  "plan,"  "intend,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue" or the
negative  or other  variations  of these  words,  or other  comparable  words or
phrases.

Although  we believe  that the  expectations  reflected  in our  forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  levels of
activity, performance, achievements or other future events. Moreover, neither we
nor anyone else assumes  responsibility for the accuracy and completeness of our
forward-looking  statements.  We  are  under  no  duty  to  update  any  of  our
forward-looking  statements after the date of this report.  You should not place
undue reliance on our forward-looking statements.


                                     PART I

ITEM 1. BUSINESS

OVERVIEW

Pivotal Corporation,  incorporated in 1990 in British Columbia,  Canada, enables
large and medium-sized  businesses worldwide to acquire,  serve and manage their
customers by providing customer relationship  management and electronic business
solutions.  Customer  relationship  management and electronic business solutions
automate  and  manage  marketing,  selling  and  servicing  processes  over  the
Internet.  We  refer  to our  solutions  as the  Pivotal  Customer  Relationship
Management and eBusiness  solution suite. The Customer  Relationship  Management
and  eBusiness  solution  suite is designed to complement  and integrate  with a
business' supply chain,  therefore enabling businesses to improve efficiency and
increase revenues.

On December 5, 2000, we announced a joint-three  year  initiative with Microsoft
to develop,  market and sell the Customer Relationship  Management and eBusiness
solution   suite  to  large   enterprises   which  will  result  in  incremental
expenditures by Microsoft and us towards this  initiative  over this period.  We
have  completed  the first phase of our  business  development  initiative  with
Microsoft  by  implementing  a  training  program  to  educate  Microsoft  sales
professionals  about our solutions  and engaged  Microsoft in  co-marketing  and
co-selling  initiatives.  In addition,  we were featured as the premier Customer
Relationship  Management  partner in the Microsoft  Business  Advantage  tour in
March and April 2001.

On August 14,  2001,  we announced  the  worldwide  availability  of the Pivotal
ePower Lifecycle Engine - Oracle Edition. In the past, we have focused solely on
Microsoft database platforms. With this new development, our solution can now be
implemented using Microsoft and/or Oracle based platforms and  technologies.  We
believe this will open up a new set of business  opportunities  to us as we will
now  have  access  to  businesses  using  an  Oracle  platform.   With  our  new
Oracle-based  solution, we will seek to broaden our market by directly targeting
Oracle-based  companies  and by  expanding  our  relationships  with third party
distributors and systems integrators that have Oracle-based practices.

Our solutions  are sold in 35 countries  and are  available in English,  French,
German and Spanish from  Pivotal  directly and  Portuguese,  Swedish,  Japanese,
Chinese and Hebrew from members of our Pivotal Alliance.  Our worldwide customer
base includes more than 1,300 organizations in traditional,  commercial,  public
market sectors and in the new digital economy and includes companies such as ABN
AMRO Securities LLC,  American Medical Security Group Inc., Atlas Copco Airpower
N.V., Belgacom France,  Bombardier  Aerospace,  CIBC World Markets,  Commonfund,
Compuware Corporation Japan, Deloitte & Touche, Emerson Electric, Ericsson, Farm
Credit Services of America, FLAG Telecom, Grantham, Mayo, Van Otterloo & Company
L.L.C.,  Haldex Services  Corporation,  Heller Financial,  Hitachi Telecom (USA)
Inc., Intrawest  Corporation,  Kikkoman Corporation,  KPMG, Miller Heiman, Inc.,
National Air Traffic Services,  London, National City Bank of Minneapolis,  NEC,
Nissan Motor (Denmark),  Novozymes North America,  Inc., Panasonic SA, Principal
Financial Group,  Qiagen, RBC Dain Rauscher Wessels,  Southern Company,  Toshiba
Information  Systems  Corporation,  USFilter,  and 1201  Financial  &  Insurance
Services,  Inc. We market and sell our solutions through a direct sales force as
well as through third-party solution providers.

                                       1
<PAGE>


Our  common  shares  are  listed on NASDAQ  under the  symbol  "PVTL" and on the
Toronto Stock Exchange under the symbol "PVT". Our head office is located at 300
- 224 West Esplanade, North Vancouver, British Columbia, Canada V7M 3M6, and our
telephone  number is (604) 988-9982.  Our home page on the Internet can be found
at  www.pivotal.com.  Information  contained on our website does not  constitute
part of this report.

Pivotal  Corporation was incorporated in British Columbia in 1990 under the name
Pen Magic Software Corporation,  and changed its name to Pen Magic Software Inc.
in 1991, to Pivotal  Software Inc. in 1995 and to Pivotal  Corporation  in 1999.
The terms  "Pivotal,"  "our  company"  and "we" in this filing  refer to Pivotal
Corporation, a British Columbia company, and all of Pivotal Corporation's wholly
owned  subsidiaries  including Pivotal  Corporation,  incorporated in Washington
State, Pivotal Corporation Limited,  incorporated in the United Kingdom, Pivotal
Corporation France S.A.,  incorporated in France, Exactium Ltd., incorporated in
Israel,  Exactium,  Inc.,  incorporated in Delaware State,  Pivotal Technologies
Corporation   Limited,   incorporated  in  the  Republic  of  Ireland,   Pivotal
Corporation  (N.I.)  Limited,  incorporated in Northern  Ireland,  Pivotal GmbH,
incorporated in Germany,  Digital  Conversations  Inc.,  incorporated in British
Columbia,  Pivotal Corporation  Australia Pty. Ltd.,  incorporated in Australia,
Project One Business Technologies Inc., incorporated in British Columbia,  Nihon
Pivotal K.K.,  incorporated in Japan and Inform, Inc.,  incorporated in Ontario,
collectively.

Pivotal Relationship, Pivotal eRelationship, Pivotal eRelationship 2000, Pivotal
eRelationship 2000 IntraHub,  Pivotal  eRelationship  2000 CustomerHub,  Pivotal
eRelationship  2000  PartnerHub,  Pivotal ePower,  Pivotal ePower 2000,  Pivotal
eSelling  2000,  PivotalHost,  Pivotal  Anywhere,  Pivotal  ePower  Intelligence
Engine,  Pivotal  Sales & Marketing  Intelligence,  Pivotal  ePower  Interaction
Engine, PivotalLink for Customer Interaction Center, Pivotal SyncStream, Pivotal
Demand Chain Management,  Pivotal Digital Intelligence,  Pivotal Instant Action,
Pivotal Commerce,  Pivotal PartnerHub,  Pivotal  CustomerHub,  Pivotal eSelling,
Pivotal  Service,  Pivotal  Marketing,  Pivotal ePower Lifecycle Engine - Oracle
Edition  and  Miller  Heiman  for  eRelationship  Sales  are  trademarks  and/or
registered  trademarks of Pivotal Corporation.  All other company names, product
names, marks, logos, and symbols referenced are the trademarks and/or registered
trademarks of their respective owners.

INDUSTRY BACKGROUND
In the mid-1980's  businesses began to implement contact management  software to
track prospects,  customers and customer data. Since then, departmental software
solutions  have been  developed to track data related to servicing  customers on
the  demand  side  of the  business.  Some  examples  of  departmental  software
solutions  are sales force  automation  software  which  provides  prospect  and
customer data to sales staff;  customer service software which provides customer
service request and history to customer service  representatives;  and marketing
automation  software to provide  campaign  and  prospect  and  customer  data to
marketing staff to generate more demand for products and services.  In the 1990s
cross-departmental Customer Relationship Management systems began to emerge that
brought departmental data assets together into centralized customer and prospect
data  repositories  while allowing these demand side  departments to input their
own  specific  information,  providing  the company  with a unified  view of the
customer and  prospect.  Today  Customer  Relationship  Management  has become a
business  strategy  that seeks to optimize  profitability,  revenue and customer
satisfaction  by  organizing  around  customer   segments,   fostering  customer
satisfying behaviors and implementing  customer-centric  processes.  On July 16,
2001, Giga Information Group IdeaByte published "IT Trends:  Midyear CRM Update"
which  states  "...more  than 50 percent of  companies  today both in the United
States and Europe are embarking on enterprise CRM  initiatives.  And in the face
of the economic downturn customer relationship  management (CRM) interest is not
wavering, but instead there is new emphasis on clear goals and quick, measurable
results from CRM investments."

With the  appearance of the Internet in the 1990s as a ubiquitous  communication
network,  companies  began to provide  support  over the  Internet for field and
remote  staff  who  needed  access  to  departmental   data  assets.   As  other
communication channels have continued to evolve, such as fax, email and wireless
communications,  businesses  have looked for  Customer  Relationship  Management
systems that can provide an integrated  "real-time" view of customer information
across all these communication  channels. In addition, they have recognized that
the Internet is more than just a network for allowing  their own remote staff to
access  centralized  data  repositories;  the  Internet  provides a backbone for
businesses to change the way they interact with business partners and customers.

We  believe  that the  Internet  and other  communication  technologies  such as
wireless  technologies  have  created  a  fundamental  change  in the  way  many
companies   conduct   business.   Today,   the  Internet   goes  beyond   simple
communication.  It provides a means for prospects and customers to interact with
businesses,  and businesses to interact with all their  stakeholders,  including
employees,  customers,  partners and suppliers in "real-time"  across global and
corporate  boundaries.  As a result, there has been a demand for enterprise-wide
software   solutions  that  support   stakeholders'   need  to  communicate  and
collaborate with businesses across departments and communication channels.

                                       2
<PAGE>

Today's  demand  side  and  enterprise-wide  eBusiness  solutions  support  this
business  need.  These  software  solutions  automate  and manage the people and
processes  related to  customer  management  in order to increase  revenues  and
decrease costs. This enterprise-wide  solution ties into companies' supply chain
management  solutions and enterprise resource planning  applications to increase
productivity, decrease costs, and increase revenues.

In March 2001, the Gartner Group published a review of the market performance of
Customer Relationship Management software, finding "tremendous growth during the
past three  years." New license  revenue for  Customer  Relationship  Management
vendors  reached  $3.7  billion in 2000.  Growth  ranging  from 57 percent to 76
percent in each of the past three years has continued to confirm the  acceptance
and priority of customer relationship  management investments by the enterprise.
According to a July 2001 report of the  high-tech  market  research firm Cahners
In-Stat Group, Customer Relationship  Management software application revenue is
expected to increase to more than US$30 billion over the period of 2001 to 2005,
with much of that growth  coming in Europe and Asia.  Gartner also points to the
highest levels of growth in the Asia/Pacific  region,  where new license revenue
for Customer  Relationship  Management  software  achieved 153 percent growth in
2000.

The Impact of Changing Technologies

Developments  in  technology  have  dramatically  affected the  marketplace  for
Customer Relationship Management solutions. These developments include:

     -    The  Internet.  With  the  emergence  of the  Internet  as a  dominant
          platform  for  global  interactive  communication,   coordination  and
          commerce,  businesses are seeking better ways to use the Internet as a
          platform  to  conduct  their  business.  As a result,  businesses  are
          investing in technologies that support and exploit the capabilities of
          the  Internet.  Emerging  new  technology  standards  based on XML and
          Internet  services  are  being  embraced  by  enterprises  seeking  to
          integrate internal systems and provide collaboration with partners and
          suppliers  in a drive to reduce  costs,  increase  revenues,  increase
          market intelligence and improve customer  satisfaction.  Increasingly,
          these  new  technologies  are  also  supplanting  non-Internet  native
          architectures, such as client server computing.

     -    Widespread Adoption of Microsoft  Technologies.  Microsoft Windows NT,
          Microsoft  Windows 2000 and Microsoft .NET platforms offer  businesses
          the opportunity to develop, deploy and maintain information technology
          systems with increased  flexibility on a cost-effective  basis.  These
          platforms  are  also  widely  used and well  understood  by  technical
          personnel. With the recent addition of Microsoft Commerce Server 2000,
          Share Point Server 2001 and BizTalk Server,  Microsoft is delivering a
          rich and cost-effective  application  development  platform to support
          the  requirement  for  integration,   application   customization  and
          flexibility, and document exchange.

     -    Growth of Wireless Computing.  The proliferation of wireless computing
          devices,  such as palm  computers,  Internet-enabled  cell  phones and
          improved  remote  computing  has  empowered  the mobile  professional.
          Electronic  solutions  enable  users to  access  information  from any
          location using their preferred wireless computing device.

     -    Availability of  Intelligence  Systems.  Intelligence  systems include
          customer profiling  technologies that enable software to respond to or
          anticipate  user needs with less input from the user and more analysis
          of profiles or actual website visitor  behavior.  These include guided
          selling  technologies  to help users make  purchases on the  Internet,
          even   for  very   complex   products   and   services.   With   these
          customer-profiling  technologies,  the customer's buying experience is
          personalized and targeted to fulfill its specific needs.

THE OPPORTUNITY

The  customers we serve are  typically  mid-size  companies,  divisions of large
businesses  and large  businesses.  Many of these  businesses  are responding to
pressures to implement  cross-departmental  or  enterprise-wide  business models
that put the  customer  at the  center of their  business  in order to  increase
revenues,  decrease costs, and increase  productivity.  Many of these businesses
require close integration and  collaboration  between the organization and their
customers and partners,  not only to deliver the high levels of customer service
but also to use the  strengths  of their  partner  networks  at reduced  cost to
themselves.  Until recently,  most electronic business  applications designed on
the  Microsoft  platform  were  designed  primarily  to address the needs of the
smaller enterprise,  were often considered too unstable,  were not appropriately
scalable  for  large  enterprises  and  were  considered  not  designed  for the
Internet.  Today,  Microsoft  Windows  NT,  Microsoft  Windows  2000,  Microsoft
BackOffice  platforms and Microsoft .NET servers are considered highly scalable,
enterprise class solutions.

                                       3
<PAGE>

The recent  development  of our  solutions for use on the Oracle 8i database has
allowed  us to  target  larger  customers  and to  access  an  increased  market
opportunity  by  accessing  Oracle  database  customers.  Oracle  databases  are
typically  deployed  at larger  customer  sites  than the  Microsoft  SQL Server
database.

We believe that a significant  market  opportunity exists for an enterprise-wide
customer  relationship  management and electronic  business solution that can be
easily  customized,   quickly  integrated  with  current  systems  and  business
processes  and rapidly  deployed.  Many  businesses  have adopted the  Internet,
Oracle, Microsoft Windows NT, Microsoft Windows 2000, Microsoft BackOffice,  and
Microsoft .NET server platforms. As a result, a new opportunity also has emerged
for an enterprise-wide  customer relationship management and electronic business
solution and  departmental  or business  unit  applications  optimized for these
platforms and to meet the requirement for maximum  flexibility.  Such a solution
must incorporate many of the benefits enabling businesses to take control of the
demand  side of their  business  in response  to  pressure  from  prospects  and
customers to deliver powerful and productive  customer  experiences.  We believe
that such a solution must:

     -    support the need for a modular or phased application deployment and be
          usable by a  business  without  significant  customization,  to enable
          rapid deployment at low total cost of ownership;

     -    support  Internet-based  collaboration  and the sharing of information
          with customers and partners;

     -    support  integration  and  collaboration  among sales,  marketing  and
          customer service employees;

     -    support  integration  between other internal  business systems such as
          supply chain, enterprise resource planning and finance systems through
          an XML-based computing platform;

     -    have the ability to support multiple  enterprise  database  platforms,
          such as Oracle and Microsoft;

     -    support mobile professionals and their wireless computing devices;

     -    provide tools for easy implementation to meet specific needs;

     -    be easy to use by all  end-users  without  extensive  training;  and

     -    support the emerging  needs of high-growth  industry  segments such as
          manufacturing, finance and health care.

PIVOTAL SOLUTIONS

We are a leading  provider of customer  relationship  management  and electronic
business  solutions.  These  solutions  include  applications  for  sales  force
automation,  marketing automation,  service automation,  call center management,
partner relationship management and electronic commerce.  These solutions enable
companies  to increase  revenues  and decrease  costs by  increasing  efficiency
within the sales,  marketing  and  service  activities  that  ultimately  impact
customer  acquisition  and  retention.  To achieve this,  our solutions  connect
employees,  partners  and  customers  into one  unified  business  network.  Our
electronic business solutions include award-winning, Internet-based applications
supported by an array of professional  services and our global Pivotal  Alliance
network of  third-party  distributors.  Our solutions are designed and optimized
for the Internet,  Microsoft  and Oracle  platforms.  In July 2000,  Pivotal was
named the North  American  Packaged  Application  of the Year by  Microsoft.  In
December  2000,  we won  the  Microsoft  Industry  Solution  Award  for -  "Best
Integrated Customer Relationship Management/eBusiness Solution".

We believe our solutions deliver the following benefits:

     -   Enables Businesses to Improve  Productivity by Increasing  Revenues and
         Decreasing  Costs.  Our solutions  unify sales,  marketing and customer
         service   employees  and  partners   around   customer   processes  and
         interactions.  By  maintaining  all  customer  information  in a shared
         database,  our solutions  make it easy for different  users to maximize
         their  contribution  to  customer  relationship  management  by  better
         capturing   customer   profiles   and  building   one-to-one   customer
         relationships.  We believe this  improvement  in customer focus enables
         businesses to increase  revenues  through better  customer  loyalty and
         retention.  Our customers also realize  decreased costs by streamlining
         processes and interactions  between employees,  partners and customers,
         through more effective and more targeted  marketing,  sales and service
         campaigns,   the  reduction  of  inefficient   communications  and  the
         increased effectiveness of targeted communications efforts.

     -   Improves the Collaboration and Interaction Between Businesses and Their
         Customers.  Using Pivotal  solutions,  businesses  can transform  their
         static  website  into a  collaborative  tool  used  to  increase  their
         customer  base,  and to  service  and  sell to  customers.  Prospective
         customers can obtain  information  regarding  businesses'  products and
         services  over the  Internet.  Customers  can place orders and retrieve
         information  on products  and  services  over the Internet and directly
         interact online
                                       4
<PAGE>
          with sales,  marketing and customer service  departments.  This direct
          interaction can result in improved  customer service and generation of
          leads, as well as lower customer service costs.

     -    Improves the  Collaboration  and  Interaction  Between  Businesses and
          Their Partners.  Pivotal solutions enables businesses to improve their
          efficiency  and selling  processes  by  facilitating  interaction  and
          collaboration  with their partners over the Internet.  Our application
          maintains  a shared  database  consisting  of  customer's  information
          related  to   products,   services,   customer   contacts   and  sales
          opportunities.  By  enabling  their  partners to access and update the
          shared  database,  our solutions  simplify the sharing of  information
          between  businesses  and their  partners so they can  jointly  service
          their customers' needs and concerns.

     -    Enables Rapid Implementation and Simple Customization.  Businesses can
          use our solutions without  significant  customization  which expedites
          the implementation  process. If they desire,  businesses can customize
          our solutions to reflect their own internal processes easily using the
          industry  standard  business  programming  language  Microsoft  Visual
          Basic.  In addition,  businesses can choose one of our solutions for a
          particular  industry - solutions  already optimized and configured for
          such industries as financial  services,  healthcare and manufacturing.
          These industry  solutions allow businesses to immediately gain benefit
          from our  solutions  as we have  already  done  the  industry-specific
          customizations.

     -    Yields  a  Low  Total  Cost  of   Ownership.   Our  solutions  can  be
          cost-effectively   deployed  and   customized  and  thus  require  few
          resources  for  ongoing  support,   system  maintenance  and  end-user
          training.  Our  solutions  are also  relatively  easy for end-users to
          learn, which results in lower ongoing training costs. In addition, our
          software   applications  permit   modifications  and  upgrades  to  be
          transmitted to all users, including mobile users, thereby reducing the
          cost of modifying the solutions.

     -    Scales  With the Growing  Needs of  Pivotal's  Customers.  Many of our
          customers  require that our solutions  support their growing number of
          employees,  online  customers and partners.  Our solutions'  structure
          enables our customers to expand our solutions as their businesses grow
          by adding servers in a number of locations.  This capability  improves
          performance  and enables our  solutions to support  larger  numbers of
          concurrent users.

     -    Increases the Efficiency of Mobile Professionals. Mobile professionals
          can  access  our  solutions   remotely  across  local-area   networks,
          wide-area  networks or over the Internet by using a number of portable
          computing    devices   including    laptops,    palm   computers   and
          Internet-enabled  cell  phones.  Mobile  professionals  also  can work
          unconnected  to a network  and  transmit  and receive  information  to
          automatically   update  their  own  files  and  the  shared  corporate
          database.   These  capabilities  increase  the  efficiency  of  mobile
          professionals.

BUSINESS STRATEGY

Our goal is to become a leading global provider of electronic business solutions
which combine Customer Relationship Management, electronic commerce and wireless
technologies. The key elements of our growth strategy are as follows:

     -    Extend  Application  and  Solution  Scope.  We intend to continue  the
          development  of  our  applications  to  add  new  functions,   with  a
          particular emphasis on Internet-based selling,  marketing and customer
          services. We also intend to continue to develop industry solutions for
          specific  industries that will further simplify the deployment and use
          of  applications.  In  addition,  we plan to offer new versions of our
          applications  that support a wider variety of international  customers
          and their respective business practices and languages.

     -    Deepen  Collaboration  and  Interaction  with  Members of the  Pivotal
          Alliance.  We plan to continue  broadening  our  network of  strategic
          relationships,  including our Pivotal  Alliance  network.  The Pivotal
          Alliance   network   includes  over  50  independent   companies  that
          distribute  our  products,  install  the  software  purchased  by  our
          customers  and provide other  software or related  services to address
          specific  customer needs.  This network has allowed us to focus on our
          core  competencies  while taking advantage of the strengths of Pivotal
          Alliance  members who may have specific  industry  expertise or better
          regional  presence,  which enables them to better address the needs of
          our  customers  and provide them with a complete  electronic  business
          solution. New strategic  relationships for the coming year include Cap
          Gemini Ernst and Young, and Intel. Additionally, we have significantly
          expanded our relations with Microsoft.

     -    Deepen   Collaboration   and  Interaction   Between  Pivotal  and  Our
          Customers.  We will continue to focus on providing  customer solutions
          that help our customers  achieve business success.  In particular,  we
          plan  to  maintain  a  customer-focused  culture  by  inviting  repeat
          business  from existing  customers as we make new features  available,
          and to gain new customers as our existing customers become independent
          references  for our  solutions.  We believe  that the  benefits of our
          solutions  have  helped us to  develop a loyal base of  customers.  We
          intend to continue to focus significant  resources on customer success

                                       5
<PAGE>

          programs,  including  a  systematic  customer  surveying  process,  to
          improve  our  customer-driven   product  development  initiatives  and
          ultimately improve our solutions.

     -    Extend Relationships with Application Service Providers to Deliver Our
          Solutions  on a Usage  Fee  Basis.  We will  continue  to  expand  our
          relationships  with  application   service  providers  to  provide  an
          alternative   licensing   arrangement   through   these   third  party
          application  service  providers that enables  customers to pay a usage
          fee to access our  software  on servers  operated  by the  application
          service   providers.   This  enables  businesses  to  outsource  their
          electronic  business  solutions  and  related  information  technology
          infrastructure through an alternative pricing model, such as a monthly
          fee.

     -    Continue  Expansion  of  Our  Worldwide   Distribution   Capacity.  We
          currently  have a  distribution  strategy that  includes  direct sales
          personnel and  resellers  which enables us to target a wide variety of
          customers in different industries and geographical regions. We plan to
          continue to invest in our worldwide  distribution capacity to increase
          market share and penetration.  This investment will include  expanding
          our  direct  sales  force,  continuing  to expand  relationships  with
          existing and new resellers  and entering  into  bundling  arrangements
          with technology  providers to provide  complimentary niche products to
          our customers.

     -    Expand  Industry  Solution  Program.   We  will  continue  to  develop
          solutions  in  response  to  industry  need.   Today's  core  industry
          solutions  include solutions for the following  industries:  financial
          services, healthcare, manufacturing, technology, and electronic market
          places.


PRODUCTS AND PROFESSIONAL SERVICES

Our  solution  consists  of six suites  that help  companies  control the sales,
marketing,  and service  processes  core to their  business.  These  suites are:
Pivotal Sales, Pivotal Marketing,  Pivotal Service,  Pivotal Collaboration Hubs,
Pivotal  Commerce,  and  Pivotal  eBusiness  Platform.  In  addition,  we market
industry specific solutions.

These  solution  suites are  comprised of our core  products  including  Pivotal
eRelationship,   Pivotal  CustomerHub,  Pivotal  PartnerHub,  Pivotal  eSelling,
Pivotal ePower,  Pivotal Intelligence Suite, Pivotal Interaction Center, Pivotal
Anywhere,  Pivotal Instant Action,  Pivotal Toolkit and PivotalHost.  These core
products  and  other  leading   technology   options   provide  an   integrated,
collaborative  network  that  helps to  manage  information,  transactions,  and
interactions for every stakeholder in the customer lifecycle.


PIVOTAL SOLUTIONS

Our six  solutions  are  comprised of a variety of core  products.  For detailed
information on the products  which are bundled  together into the six solutions,
see the "Core Products" section ahead.

Pivotal Sales

Pivotal Sales empowers sales  professionals  to create a meaningful and relevant
buying  experience  by focusing on one-to-one  relationships  with the customer.
Pivotal  Sales   expedites   sales   processes   with  "best   practice"   sales
methodologies,  and identifies  cross-selling  and up-selling  opportunities for
mobile  sales  professionals  regardless  of their  location or the time of day.
Pivotal Sales supports sales strategy with  integrated  forecasting and analysis
through all sales channels.

The Pivotal Sales solution  supports the electronic  management of the following
capabilities:
     o Quote and Proposal Management
     o Consolidated Revenue Forecast
     o Territory Management
     o Opportunity Management
     o Team-selling Enablement
     o Best Practices Enablement
     o Multi-Channel Sales Integration
     o Real-Time Product Configuration
     o Expense Management
     o Sales Efficiency Tools
     o Prospecting Campaigns
     o Web-based  Collaborative  Services

                                       6
<PAGE>



     o Up/Cross-Selling Automation
     o Competitive & Industry Intelligence

Pivotal Marketing

Pivotal  Marketing  empowers a business to attract  and retain  more  profitable
customers by enabling the business to understand  the value of each customer and
create  a   differentiated   customer   experience   with  highly   personalized
interactions.  With Pivotal Marketing, businesses maximize profitability through
one-to-one  marketing  strategies  that deliver  optimal  customer  acquisition,
retention, cross-selling and up-selling results.

The  Pivotal  Marketing  solution  supports  the  electronic  management  of the
following key marketing capabilities:

     o Campaign Management
     o Lead Capturing & Tracking
     o Intelligence Repository
     o Forecasting: campaign impact, market shifts and customer perception
     o Customer Profiling
     o Event Management
     o ROI Calculation and Analysis
     o Best Practices
     o Data Mining
     o Strategic Analysis
     o Direct Mail Campaign Management
     o Collaborative Action Plans


Pivotal Service

Pivotal  Service  provides  service  professionals  with  the  intelligence  and
knowledge  they need to deliver  precise and timely  resolutions to customers in
personalized  interactions that help foster long-term relationships and loyalty.
Pivotal  Service  can  assist  in  maximizing   revenue  by  empowering  service
professionals  to transform  customer  interactions  into cross-sell and up-sell
transactions.

The Pivotal Service solution supports the electronic management of the following
key service capabilities:

     o Integrated Communication Platform
     o Multi-channel Interactions
     o End-to-End Reporting
     o Online Issue Resolution
     o Online Request Tracking and Escalation
     o Service-to-Order Integration
     o Personalized Self-Service
     o Online Frequently Asked Questions Management
     o Interactive Voice Response Self-Service
     o Knowledge Base Management
     o Sales/Marketing Integration
     o Market-driven Product Enhancement
     o Time & Activity Management
     o Productivity & Performance Analysis

Pivotal Collaboration Hubs

Pivotal  Collaboration  Hubs are Internet  solutions that empower  customers and
partners to become active  participants  in every  marketing,  sales and service
activity  through  highly  personalized   self-service  and  commerce.   Pivotal
Collaboration  Hubs  create  a  collaboration  and  communication   network  for
employees, customers, and partners to conduct business in a synchronized manner.

The Pivotal Collaboration Hub solution supports the electronic management of the
following capabilities:

o        Partner Management

                                       7
<PAGE>



     o Joint Account Management
     o Customer Self-Service
     o Online Partner & Customer Training
     o Multi-channel Data Repository
     o Multi-Channel Lead Management & Forecasting
     o Sales Tools & Literature Fulfillment
     o Order Entry & Tracking
     o Service request management & tracking
     o Joint Marketing Management
     o Issue management & tracking
     o Partner Recruitment
     o Partner Profiling
     o Partner Performance Reporting & Analytics
     o Customer Self-Service
     o Online Customer Training
     o Order Entry and Tracking
     o Service Request Management and Tracking

Pivotal Commerce

The  Pivotal  Commerce  solution  is  an  integrated  transaction  platform  for
business-to-business  commerce.  It efficiently  manages financial  transactions
across   traditional   channels  and  the  Internet,   delivering   personalized
transactions  that are  coordinated  and  integrated  with the back  office.  By
guiding  customers  across  multiple  channels  at every  phase of the  customer
lifecycle,  Pivotal  Commerce  allows  companies to quickly  develop  proposals,
generate quotes, manage complex pricing configurations, and link leads and sales
activity with traditional channels.

Pivotal  Commerce has the following  capabilities to support the requirements of
sophisticated online selling:

     o Electronic Data Repository: product, pricing, sales data
     o Dynamic Proposals
     o Quotes
     o Reports & Orders
     o Browser-based Authoring Environment
     o Catalog Management
     o Configuration Management
     o Supply Chain Integration
     o Guided Product, Pricing
     o Service Configuration
     o Web-based Product and Configuration Management
     o Site Management
     o Multi-Currency & Language
     o Single Source Shipping & Tracking
     o Quote and Proposal Management
     o Multi-channel Sales Management

Pivotal eBusiness Platform

The  Pivotal  eBusiness  platform  delivers  the full range of  personalization,
collaboration,  communication,  and  commerce  technologies  that  enable  rapid
deployment of strategic electronic business and electronic commerce initiatives.
This platform includes the tools,  engines,  and templates required to create an
integrated Information Technology  infrastructure that responds to market demand
and adapts to the ongoing expansion of enterprise-scale  electronic business and
electronic commerce systems.


Pivotal Industry Specific Solutions

We  provide  industry-focused  solutions  in  financial  services,   healthcare,
manufacturing, technology, and electronic marketplaces.

                                       8
<PAGE>


     o    Our finance  solution is an industry  specific  solution  that enables
          financial  services  companies to achieve increased revenue generation
          and business agility by delivering quick, intelligent customer service
          across all communication  channels including direct,  electronic mail,
          wireless,  and  facsimile.  It identifies  customer  buying trends and
          service   preferences;   builds   extensive   profiles  that  identify
          cross-selling  and up-selling  opportunities;  and conducts  marketing
          campaigns  that are personal,  precise,  relevant and timely.  It also
          provides   security  feature  that  financial   companies  require  to
          confidently  conduct  business  across all  Internet  and  traditional
          communications channels.

     o    Our healthcare solution addresses the health insurance industry's need
          to adopt  technologies  that address the needs of the  organization to
          create  administrative  efficiencies in their front office activities.
          ManagedCare.NET  is a  solution  suite  built  on the  Pivotal  ePower
          platform that provides healthcare  insurance  organizations a cohesive
          customer   relationship   management   platform   across   the  entire
          enterprise.

     o    Our  manufacturing  solution helps  organizations  meet their business
          targets  and  respond to demand side  pressures  by helping  them move
          complex product and service sales to the Internet to decrease  selling
          cycles  and  improve  customer  and  prospect  satisfaction;  changing
          marketing approaches with highly targeted campaigns based on extensive
          customer  and  prospect  data;  networking  suppliers,   distributors,
          wholesalers and other partners to improve  opportunity  management and
          inventory   levels;   and   increasing   field   sales   and   service
          representatives  success with real-time access to product and customer
          data.

     o    Our  technology   solution  helps   technology   companies   create  a
          comprehensive   loyalty  plan  through  consolidating  and  segmenting
          customer  information  based on  buying  trends  so they  can  develop
          aggressive sales and marketing efforts.  Our technology  solution also
          enables  technology  companies  to  support  their  sales  force  with
          information   about   their  most   valuable   customers'   needs  and
          preferences.  It helps ensure successful  relationships with customers
          and  prospects by  integrating  new Internet  sales and  communication
          channels; supports field sales and service representative success with
          real-time  access to product and customer  data;  increases  marketing
          return on investment with highly targeted campaigns; helps to decrease
          sales cycles and improve satisfaction by implementing Internet service
          and sales;  and can improve  opportunity  management,  tighten channel
          forecasting  and decrease  inventory  levels by networking  suppliers,
          distributors and resellers online.

     o    Our eMarketplace solution can turn a transactional  marketplace into a
          collaborative electronic marketplace that increases buyer satisfaction
          and loyalty,  improves seller participation and maximizes revenues. It
          enables   organizations  to  manage  the  complex   relationships  and
          interactions  between marketplace buyers and sellers by leveraging the
          power  of  customer  relationship  management,   partner  relationship
          management, interactive selling, and marketing analytics.

CORE PRODUCTS

The above  Pivotal  solutions are  comprised of a variety of core  products,  as
follows:

Pivotal eRelationship

Pivotal eRelationship 2000 is our award-winning Customer Relationship Management
product.  It is the application that delivers the capabilities for the Pivotal's
Sales,  Marketing and Service solutions.  Pivotal  eRelationship  connects these
three areas of a company into one unified  database that is fully integrated for
seamless interaction and information sharing.

Pivotal CustomerHub

Pivotal  CustmerHub is one of two applications that deliver the capabilities for
the Pivotal  Collaboration Hub solutions.  Pivotal CustomerHub improves customer
satisfaction  by providing a secure self service  channel for customers to place
orders or  resolve  problems  twenty-four  hours a day,  seven  days a week with
highly  personalized  Internet,  email,  and phone-based  interactions.  Pivotal
CustomerHub  gives customers the ability to become active  participants in every
marketing, sales and service activity.

Pivotal PartnerHub

Pivotal  PartnerHub is one of two applications that deliver the capabilities for
the Pivotal Collaboration Hub solution.  Pivotal PartnerHub empowers demand side
partners  to become  collaborative  members of your  extended  business  team to
generate sales,

                                       9
<PAGE>

deliver customer value, and keep customers satisfied. Pivotal PartnerHub creates
a  collaborative   inter-company   framework  to  exchange   knowledge,   manage
relationships,  and synchronize transactions over marketing, sales, service, and
commerce processes.

Pivotal ePower

Pivotal  ePower 2000 is the core product which  comprises the Pivotal  eBusiness
Platform.  It is an  XML-based  technology  platform  that  includes  the tools,
engines and templates  required to rapidly deploy and operate Pivotal's customer
relationship  management  and  electronic  business  solution.  This platform is
optimized for use in conjunction with the Microsoft .NET platform, can be scaled
to  work in any  size of  business  and is  designed  to  allow  all  employees,
customers and business  partners the ability to access and  manipulate  the same
information.

Pivotal eSelling

Pivotal eSelling is the core application which delivers the capabilities for the
Pivotal  Commerce  solution.  Pivotal  eSelling  simplifies  the  online  buying
experience  for  sophisticated  products and  services  with  interactive  needs
analysis and intelligent  guided selling  services.  Pivotal eSelling  maximizes
revenue with system  knowledge  that  guarantees  the  execution of each enables
customers to increase  their revenue  through  obtaining  information  regarding
cross-sell and up-sell  opportunities  and instantly  synchronization  of online
transactions across the enterprise.

ADDITIONAL APPLICATIONS
We offer a number of different  applications that extend the capabilities of our
solutions. These include:

Pivotal   Intelligence  Suite.   Pivotal  Intelligence  Suite  includes  Digital
Intelligence  and  Pivotal  Business  Intelligence.  These  add on  applications
provide  Internet-based  tools for data mining,  data  analysis,  and  marketing
campaign   management  that  help  sales,   marketing,   and  customer   service
professionals  analyze data and extract  knowledge  and insight which allows for
better business decisions.

         Pivotal  Digital   Intelligence.   Pivotal   Digital   Intelligence  is
         intelligence   an  application   that  tracks  actual  website  visitor
         interests.  As website content  changes,  Pivotal Digital  Intelligence
         continues to recognize themes,  creating a profile of visitor interests
         through a specific period.  Pivotal Digital Intelligence can be used to
         collect the entire visitor text content stream and the data required to
         interpret visitor behavior.

         Pivotal  Business  Intelligence.  Pivotal  Business  Intelligence in an
         application that combines analytical  processing  reporting tools, data
         mining, and other technologies into an integrated  platform,  navigated
         with an intuitive Internet-browser interface. It provides enhanced data
         analysis,  greater  insight and  detailed  reports  that help  evaluate
         present  performance and establish effective plans for the future. This
         highly scalable solution, which is both easy to use and integrated into
         marketing  and sales  applications,  allows  organizations  to use data
         mining to its full potential.

Pivotal  Interaction  Center.  Pivotal  Interaction  Center  routes phone calls,
voice-mail,  email,  faxes,  Internet  chat,  Internet  callback  requests,  and
voice-over-Internet  calls.  This allows  organizations  to replace  traditional
systems made up of a private branch exchange,  interactive  voice response unit,
and automatic call distribution using a single application.

Pivotal  Anywhere.  Pivotal Anywhere enables mobile  professionals to access our
solutions  remotely  over the  Internet by using a number of portable  computing
devices including palm computers and Internet-enabled cell phones.

Pivotal  Instant  Action Pivotal  Instant Action is an alert-based  task manager
that is ideal for companies that depend on valuable,  time-sensitive information
that require input from multiple individuals.  As a web-based solution,  Pivotal
Instant Action routes  critical  communications  and tasks and tracks the status
between  individuals  and user  groups  based on  specific  business  rules  and
workflow  process.  Pivotal  Instant  Action  employs  Internet,   wireless  and
traditional  communication  channels to  accelerate  response  times to critical
business issues. This solution allows companies to address urgent customer needs
with speed and intelligence even when workforces are dispersed and mobile.

Pivotal  Toolkit.   Pivotal  Toolkit  helps  businesses  to  easily   customize,
administer  and  adapt  our  products,  without  programming,  to meet  business
specific needs.  This option helps to reduce  implementation  and  customization
costs,  ongoing  administrative  burden and the need for employees with advanced
technical skills. Using Pivotal Toolkit's simple graphical, point-and-click user
interface,  businesses  can modify any aspect of our products  without  altering
source code.  Pivotal  Toolkit also  includes  visual  scripting  tools,

                                       10
<PAGE>

called  agents,  which  allow  users to create  workflow  processes  that do not
require programming.  By simply connecting arrows between objects on the screen,
users can automate  and model  business  processes,  develop  sales  scripts and
create online tutorials to guide other users through complex tasks.

PivotalHost.  PivotalHost is an Internet  hosting  solution for our  technology.
PivotalHost  is  a  solution   whereby  we  provide   customers  access  to  our
applications  on a monthly  subscription  basis  over the  Internet  through  an
application   service   provider.   This  solution  includes  our  software  and
Microsoft's software, server hardware, data center, secure Internet connectively
from the data center, and information technology staff to administer and support
the customer's solution.

PRODUCT PRICING

We license  platform  products on a "per  processor"  basis,  user licenses on a
"named user" basis and/or  applications and a "flat fee" basis. All our products
may be  licensed  on a  monthly  subscription  basis  or as a  one-time  fee for
perpetual licenses.

PRODUCT AWARDS

The following table lists some of the awards our solutions have won:

<TABLE>
<S>     <C>                                         <C>                   <C>
       SPONSOR                                       DATE               AWARD
       Microsoft                                     December 2000      Industry Solution Awards for 2000
                                                                        - Best Integrated Customer Relationship Management/eBusiness
                                                                        Solution
       Microsoft                                     July 2000          North American Packaged Application Partner of the Year
       Microsoft                                     February 2000      World Record for Scalability and Performance
       Microsoft                                     December 1999      Industry Solution Awards for 1999
                                                                        - Best Internet Solution for Customer Service
                                                                        - Best Integrated Customer Relationship Management
                                                     December 1998      Industry Solution Awards for 1998 - Best Overall Customer
                                                                             Relationship Management Solution
                                                     December 1997      Industry Solution Awards -- Best Mobile Sales Solution
                                                     May 1997           Solutions Provider Awards -- Best Solution by a Solution
                                                                             Developer
       Upside Magazine                               February 2000      eBusiness Winner
       Information Systems Marketing                 February 2001      Top 15 CRM Software Award
                                                     February 2000      Top 15 CRM Software Award
                                                     February 1999      Top 15 CRM Software Award
                                                     December 1997      Top 15 CRM Software Award
                                                     December 1996      Top 15 CRM Software Award
       Open Systems Advisors                         January 1999       Crossroads 99 A-List Award
       Information Week Magazine                     February 1999      IT Innovators for 1999
       British Columbia Technology Industry          June 2000          Company of the Year
           Association
       start Magazine                                July 2000          Hottest Companies of 2000
       Deloitte & Touche                             November 2000      Technology Fast 500
       Deloitte & Touche                             September 2000     Fastest Growing Canadian Technology Company
       Aberdeen Group                                April 2001         Aberdeen List of Top Ten Significant CRM Applications for
                                                                        2000
</TABLE>

                                       11
<PAGE>

PROFESSIONAL SERVICES

We provide  customers with access to a combination  of services to  successfully
implement  and  effectively  maintain a  customer  relationship  management  and
electronic business solution.

These services include:

     -    Technical  Support  and  Maintenance.  We maintain  technical  support
          centers  that  provide  telephone,  Internet  and email based  problem
          identification,  analysis and  resolution  to our  worldwide  customer
          base.  Various levels of support are available  depending on the needs
          of the  customer.  Our  technical  support  and  maintenance  services
          include upgrades of our software applications.

     -    Education.   Our  education  services  are  designed  to  educate  our
          customers and Pivotal  Alliance members about the  customization,  use
          and administration of our solutions. We offer education,  training and
          certification  that help our customers and selling partners to improve
          their ability to implement our solutions. We also offer customized and
          on-site training classes to customers with specific needs.

     -    Implementation Services. We offer implementation services that include
          project management,  customization and systems engineering. We provide
          a  standardized  implementation  methodology,  which we call the rapid
          productivity methodology and solution development centers that enables
          the efficient implementation of our solutions. Customers can work with
          us directly or retain one of the Pivotal Alliance members to implement
          their  customer  relationship  management  solutions.  Members  of the
          Pivotal  Alliance  currently  provide the  majority of  implementation
          services for our products. See "Strategic Relationships."

     -    Business  Consulting.  We offer business  consulting services that are
          focused on key  customer  relationship  management  trends such as the
          impact   of  the   Internet   on   customer   relationships   and  the
          implementation of one-to-one marketing and business practices. We also
          assist our  customers in measuring and  maximizing  return on customer
          relationship management investments.

Our technical  support and maintenance  services are sold on a per license basis
and renewed annually. Our education fees are standardized on a per day rate. Our
business  consulting  services and implementation  services are priced on a time
and  materials  basis.  As of  June  30,  2001,  we  had  214  employees  in our
Professional Services department.

CUSTOMERS AND MARKETS

We have  licensed  our  applications  on a  worldwide  basis to more than  1,300
customers  across  a wide  range  of  industries.  Customers  in  North  America
accounted for 67%, 72% and 80% of our total revenues in the years ended June 30,
2001, 2000 and 1999,  respectively.  Customers in Canada  accounted for 12%, 11%
and 6% of our total  revenues in the years ended June 30,  2001,  2000 and 1999,
respectively.  Customers  in the U.S.  accounted  for 55%,  62% and 74% of total
revenues.

Some of our  customers  which  purchased  a minimum of  US$100,000  of  software
licenses from us prior to June 30, 2001, are set forth in the table below:

<TABLE>
<S>     <C>                                     <C>                                 <C>
   CONSULTING                            MANUFACTURING                         TECHNOLOGY
   ----------                            -------------                         ----------
   Burntsand Inc.                        Foss Electric A/S                     AremisSoft Manufacturing
   KPMG  SA                              IMI Norgren Limited                   Captivate Network, Inc.
   KPMG Consulting AG                    James Hardie Industries Limited       Compaq Computer Corporation
   KPMG Peat Marwick LLP                 Newport Corporation                   HeadHunter.NET, Inc.
   Net-Commerce                          Siemens SAS                           ProClarity Corporation
   The Wynford Group                     Teknion Corporation                   Research in Motion
                                         Toshiba Corporation                   SecureWorks, Inc
   FINANCIAL SERVICES                    Wilo GmbH                             Allen Systems Group, Inc.
   ------------------                                                          Crystal Decisions Corporation
                                                                               Eprise Corporation
   BoE Bank Limited                      EMARKETPLACE                          Evolve Software, Inc.
   CIBC World Markets                    ------------                          Interactive Intelligence, Inc.
   The Common Fund for Nonprofit         HIT International Trading AG          Software Spectrum Inc.
   Organizations                        (formerly PaperExchange.com Inc.)      VERITAS Software Corporation
   Dresdner RCM Global Investors(UK)Ltd
   Farm Credit Services                  TELECOMMUNICATIONS
                                         ------------------
</TABLE>



                                    12
<PAGE>

<TABLE>
<S>                             <C>                       <C>                       <C>
                                                                                RETAIL
Grantham, Mayo, Van Otterloo & Co. LLC   Alcatel e-Business Distribution GmbH   ------
The Principal Financial Group            Belgacom France                       Taco Bell Corporation
Raymond James Ltd                        FLAG Telecom Ltd.                     The Brand Factory
                                         Hitachi Telecom (USA), Inc.           Wickes Building Supply Supplies Limited
HEALTH CARE
-----------
                                         OTHER SERVICES
Marriott International (Senior Living    ---------------
                             Services)
McKesson Corporation (formerly           Miller Heiman, Inc.
Medical Management Group)                United Business Media International Ltd.

NDC Health Information Services          Intrawest Corporation
                                         Televerde
                                         Total Information Systems (DAC Services)

</TABLE>

SALES AND MARKETING

We sell our  solutions  through a direct  sales  force  and over 50  independent
members of the Pivotal  Alliance  which resell our  solutions.  Our direct sales
force is located in the  United  States,  Canada,  the United  Kingdom,  France,
Germany,  Australia,  New  Zealand,  Japan,  and Mexico.  Members of the Pivotal
Alliance are located  worldwide in North and South America,  Europe,  the Middle
East and Asia.

Our  marketing  efforts are directed at promoting  our  solutions  and services,
creating market awareness and generating leads. Our marketing activities include
Internet  business  seminars,  print  and  Internet  advertising  campaigns  and
attendance  at  industry  trade show  events and trade  conferences.  We use the
Internet   extensively  to  communicate  with  potential   customers,   existing
customers,  partners and others. We also conduct  comprehensive public relations
programs  that  establish  and  maintain  relationships  with key  trade  press,
business press and industry  analysts.  We have a customer  communications  team
targeted at working  directly with our customers to obtain feedback and to track
ongoing customer success stories. This team also performs a series of surveys on
each customer to assess the  customer's  satisfaction  with our solutions and to
anticipate any further needs of the customer. As of June 30, 2001, we employed a
total of 250 people on our sales and marketing team.

STRATEGIC RELATIONSHIPS

THE PIVOTAL ALLIANCE PROGRAM

Pivotal Alliance Members help us market,  sell,  implement,  support and enhance
our solutions. Members of the Pivotal Alliance Program include:

     -    Systems  Integrators.  We have agreements with third parties that have
          been granted the right to provide  implementation,  customization  and
          training  services to customers who have purchased  solutions  through
          our direct  sales  team.  We refer to these  third  parties as systems
          integrators.  Some of our systems integrators operate worldwide,  such
          as KPMG,  Cap Gemini  Ernst & Young and  Hewlett  Packard  while other
          focus on specific  regional  markets such as Internosis  Inc.,  Sierra
          Systems and ePartners.

     -    Solution  Providers.  We have  agreements with third parties that have
          been  granted  the right to market and re-sell  our  solutions  and to
          provide  education,  implementation  and  customization  services  for
          solutions they sell, as well as for most sales made through our direct
          sales  team.  We refer to these third  parties as solution  providers.
          Solution  providers  address  the market  needs of a specific  region,
          permitting us to sell our solutions in markets that might otherwise be
          difficult for us to serve directly.  In some foreign markets,  we rely
          on  selected  solution   providers  to  customize  our  solutions  and
          translate our software applications into local languages.

     -    Solution Alliances.  We have agreements with third parties that supply
          software  applications  that  are  integrated  with our  solutions  to
          address specific  industry or customer  requirements.  We refer to our
          relationships with these third parties as solution  alliances.  We are
          developing  solution  alliances  in a  number  of  product  categories
          including Internet applications,  client/server applications, business
          productivity,    reporting,    finance,    mobile   office   products,
          communications, sales configurators, data mining, business information
          suppliers  and  vertical  market  solutions.   The  purpose  of  these
          relationships  is to expand the  breadth of  technology  and  services
          available to our customers.

     -    Application  Service  Providers.  We have  agreements with third party
          application   service  providers  that  provide  hosting  services  to
          businesses  that  purchase our solutions but who do not wish to house,
          support  or  maintain  the  solutions  on their

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          internal information technology systems. Application service providers
          provide businesses with server hardware,  data center, secure Internet
          connectivity from the data center, and information technology staff to
          administer and support the customer's solution.

We provide  education and training  services to members of the Pivotal  Alliance
Program  to  increase  their   understanding  of  our  solution  suite.  We  are
implementing  a  certification  program that will  require  members that perform
implementation and customization  services, to meet our certification  standards
in the areas of business analysis, systems design, installation,  customization,
training  and  support.  We intend to expand  the  Pivotal  Alliance  Program by
upgrading the capabilities of its members.

MICROSOFT

Our applications are optimized for the Microsoft  Windows NT, Microsoft  Windows
2000 and Microsoft  BackOffice  platforms.  Our focused development efforts have
enabled us to create  solutions  that exploit the  capabilities  of  Microsoft's
products,  including  SQL  Server,  that  are  bundled  and  licensed  with  our
solutions.  We also created a direct link between our  products'  databases  and
Microsoft  Outlook which allows our  customers to use the familiar  interface of
Microsoft Outlook to update their calendar,  tasks and contact  information.  In
addition,   our  solutions  use  Microsoft  Internet   technologies  to  publish
information across the Internet.

Pivotal and  Microsoft  are  jointly  educating  the market on our unique  value
proposition and how our demand chain management solution suite increases revenue
and improves customer retention.  To support this, we participate with Microsoft
in numerous industry  conferences and trade shows,  partner focused national and
regional events and public relations initiatives.

On December 5, 2000, we announced a joint  three-year  initiative with Microsoft
to develop,  market and sell the Pivotal  Customer  Relationship  Management and
eBusiness  solution suite to large  enterprises which will result in incremental
expenditures by Microsoft and us towards this  initiative  over this period.  We
have  executed  on the first  phase our  business  development  initiative  with
Microsoft  by  implementing  a  training  program  to  educate  Microsoft  sales
professionals  about our solutions and engaging  Microsoft in  co-marketing  and
co-selling  initiatives.  In addition,  we were featured as the premier Customer
Relationship  Management  partner in the Microsoft  Business  Advantage -tour in
March and April 2001.

Our strong relationship with Microsoft is also evidenced by our participation in
the  launch of  Microsoft  Windows  2000 and the  optimization  of our  Customer
Relationship  Management  and  eBusiness  solution  suite  to  leverage  the new
productivity  features  offered in Microsoft  Office XP - the latest  version of
Microsoft  Office - has enabled us to participate  in early product  development
initiatives with Microsoft.

CAP GEMINI ERNST & YOUNG

In May 2001, we signed a strategic  alliance  agreement  with Cap Gemini Ernst &
Young,  one of the largest  management and IT consulting firms in the world. The
two companies will jointly deliver the Pivotal Customer Relationship  Management
and  eBusiness  solution  suite,  together with the  consulting  services of Cap
Gemini Ernst & Young. Cap Gemini Ernst & Young has built a Pivotal practice team
consisting of sales  professionals,  senior  executives,  practice  managers and
consultants. They are currently working jointly and collaborating with our sales
executives  and  professional  services to deliver our  solution  suite in North
America,  France and New Zealand. Cap Gemini Ernst & Young offers management and
IT consulting services, systems integration, and technology development,  design
and outsourcing  capabilities  on a global scale to help businesses  continue to
implement  growth  strategies  and leverage  technology  in the new economy.  We
expect  to work  closely  with  Cap  Gemini  Ernst & Young to  develop  industry
solutions,   sales  and  marketing  strategies  and  a  specific  implementation
methodology for deployment of the Pivotal Customer Relationship Management and e
Business solution suite.

OTHER

We continue to experience growth with other existing systems integrator partners
such as and KPMG LLP.

TECHNOLOGY

Our software  architecture  provides a foundation for the development of new and
innovative products and allows our solutions to be easily adaptable,  to operate
with other  applications and to address the needs of users on multiple computing
devices.  This software  architecture  also allows our solutions to be used over
the Internet.  We have invested in the following  technologies  which serve as a
basis  for  our  customer   relationship   management  and  electronic  business
solutions:

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     -    Microsoft  Technology.  Our  solutions are optimized for the Microsoft
          Windows NT, Microsoft Windows 2000 and Microsoft BackOffice platforms.
          Our focused  development  efforts have enabled us to create  solutions
          that exploit the capabilities of Microsoft's  products,  including SQL
          Server,  that are bundled and  licensed  with our  solutions.  We also
          created a direct link between our  products'  databases  and Microsoft
          Outlook that allows our  customers  to use the  familiar  interface of
          Microsoft  Outlook  to  update  their  calendar,   tasks  and  contact
          information.   In  addition,  our  solutions  use  Microsoft  Internet
          technologies to publish information across the Internet.

     -    eBusiness  Platform  Architecture.  Our solutions are structured to be
          able  to use  XML  both  within  the  platform  architecture  and  for
          interfacing to our products,  including our PartnerHub and CustomerHub
          products  which support  users' which are external to the  enterprise.
          Our solutions are also structured to support multiple user access such
          as wireless  devices and electronic mail. This allows our professional
          service  staff,  partners  and  customers  the  ability to work in the
          applications in an industry standard fashion allowing integration with
          other systems and  technologies.  This also allows for a  well-defined
          interface  between our  applications,  thereby reducing the dependency
          between such  applications.  In addition,  it allows us to more easily
          integrate  other  XML-capable   technologies  and  products  into  our
          solutions.

     -    Internet  Commerce  Platform   Architecture.   Pivotal  eSelling,   an
          electronic  sales channel for  delivering a  personalized,  one-to-one
          buying  experience,  implements an  object-oriented  database to store
          complex product and selling relationships, with a scalable middle tier
          supporting both declarative and procedural rule  definition,  rendered
          via XML as a web  commerce  application.  We  believe  that  this is a
          powerful and cost-effective  architecture and data  representation for
          selling complex  products and managing the rules  associated with this
          process.

     -    Metadata  Repository.  Our  software  contains  a  database,  called a
          metadata repository, that is the blueprint for each application's data
          structure,   forms,  lists,  business  rules,  workflow,  queries  and
          reports.  The inclusion of this database allows for rapid adaptability
          and deployment by enabling  customization to occur without source code
          modification.  A business can distribute  custom  application  changes
          throughout  its  organization  in  the  normal  data   synchronization
          process.  We believe these  benefits  differentiate  our solution from
          those of our competitors.

     -    Pivotal's   SyncStream.   Our   SyncStream   captures  any  additions,
          modifications or deletions to our application and the shared corporate
          database and transmits only the net changes to the appropriate  users.
          This technology  eases the deployment of new  applications,  minimizes
          the connection  costs  associated  with the  synchronization  of data,
          transmits  changes  securely  and enables  mobile users to receive the
          correct data when synchronizing.

     -    Distributed  Database  Design.  Our  solution  is  designed to support
          various  databases  that reside on multiple  servers,  including  both
          Microsoft  SQL Server and Oracle 8i. Due to our  distributed  database
          design, data from the central database can be replicated to servers in
          different  locations  and on  various  mobile  remote  databases  (eg.
          laptops),  and  to be  updated  by our  SyncStream.  This  allows  for
          scalability  and  configuration  flexibility  as customers can upgrade
          network  hardware and software in a modular  fashion with minimal loss
          of performance and downtime.

     -    Pivotal's   Enterprise   Manager.   Our  Enterprise  Manager  provides
          centralized   configuration   management   through  a  graphical  user
          interface.  The Enterprise  Manager enables system  administrators  to
          audit and apply configuration  changes to the application,  manage and
          test customization changes off-line and replicate custom data sets for
          mobile users.  From a single  interface,  customers can  distribute an
          updated system online across the entire  enterprise  without  downtime
          for users.

RESEARCH AND DEVELOPMENT

Our research and  development  department is divided into six functional  areas:
Advanced Technology,  Software  Development,  Documentation,  Quality Assurance,
Program Management and Product  Management.  As of June 30, 2001, there were 156
employees in our research and  development  department.  Where  appropriate,  we
contract with third-party  developers to expand the capacity of our research and
development department.

For the years ended June 30, 2001, 2000 and 1999, we spent  approximately  $18.8
million,   $9.0  million  and  $5.0  million,   respectively   on  research  and
development.

Our  software  development  approach  consists of a  methodology  that  provides
guidelines for planning,  controlling and  implementing  projects.  Our advanced
technology team focuses on tracking and evaluating new technologies  with a view
to incorporating the best technologies available into our solutions. Our product
management  team  gathers  and  documents  market  requirements  and trends in a
requirements  analysis.  After the  requirements  analysis has been reviewed for
feasibility and the proposed project  approved by management,  a product team is
established  to  implement  the  project.  Our  program  management  team  takes
responsibility  for
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<PAGE>

documenting a detailed product specification.  The software development team may
build prototypes to assess the risks and business  requirements of a project and
then  concentrates  on research and  development  activities.  Through the later
stages of  development  we perform  final  testing  and quality  assurance.  Our
program and product  management  teams are involved at all stages of development
so that market  requirements  continue to be addressed.  The program and product
management  teams also assists with the  introduction of the product by training
our direct sales force and internal professional services staff.

We place  particular  emphasis on quality  assurance and testing  throughout the
development  process.  We use version control  software as well as standard test
tools,  scripts  and agents  developed  by us in order to  automate  our testing
processes and increase the quality of code we develop.

COMPETITION

The market for our software is intensely  competitive and rapidly changing.  The
past year has been one of vendor  consolidation.  Today, the direct  competitors
are fewer in number as companies are looking for business  technology  solutions
that deliver rapid results.  We face  competition from companies in the Customer
Relationship  Management  software market and in the overall enterprise business
application  market.  Some  competitors  include  Siebel  Systems  Inc.,  Oracle
Corporation, SAP AG, Onyx Corporation and PeopleSoft, Inc.

Other  competitors  may enter the market by developing or acquiring new products
and applications.

Microsoft has entered the Customer  Relationship  Management  market with its MS
portal  site called  bCentral,  which is designed  for small  businesses.  It is
possible  that  Microsoft  may decide to introduce  solutions  or services  that
directly  compete with our solutions.  The  introduction  of these  solutions or
services could result from Microsoft  acquiring one of our competitors or one of
our competitor's  products. If Microsoft becomes our competitor,  it may harm or
end our co-marketing and co-selling initiatives with Microsoft. Such competition
with  Microsoft  would likely have a material  adverse  affect on our  business,
market share, financial condition and results of operations.

In addition,  as we develop new products,  particularly  applications focused on
electronic  commerce  or on specific  industries,  we may begin  competing  with
companies  with whom we have not previously  competed.  It is also possible that
new  competitors  will  enter  the  market  or that our  competitors  will  form
alliances that may enable them to rapidly  increase their market share.  Some of
our actual and potential  competitors are larger,  better established  companies
that have  greater  technical,  financial  and  marketing  resources.  Increased
competition may result in price  reductions,  lower gross margins or loss of our
market  share,  any of which could  materially  adversely  affect our  business,
financial condition and operating results.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

We  rely on a  combination  of  copyright,  trade  secret  and  trademark  laws,
confidentiality procedures, contractual provisions and other similar measures to
protect our proprietary information and technology. We do not currently hold any
patents  nor  do we  have  any  patent  applications  pending.  There  can be no
assurance that any copyrights or trademarks held by us will not be challenged or
determined to be invalid.

As part of our  confidentiality  procedures,  we have a policy of entering  into
non-disclosure and confidentiality  agreements with our employees,  consultants,
corporate alliance members,  customers and prospective customers.  We also enter
into license agreements with respect to our technology,  documentation and other
proprietary  information.   These  licenses  are  perpetual  and  are  generally
transferable  subject to  obtaining  our prior  consent.  Despite the efforts to
protect  our  proprietary  rights,  unauthorized  parties may attempt to copy or
otherwise  obtain  the  use of our  products  or  technology  that  we  consider
proprietary  and  third  parties  may  attempt  to  develop  similar  technology
independently. We pursue registration and protection of our trademarks primarily
in the United States,  although we do seek protection  elsewhere in selected key
markets. Effective protection of intellectual property rights may be unavailable
or limited in some  countries.  The laws of some  countries  do not  protect our
proprietary rights to the same extent as in the United States and Canada.  There
can be no assurance that protection of our  proprietary  rights will be adequate
or that our competitors will not independently develop similar technology.

We anticipate that companies that develop software  applications will be subject
to infringement claims as the number of products and competitors in our industry
segment grows and the  functionality of products in different  industry segments
overlaps.  As a result,  we may become  involved in these  claims.  Any of these
claims,  with or without merit,  could result in costly  litigation,  divert our
management's  time,  attention  and  resources,  delay our product  shipments or
require us to enter into  royalty or license  agreements.  If a claim of product
infringement against us is successful,  our business and operating results could
be seriously harmed.

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<PAGE>

EMPLOYEES

As of June  30,  2001 we had a total  of 714  employees,  excluding  independent
contractors and temporary employees.  Of this number, 156 people were engaged in
research and  development,  250 people were engaged in sales and marketing,  214
people were  engaged in  professional  services  and 94 people  were  engaged in
general  administration.  No employees  are known by us to be  represented  by a
collective  bargaining  agreement and we have never experienced a strike or work
stoppage.  We consider our employee relations to be good. Our ability to achieve
our financial and operational  objectives depends in large part upon our ability
to attract, retain and motivate highly qualified sales, technical and managerial
personnel.  There can be no assurance that we will be able to attract and retain
such employees in the future.

RECENT ACQUISITIONS

Ionysys Technology Corporation Acquisition

On October  16,  2000,  we  acquired  100% of the  assets of Ionysys  Technology
Corporation, a privately held provider of Internet solutions based in Vancouver,
British Columbia.  Pivotal paid an aggregate cash purchase price of $1.0 million
including acquisition related expenditures of $360,000.

Project One Business Technologies Inc. Acquisition

On October 31, 2000, we acquired 100% of the  outstanding  shares of Project One
Business  Technologies  Inc., a privately  held  provider of Internet  solutions
specifically  designed for the health care  industry  based in North  Vancouver,
British Columbia. We paid an aggregate purchase price of $1.4 million consisting
of 19,000 common shares and stock options and cash of $460,000,  which  includes
acquisition related expenditures of $380,000.

The agreement for the  acquisition  of Project One also provided for  additional
consideration  of  approximately  96,000  common  shares  to be  paid  based  on
achieving  certain  product  development  and operating  targets over the next 3
years. All earn-out payments will be recorded as additional  purchase price when
determinable.  No earn-out  payments were required to be made in connection with
the  acquisition of Project One since  acquisition to the period ended March 31,
2001.

Software Spectrum CRM, Inc. Acquisition

On December  5, 2000,  we acquired  100% of the  outstanding  shares of Software
Spectrum CRM, Inc. Software Spectrum, based in Dallas, Texas, delivers solutions
and  consulting   expertise  in  multi-channel   contact  centers  and  customer
relationship  management.  We paid an aggregate  purchase  price of $7.5 million
consisting of 138,000  common shares and cash of $1.9  million,  which  includes
acquisition related expenditures of $1.2 million.

Inform, Inc. Acquisition

On June 22, 2001, we acquired all of the shares of Inform Inc. a company located
in  Toronto,  Canada,  which  specializes  in  implementation  services  for the
financial services industry. We paid an aggregate purchase price of $1.3 million
consisting  of  45,446  common  shares  and  cash of  $359,000,  which  includes
acquisition related expenditures of $266,000.

IMPORTANT  FACTORS THAT MAY AFFECT OUR BUSINESS,  OUR RESULTS OF OPERATIONS  AND
OUR STOCK PRICE.

Holders of our common shares are subject to the risks and uncertainties inherent
in our business.  You should  consider the following  factors,  as well as other
information  set forth in this report,  in connection with any investment in our
common shares. If any of the risks described below occurs, our business, results
of  operations  and financial  condition  could be adversely  affected.  In such
cases, the price of our common shares could decline,  and you could lose part or
all of your investment.

Although  we believe  that the  expectations  reflected  in our  forward-looking
statements  are  reasonable,  we  cannot  guarantee  future  results,  levels of
activity,  performance or achievements or other future events. Moreover, neither
we nor anyone else assumes  responsibility  for the accuracy or  completeness of
forward-looking  statements.  You should consider our forward-looking statements
in light of the following risk factors and other  information in this report. If
any of the risks described below occurs, our business,  results of operation and
financial  condition  could differ from those  projected in our  forward-looking
statements. We are under no duty to

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<PAGE>


update any of our forward-looking  statements after the date of this report. You
should not place undue reliance on forward-looking statements.

FACTORS  RELATING  TO OUR  BUSINESS  AND THE  MARKET FOR  CUSTOMER  RELATIONSHIP
MANAGEMENT AND ELECTRONIC  BUSINESS  SOLUTIONS MAKE OUR TOTAL REVENUE AND FUTURE
OPERATING  RESULTS  UNCERTAIN  AND MAY CAUSE THEM TO  FLUCTUATE  FROM  PERIOD TO
PERIOD.

Our  operating  results  have  varied in the past,  and we expect  that they may
continue to fluctuate in the future. In addition,  our operating results may not
follow any past  trends.  Some of the factors  that could  affect the amount and
timing of our revenues from software licenses and related expenses and cause our
operating results to fluctuate include:

     o    general economic  conditions,  which may affect our customers' capital
          investment levels in management information systems;

     o    changes in the economy and foreign currency exchange rates;

     o    market acceptance of our solutions;

     o    the length and variability of the sales cycle for our solutions, which
          typically ranges between two and eight months from our initial contact
          with a potential customer to the signing of a license agreement;

     o    the size and  timing of  customer  orders,  which can be  affected  by
          customer   order   deferrals   in   anticipation   of   new   solution
          introductions,  solution  enhancements,  and  customer  budgeting  and
          purchasing cycles;

     o    our  ability  to  successfully  expand our sales  force and  marketing
          programs;

     o    increases in the cost of software and professional services;

     o    our ability to successfully expand our international operations;

     o    the  introduction or enhancement of our solutions or our  competitors'
          solutions;

     o    changes in our or our competitors' pricing policies;

     o    activities of and acquisitions by competitors;

     o    our ability to develop, introduce and market new solutions on a timely
          basis and control our costs; and

     o    customer  satisfaction and our reputation relating to our products and
          services.

One or more of the  foregoing  factors  may cause our  operating  expenses to be
disproportionately high during any given period or may cause our net revenue and
operating results to fluctuate significantly.  Based upon the preceding factors,
we may  experience a shortfall in revenue or earnings or otherwise  fail to meet
public market  expectations,  which could  materially  and adversely  affect our
business, financial condition, results of operations and the market price of our
common stock.

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<PAGE>

OUR  QUARTERLY  OPERATING  RESULTS  MAY  FLUCTUATE  DUE TO  SEASONAL  TRENDS AND
VARIATIONS IN THE FISCAL OR QUARTERLY CYCLES OF OUR CUSTOMERS

Our total revenue and operating results may vary  significantly  from quarter to
quarter. The main factors that may affect these fluctuations are:

     o seasonal variations in operating results;

     o variations in the fiscal or quarterly cycles of our customers;

     o the discretionary nature of our customers' purchase and budget cycles;

     o the size and complexity of our license transactions;

     o the potential delays in recognizing revenue from license transactions;
       and

     o the timing of new product releases.

We have  experienced,  and expect to continue to  experience,  seasonality  with
respect to solution license  revenues.  Except for the year ended June 30, 2001,
we have  historically  recognized more license revenues in the fourth quarter of
our fiscal year and recognized  less license  revenues in the  subsequent  first
quarter.  We believe  that  these  fluctuations  are caused in part by  customer
buying  patterns  and the  efforts of our direct  sales  force to meet or exceed
fiscal  year-end  quotas.  In addition,  our sales in Europe are generally lower
during the  summer  months  than  during  other  periods.  We expect  that these
seasonal trends are likely to continue in the future.  If revenues for a quarter
ending September 30 are lower than the revenues for the prior quarter, it may be
hard to  determine  whether the reason for the  reduction  in revenues  involves
seasonal trends or other factors adversely affecting our business.

Our  solution  revenues  are not  predictable  with any  significant  degree  of
certainty and future solution revenues may differ from historical  patterns.  If
customers  cancel or delay orders,  it can have a material adverse impact on our
revenues and results of operations from quarter to quarter.  Because our results
of operations may fluctuate from quarter to quarter,  you should not assume that
you could predict  results of  operations in future  periods based on results of
operations in past periods.

Even though our revenues are difficult to predict, we base our expense levels in
part on future  revenue  projections.  Many of our  expenses  are fixed,  and we
cannot quickly reduce  spending if revenues are lower than expected.  This could
result in significantly  lower income or greater loss than we anticipate for any
given period. We will react accordingly to minimize any impact.

OUR LIMITED  OPERATING  HISTORY  MAKES IT  DIFFICULT TO PREDICT HOW OUR BUSINESS
WILL DEVELOP AND FUTURE OPERATING RESULTS.

We commenced operations in January 1991. We initially focused on the development
of  application  software for pen computers.  In September  1994, we changed our
focus to research  and  development  of  customer  relationship  management  and
electronic  business  solutions.  We  commercially  released the versions of our
solutions on the following dates: o Pivotal Relationship - April 1996.

     o Pivotal eRelationship - February 1999.

     o Pivotal eRelationship 2000 - February 2000.

     o Pivotal Anywhere - October 1999.

     o Pivotal eSelling - June 2000.

     o Pivotal eSelling 2.0 - March 2001.

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     o Pivotal ePower (originally a component of eRelationship) - February 2000.

     o Pivotal ePower 2.0 - March 2001.

     o Pivotal Digital Intelligence - March 2001.

     o Pivotal PartnerHub 2.0 - May 2001.

     o Pivotal Instant Action - May 2001.

     o Pivotal ePower Lifecycle Engine - Oracle Edition - August 2001.

We  have a  limited  operating  history  and we  face  many  of  the  risks  and
uncertainties  encountered by early-stage companies in rapidly evolving markets.
These risks and uncertainties include:

     o no history of profitable operations;

     o uncertain market acceptance of our solutions;

     o our reliance on a limited number of solutions;

     o the risks that competition,  technological change or evolving customer
       preferences could adversely affect sales of our solutions;

     o the need to expand our sales and support capabilities;

     o our  reliance  on third  parties to market,  install,  and support our
       solutions;

     o our  dependence on a limited  number of key  personnel,  including our
       co-founders;

     o our  dependence  on the  adoption  and success of the  Microsoft.  NET
       platform; and

     o the risk that our management  will not be able to  effectively  manage
       growth or  acquisitions  we have  undertaken  or may  undertake in the
       future.

The  new  and  evolving  nature  of the  customer  relationship  management  and
electronic business market increases these risks and uncertainties.  Our limited
operating  history  makes it difficult to predict how our business  will develop
and our future operating results.

WE HAVE A HISTORY  OF LOSSES,  WE MAY INCUR  LOSSES IN THE FUTURE AND OUR LOSSES
MAY  INCREASE IF  PROJECTED  REVENUES  ARE NOT  ACHIEVED TO SUPPORT THE LEVEL OF
OPERATING EXPENSES.

We have incurred net losses in each fiscal year since inception,  except for the
year ended June 30, 1998, in which we had net income of approximately $4,000. As
at June 30, 2001, we had an accumulated  deficit of approximately $48.2 million.
We have  increased our operating  expenses in recent  periods and expect them to
remain  approximately  the same in the first  quarter  of fiscal  2002.  We will
continue to examine the level of operating expenses based on projected revenues.
Any planned  increases  in  operating  expenses  may result in larger  losses in
future periods if projected revenues are not achieved. As a result, we will need
to generate  significantly  greater revenues than we have to date to achieve and
maintain  profitability.  We cannot be certain that our revenues will  increase.
Our business  strategies  may not be successful  and we may not be profitable in
any future period.

THE MARKET FOR OUR SOLUTIONS IS HIGHLY COMPETITIVE.

The market for our software is intensely  competitive and rapidly changing.  The
past year has been one of vendor  consolidation.  Today, the direct  competitors
are fewer in number as companies are looking for business  technology  solutions
that deliver rapid results.  We face  competition from companies in the Customer
Relationship  Management  software market and in the overall enterprise

                                       20
<PAGE>


business  application market.  Some of our actual and potential  competitors are
larger, better established  companies and have greater technical,  financial and
marketing resources. Increased competition may result in price reductions, lower
gross  margins  or loss of our  market  share,  any of  which  could  materially
adversely affect our business,  financial condition and operating results.  Some
competitors  include  Siebel  Systems  Inc.,  Oracle  Corporation,  SAP AG, Onyx
Corporation and PeopleSoft, Inc.

Microsoft has also entered the Customer Relationship  Management market with its
MS portal site called  bCentral  which is designed for small  businesses.  It is
possible that Microsoft may introduce solutions that compete directly with us.


In addition, as we develop new solutions,  particularly  applications focused on
electronic  commerce  or  specific  industries,  we  may  begin  competing  with
companies  with whom we have not previously  competed.  It is also possible that
new  competitors  will  enter  the  market  or that our  competitors  will  form
alliances that may enable them to rapidly increase their market share.

WE DEPEND UPON  MICROSOFT  AND THE  CONTINUED  ADOPTION AND  PERFORMANCE  OF THE
MICROSOFT .NET PLATFORM.

We have  designed  our  solutions  to operate on the  Microsoft  .NET  platform,
including  Windows .NET and .NET  Enterprise  Servers.  Microsoft  .NET is a new
platform  initiative  of  Microsoft  announced  in  June  2000.  We  have  spent
considerable resources developing and testing the compatibility of our solutions
for Microsoft  .NET. The  performance of our solutions with Windows .NET and the
 .NET Enterprise Servers has limited experience in the marketplace.  As a result,
we market our  solutions  exclusively  to  customers  who have  developed  their
computing systems around this platform.

Our  future  financial  performance  will  depend on the  continued  growth  and
successful  adoption of  Microsoft  .NET  -including,  Windows .NET and the .NET
Enterprise  Servers.   Microsoft  .NET  faces  competition,   particularly  from
computing  platforms  such as Unix and the Java 2 Platform,  Enterprise  Edition
(J2EE),  and databases from  companies  such as Oracle.  Acceptance of Microsoft
 .NET may not  continue  to  increase  in the  future.  The market  for  software
applications  that run on these  platforms  has in the past  been  significantly
affected by the timing of new solution releases,  competitive  operating systems
and enhancements to competing computing  platforms.  If the number of businesses
that adopt  Microsoft  Windows  .NET fails to grow or grows more  slowly than we
currently  expect,  or if  Microsoft  delays  the  release  of new  or  enhanced
solutions,  our revenues from the Pivotal Customer  Relationship  Management and
eBusiness solution suite could be adversely affected.

The  performance  of our  solutions  depends,  to some extent,  on the technical
capabilities of the Microsoft .NET platform.  If this platform does not meet the
technical  demands of our  solutions,  the  performance  or  scalability  of our
solutions  could be limited  and,  as a result,  our  revenues  from the Pivotal
Customer Relationship Management and eBusiness solution suite could be adversely
affected.

We have also launched a global  business  development  initiative with Microsoft
aimed at leading the emerging  customer  relationship  management and electronic
business  market.  The success of this  initiative will depend on the ability of
Pivotal and  Microsoft to jointly  market and sell to Global 2000  companies the
Pivotal Customer  Relationship  Management and eBusiness solution suite combined
with Microsoft .NET Enterprise Servers.

Microsoft has entered the Customer  Relationship  Management  market with its MS
portal  site called  bCentral,  which is designed  for small  businesses.  It is
possible  that  Microsoft  may decide to introduce  solutions  or services  that
directly  compete with our solutions.  The  introduction  of these  solutions or
services could result from Microsoft  acquiring one of our competitors or one of
our competitor's  products. If Microsoft becomes our competitor,  it may harm or
end our co-marketing and co-selling initiatives with Microsoft. Such competition
with  Microsoft  would likely have a material  adverse  affect on our  business,
market share, financial condition and results of operations.

Broad antitrust  actions  initiated by federal and state regulatory  authorities
resulted  in a verdict  against  Microsoft  in the U.S.  District  Court for the
District of Columbia.  The U.S. District Court adopted the government's proposed
remedy and held that Microsoft  should be divided into two companies.  Microsoft
appealed this verdict to the U.S. Court of Appeals for the District of Columbia.
The U.S.  Court of  Appeals  affirmed  the U.S.  District  Court's  findings  of
antitrust violations, but overturned the ruling that Microsoft should be divided
into two companies.  The U.S. Court of Appeals also removed the judge  presiding
over this matter in the U.S.  District  Court and remanded to the U.S.  District
Court the determination as to what remedies should be pursued against Microsoft.
Microsoft has appealed the finding of a violation of antitrust  laws to the U.S.
Supreme  Court.  Recently,  the  Justice  Department  determined  not to  seek a
break-up of Microsoft as a remedy to the case.

                                       21
<PAGE>

European Union  regulators  are currently  investigating  whether  Microsoft has
violated European antitrust laws.

Any outcome to these actions that weakens the competitive  position of Microsoft
 .NET solutions could adversely affect the market for our solutions.

THE MARKET FOR PIVOTAL EPOWER LIFECYCLE ENGINE - ORACLE EDITION IS UNKNOWN.

We have  announced the  availability  of our Pivotal ePower  Lifecycle  Engine -
Oracle Edition  whereby our solution can now be  implemented  using Oracle based
platforms and technologies. We do not know whether our new Oracle based solution
will prove to be  attractive  to Oracle  customers  or if it will  result in any
material revenue for us.

THE SUCCESS OF OUR STRATEGIC ALLIANCE WITH CAP GEMINI ERNST & YOUNG IS UNKNOWN.

We entered a strategic  alliance  agreement with Cap Gemini Ernst & Young in May
2001 whereby we will jointly market and sell the Pivotal  solution  suite. We do
not know if this will prove to be a successful  relationship in the future or if
it will result in any material revenue for Pivotal.

THE MARKET FOR OUR  SOLUTIONS IS NEW AND HIGHLY  UNCERTAIN AND OUR PLAN TO FOCUS
ON INTERNET-BASED  APPLICATIONS AND INTEGRATE  ELECTRONIC COMMERCE FEATURES ADDS
TO THIS UNCERTAINTY.

The  market  for  customer  relationship   management  and  electronic  business
solutions is still  emerging and continued  growth demand for and  acceptance of
the Pivotal  Customer  Relationship  Management  and  eBusiness  solution  suite
remains  uncertain.  Even if the market  for  customer  relationship  management
electronic  business  solutions grows,  businesses may purchase our competitors'
products or develop their own. We believe that many of our  potential  customers
are not  fully  aware  of the  benefits  of the  Pivotal  Customer  Relationship
Management and eBusiness  solution suite and, as a result,  these  solutions may
never achieve full market acceptance.

The development of our Internet-based  Pivotal Customer Relationship  Management
and eBusiness solution suite for customer relationship management and electronic
business  and our plan to  integrate  additional  features  presents  additional
challenges  and  uncertainties.  We are  uncertain how  businesses  will use the
Internet as a means of  communication  and  commerce  and whether a  significant
market will develop for  Internet-based  customer  relationship  management  and
electronic  business  solutions  such as those  developed  by us. The use of the
Internet is evolving rapidly, and many companies are developing new products and
services  that use the  Internet.  We do not know  what  forms of  products  and
services may emerge as alternatives  to our existing  solutions or to any future
Internet-based   customer   relationship   management  and  electronic  business
solutions  we may  introduce.  We  have  spent,  and  will  continue  to  spend,
considerable  resources  educating  potential  customers about our solutions and
customer  relationship  management and electronic  business software  solutions.
However, even with these educational efforts, market acceptance of our solutions
may not  increase.  If the  markets for our  solutions  do not grow or grow more
slowly than we  currently  anticipate,  our  revenues  may not grow and may even
decline.

OUR SALES CYCLE IS INCREASING AND THE AVERAGE SIZE OF OUR LICENSING TRANSACTIONS
VARIES WIDELY FROM QUARTER TO QUARTER, WHICH COULD HARM OUR OPERATING RESULTS.

We believe  that an  enterprise's  decision to purchase a customer  relationship
management  and  electronic  business  solution  is  discretionary,  involves  a
significant  commitment of its resources and is influenced by its budget cycles.
To successfully  sell licenses for our solutions,  we typically must educate our
potential  customers  regarding  the use and  benefits of customer  relationship
management  and  electronic  business  solutions in general and our solutions in
particular, which can require significant time and resources.  Consequently, the
period between initial contact and the purchase of licenses for our solutions is
often long and subject to delays associated with the lengthy budgeting, approval
and  competitive  evaluation  processes  that  typically  accompany  significant
capital expenditures. We frequently must invest substantial resources to develop
a  relationship  with a potential  customer and educate its personnel  about our
solutions and services with no guarantee  that our efforts will be rewarded with
a sale.

Our sales cycles are lengthy and variable and have been growing  longer over the
last quarter.  In recent  months we were impacted by a significant  reduction in
our customers'  project sizes,  deferral of purchasing and lack of an urgency to
purchase  and the  overall  unpredictability  of  customer  decision-making.  In
addition,  we have also recently seen a reduction in size of customer  orders in
the

                                       22
<PAGE>

final stages of negotiations as a result of reduction in the customer's  project
size.  We do not know if these  trends will  continue  and the increase in sales
cycle and varying transaction sizes could harm our operating results

OUR SUCCESS WILL DEPEND UPON THE SUCCESS OF OUR SOLUTIONS.

We  anticipate  that a majority of our  revenues  and growth in the  foreseeable
future  will come from  license  and  service  related  sales of our  integrated
solution suite, consisting of Pivotal Sales, Pivotal Marketing, Pivotal Service,
Pivotal Collaboration Hubs, Pivotal Commerce, and Pivotal eBusiness Platform, as
well as industry  specific  solutions.  Accordingly,  failure of our  integrated
solution suite to gain  increased  market  acceptance  and compete  successfully
would  adversely  affect our  business,  results  of  operations  and  financial
condition.  Our  future  financial  performance  will  depend on our  ability to
succeed in the  continued  sale of our  integrated  solution  suite and  related
services as well as the  development of new versions and  enhancements  of these
solutions.

THE SUCCESS OF OUR SOLUTIONS WILL DEPEND UPON THE CONTINUED USE AND EXPANSION OF
THE INTERNET.

Increased sales of our solutions and any future Internet-based  applications and
electronic  commerce  features we  integrate  with our current  solutions,  will
depend upon the expansion of the Internet as a leading platform for commerce and
communication.  If the  Internet  does  not  continue  to  become  a  widespread
communications medium and commercial  marketplace,  the demand for our solutions
could be significantly  reduced and our solutions and any future  Internet-based
and  electronic  commerce  features  may  not be  commercially  successful.  The
Internet  infrastructure  may not be able to support the demands placed on it by
continued  growth.  The Internet  could lose its  viability due to delays in the
development  or adoption of new  equipment,  standards  and  protocols to handle
increased levels of Internet activity, security, reliability, cost, ease of use,
accessibility and quality of service.

Other  concerns  that could  inhibit the growth of the  Internet  and its use by
business as a medium for communication and commerce include:

     o    concerns about security of transactions conducted over the Internet;

     o    concerns  about  privacy  and  the use of data  collected  and  stored
          recording interactions over the Internet;

     o    the possibility that federal, state, local or foreign governments will
          adopt laws or regulations  limiting the use of the Internet or the use
          of information  collected from communications or transactions over the
          Internet; and

     o    the possibility that governments will seek to tax Internet commerce.

WE  DEPEND  ON  THIRD-PARTY   WIRELESS  SERVICE  PROVIDERS  FOR  THE  SUCCESSFUL
IMPLEMENTATION OF OUR PIVOTAL ANYWHERE SOLUTION.

Our Pivotal Anywhere solution provides a wireless platform that allows our other
solutions  to be accessed  wirelessly.  We depend on  third-party  providers  of
wireless services for the successful implementation of Pivotal Anywhere. Because
Pivotal Anywhere relies on wireless  services  developed and maintained by third
parties,  we depend on these  third  parties'  abilities  to deliver and support
reliable wireless services.  The wireless industry is new and rapidly developing
and involves many risks, including:

     o    extensive government regulation in licensing, construction, operation,
          sale and interconnection  arrangements of wireless  telecommunications
          systems which may prevent our third-party  providers from successfully
          expanding their wireless services;

     o    rapid  expansion of the  wireless  services  infrastructure  which may
          result in flaws in the infrastructure; and

     o    concerns over the radio frequency emissions or other health and safety
          risks that may discourage use of wireless services.

OUR  FUTURE  REVENUE  GROWTH  COULD BE  IMPAIRED  IF WE ARE UNABLE TO EXPAND OUR
DIRECT SALES AND SUPPORT INFRASTRUCTURE.

                                       23
<PAGE>

Our  future  revenue  growth  will  depend  in  large  part  on our  ability  to
successfully  expand our direct sales force and our customer support capability.
We may not be able to successfully manage the expansion of these functions or to
recruit and train  additional  direct  sales,  consulting  and customer  support
personnel.  There is presently a shortage of  qualified  personnel to fill these
positions.  If we are unable to hire and retain additional highly skilled direct
sales personnel we may not be able to increase our license revenue to the extent
necessary  to achieve  profitability.  If we are unable to hire  highly  trained
consulting  and customer  support  personnel  we may be unable to meet  customer
demands.  We are not likely to be able to increase our revenues as we plan if we
fail to expand our direct sales force or our  consulting  and  customer  support
staff.  Even if we are  successful  in  expanding  our  direct  sales  force and
customer support capability, the expansion may not result in revenue growth.

WE RELY ON OUR  PIVOTAL  ALLIANCE  NETWORK  OF  INDEPENDENT  COMPANIES  TO SELL,
INSTALL AND SERVICE OUR  SOLUTIONS AND TO PROVIDE  SPECIALIZED  SOFTWARE FOR USE
WITH THEM AND OUR PIVOTALHOST PROGRAM RELIES ON THIRD-PARTY  APPLICATION SERVICE
PROVIDERS.

We do not have the  internal  implementation  and  customization  capability  to
support our current level of sales of licenses. Accordingly, we have established
and relied on our  international  network of  independent  companies we call the
Pivotal Alliance. Members of the Pivotal Alliance market and sell our solutions,
provide implementation and customization services, provide technical support and
maintenance on a continuing basis and provide us with software applications that
we can bundle with our  solutions  to address  specific  industry  and  customer
requirements.  Approximately  20% and 24% of our license  revenues  for the year
ended  June 30,  2001 and  2000,  respectively  were  from  sales  made  through
third-party  resellers.  The  majority of our  customers  retain  members of the
Pivotal Alliance to install and customize our solutions.  If we fail to maintain
our existing Pivotal Alliance relationships,  or to establish new relationships,
or if  existing  or new  members of the  Pivotal  Alliance do not perform to our
expectations, our ability to sell, install and service our solutions may suffer.

There is an industry  trend toward  consolidation  of systems  integrators  that
implement,  customize  and  maintain  software  solutions.  Some of the  systems
integrators  in the Pivotal  Alliance  have  engaged in  discussions  concerning
business   consolidations.   We  are   uncertain  as  to  the  effect  that  any
consolidation  may  have  on our  relationships  with  members  of  the  Pivotal
Alliance.

The  success  of our  PivotalHost  program  will  depend on the  commitment  and
performance  of  third-party   application  service  providers  to  successfully
implement and market services that incorporate our solutions.

THE LOSS OF OUR CO-FOUNDERS OR OTHER KEY PERSONNEL OR OUR FAILURE TO ATTRACT AND
RETAIN ADDITIONAL PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.

Our success depends largely upon the continued service of our executive officers
and other key management,  sales and marketing and technical personnel. The loss
of the services of one or more of our executive  officers or other key employees
could have a material adverse effect on our business,  results of operations and
financial condition. In particular, we rely on our co-founders,  Norman Francis,
Chairman  of the  Board of  Directors,  and  Keith  Wales,  our  Executive  Vice
President,  Corporate  Projects and  director.  We also rely on Bo Manning,  our
President,  Chief  Executive  Officer and director,  Vincent  Mifsud,  our Chief
Operating Officer,  Chief Financial Officer and Executive Vice President.  We do
not  have an  employment  agreement  with Mr.  Wales  and,  therefore,  he could
terminate his employment  with us at any time without  penalty.  We maintain key
man insurance on the lives of Messrs.  Francis and Wales but do not maintain key
man insurance on the lives of Messrs. Manning and Mifsud.

Our future  success  also  depends on our ability to attract  and retain  highly
qualified  personnel.  The competition  for qualified  personnel in the computer
software  and  Internet  markets is intense,  and we may be unable to attract or
retain highly  qualified  personnel.  Due to intense  competition  for qualified
employees, it may be necessary for us to increase the level of compensation paid
to  existing  and new  employees  such  that  our  operating  expenses  could be
materially increased.  The price of our common shares has declined significantly
in the past year.  Many of our key  employees  hold  options to purchase  common
shares with exercise prices significantly  greater than the current market price
of the common  shares.  Accordingly,  our current share option program may be of
limited value in retaining and motivating employees.

WE FACE RISKS FROM THE EXPANSION OF OUR INTERNATIONAL OPERATIONS.

We have  permanent  offices in the United  States,  Canada,  Ireland,  Northern
Ireland,  England,  Japan,  Australia,  New Zealand,  Germany and France. We are
constantly  reviewing  our  international  sales and  operations to determine if
offices are required in other

                                       24
<PAGE>

countries.   As  a  result,   we  expect  to  continue  this  expansion  of  our
international operations in the future.  International operations are subject to
numerous inherent potential risks, including:

     o unexpected changes in regulatory requirements;

     o export restrictions, tariffs and other trade barriers;

     o changes in local tax rates or rulings by local tax authorities;

     o challenges  in staffing and  managing  foreign  operations,  differing
       technology  standards,   employment  laws  and  practices  in  foreign
       countries;

     o less favorable intellectual property laws;

     o longer  accounts   receivable   payment  cycles  and  difficulties  in
       collecting payments;

     o political and economic instability; and

     o fluctuations in currency exchange rates and the imposition of currency
       exchange controls.

Any of these  factors  could have a  material  adverse  effect on our  business,
financial condition or results of operations.

Our  international  expansion  has and  will  continue  to  require  significant
management  attention  and  financial  resources.  We have had to  significantly
enhance our direct and indirect international sales channels and our support and
services capabilities.  We may not be able to maintain or increase international
market  demand for our  solutions.  We may not be able to  sustain  or  increase
international revenues from licenses or from consulting and customer support.

In some foreign  countries we rely on selected  solution  providers to translate
our software  into local  languages,  adapt it to local  business  practices and
complete  installations in local markets. We are highly dependent on the ability
and  integrity of these  solution  providers,  and if any of them should fail to
properly  translate,  adapt or install our  software,  our  reputation  could be
damaged  and we could  be  subjected  to  liability.  If any of  these  solution
providers  should fail to adequately  secure our software  against  unauthorized
copying, our proprietary software could be compromised.

POLITICAL  UNREST MAY ADVERSELY  AFFECT THE  OPERATION OF OUR EUROPEAN  CUSTOMER
SUPPORT CENTER LOCATED IN NORTHERN IRELAND.

We have 15 employees  located in our Belfast,  Northern Ireland customer support
center.  This center provides customer support primarily to all of our customers
in Europe and provides back-up support for other customers around the world.

Northern Ireland has historically  experienced  periods of religious,  civil and
political  unrest.  Northern  Ireland may experience  further unrest which could
disrupt our ability to provide customer support and have material adverse effect
on our results of operations and financial condition.

FLUCTUATIONS  IN  CURRENCY  EXCHANGE  RATES AND RISKS  ASSOCIATED  WITH OUR RISK
MANAGEMENT POLICIES MAY AFFECT OUR OPERATING RESULTS.

Substantially  all of our revenues  and  corresponding  receivables  are in U.S.
dollars. However, a majority of our research and development expenses,  customer
support costs and administrative expenses are in Canadian dollars.  Accordingly,
we are exposed to fluctuations in the exchange rates between the U.S. dollar and
the Canadian dollar.

We have adopted a foreign currency risk management policy intended to reduce the
effects of potential fluctuations on the results of operations stemming from our
exposure to these risks. As part of this risk management, we identify our future
Canadian currency requirements related to payroll costs, capital expenditure and
operating  lease  commitments  and enter  into  forward  exchange  contracts  or
purchase  Canadian  dollars in the open market at the  beginning of an operation
period to cover these  anticipated  currency needs.

                                       25
<PAGE>

For additional information regarding our forward exchange contracts,  see Item 3
"Quantitative Disclosures About Market Risk" contained in this Report.

If our actual currency  requirement in the period  forecasted  differ materially
from the notional amount of our forward  contracts and/or the amount of Canadian
dollars  purchased in the open market during a period of currency  volatility or
if we do not continue to manage our exposure to foreign currency through forward
contracts or other means, we could  experience  unanticipated  foreign  currency
gains or losses.

Our foreign currency risk management policy subjects us to risks relating to the
creditworthiness  of the  commercial  banks  with  which we enter  into  forward
contracts.  If one of these banks cannot honor its obligations,  we may suffer a
loss.

We also  invest in our  international  operations  which will  likely  result in
increased  future  operating  expenses  denominated  in United Kingdom and Irish
pounds, French Francs, euros, German marks, Japanese yen, Australian dollars and
New Zealand dollars. Our exposure to exchange fluctuations in foreign currencies
is not  material to date and  accordingly,  our current  foreign  currency  risk
management  practices do not cover foreign exchange risks related to these other
currencies.  In the future,  our exposure to foreign  currency  risks from these
other foreign currencies may increase and if not managed appropriately, we could
experience unanticipated foreign currency gains and losses.

The  purpose of our foreign  currency  risk  management  policy is to reduce the
effect of exchange rate  fluctuation  on our results of  operations.  Therefore,
while our foreign  currency  risk  management  policy may reduce our exposure to
losses  resulting from unfavorable  changes in currency  exchange rates, it also
reduces or eliminates our ability to profit from  favorable  changes in currency
exchange rates.

FLUCTUATIONS  IN THE MARKET VALUE OF OUR SHORT-TERM  INVESTMENTS AND IN INTEREST
RATES MAY AFFECT OUR OPERATING RESULTS.

For additional  information  regarding the  sensitivity of and risks  associated
with the market value of short-term  investments and interest rates,  see Item 7
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" contained in this Report.

WE HAVE EXPERIENCED  RAPID GROWTH WHICH HAS PLACED A STRAIN ON OUR RESOURCES AND
ANY FAILURE TO MANAGE OUR GROWTH EFFECTIVELY COULD CAUSE OUR BUSINESS TO SUFFER.

We have been  expanding  our  operations  rapidly  and intend to  continue  this
expansion for the foreseeable future. The number of our employees increased from
526 on June 30, 2000 to 714 on June 30, 2001. This expansion has placed,  and is
expected  to  continue  to  place,  a  significant  strain  on  our  managerial,
operational  and financial  resources as we integrate and manage new  employees,
more locations, more customers,  suppliers and other business relationships.  In
the past we have  decided  to,  and in the  future  we may need to,  improve  or
replace our existing  operational and customer service  systems,  procedures and
controls.  Any failure by us to properly  manage our growth or these systems and
procedural  transitions  could  impair  our  ability to  efficiently  manage our
business,  to maintain and expand  important  relationships  with members of the
Pivotal  Alliance and other third parties and to attract and service  customers.
It could  also  cause us to incur  higher  operating  costs  and  delays  in the
execution of our business  plan or in the reporting or tracking of our financial
results.

THE  INTEGRATION  OF  CURRENT  AND  FUTURE  ACQUISITIONS  MAY BE  DIFFICULT  AND
DISRUPTIVE.

We are in the process of integrating  the Inform  business with our business and
we  are  expending  financial  and  management  resources  in  this  effort.  We
anticipate that we may acquire other companies in the future.  Acquisitions  and
the  integration  of new companies  take  significant  financial and  management
resources  and are  subject  to  risks  commonly  encountered  in  acquisitions,
including, among others, risk of loss of key personnel,  difficulties associated
with  assimilating  ongoing  businesses  and the  ability of our sales force and
consultants to become educated on new products and solutions.  We will also need
to integrate the solutions of acquired companies into our solution offering.  We
may not  successfully  overcome  these risks or any other  problems  that may be
encountered in connection with the acquisition of Inform or future acquisitions.
Accordingly,  it is uncertain whether we will receive the benefits we anticipate
from these  acquisitions  and we may not  realize  value from these  acquisition
comparable to the resources we invest in them.

Amortization of intangible  assets  resulting from  acquisitions  will adversely
affect our reported  income.  In connection with our  acquisitions of Transitif,
Exactium, Simba, Ionysys, Project One, Software Spectrum and Inform we allocated
an aggregate of $73.2



                                       26
<PAGE>

million of the purchase prices to intangible assets that we have been amortizing
over a period of three years on a straight-line  basis.  Future acquisitions may
result in the creation of significant additional intangible assets.

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standard (SFAS) No. 141, "Business  Combinations" and SFAS
No.142,  "Goodwill  and Other  Intangible  Assets".  SFAS No. 141  addresses the
initial  recognition  and  measurement of goodwill and other  intangible  assets
acquired  in a business  combination  and SFAS No.  142  addresses  the  initial
recognition and measurement of intangible  assets acquired outside of a business
combination whether acquired individually or with a group of other assets. These
standards require all future business combinations to be accounted for using the
purchase method of accounting.  Goodwill will no longer be amortized but instead
will be subject to impairment tests at least annually.  We are required to adopt
SFAS  No.  141 and 142 on a  prospective  basis  as of  July  1,  2002,  but are
permitted to adopt in the first quarter of 2002. We are currently evaluating the
impact the adoption of these  pronouncements  may have on its financial position
and results of operations;  however, due to these pronouncements being issued in
late  July 2001 and due to our  expectation  that the FASB  will  issue  further
guidance  with  respect to the  adoption  of both SFAS No.  141 and 142,  we are
currently  unable to determine  the impact the adoption of these  pronouncements
may have on its financial position or results of operations.  Although we cannot
determine  the impact  SFAS the  adoption of SFAS 141 and SFAS would have on our
operating  results,  once  adopted  there could be a material  impact on further
operating results if there was an impairment in the value of goodwill.

As part of our business strategy, we regularly review acquisition  opportunities
and we  may  seek  to  grow  by  making  additional  acquisitions.  We  may  not
effectively select acquisition candidates,  negotiate or finance acquisitions or
integrate the acquired  businesses and their  personnel or acquired  products or
technologies  into our  business.  We cannot be certain that we can complete any
acquisition  we  pursue  on  favorable  terms,  or  that  any  acquisition  will
ultimately benefit our business.

OUR PLAN TO EXPAND OUR SERVICE  CAPABILITY  COULD ADVERSELY  AFFECT GROSS PROFIT
MARGINS AND OPERATING RESULTS.

Revenues  from services and  maintenance  have lower gross margins than revenues
from licenses.  Therefore,  an increase in the percentage of revenues  generated
from services and  maintenance  as compared to revenues from licenses will lower
our overall gross margins. In addition, an increase in the cost of revenues from
services  and  maintenance  as  a  percentage  of  revenues  from  services  and
maintenance could have a negative impact on overall gross margins.

Although  margins  related to revenues from services and  maintenance  are lower
than  margins  related to revenues  from  licenses,  our  services  organization
currently  generates  gross  profits,  and we are  seeking to expand our service
capability and our revenues from services and maintenance.

Revenues from services and  maintenance  depend in part on renewals of technical
support  contracts  by our  customers,  some of which  may not be  renewed.  Our
ability to increase  revenues from services and maintenance will depend in large
part  on our  ability  to  increase  the  scale  of our  services  organization,
including our ability to successfully  recruit and train a sufficient  number of
qualified services personnel. We may not be able to do so.

To meet our expansion goals, we expect to hire additional services personnel. If
demand for our  services  organization  does not increase in  proportion  to the
number of  additional  personnel we hire,  gross  profits  could fall, or we may
incur losses from our services activities.  In addition, the costs of delivering
services could increase and any material increase in these costs could reduce or
eliminate the profitability of our services activities.

WE RELY ON SOFTWARE  LICENSED TO US BY THIRD  PARTIES FOR FEATURES WE INCLUDE IN
OUR SOLUTIONS.

We  incorporate  into  our  solutions,  software  that  is  licensed  to  us  by
third-party  software developers  including Microsoft SQL Server 2000, Microsoft
SQL Server 7.0,  Sheridan  Calendar  Control,  InstallShield 3, Crystal Reports,
E.piphany E.4, and Interactive  Intelligence  Enterprise  Interaction Center. We
are seeking to further  increase the  capabilities of our solutions by licensing
additional  applications from third parties.  A significant  interruption in the
availability of any of this licensed  software could adversely affect our sales,
unless and until we can replace this software with other  software that performs
similar  functions.  Because our solutions  incorporate  software  developed and
maintained  by third  parties,  we depend on these third  parties'  abilities to
deliver and support reliable products,  enhance their current products,  develop
new  products  on a timely and  cost-effective  basis,  and  respond to emerging
industry  standards and other  technological  changes.  If third-party  software
offered now or in the future in conjunction with our

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<PAGE>

solutions   becomes  obsolete  or  incompatible  with  future  versions  of  our
solutions,  we may not be able to  continue  to offer  some of the  features  we
presently include in our solutions unless we can license alternative software or
develop the features ourselves.

WE MUST CONTINUE TO DEVELOP  ENHANCEMENTS TO OUR SOLUTIONS AND NEW  APPLICATIONS
AND  FEATURES  THAT  RESPOND  TO THE  EVOLVING  NEEDS  OF OUR  CUSTOMERS,  RAPID
TECHNOLOGICAL CHANGE AND ADVANCES INTRODUCED BY OUR COMPETITORS.

The software market in which we compete is  characterized by rapid change due to
changing customer needs, rapid technological  changes and advances introduced by
competitors.  Existing  products become obsolete and unmarketable  when products
using new technologies  are introduced and new industry  standards  emerge.  New
technologies  could  change  the  way  customer   relationship   management  and
electronic  business  solutions  are sold or  delivered.  As a result,  the life
cycles of our solutions  are  difficult to estimate.  We also may need to modify
our  solutions  when  third  parties  change  software  we  integrate  into  our
solutions.  To be successful  we must continue to enhance our current  solutions
and develop new applications and features.

We may not be able to successfully develop or license the applications necessary
to offer these or other features,  or to integrate these  applications  with our
existing solutions.  We have delayed enhancements and new solution release dates
several  times  in the  past  and may not be able to  introduce  new  solutions,
solution enhancements,  new applications or features successfully or in a timely
manner in the  future.  If we delay  release of our new  solutions  or  solution
enhancements  or new  applications or features or if they fail to achieve market
acceptance  when  released,  we may not be able  to  keep  up  with  the  latest
developments  in the market  and our  revenues  may fall.  We may not be able to
respond  effectively  to  customer  needs,  technological  changes  or  advances
introduced by our competitors, and our solutions could become obsolete.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS.

Our success depends in part on our ability to protect our  proprietary  software
and  our  other  proprietary  rights  from  copying,   infringement  or  use  by
unauthorized  parties.  To protect our proprietary rights we rely primarily on a
combination  of  copyright,  trade secret and  trademark  laws,  confidentiality
agreements  with  employees  and  third  parties,  and  protective   contractual
provisions  such as those  contained  in license  agreements  with  consultants,
vendors and customers,  although we have not signed these types of agreements in
every case. Despite our efforts to protect our proprietary rights,  unauthorized
parties may copy aspects of our solutions and obtain and use information that we
regard as proprietary.  Other parties may breach confidentiality  agreements and
other protective  contracts we have entered into. We may not become aware of, or
have adequate  remedies in the event of, these types of breaches or unauthorized
activities.

CLAIMS BY OTHER  COMPANIES  THAT OUR  SOLUTIONS  INFRINGE  THEIR  COPYRIGHTS  OR
PATENTS  COULD  ADVERSELY  AFFECT OUR ABILITY TO SELL OUR SOLUTIONS AND INCREASE
OUR COSTS.

If any of our  solutions  violates  third-party  proprietary  rights,  including
copyrights and patents, we may be required to reengineer our solutions or obtain
licenses  from  third  parties  to  continue   offering  our  solutions  without
substantial   reengineering.   Although   some  of  our  current  and  potential
competitors  have sought patent  protection  for similar  customer  relationship
management  and  electronic  business  solutions,  we  have  not  sought  patent
protection  for our  solutions.  If a patent has been issued or is issued in the
future to a third-party that prevents us from using  technology  included in our
solutions,  we would need to obtain a license or  re-engineer  our  solution  to
function without infringing the patent. Any efforts to re-engineer our solutions
or obtain  licenses from third  parties may not be successful  and, in any case,
could  substantially  increase our costs,  force us to interrupt  sales or delay
solution releases.

OUR SOLUTIONS AND PRODUCTS WE RELY ON MAY SUFFER FROM DEFECTS OR ERRORS.

Software solutions as complex as ours may contain errors or defects,  especially
when first  introduced or when new versions are  released.  We have had to delay
commercial  release of some versions of our solutions  until  software  problems
were corrected, and in some cases have provided solution enhancements to correct
errors in released solutions. Our new solutions and solution enhancements or new
applications or features may not be free from errors after commercial  shipments
have begun. Any errors that are discovered after commercial release could result
in loss of  revenues or delay in market  acceptance,  diversion  of  development
resources,  damage to our reputation,  increased  service and warranty costs and
liability claims.

Our  end-user  licenses  contain  provisions  that limit our exposure to product
liability   claims,   but  these  provisions  may  not  be  enforceable  in  all
jurisdictions.  In some cases, we have been required to waive these  contractual
limitations.  Further,  we  may  be  exposed  to  product  liability  claims  in
international  jurisdictions  where  our  solution  provider  has  supplied  our
solutions  and  negotiated

                                       28
<PAGE>

the license without our involvement.  A successful product liability claim could
result in material liability and damage to our reputation.

In  addition,  products we rely on, such as  Microsoft  platform  products,  may
contain  defects or errors.  Our  solutions  rely on these  products  to operate
properly.  Therefore,  any defects in these products could adversely  affect the
operation of and market for our  solutions,  reduce our  revenues,  increase our
costs and damage our reputation.

IF OUR CUSTOMERS' SYSTEM SECURITY IS BREACHED, OUR BUSINESS AND REPUTATION COULD
SUFFER.

A fundamental  requirement for online  communications is the secure transmission
of confidential  information over the Internet.  Users of our solutions transmit
their and their customers'  confidential  information over the Internet.  In our
license  agreements  with our  customers,  we  disclaim  responsibility  for the
security of confidential  data and have contractual  indemnities for any damages
claimed  against us. However,  if  unauthorized  third parties are successful in
obtaining confidential  information from users of our solutions,  our reputation
and business may be damaged and, if our contractual  disclaimers and indemnities
are not enforceable, we may be subjected to liability.

CHANGES IN  ACCOUNTING  STANDARDS  AND IN THE WAY WE CHARGE FOR  LICENSES  COULD
AFFECT OUR FUTURE OPERATING RESULTS.

We  recognize  revenues  from the sale of  software  licenses on delivery of our
solutions if:

     o persuasive evidence of an arrangement exists,

     o the fee is fixed and determinable,

     o we can  objectively  allocate  the total fee among all elements of the
       arrangement, and

     o collection of the license fee is probable.

Under some license  arrangements,  with either a fixed or indefinite  term,  our
customers agree to pay for the license with periodic  payments  extending beyond
one year. We recognize revenues from these arrangements as the periodic payments
become due,  provided all other  conditions for revenue  recognition are met. We
have not  entered  into  many of these  arrangements,  however,  if they  become
popular with our customers, we may have lower revenues in the short term than we
would  otherwise,  because  revenues for licenses sold under these  arrangements
will be recognized over time rather than upon delivery of our solution.

We recognize  maintenance revenues ratably over the contract term, typically one
year, and recognize  revenues for consulting,  education and  implementation and
customization services as the services are performed.

Administrative agencies responsible for setting accounting standards,  including
the Securities and Exchange  Commission and the Financial  Accounting  Standards
Board,  are  also  reviewing  the  accounting   standards  related  to  business
combinations and stock-based compensation.

Any changes to these accounting  standards or any other accounting  standards or
the way these  standards are  interpreted  or applied could require us to change
the  manner  in which we  recognize  revenue  or the way we  account  for  share
compensation  or for any  acquisition  we may  pursue  or other  aspects  of our
business,  in a manner  that  could  adversely  affect  our  reported  financial
results.

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<PAGE>

OUR SHARE PRICE MAY CONTINUE TO BE VOLATILE.

Our share price has fluctuated  substantially  since our initial public offering
in August 1999. The trading price of our common shares is subject to significant
fluctuations in response to variations in quarterly operating results,  the gain
or loss of  significant  orders,  changes in revenues and earnings  estimates by
securities analysts, announcements of technological innovations or new solutions
by us or our  competitors,  general  conditions  in the  software  and  computer
industries and other events or factors. In addition, the stock market in general
has  experienced  extreme price and volume  fluctuations  that have affected the
market  price for many  companies in  industries  similar or related to ours and
have been  unrelated to the  operating  performance  of these  companies.  These
market fluctuations have adversely affected and may continue to adversely affect
the market price of our common shares.

CERTAIN SHAREHOLDERS  MAY BE  ABLE  TO  EXERCISE  CONTROL  OVER  MATTERS
REQUIRING SHAREHOLDER APPROVAL.

Our  current  officers,  directors  and  entities  affiliated  with us  together
beneficially owned a significant  portion of our outstanding common shares as of
June  30,  2001.  While  these  shareholders  do  not  hold  a  majority  of our
outstanding common shares, they will be able to exercise  significant  influence
over matters requiring shareholder approval, including the election of directors
and the approval of mergers,  consolidations  and sales of our assets.  This may
prevent or discourage tender offers for our common shares.

ITEM 2. PROPERTIES

Our principal administrative, professional services and education facilities are
located in North  Vancouver,  British  Columbia,  Canada,  and our  research and
development  campus is  located  in  Vancouver,  British  Columbia,  Canada  and
together  consist of  approximately  85,288 square feet of office space in three
separate  buildings.  The leases for the buildings in North Vancouver  expire in
September  2002 and the lease for the  building  in  Vancouver  expires in April
2002. We intend to consolidate these offices to one newly  constructed  facility
in Vancouver,  British Columbia with a scheduled completion in the fall of 2002.
Pursuant  to an offer to lease  this  facility,  our  obligation  to occupy  the
premises  and  commence  paying  rent does not arise until  construction  of the
building is complete.  Once construction is finished,  the building will consist
of 126,790  square feet of office space under a lease that expires in July 2017.
Our principal marketing facility is located in Kirkland, Washington and consists
of  approximately  13,600  square  feet of office  space held under a lease that
expires in December  2003. We also have a significant  research and  development
facility in Atlanta,  Georgia that consists of approximately  26,708 square feet
of  office  space  under a lease  that  expires  on April  2006.  We also have a
significant  professional  services  facility in Dallas,  Texas that consists of
7,877 square feet of space under a lease that expires in September 2003.

Our main administrative office for Europe, the Middle East and Africa is located
in Dublin,  Ireland held under a lease  expiring in November 2001. Our principal
sales and marketing office for Europe,  the Middle East and Africa is located in
Luton,  England held under a lease that expires in November  2005.  Our European
customer support center is located in Belfast,  Northern Ireland and consists of
approximately  9,648  square feet of office  space under a lease that expires in
May 2010.

As of June 30, 2001, we also leased offices in: Tokyo, Japan; Sydney, Australia;
Auckland, New Zealand;  Mainz, Germany; High Point, North Carolina; Des Plaines,
Illinois;  San Bruno and Irvine,  California;  Dallas, Texas; Denver,  Colorado;
Levallois-Perret,   France;   Paris,  France;   North  Andover,   Massachusetts;
Morristown,  New Jersey;  New York,  New York;  Bethesda,  Maryland;  St.  Paul,
Minnesota and Toronto, Ontario.

ITEM 3. LEGAL PROCEEDINGS

We are  subject  to legal  proceedings,  claims  and  litigation  arising in the
ordinary  course of business.  Management,  after review and  consultation  with
legal  counsel,  considers  that  any  liability  from the  disposition  of such
lawsuits  would  not  have a  material  adverse  effect  upon  our  consolidated
financial condition.

We are currently in arbitration with one of our business  partners,  following a
breach of contract  claim  against us. We believe the claim is without merit and
we have made a counterclaim.  While the results of arbitration and claims cannot
be predicted  with  certainty,  we believe that the final outcome of this matter
will not have a material  adverse effect on our business,  financial  condition,
results of operations or cash flows.


ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

Not Applicable.

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<PAGE>

                                     PART II

ITEM 5.  MARKET FOR  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS

MARKET INFORMATION

Our common shares began trading on the Nasdaq  National Market on August 5, 1999
under the symbol PVTL. The table below lists the high and low closing prices per
share of our common  shares for each  quarterly  period  during the past  fiscal
year, as reported on the Nasdaq National Market.

                                                                 Price Range
                                                              of Common Shares
                                           Price Range         for Year Ended
                                         of Common Shares       June 30, 2000
                                         for Year Ended          (beginning
                                          June 30, 2001        August 5, 1999)
                                         -----------------    -----------------
                                          High       Low        High        Low
                                          -----      ---        ----        ---
First Quarter..........................$...59.38 $   23.44   $  19.69   $  12.06
Second Quarter.............................70.23     31.00      59.00      18.13
Third Quarter..............................35.56     10.31      68.56      30.06
Fourth Quarter.............................25.10      9.44      45.50      18.78

Our common shares began trading on The Toronto Stock Exchange on August 17, 2000
under the symbol PVT. The table below lists the high and low closing  prices per
share of our common  shares for each  quarterly  period  during the past  fiscal
year, as reported on The Toronto Stock Exchange.

                                                                 Price Range
                                                              of Common Shares
                                                             -----------------
                                                             High           Low
                                                             ----           ---
Year Ended June 30, 2001
First Quarter (beginning August 17, 2000)..............Cdn$  88.25    Cdn$ 54.75
Second Quarter............................................. 105.00         48.00
Third Quarter..............................................  54.00         16.20
Fourth Quarter.............................................  38.46         14.70


SHAREHOLDERS

As of September 1, 2001, there were  approximately 388 registered holders of our
common  shares.  This does not include the number of persons whose shares are in
nominee or "street name" accounts through brokers.

DIVIDENDS

We have never  declared  or paid any cash  dividends  on our share  capital.  We
currently  intend to retain  any future  earnings  to fund the  development  and
growth of our business and we do not anticipate paying any cash dividends in the
foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

On June 22, 2001, in connection  with the  acquisition  of Inform Inc. we issued
45,446 common shares. We relied on the exclusion from  registration  provided by
Rule  903(b)(2) of  Regulation  S under the  Securities  Act of 1933.  We were a
"foreign  issuer",  as defined by  Regulation S and issued our shares to persons
outside  the  United  States  and not for the  account  or  benefit of any "U.S.
Person." We imposed offering restrictions in compliance with Rule 903(b)(2).

USE OF PROCEEDS

On August 4, 1999,  our  registration  statement on Form F-1,  Registration  No.
333-82871,  became effective. The offering date was August 5, 1999. The offering
has terminated as a result of all of the shares offered being sold. The managing
underwriters  were  Merrill  Lynch & Co.,  Bear,  Stearns  & Co.  Inc.  and Dain
Rauscher  Wessels.  The offering  consisted  of 3,975,000 of our common  shares,
which included 475,000 common shares offered pursuant to the subsequent exercise
of the  underwriter's  over  allotment  option

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<PAGE>

on August 19, 1999. The aggregate price of the shares offered and sold was $47.7
million.  Proceeds  to us,  after $3.3  million in  underwriting  discounts  and
commissions and $1.3 million in other expenses,  were $43.1 million.  During the
year  ended  June  30,  2000,  we used  $14.5  million  of the net  proceeds  in
connection with acquisitions of Exactium,  Simba and Transitif.  During the year
ended June 30, 2001, we used $5.7 million of the net proceeds in connection with
acquisitions of Ionysys, Project One, Software Spectrum and Inform. Another $6.0
million of the net proceeds was used for working  capital.  The remaining  $16.9
million  of the net  proceeds  continues  to be  invested  in  investment-grade,
interest bearing short-term instruments.

None of the net  offering  proceeds  were paid,  and none of the initial  public
offering expenses related to payments, directly or indirectly, to our directors,
officers or general partners or their associates,  persons owning 10% or more of
any class of securities or our affiliates.

Exchange Controls

There are no government  laws,  decrees or  regulations in Canada which restrict
the export or import of capital or which  affect the  remittance  of  dividends,
interest or other payments to  non-resident  holders of our common  shares.  Any
remittances of dividends to United States  residents and to other  non-residents
are, however, subject to withholding tax. See "Taxation" below.

Taxation

Canadian Federal Income Taxation

We consider that the following summary fairly describes in general the principal
Canadian  federal income tax  consequences  applicable to a holder of our common
shares who at all  material  times deals at arm's  length with us, who holds all
common shares as capital property,  who is resident in the United States, who is
not a resident of Canada and who does not use or hold,  and is not deemed to use
or hold, his common shares of Pivotal in connection  with carrying on a business
in Canada (a "non-resident  holder").  It is assumed that the common shares will
at all  material  times be listed on a stock  exchange  that is  prescribed  for
purposes of the Income Tax Act (Canada) (the "ITA") and regulations  thereunder.
The Canadian federal income tax consequences applicable to holders of our common
shares will not change if we are deemed  inactive by The Toronto Stock Exchange.
Investors  should  however  be  aware  that  the  Canadian  federal  income  tax
consequences  applicable to holders of our common shares will change if we cease
to be listed on a prescribed  stock  exchange like The Toronto  Stock  Exchange.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax  consequences of them
purchasing,  owing and  disposing  of our  common  shares  should we cease to be
listed on a prescribed stock exchange.

This summary is based upon the current  provisions  of the ITA, the  regulations
thereunder,  the Canada-United States Tax Convention as amended by the Protocols
thereto (the  "Treaty")  as at the date of the  registration  statement  and the
currently publicly announced administrative and assessing policies of the Canada
Customs and Revenue Agency (the "CCRA"). This summary does not take into account
Canadian provincial income tax consequences.  This description is not exhaustive
of all possible  Canadian federal income tax consequences and does not take into
account or anticipate any changes in law,  whether by legislative,  governmental
or judicial action. This summary does,  however,  take into account all specific
proposals to amend the ITA and regulations thereunder, publicly announced by the
Government of Canada to the date hereof.

This summary does not address  potential tax effects relevant to us or those tax
considerations  that  depend  upon  circumstances  specific  to  each  investor.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax  consequences to them
of purchasing, owning and disposing of our common shares.

Dividends

The ITA provides that dividends and other  distributions  deemed to be dividends
paid or deemed to be paid by a Canadian  resident  corporation (such as Pivotal)
to a non-resident  of Canada shall be subject to a non-resident  withholding tax
equal to 25% of the gross amount of the dividend of deemed dividend.  Provisions
in the ITA  relating  to  dividend  and deemed  dividend  payments  to and gains
realized by non-residents of Canada, who are residents of the United States, are
subject  to the  Treaty.  The Treaty  may  reduce  the  withholding  tax rate on
dividends as discussed below.

Article  X of the  Treaty as  amended  by the  US-Canada  Protocol  ratified  on
November 9, 1995  provides a 5%  withholding  tax on gross  dividends  or deemed
dividends paid to a United States  corporation which  beneficially owns at least
10% of our voting stock paying the dividend.  In cases where dividends or deemed
dividends are paid to a United States  resident  (other than a corporation) or a
United

                                       32
<PAGE>

States  corporation which beneficially owns less than 10% of our voting stock, a
withholding  tax of 15% is imposed on the gross amount of the dividend or deemed
dividend  paid.  We will be required to withhold  any such tax from the dividend
and remit the tax directly to CCRA for the account of the investor.

The reduction in withholding tax from 25%,  pursuant to the Treaty,  will not be
available:


     (a)  if the shares in respect of which the  dividends  are paid formed part
          of the business property or were otherwise  effectively connected with
          a permanent  establishment or fixed base that the holder has or had in
          Canada within the 12 months preceding the disposition, or

     (b)  the holder is a U.S. LLC which is not subject to tax in the U.S.

The Treaty  generally  exempts  from  Canadian  income tax  dividends  paid to a
religious, scientific, literary, educational or charitable organization or to an
organization exclusively administering a pension, retirement or employee benefit
fund or plan,  if the  organization  is resident in the U.S.  and is exempt from
income tax under the laws of the U.S.

Capital Gains

A  non-resident  holder is not  subject  to tax under  the ITA in  respect  of a
capital  gain  realized  upon the  disposition  of our  share  unless  the share
represents "taxable Canadian property" to the holder thereof.  Our Common shares
will be considered taxable Canadian property to a non-resident holder only if-.

     (a)  the non-resident holder;

     (b)  persons  with  whom  the  non-resident  holder  did not  deal at arm's
          length- or

     (c)  the non-resident holder and persons with whom he did not deal at arm's
          length,

owned not less than 25% of our issued  shares of any class or series at any time
during  the  five  year  period  preceding  the  disposition.  In the  case of a
non-resident  holder to whom our shares represent  taxable Canadian property and
who is  resident  in the United  States,  no Canadian  taxes will  generally  be
payable  on a capital  gain  realized  on such  shares  by reason of the  Treaty
unless:

     (a)  the value of such  shares is derived  principally  from real  property
          (including resource property) situated in Canada,

     (b)  the holder was resident in Canada for 120 months  during any period of
          20 consecutive  years  preceding,  and at any time during the 10 years
          immediately  preceding,  the  disposition and the shares were owned by
          him when he ceased to be a resident of Canada,

     (c)  they  formed  part  of  the  business   property  or  were   otherwise
          effectively  connected  with a permanent  establishment  or fixed base
          that the  holder has or bad in Canada  within the 12 months  preceding
          the disposition, or

     (d)  the holder is a U.S. LLC which is not subject to tax in the U.S.

If subject to Canadian tax on such a disposition,  the  taxpayer's  capital gain
(or  capital  loss) from a  disposition  is the  amount by which the  taxpayer's
proceeds  of  disposition  exceed  (or are  exceeded  by) the  aggregate  of the
taxpayer's  adjusted  cost  base  of  the  shares  and  reasonable  expenses  of
disposition.  For Canadian  income tax purposes,  the "taxable  capital gain" is
equal to one-half of the capital gain.

United States Federal Income Taxation

The  following is a general  discussion of the material  United  States  Federal
income tax  consequences,  under  current law,  generally  applicable  to a U.S.
Holder (as defined  below) of our common shares who holds such shares as capital
assets. This discussion does not address all potentially  relevant United States
Federal  income tax  matters and it does not  address  consequences  peculiar to
persons  subject to special  provisions of United States Federal income tax law,
such as those described below as excluded from the definition of a U.S.  Holder.
In addition,  this  discussion  does not cover any state,  local, or foreign tax
consequences. (See "Canadian Federal Income

                                       33
<PAGE>

Tax Consequences" above.)

The  following  discussion  is based on the Internal  Revenue  Code of 1986,  as
amended (the "Code"),  Treasury Regulations,  published Internal Revenue Service
("IRS")  rulings,  published  administrative  positions  of the  IRS  and  court
decisions that are currently applicable, any or all of which could be materially
and  adversely  changed,  possibly  on a  retroactive  basis,  at any  time.  In
addition,  this discussion does not consider the potential effects, both adverse
and beneficial, of any proposed legislation which, if enacted, could be applied,
possibly on a retroactive basis, at any time.

The discussion below does not address potential United States Federal income tax
effects relevant to us or those United States Federal income tax  considerations
that depend upon  circumstances  specific to each  investor.  In addition,  this
discussion  does not address United States Federal income tax consequences  that
may be relevant  to  particular  investors  subject to special  treatment  under
certain U.S.  Federal income tax laws, such as those described below as excluded
from the  definition  of a U.S.  Holder.  Purchasers  of our common stock should
therefore  satisfy  themselves  as to the  overall  tax  consequences  of  their
ownership  of the common  stock,  including  the State,  local and  foreign  tax
consequences  thereof (which are not reviewed herein),  and should consult their
own tax advisors with respect to their particular circumstances.

U.S. Holders

As used herein, a "U.S.  Holder" means a beneficial  holder of our common shares
who is a citizen or resident of the United States,  a corporation or partnership
created  or  organized  in or under  the  laws of the  United  States  or of any
political  subdivision  thereof, an estate whose income is taxable in the United
States  irrespective  of source and any trust if a US court is able to  exercise
primary  supervision  over the  administration  of the  trust and one or more US
persons have the authority to control all substantial  decisions of the trust. A
U.S.  Holder does not include  persons  subject to special  provisions of United
States  Federal  income tax law,  such as tax-exempt  organizations,  individual
retirement accounts and other tax-deferred accounts, qualified retirement plans,
financial  institutions,  insurance  companies,  real estate investment  trusts,
regulated  investment  companies,  broker-dealers,  shareholders  subject to the
alternative minimum tax provisions of the Code, shareholders who hold our shares
as part of a straddle,  hedging,  conversion  transaction,  constructive sale or
other  arrangement  involving  more  than one  position,  and  shareholders  who
acquired  their  shares  through  the  exercise  of  employee  stock  options or
otherwise as  compensation.  This summary does not address the consequences to a
person or entity holding an interest in a shareholder or the  consequences  to a
person of the ownership,  exercise or  disposition  of any options,  warrants or
other rights to acquire common shares.

Dividend Distribution on our Shares

U.S. Holders receiving dividend distributions (including constructive dividends)
with  respect to our common  shares are  required to include in gross income for
United States Federal income tax purposes the gross amount of such distributions
to the extent that we have current or accumulated earnings and profits,  without
reduction  for any Canadian  income tax withheld from such  distributions.  Such
Canadian  tax  withheld  may be deducted or may be credited  against  actual tax
payable,  subject to certain  limitations  and other complex rules,  against the
U.S.  Holder's United States Federal  taxable  income.  See "Foreign Tax Credit"
below.  To the  extent  that  distributions  exceed our  current or  accumulated
earnings and profits,  they will be treated  first as a return of capital to the
extent of the U.S.  Holder's  basis in our common shares and  thereafter as gain
from the sale or exchange of our common shares.  Preferential  tax rates for net
long  term  capital  gains  may be  applicable  to a  U.S.  Holder  which  is an
individual,  estate or trust.  There are currently no preferential tax rates for
net long term capital gains of a U.S. Holder that is a corporation.

In general,  dividends  paid on our common  shares will not be eligible  for the
dividends received deduction provided to corporations  receiving  dividends from
certain United States corporations.

In the case of foreign currency  received as a dividend that is not converted by
the recipient into U.S. dollars on the date of receipt,  a U.S. Holder will have
a tax basis in the foreign  currency equal to its U.S.  dollar value on the date
of receipt.  Generally  any gain or loss  recognized  upon a subsequent  sale or
other  disposition  of the foreign  currency,  including  the  exchange for U.S.
dollars,  will be ordinary income or loss. However, an individual whose realized
gain does not exceed $200 will not recognize that gain, to the extent that there
are no expenses  associated with the transaction  that meet the requirements for
deductibility  as a trade or business  expense  (other  than travel  expenses in
connection with a business trip) or as an expense for the production of income.

Certain  information  reporting  and  backup  withholding  rules may apply  with
respect to our common  shares.  In particular,  a payor or middleman  within the
U.S.,  or in certain  cases  outside the U.S.,  will be required to withhold 31%
(which rate is scheduled for periodic  reduction on payments made  subsequent to
August 6, 2001) of any  payments to a holder of our common  shares of  dividends
on, or

                                       34
<PAGE>

proceeds from the sale of, such common shares within the U.S., unless the holder
is an exempt  recipient,  if the holder  fails to furnish its  correct  taxpayer
identification  number  or  otherwise  fails to comply  with,  or  establish  an
exemption from, the backup  withholding tax  requirements.  Any amounts withheld
under the U.S.  backup  withholding  tax rules  will be allowed as a refund or a
credit against the U.S. Holder's U.S. federal income tax liability, provided the
required  information is furnished to the IRS. U.S. Holders are urged to consult
their own tax counsel regarding the information reporting the backup withholding
rules applicable to our common shares.

Foreign Tax Credit

A U.S.  Holder who pays (or who has had withheld  from  distributions)  Canadian
income tax with respect to the  ownership of our common  shares may be entitled,
at the  election of the U.S.  Holder,  to either a deduction or a tax credit for
such foreign tax paid or withheld. This election is made on a year-by-year basis
and generally applies to all foreign income taxes paid by (or withheld from) the
U.S.  Holder during that year.  There are  significant  and complex  limitations
which apply to the credit, among which is the general limitation that the credit
cannot exceed the proportionate  share of the U.S. Holder's United States income
tax liability that the U.S.  Holder's  foreign source income bears to his or its
world-wide  taxable income.  In determining the application of this  limitation,
the various  items of income and deduction  must be classified  into foreign and
domestic sources and into various  categories,  such as "passive income",  "high
withholding tax interest",  "financial  services income",  "shipping income" and
certain other  classifications  of income. A U.S. Holder that is a domestic U.S.
corporation  owning 10% or more of our voting stock is also entitled to a deemed
paid foreign tax credit in certain  circumstances for our underlying foreign tax
related to dividends  received or Subpart F income deemed received from us. (See
the discussion below of Controlled  Foreign  Corporations).  The availability of
the foreign tax credit and the application of the limitations on the foreign tax
credit are fact  specific  and  holders  and  prospective  holders of our common
shares  should  consult  their  own  tax  advisors  regarding  their  individual
circumstances.

Disposition of Common Shares

Gain or loss  realized  on a sale of our  common  shares by a U.S.  Holder  will
generally  be a capital gain or loss,  and will be long-term if the  shareholder
has a  holding  period  of  more  than  one  year.  The  amount  of gain or loss
recognized by a selling U.S.  Holder will be measured by the difference  between
(i) the amount realized on the sale and (ii) his tax basis in our common shares.
Preferential  tax rates for net long term capital  gains may be  applicable to a
U.S.  Holder that is an  individual,  estate or trust.  There are  currently  no
preferential  tax rates for net long term capital gain for a U.S. Holder that is
a  corporation.  Capital  losses  are  deductible  only to the extent of capital
gains.  However,  in the case of taxpayers other than corporations  (U.S.)$3,000
($1,500  for  married  individuals  filing  separately)  of  capital  losses are
deductible  against  ordinary  income  annually.  In the case of individuals and
other non-corporate taxpayers,  capital losses that are not currently deductible
may be carried  forward to other  years.  In the case of  corporations,  capital
losses that are not currently  deductible  are carried back to each of the three
years  preceding the loss year and forward to each of the five years  succeeding
the loss year.

Other Considerations for U.S. Holders

In the following  circumstances,  the above sections of this  discussion may not
describe the United States Federal income tax  consequences  resulting to a U.S.
Holder from the holding and  disposition  of our common  shares.  Management  of
Pivotal is of the opinion that there is little,  if any,  likelihood of us being
deemed a "Foreign Personal Holding Company", a "Foreign Investment Company" or a
"Controlled  Foreign  Corporation"  (each as defined  below)  under  current and
anticipated conditions.

Foreign Personal Holding Company

If at any time during a taxable year more than 50% of the total combined  voting
power or the  total  value of our  outstanding  shares  is  owned,  actually  or
constructively,  by five or fewer  individuals  who are citizens or residents of
the United States and 60% or more of our gross income for such year was "foreign
personal  holding  company income" (e.g.,  income from  dividends,  interest and
similar income), we would be treated as a "foreign personal holding company." In
that event, U.S. Holders that hold common shares would be required to include in
income for such year their allocable  portion of our "foreign  personal  holding
company income" to the extent that we do not distribute such income.

Foreign Investment Company

If 50% or more of the combined  voting  power or total value of our  outstanding
shares are held,  actually or  constructively,  by citizens or  residents of the
United States, United States domestic  partnerships or corporations,  or estates
or trusts other than  foreign  estates or trusts (as defined by the Code Section
7701(a)(31)),  and we are  found to be  engaged  primarily  in the  business  of
investing,

                                       35
<PAGE>

reinvesting, or trading in securities,  commodities, or any interest therein, it
is  possible  that we might be  treated  as a "foreign  investment  company"  as
defined in Section 1246 of the Code, causing all or part of any gain realized by
a U.S.  Holder selling or exchanging our common shares to be treated as ordinary
income rather than capital gains.

Passive Foreign Investment Company

As a foreign corporation with U.S. Holders, we could potentially be treated as a
passive foreign investment  company ("PFIC"),  as defined in Section 1297 of the
Code,  depending  upon the  percentage  of our income  which is passive,  or the
percentage of our assets which produce or are held for the production of passive
income.  U.S.  Holders owning common shares of a PFIC are subject to the highest
rate of tax on ordinary income in effect for the applicable  taxable year and to
an interest  charge based on the value of deferral of tax for the period  during
which the common  shares of the PFIC are owned with  respect to certain  "excess
distributions"  on and dispositions of PFIC stock.  However,  if the U.S. Holder
makes a timely  election to treat a PFIC as a qualified  electing  fund  ("QEF")
with respect to such shareholder's  interest therein, the above-described  rules
generally  will not apply.  Instead,  the electing  U.S.  Holder  would  include
annually in his gross income his pro rata share of the PFIC's ordinary  earnings
and net capital  gain  regardless  of whether  such income or gain was  actually
distributed.  A U.S. Holder of a QEF can, however, elect to defer the payment of
United States federal income tax on such income inclusions.  Special rules apply
to U.S. Holders who own their interests in a PFIC through intermediate  entities
or persons. In addition,  subject to certain  limitations,  U.S. Holders owning,
actually or constructively, marketable (as specifically defined) stock in a PFIC
will be permitted to elect to mark that stock to market annually, rather than be
subject  to the excess  distribution  regime of section  1291  described  above.
Amounts  included in or deducted from income under this  alternative (and actual
gains and losses realized upon disposition, subject to certain limitations) will
be treated as ordinary gains or losses.  This  alternative will apply to taxable
years of U.S.  Holders  beginning  after  1997  and  taxable  years  of  foreign
corporations ending with or within such taxable years of U.S. Holders.

We  believe  that we were not a PFIC for our fiscal  year  ended June 30,  2001.
There can be no assurance that our determination concerning our PFIC status will
not be challenged by the IRS, or that we will be able to satisfy  record keeping
requirements  which  will be  imposed  on QEFs in the event that we qualify as a
PFIC.

Controlled Foreign Corporation Status

If more than 50% of the voting  power of all classes of stock or the total value
of our stock is owned,  directly or indirectly,  by citizens or residents of the
United States, United States domestic  partnerships or corporations,  or estates
or trusts other than  foreign  estates or trusts (as defined by the Code Section
7701(a)(31)),  each of which own,  directly  or  indirectly,  10% or more of our
total  combined  voting  power,  we would be  treated as a  "controlled  foreign
corporation"  or "CFC" under Subpart F of the Code.  This  classification  would
bring into effect many complex results including the required  inclusion by such
10% U.S.  Holders in income of their pro rata  shares of our  "Subpart F income"
(as  defined  by the Code) and our  earnings  invested  in "U.S.  property"  (as
defined by Section 956 of the Code).  In  addition,  under  Section  1248 of the
Code, if we are  considered a CFC at any time during the five year period ending
with the sale or  exchange  of our stock,  gain from the sale or exchange of our
common shares by such a 10% U.S.  Holder at any time during the five year period
ending with the sale or exchange is treated as ordinary  dividend  income to the
extent of our earnings and profits  attributable to the stock sold or exchanged.
Because of the  complexity  of  Subpart F, and  because we may never be a CFC, a
more detailed review of these rules is beyond of the scope of this discussion.

If we are both a PFIC and a CFC, we generally will not be treated as a PFIC with
respect to any 10% U.S. Holders as described above.  This rule generally will be
effective for taxable years of 10% U.S. Holders beginning after 1997 and for our
taxable years ending with or within such taxable years of such 10% U.S. Holders.
Special  rules apply to 10% U.S.  Holders  who are  subject to the special  PFIC
taxation rules discussed  above.  Because of the complexity of Subpart F, a more
detailed review of these rules is outside of the scope of this discussion.

ALL  PROSPECTIVE  INVESTORS  ARE ADVISED TO CONSULT  THEIR OWN TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING OUR COMMON SHARES.


ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction
with  the  Consolidated   Financial  Statements  and  Notes  thereto,  and  with
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  included  elsewhere in this report.  The consolidated  statement of
operations  data for each of the three years ended June 30, 2001,  2000 and 1999
and the

                                       36
<PAGE>


consolidated  balance  sheet data as of June 30, 2001 and 2000 are derived  from
audited financial statements included elsewhere in this report. The consolidated
statement of operations  data for the years ended June 30, 1998 and 1997 and the
consolidated  balance sheet data as of June 30, 1999,  1998 and 1997 are derived
from audited consolidated financial statements not included in this report.

<TABLE>
<S>                                                                                    <C>
                                                                       YEAR ENDED JUNE 30,
                                                    ------------------------------------------------------------------
                                                      2001          2000(1)        1999            1998          1997
                                                    ---------    ----------     --------        --------       -------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF OPERATIONS
    DATA:
REVENUES:
     Licenses                                        $ 58,510       $ 37,384      $ 18,819       $ 11,311     $ 2,916
     Services and maintenance                          36,780         15,555         6,508          2,898         590
                                                     --------       --------      --------       --------     -------
         Total revenues                                95,290         52,939        25,327         14,209       3,506
                                                     --------       --------      --------       --------     -------
COST OF REVENUES:
     Licenses                                           3,800          2,141           536            401         121
     Services and maintenance                          20,166          8,147         3,078          1,281         387
                                                     --------       --------      --------       --------     -------
         Total cost of revenues                        23,966         10,288         3,614          1,682         508
                                                     --------       --------      --------       --------     -------

Gross profit                                           71,324         42,651        21,713         12,527       2,998

OPERATING EXPENSES:
     Sales and marketing                               51,230         31,165        16,830          9,226       2,646
     Research and development                          18,750          8,906         4,958          1,910       1,163
     General and administrative                        13,567          4,190         2,466          1,513         725
     Amortization of goodwill                          23,062          1,409            --             --          --
     In-process research and development and               --          6,979            --             --          --
     other charges                                   --------       --------      --------       --------     -------
         Total operating expenses                     106,609         52,649        24,254         12,649       4,534
                                                     --------       --------      --------       --------     -------
</TABLE>



                                       37
<PAGE>

<TABLE>
<S>                                                                                                      <C>
                                                                                         YEAR ENDED JUNE 30,
                                                        -------------------------------------------------------------------------
                                                             2001          2000(1)          1999           1998          1997
                                                        -----------     ----------        ---------      -------        --------
                                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)

Loss from operations                                      (35,285)        (9,998)           (2,541)          (122)      (1,536)
Interest and other income (loss)                            3,333          2,193               (24)           136          142
                                                        ----------       ---------        ---------      --------      ---------
Income (loss) before income taxes                         (31,952)        (7,805)           (2,565)            14       (1,394)
Income taxes                                                  503            557               243             10           --
                                                        ----------       ---------        --------       --------      ---------
Net income (loss) for the period                         $(32,455)      $ (8,362)         $ (2,808)      $      4      $(1,394)
                                                        ==========      =========         =========      =========     =========
Basic and diluted earnings (loss) per share              $  (1.40)      $  (0.45)         $  (0.72)      $     --      $ (0.41)
Pro forma basic and diluted loss per share(2)                           $  (0.39)         $  (0.18)            --           --
Shares used to calculate  earnings (loss) per share
     Basic                                                 23,173         18,643             3,888          3,720        3,393
     Diluted                                               23,173         18,643             3,888         14,927        3,393
     Pro forma basic and diluted loss per share(2)                        21,339            15,940

</TABLE>

<TABLE>
<S>                                     <C>              <C>                            <C>                                <C>

                                                                                    AS OF JUNE 30,
                                                        -----------------------------------------------------------------------
                                                          2001             2000           1999           1998          1997
                                                        --------         --------        -------       -------        ------
                                                                                      (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents                                $  13,247      $   4,734        $ 9,338        $ 1,202       $ 3,898
Working capital                                             58,366         28,297          7,257          3,317         4,417
Total assets                                               168,443        121,945         21,722         10,752         6,729
Long-term obligations                                          592             --             --             --            --
Redeemable convertible preferred shares                         --             --         17,500          9,500         9,500
Total shareholders' equity (deficit)                       128,201         96,097         (7,192)        (4,455)       (4,533)
</TABLE>


NOTES:

     (1)  Results  for the year  ended  June 30,  2000  include a charge  for in
          process  research and  development  and other  charges  related to the
          acquisition  of  Exactium  and  Simba.  See  note  2  to  consolidated
          financial statements.

     (2)  See  note 1 of  notes  to  consolidated  financial  statements  for an
          explanation  of the method  used to  calculate  basic and  diluted per
          share amounts. The 2000 and 1999 amounts are calculated on a pro forma
          basis.


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

OVERVIEW

Pivotal  Corporation,  incorporated in 1990 British  Columbia,  Canada,  enables
large and  medium-sized  businesses  worldwide to  increase,  acquire and manage
their  customers by providing  customer  relationship  management and electronic
business  solutions.  Customer  Relationship  management and electronic business
solutions  automate and manage marketing,  selling and servicing  processes over
the  Internet  and  through   traditional   channels  by  integrating   customer
relationship  management,  electronic selling,  electronic commerce and wireless
technologies.  We refer to our customer  relationship  management and electronic
solutions as the Pivotal Customer Relationship Management and eBusiness solution
suite. The Pivotal Customer Relationship Management and eBusiness solution suite
is designed to complement and integrate with a business' supply chain, therefore
enabling businesses to improve efficiency and increase revenues.

Our solutions  are sold in 35 countries  and are  available in English,  French,
German and Spanish from  Pivotal  directly and  Portuguese,  Swedish,  Japanese,
Chinese and Hebrew from members of our Pivotal Alliance.  Our worldwide customer
base includes more than

                                       38
<PAGE>


1,300 organizations in traditional, commercial, public market sectors and in the
new digital  economy and includes  companies  such as ABN AMRO  Securities  LLC,
American  Medical  Security  Group Inc.,  Atlas Copco  Airpower  N.V.,  Belgacom
France,  Bombardier  Aerospace,  CIBC  World  Markets,   Commonfund,   Compuware
Corporation Japan, Deloitte & Touche,  Emerson Electric,  Ericsson,  Farm Credit
Services  of America,  FLAG  Telecom,  Grantham,  Mayo,  Van  Otterloo & Company
L.L.C.,  Haldex Services  Corporation,  Heller Financial,  Hitachi Telecom (USA)
Inc., Intrawest  Corporation,  Kikkoman Corporation,  KPMG, Miller Heiman, Inc.,
National Air Traffic Services,  London, National City Bank of Minneapolis,  NEC,
Nissan Motor (Denmark),  Novozymes North America,  Inc., Panasonic SA, Principal
Financial Group,  Qiagen, RBC Dain Rauscher Wessels,  Southern Company,  Toshiba
Information  Systems  Corporation,  USFilter,  and 1201  Financial  &  Insurance
Services,  Inc. We market and sell our solutions through a direct sales force as
well as through third-party solution providers.

RECENT ACQUISITIONS

During the year ended June 30, 2001, we completed  acquisitions  including those
described   below  which  were  accounted  for  under  the  purchase  method  of
accounting.  Accordingly,  the results of  operations  of each  acquisition  are
included in our consolidated statement of operations since the acquisition date,
and the related assets and liabilities were recorded based upon their respective
fair values at the date of acquisition. Pro forma results of operations have not
been presented  because the effects of these  acquisitions  were not material on
either an individual or an aggregate basis.

Ionysys Technology Corporation

On October  16,  2000,  we  acquired  all of the  assets of  Ionysys  Technology
Corporation, a privately held provider of Internet solutions based in Vancouver,
British  Columbia.  We paid an  aggregate  cash  purchase  price of $1.0 million
including acquisition related expenditures of $360,000.

Project One Business Technologies Inc.

On October  31,  2000,  we acquired  all of the shares of Project  One  Business
Technologies Inc., a privately held provider of Internet solutions  specifically
designed  for the  health  care  industry  based  in  North  Vancouver,  British
Columbia.  We paid an aggregate  purchase  price of $1.4 million  consisting  of
19,000 common shares and cash of $460,000,  which includes  acquisition  related
expenditures of $380,000.

The agreement for the  acquisition  of Project One also provided for  additional
consideration  of  approximately  96,000  common  shares  to be  paid  based  on
achieving  specified  product  development and operating targets over the next 3
years. All earn-out payments will be recorded as additional  purchase price when
determinable.  There were no earn-out payments required to be made in connection
with the  acquisition of Project One since  acquisition to the period ended June
30, 2001.

Software Spectrum CRM, Inc.

On December 5, 2000,  we acquired  all of the shares of Software  Spectrum  CRM,
Inc.  Software  Spectrum,   based  in  Dallas,  Texas,  delivers  solutions  and
consulting  expertise in  multi-channel  contact  centers,  demand chain network
management and customer relationship  management.  We paid an aggregate purchase
price of $7.5  million  consisting  of  138,000  common  shares and cash of $1.9
million, which includes acquisition related expenditures of $1.2 million.

Inform, Inc.

On June 22, 2001, we acquired all of the shares of Inform Inc. a company located
in  Toronto,  Canada,  which  specializes  in  implementation  services  for the
financial services industry. We paid an aggregate purchase price of $1.3 million
consisting of 45,446 common shares and cash of $359,000,  including  acquisition
related expenditures of $266,000.

The total  consideration,  including  acquisition  costs, was allocated based on
estimated fair values on the acquisition date as follows:

                                       39
<PAGE>

<TABLE>
                                                   Project     Software
      (all amounts in thousands)       Ionysys       One       Spectrum     Inform     Other      Total
                                      ----------- ----------- ------------ -------------------- -----------
<S>                                       <C>           <C>        <C>          <C>     <C>         <C>
Consideration (inclusive of cash
   received of $372)
     Cash                                 $1,014        $460       $1,925       $359    $2,296      $6,054
     Fair value of common shares
     issued                                    -         904        5,549        951         -       7,404
                                      ----------- ----------- ------------ -------------------- -----------
                                          $1,014      $1,364       $7,474     $1,310    $2,296     $13,458
                                      =========== =========== ============ ==================== ===========
</TABLE>


     See note 2 of the Consolidated  Financial Statements for additional details
     related to these acquisitions.

SOURCE OF REVENUE AND REVENUE RECOGNITION POLICY

We derive our revenues from the sale of licenses and services and maintenance to
end-users,  value added  resellers and application  service  providers and, to a
lesser  extent,  through  distribution  of third party  products.  We  recognize
license revenues on delivery to the customer of our solutions if:

     -    there is persuasive evidence of an arrangement;

     -    the fee is fixed or determinable;

     -    there is vendor-specific  objective evidence supporting allocating the
          total fee among all elements of a multiple-element arrangement; and

     -    the collection of the license fee is probable.

Multiple-element  arrangements  could  consist of software  licenses,  upgrades,
enhancements,   maintenance   and  consulting   services.   Under  some  license
arrangements, with either a fixed or indefinite term, our customers agree to pay
for the license with periodic  payments  extending beyond one year. We recognize
revenues from these  arrangements as the periodic  payments become due, provided
all other conditions for revenue recognition are met.

We enter into reseller and sub-licensing arrangements that provide a fee payable
to us based on a percentage of list price. We recognize revenue only on the fees
payable to us, net of any amount payable to the reseller by the customer.

We typically  sell first year  maintenance  with the related  software  license.
Revenue  related to maintenance is recognized  over the term of the  maintenance
contract,  typically  one year.  Revenues  relating  to  technical  support  and
maintenance  have increased due to our increasing  customer base and the renewal
of technical  support and  maintenance  contracts upon  expiration of first year
maintenance arrangements.

We recognize revenues from consulting, implementation services, and education as
these services are performed. We derive revenue from these services primarily on
a  time-and-materials  basis  under a  separate  service  arrangement  with  the
customer. The majority of the implementation  services provided to our customers
in connection  with  installations  of our solutions are provided by third-party
consulting and  implementation  service  providers.  These  third-party  service
providers contract directly with the customer.

Our cost of license revenues  primarily  consists of costs related to media, the
packaging and  distribution of solutions,  the related  documentation  and other
production   costs  and  royalty  fees  due  to  third  parties  for  integrated
technology. Our cost of services revenues includes salaries and related expenses
for our  implementation,  consulting support and education  organizations and an
allocation  of  facilities,   communications  and  depreciation   expenses.  Our
operating  expenses are  classified  into three  general  categories:  sales and
marketing, research and development and general and administrative.  We classify
all charges to these  operating  expense  categories  based on the nature of the
expenditures.  We allocate the costs for overhead and  facilities to each of the
functional areas based on their headcount. Our customers include a number of our
suppliers.  On occasion,  we have purchased goods or services for our operations
from these  vendors at or about the same time we have  licensed  our software to
these organizations.  These transactions are negotiated  separately and recorded
at terms we consider to be arms-length.

                                       40
<PAGE>

Software  development costs incurred prior to the establishment of technological
feasibility  are included in research and development  costs as incurred.  Since
license revenues from our solutions are not recognized until after technological
feasibility has been established,  software  development costs are not generally
expensed  in the  same  period  in  which  license  revenues  for the  developed
solutions are recognized.


RESULTS OF OPERATIONS

The following table sets forth the consolidated statement of operations data for
each of the  years in the  three  years  ended  June  30,  2001  expressed  as a
percentage of total revenues:

 <TABLE>
                                                                   Year ended June 30,
--------------------------------------------------------------------------------------------
                                                             2001          2000        1999
--------------------------------------------------------------------------------------------
<S>                                                       <C>            <C>         <C>
REVENUES:
     Licenses                                                 61%           71%         74%
     Services and maintenance                                 39%           29%         26%
--------------------------------------------------------------------------------------------
         Total revenues                                      100%          100%        100%
--------------------------------------------------------------------------------------------
COST OF REVENUES:
     Licenses                                                  4%            4%          2%
     Services and maintenance                                 21%           15%         12%
--------------------------------------------------------------------------------------------
         Total cost of revenues                               25%           19%         14%
--------------------------------------------------------------------------------------------
Gross profit                                                  75%           81%         86%
--------------------------------------------------------------------------------------------
OPERATING EXPENSES:
     Sales and marketing                                      54%           59%         66%
     Research and development                                 20%           17%         20%
     General and administrative                               14%            8%         10%
     Amortization of goodwill                                 24%            3%          -
     In-process research and development and other charges     -            13%          -
--------------------------------------------------------------------------------------------
         Total operating expenses                            112%          100%         96%
--------------------------------------------------------------------------------------------
Loss from operations                                         (37%)         (19%)       (10%)

Interest and other income                                      4%            4%           -
--------------------------------------------------------------------------------------------
Loss before income taxes                                     (33%)         (15%)       (10%)

Income taxes                                                   1%           1%           1%
--------------------------------------------------------------------------------------------
Net loss                                                     (34%)         (16%)       (11%)
============================================================================================
</TABLE>



YEARS ENDED JUNE 30, 2001 AND 2000

REVENUES

Total  revenues  increased 80% to $95.3 million for the year ended June 30, 2001
from $52.9 million for the year ended June 30, 2000.

Licenses

Revenues  from  licenses  increased 57% to $58.5 million for the year ended June
30, 2001 from $37.4 million for the year ended June 30, 2000.

Our revenues  from  licenses  increased due to sale of licenses to new customers
and to follow-on sales to existing customers.  These increases were attributable
to increased market  acceptance of our solutions and increased sales as a result
of our  expansion of our direct and indirect  channels of  distribution  both in
North America and internationally. In addition, we believe that the availability
of new  features  added to the  Pivotal  Customer  Relationship  Management  and
eBusiness solution suite has increased revenues as this has

                                       41
<PAGE>

extended the overall functionality of our solutions by permitting  organizations
to collaborate with customers and partners over the Internet.  In recent months,
the  buying  patterns  of our  potential  customers  were  different  than prior
quarters due to economic downturn in North America.  This weakening of the North
American  economy has  resulted in longer  sales  cycles  making it difficult to
predict when sales of licenseswill close.

Revenues from licenses  represented  61% and 71% of total revenues for the years
ended June 30, 2001 and 2000,  respectively.  License  revenues  decreased  as a
percentage  of  total  revenues  primarily  due to  growth  in our  professional
services business to meet the demand for  implementation of our products.  North
American license revenues accounted for 67% and 72% of total license revenues in
the years  ended June 30,  2001 and 2000,  respectively.  International  license
revenues  increased as a percentage of total revenues as demand for our products
increased  as we  expanded  our  European  and  other  international  operations
combined with a weakening U.S. economy.  No single customer accounted for 10% or
more of our revenues for the years ended June 30, 2001 and 2000.

Our  license   revenue  growth  depends  on  the  overall  demand  for  customer
relationship management solutions and electronic business solutions. The overall
demand  for our  software  depends  in large part on the  general  economic  and
business conditions.  Due primarily to the general weakening of the U.S. economy
in  the  first  half  of  calendar  2001,  we  experienced  a  decrease  in  the
year-on-year  growth rate of our software license revenues in the fourth quarter
of 2001.  Software license revenues as a percentage of total revenues  decreased
from 64% in the three month ended  December 31, 2000 to 62% in the third quarter
ended  March 31,  2001 and to 54% in the fourth  quarter  ended  June 30,  2001.
Software license revenues  decreased as a percentage of total revenues primarily
due to a slower growth rate of our software license  revenues,  which we believe
was due  primarily as a result of the weakening  U.S.  economy and the growth of
our professional  servicesdue to an increase in the number of technical  support
and maintenance contracts we obtained as our customer base grew.

Revenues are difficult to forecast and will be  significantly  influenced by the
overall global economy and corporate spending trends.

Services and Maintenance

Revenues from services and  maintenance  increased 136% to $36.8 million for the
year ended June 30, 2001 from $15.6  million  for the year ended June 30,  2000.
This  resulted  from an increase  of $9.9  million in  revenues  from  technical
support and maintenance  contracts,  which entitles the customer to new versions
of the product and to technical support and maintenance services and an increase
of $11.3  million in revenues  from  implementation,  education  and  consulting
service engagements.

Our revenues  from  services and  maintenance  represented  39% and 29% of total
revenues  for the years ended June 30, 2001 and 2000,  respectively.  We believe
that  revenues  from  services and  maintenance  will  continue to increase as a
percentage  of total  revenues,  due to an increase  in the number of  technical
support  and  maintenance  contracts  we expect to obtain as our  customer  base
grows. We intend to expand  consulting  services  targeted at helping  customers
understand more about matters such as effective  one-to-one  marketing and using
the  Internet to increase  revenues  and improve  customer  service.  We plan to
continue  relying  on third  parties to  provide a  majority  of  implementation
services to our customers, rather than providing those services directly.

COST OF REVENUES

Total cost of revenues  increased  133% to $24.0 million for the year ended June
30, 2001 from $10.3 million for the year ended June 30, 2000.

Licenses

Cost of revenues from licenses  consists of costs  relating to the packaging and
distribution of solutions,  related documentation and other production costs and
royalty fees paid for incorporation of third-party solutions into our solutions.

Cost of revenues from licenses  increased 77% to $3.8 million for the year ended
June 30, 2001 from $2.1 million for the year ended June 30,  2000.  The increase
is due primarily to increased costs for third-party  technology  integrated with
our  solutions.  Cost of revenues from licenses as a percentage of revenues from
licenses  was 6% for each of the years ended June 30,  2001 and 2000.  We expect
that the cost of licenses as a percentage  of revenue from  licenses will remain
approximately the same for fiscal 2002.

Services and Maintenance

Cost of revenues from services and  maintenance  consists of personnel and other
expenses  relating to the cost of providing  maintenance  and customer  support,
education  and  consulting   services.   Cost  of  revenues  from  services  and
maintenance  will vary

                                       42
<PAGE>

depending  on the mix of services we provide  between  support and  maintenance,
education,  implementation  and  consulting  services.  Gross profit margins are
higher for support and  maintenance  services  than they are for  education  and
consulting  services.  Support and maintenance  services involve the delivery of
software  upgrades,  which the  customers  download and install  themselves  and
customer  support.  Education and  consulting  services  generally  require more
involvement  by our  employees,  resulting  in higher  compensation,  travel and
similar expenses.

Cost of revenues from services and  maintenance  increased 148% to $20.2 million
for the year ended June 30,  2001 from $8.1  million for the year ended June 30,
2000.  The increase in dollar  amount  resulted  from the hiring of  consulting,
customer  support and education  personnel to support our growing customer base.
Cost of revenues from services and  maintenance as a percentage of revenues from
services and  maintenance  was 55% and 52% for the years ended June 30, 2001 and
2000, respectively.

We expect that cost of revenues from services and maintenance will be comparable
to the fourth  quarter of fiscal 2001 as a percent of revenues from services and
maintenance as we expand our service  capabilities in  international  markets to
support  planned  expansion of our  international  business and as we expand our
consulting services.

OPERATING EXPENSES

Sales and Marketing

Sales and marketing expenses consist primarily of salaries, commissions, bonuses
and benefits earned by sales and marketing  personnel,  direct expenditures such
as travel,  communication  and  occupancy for direct sales offices and marketing
expenditures related to direct mail, online marketing,  trade shows, advertising
and promotion.

Sales and marketing  expenses  increased 64% to $51.2 million for the year ended
June 30, 2001 from $31.2 million for the year ended June 30, 2000.  The increase
in dollar amounts  reflects the expansion of our  international  sales capacity,
which  required an increase in the number of sales and marketing  professionals.
Sales and marketing  expenses decreased as a percentage of total revenues to 54%
in the year ended June 30, 2001 from 59% in the year ended June 30,  2000.  This
decrease of sales and  marketing  expenses  as a  percentage  of total  revenues
resulted from the improved productivity of our sales and marketing personnel and
programs.

During the fourth  quarter  ended June 30, 2001, we increased  program  spending
which caused sales and  marketing  costs to increase as a percentage of revenue.
These costs are expected to remain at approximately the same levels in the first
quarter of fiscal  2002.  We will  continue  to  examine  the level of sales and
marketing costs based on our revenue projections.

Research and Development

Research and development  expenses  include costs  associated with new products,
enhancements of existing products and quality  assurance  activities and consist
primarily of salaries,  benefits and equipment for software  engineers,  quality
assurance personnel,  program managers, product managers,  technical writers and
outside contractors used to augment the research and development efforts.

Research and development  expenses  increased 111% to $18.8 million for the year
ended June 30,  2001 from $8.9  million  for the year ended June 30,  2000.  The
increase  was due to the  increase  in the number of  research  and  development
employees.  Research and development expenses were 20% and 17% of total revenues
for the years ended June 30, 2001 and 2000, respectively.  We expect to continue
to keep research and development expenditures as the same percentage of revenues
as we expand the Demand Chain Management solution suite.

General and Administrative

General and administrative  expenses consist primarily of salaries and occupancy
costs for executive,  finance,  administrative,  human resources and information
services personnel.  General and administrative  expenses also include legal and
other professional fees and bad debt expense.

General and administrative expenses increased 224% to $13.6 million for the year
ended June 30, 2001 from $4.2 million for the year ended June 30, 2000.  General
and administrative expenses were 14% and 8% of total revenues, respectively, for
the same  periods.  The increase of $9.4  million in general and  administrative
expenses  included  $3.6  million of  additional  charges  which  related to the
impairment  of  long-lived  assets  and an  additional  provision  for  doubtful
accounts.  The remaining $5.8 million increase in the general and administrative
expenses during the year ended June 30, 2001 relates to the hiring of additional
personnel  and the  implementation  of  internal  financial  and  administrative
systems.

The impairment of long-lived  assets of $1.4 million  relates to assets which we
will no longer be using as we are currently re-configuring our business systems.
The total bad debt  expense  was $3.6  million  for the year ended June 30, 2001
which  included an additional  provision  for doubtful  accounts of $1.7 million
during the fourth  quarter ended June 30, 2001.  This  additional  provision

                                       43
<PAGE>

was made because we are  experiencing  delay in payments from certain  customers
due to a weakening in the North American economy.

Over the next year we expect  general and  administrative  expenses to remain at
approximately the same level as the fourth quarter ended June 30, 2001.

Amortization of Goodwill

Amortization of goodwill was $23.1 million in the year ended June 30, 2001. This
amount  is  comprised  of a full  year of  amortization  and a  partial  year of
amortization  for  additions to goodwill  for  acquisitions  which  totaled$15.1
million and $58.1  million for fiscal  2001 and 2000  respectively.  Included in
goodwill is $239,000 in additional consideration paid based on the net after-tax
earnings of Transitif and license  revenues  received by Transitif  from sale of
licenses for our products.  We are amortizing  goodwill from these  acquisitions
over a period of three years.  Amortization of goodwill totaling $1.4 million in
the  year  ended  June  30,  2000,  related  to  goodwill  of  arising  from the
acquisitions of Transitif and Exactium.

In July 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standard (SFAS) No. 141, "Business  Combinations" and SFAS
No.142,  "Goodwill  and Other  Intangible  Assets".  SFAS No. 141  addresses the
initial  recognition  and  measurement of goodwill and other  intangible  assets
acquired  in a business  combination  and SFAS No.  142  addresses  the  initial
recognition and measurement of intangible  assets acquired outside of a business
combination whether acquired individually or with a group of other assets. These
standards require all future business combinations to be accounted for using the
purchase method of accounting.  Goodwill will no longer be amortized but instead
will be subject to impairment tests at least annually.  We are required to adopt
SFAS  No.  141 and 142 on a  prospective  basis  as of  July  1,  2002,  but are
permitted  to adopt in the  first  quarter  of  fiscal  2002.  We are  currently
evaluating  the  impact the  adoption  of these  pronouncements  may have on our
financial   position  and  results  of   operations;   however,   due  to  these
pronouncements  being issued in late July 2001 and due to our  expectation  that
the FASB will issue  further  guidance with respect to the adoption of both SFAS
No. 141 and 142, we are currently unable to determine the impact the adoption of
these   pronouncements  may  have  on  our  financial  position  or  results  of
operations. Although we cannot determine the impact the adoption of SFAS 141 and
SFAS 142 will have on our  operating  results,  once  adopted  there  could be a
material impact on future  operating  results if there  was an impairment in the
value of goodwill.

Pursuant  to the  foregoing,  we estimate  amortization  of goodwill to be $27.4
million from existing acquisitions for the year ended June 30, 2002 if we do not
adopt SFAS No. 141 and 142  effective in the first quarter of fiscal 2002. As we
are subject to an annual goodwill valuation test on each balance sheet date, the
charge to the Consolidated Statement of Operations could be higher if there were
an impairment  in the value of goodwill.  If we choose to adopt SFAS 141 and 142
during  the first  quarter  of fiscal  2002  SFAS No.  141 and SFAS No.  142 and
further  FASB  guidance,  we may not be  required to  continue  amortizing  past
acquisitions. This determination has not been made at this time.

INTEREST AND OTHER INCOME (LOSS)

Interest and other income consists of earnings on cash and cash  equivalents and
short term  investments net of interest  expense and foreign  exchange gains and
losses.  Interest  and other  income was $3.3  million and $2.2  million for the
years ended June 30, 2001 and 2000,  respectively.  The increase of $1.1 million
during the year ended June 30,  2001 was due  primarily  to our higher  cash and
cash  equivalents  and short-term  investments.  This was a result of the equity
financing  completed in November  2000,  which  generated  $51.8  million net of
expenses and brokers  commissions.  Interest and other income for the year ended
June 30, 2001 included  foreign  exchange gains of $65,000 compared to losses of
$168,000 for the year ended June 30, 2000. The other  components of interest and
other income were not material for the periods presented.

INCOME TAXES

The  provision  for income  taxes was  $503,000 and $557,000 for the years ended
June 30, 2001 and 2000, respectively. These income tax amounts were attributable
to our operations in the United  States,  the United Kingdom and France and were
offset by $470,000 and $127,000 related to Canadian research and development tax
incentives received during the years ended June 30, 2001 and 2000 respectively.

                                       44
<PAGE>


YEARS ENDED JUNE 30, 2000 AND 1999.

REVENUES

Total revenues  increased 109% to $52.9 million for the year ended June 30, 2000
from $25.3 million for the year ended June 30, 1999.

Licenses

Revenues  from  licenses  increased 99% to $37.4 million for the year ended June
30, 2000 from $18.8 million for the year ended June 30, 1999.

Our revenues from licenses increased due to sales to new customers and follow-on
sales to existing  customers.  These  increases were  attributable  to increased
market acceptance of our solutions, increased sales as a result of our expansion
of  our  direct  and  indirect   channels  of  distribution  and  our  marketing
organization. We believe that the availability of our Pivotal eRelationship 2000
product suite and Pivotal  eSelling 2000 product  contributed to the increase in
revenue  from  licenses,  as they  extended  the  overall  functionality  of our
solutions by permitting organizations to collaborate with customers and partners
over the Internet.

Revenues from licenses  represented  71% and 74% of total revenues for the years
ended June 30, 2000 and 1999, respectively. No single customer accounted for 10%
or more of our  revenues  for the years  ended  June 30,  2000 and  1999.  North
American license revenues accounted for 72% and 80% of total license revenues in
the years ended June 30, 2000 and 1999, respectively.

Services and Maintenance

Revenues from services and  maintenance  increased 139% to $15.6 million for the
year ended June 30,  2000 from $6.5  million  for the year ended June 30,  1999.
This  resulted  from an increase  of $4.6  million in  revenues  from  technical
support and maintenance  contracts,  which entitles the customer to new versions
of the product and to technical support and maintenance services and an increase
of $4.5  million in  revenues  from  implementation,  education  and  consulting
service engagements.  Our revenues from services and maintenance represented 29%
and 26% of  total  revenues  for  the  years  ended  June  30,  2000  and  1999,
respectively.

COST OF REVENUES

Total cost of revenues  increased  185% to $10.3 million for the year ended June
30, 2000 from $3.6 million for the year ended June 30, 1999.

Licenses

Cost of revenues from licenses increased to $2.1 million for the year ended June
30, 2000 from  $536,000  for the year ended June 30,  1999.  The increase is due
primarily to increased  costs for  third-party  technology  integrated  with our
solutions.  Cost of revenues  from  licenses as a  percentage  of revenues  from
licenses was 6% and 3% for the years ended June 30, 2000 and 1999, respectively.

Services and Maintenance

Cost of revenues from services and  maintenance  increased  165% to $8.1 million
for the year ended June 30,  2000 from $3.1  million for the year ended June 30,
1999.  The increase in dollar  amount  resulted  from the hiring of  consulting,
customer  support and educating  personnel to support our growing customer base.
Cost of revenues from services and  maintenance as a percentage of revenues from
services and  maintenance  was 52% and 47% for the years ended June 30, 2000 and
1999, respectively.

OPERATING EXPENSES

Sales and Marketing

Sales and marketing  expenses  increased 85% to $31.2 million for the year ended
June 30, 2000 from $16.8 million for the year ended June 30, 1999.  The increase
in dollar amounts reflects the expansion of our  international  sales capability
which  required an increase in the number of sales and marketing  professionals.
Sales and marketing  expenses decreased as a percentage of total revenues to 59%
in the year ended June 30, 2000 from 66% in the year ended June 30,  1999.  This
decrease of sales and  marketing  expenses  as a  percentage  of total  revenues
resulted from the improved productivity of our sales and marketing personnel and
programs.

Research and Development

Research and  development  expenses  increased  80% to $8.9 million for the year
ended June 30,  2000 from $5.0  million  for the year ended June 30,  1999.  The
increase  was due to the  increase  in the number of  research  and  development
employees as we expanded  our Customer  Relationship  Management  and  eBusiness
solution  suite.  Research and  development  expenses  were 17% and 20% of total
revenues for the years ended June 30, 2000 and 1999, respectively. This decrease
in the  percentage of research and  development

                                       45
<PAGE>
expenditures  compared to total revenues resulted from the higher growth rate of
revenues in the year ended June 30, 2000 compared to the growth rate of research
and development expenditures.

General and Administrative

General and  administrative  expenses increased 70% to $4.2 million for the year
ended June 30, 2000 from $2.5 million for the year ended June 30, 1999.  General
and administrative expenses were 8% and 10% of total revenues, respectively, for
the same periods. The increase in general and administrative expenses was due to
hiring additional  personnel and the  implementation  of internal  financial and
administrative systems.

In-Process Research and Development and Other Charges

During  the year  ended June 30,  2000,  we  recorded  in-process  research  and
development  charges of $4.7 million related to the acquisitions of Exactium and
Simba.  These amounts were expensed as the  underlying  projects had not reached
technical feasibility, had no alternative future uses and successful development
was uncertain. We also recorded a write-down of $2.3 million of our other assets
which were made redundant as a result of the acquisitions of Exactium and Simba.

Exactium Ltd.

On June 2, 2000,  we completed the purchase of Exactium and recorded a charge to
income  of $2.8  million,  or $0.15  per  share,  for  in-process  research  and
development.

Purchased  in-process  research and development was related to the completion of
Exactium's electronic selling technology and its integration into our solutions.
At the time of  acquisition,  a prototype of Exactium's  product existed and was
being used in limited  trials.  This  prototype  was not stable or  sufficiently
developed  to be  scaleable  on an  enterprise-wide  basis.  We  estimated  that
Exactium's  product was  approximately  80% complete as of the acquisition date.
There was a  considerable  amount  of  uncertainty  related  to  increasing  the
product's scalability for deployment on an enterprise-wide  basis, improving the
stability of the  application and identifying and fixing bugs. In the opinion of
management, the acquired in-process research and development had not yet reached
technological  feasibility and had no alternative future uses.  Accordingly,  we
recorded  a charge of $2.8  million in the  fourth  quarter of fiscal  year 2000
related to the acquired in-process research and development.

Our  valuation  of  in-process  research  and  development  was  based  upon the
forecasted operating cash flows from the technology  acquired,  giving effect to
the stage of completion at the  acquisition  date.  These  forecasted cash flows
were then discounted at a rate commensurate with the risk involved in completing
the acquired in-process technology.  The forecasted cash flows assumed inclusion
of the product  developed  from acquired  technology  into our existing  product
suite.  The purchased  in-process  research and  development  expense related to
completion  of Exactium's  eSelling 2000 product.  This product was completed in
late June 2000.  We  estimated  that  revenues  related to the sale of solutions
incorporating  Exactium's  technology would commence in the year ending June 30,
2001 and would  increase  thereafter.  Revenue  increases  were  based  upon the
historical  growth  rate  of  software  sales  for  the  customer   relationship
management and electronic business market.

The estimated  operating  costs as a percentage of estimated  revenue were based
upon our normal  operating  margin.  Operating  cash  flows  were  reduced by an
expected  effective  tax rate of 40%.  Net cash flows were  discounted  to their
present  value  at  the   acquisition   date  using  an  appropriate   after-tax
risk-adjusted  discount  rate  reflecting  the risk of  unproven  but  partially
developed software products.

The Exactium technology was subsequently  completed and the eSelling product was
released in late June 2000.

Simba Technologies Inc.

On June 26, 2000,  we completed  the purchase of Simba.  We recorded a charge to
income of $1.9  million for  in-process  research and  development  or $0.10 per
share.

At the time of the acquisition,  Simba did not have a first-generation  product.
There  were a  considerable  number of  uncertainties  as to  completion  of the
product.  In the opinion of  management,  the acquired  in-process  research and
development had not yet reached technological feasibility and had no alternative
future  uses.  Accordingly,  we recorded a charge of $1.9  million in the fourth
quarter  of  fiscal  2000  related  to  the  acquired  in-process  research  and
development.

Our  valuation  of the  acquired  research  and  development  was based upon the
present value of forecasted  operating cash flows from the technology  acquired,
giving  effect  to the  stage  of  completion  at the  acquisition  date.  These
forecasted cash flows were then discounted at a rate  commensurate with the risk
involved in  completing  the  acquired  technology.  The  forecasted  cash flows
assumed  inclusion of the product  developed from acquired  technology  into our
existing product suite.
                                       46
<PAGE>


Our valuation of acquired research and development was prepared using the income
approach  and  contemplated  that  sales  of  solutions   incorporating  Simba's
technology  would  commence  in  late  2000  and  increase  thereafter.  Revenue
increases were based upon our historical  growth rate and that of software sales
for the electronic marketing market.  Operating costs as a percentage of revenue
were estimated based upon our normal operating margin. Operating cash flows were
reduced by an expected effective tax rate of 40%. Net cash flows were discounted
to their present value at the  acquisition  date using an appropriate  after-tax
risk-adjusted  discount  rate  reflecting  the risk of  unproven  but  partially
developed solutions.

To date,  progress and  development  costs incurred on the Simba  technology has
been in line with our initial expectations.

Failure to achieve  the  expected  levels of  revenues  and net income  from the
Exactium and Simba  products  will  negatively  impact the return on  investment
expected at the time the acquisitions were completed and may potentially  result
in impairment of other assets related to the acquisitions.

Amortization of Goodwill

Amortization  of  goodwill  was $1.4  million in the year  ended  June 30,  2000
related to goodwill  arising from the  acquisitions  of Transitif  and Exactium.
There was no amortization of goodwill in the year ended June 30, 1999.

INTEREST AND OTHER INCOME (LOSS)

Interest  and other  income  (loss)  increased to income of $2.2 million for the
year  ended  June 30,  2000 from a loss of  $24,000  for the year ended June 30,
1999.  These  increases  are primarily  due to interest  earned from cash,  cash
equivalents and short-term investments generated by our initial public offering.
Interest  and other  income for the year ended June 30,  2000  included  foreign
exchange  losses of $168,000  compared to losses of $191,000  for the year ended
June 30,  1999.  The other  components  of  interest  and other  income were not
material for the periods presented.

INCOME TAXES

Income  taxes  increased  to  $557,000  for the year  ended  June 30,  2000 from
$243,000  for the year ended June 30,  1999.  These taxes  related to the United
States  and the  United  Kingdom.  As a result of net  operating  losses and the
availability of loss carry forwards in Canada, we have not incurred  significant
Canadian income taxes.

QUARTERLY RESULTS OF OPERATIONS

The following tables present our unaudited  quarterly results of operations both
in absolute  dollars  and on  percentage  of revenue  basis for each of our last
eight quarters. This data has been derived from unaudited consolidated financial
statements  that have been  prepared  on the same  basis as the  annual  audited
consolidated  financial  statements  and,  in our  opinion,  include  all normal
recurring  adjustments  necessary for the fair presentation of such information.
These  unaudited  quarterly  results  should  be read in  conjunction  with  our
consolidated financial statements.


<TABLE>
                                                                   Three months ended
---------------------------------------------------------------------------------------------------------------------------
(all amounts in thousands)           Sept. 30,  Dec. 31,   Mar. 31,   June 30,   Sept. 30,   Dec. 31,   Mar. 31,    June 30,
                                       1999       1999       2000       2000       2000        2000       2001        2001
----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>        <C>        <C>        <C>        <C>        <C>         <C>
REVENUES:
     Licenses                         $6,097    $  8,026   $ 10,125   $ 13,136   $13,768    $ 16,346   $ 16,368    $ 12,028
     Services and maintenance          2,578       3,516      4,412      5,049     7,290       9,385     10,026      10,079
----------------------------------------------------------------------------------------------------------------------------
         Total revenues                8,675      11,542     14,537     18,185    21,058      25,731     26,394      22,107
----------------------------------------------------------------------------------------------------------------------------
COST OF REVENUES:
     Licenses                            284         410        635        812       866         979      1,009         946

                                       47
<PAGE>



    Services and maintenance           1,368       1,813      2,295      2,671     3,870       4,979      5,346       5,971
----------------------------------------------------------------------------------------------------------------------------
         Total cost of revenues        1,652       2,223      2,930      3,483     4,736       5,958      6,355       6,917
----------------------------------------------------------------------------------------------------------------------------
Gross profit                           7,023       9,319     11,607     14,702    16,322      19,773     20,039      15,190
----------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
   Sales and marketing                 5,715       6,917      8,214     10,319    11,498      12,914     12,689      14,129
   Research and development            1,569       2,125      2,409      2,803     3,917       4,509      5,096       5,228
   General and administrative            707         968      1,197      1,318     1,776       2,100      2,787       6,904
   Amortization of goodwill               --          32         97      1,280     4,995       5,405      6,068       6,594
   In-process research and
      development and other charges       --          --         --      6,979        --          --         --          --
----------------------------------------------------------------------------------------------------------------------------
         Total operating expenses      7,991      10,042     11,917     22,699    22,186      24,928     26,640      32,855
----------------------------------------------------------------------------------------------------------------------------
Loss from operations                    (968)       (723)      (310)    (7,997)   (5,864)     (5,155)    (6,601)    (17,665)
Interest and other income                357         685        673        478       343         644        994       1,352
----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes       (611)        (38)       363     (7,519)   (5,521)     (4,511)    (5,607)    (16,313)
Income tax expense (recovery)             75         126        139        217       (67)        170         56         344
----------------------------------------------------------------------------------------------------------------------------
Net income (loss)                     $ (686)   $   (164)  $    224   $ (7,736)  $(5,454)   $ (4,681)  $ (5,663)   $(16,657)
=============================================================================================================================
</TABLE>

                                       48
<PAGE>


<TABLE>
                                                               Three months ended
-----------------------------------------------------------------------------------------------------------------------------
                                 Sept. 30,   Dec. 31,     Mar. 31,     June 30,     Sept. 30,    Dec. 31,  Mar. 31, June 30,
                                   1999        1999         2000         2000         2000         2000      2001     2001
------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>          <C>           <C>          <C>          <C>       <C>      <C>
REVENUES:
  Licenses                          70%         70%          70%          72%          65%          64%       62%      54%
  Services and maintenance          30%         30%          30%          28%          35%          36%       38%      46%
-----------------------------------------------------------------------------------------------------------------------------
    Total revenues                 100%        100%         100%         100%         100%         100%      100%     100%
-----------------------------------------------------------------------------------------------------------------------------
COST OF REVENUES:
  Licenses                           3%          3%           4%           4%           4%           4%        4%       4%
  Services and maintenance          16%         16%          16%          15%          18%          19%       20%      27%(1)
-----------------------------------------------------------------------------------------------------------------------------
    Total cost of revenues          19%         19%          20%          19%          22%          23%       24%      31%
-----------------------------------------------------------------------------------------------------------------------------
Gross profit                        81%         81%          80%          81%          78%          77%       76%      69%
-----------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
  Sales and marketing               66%         60%          56%          57%          55%          50%       48%      64%(2)
  Research and development          18%         19%          17%          15%          19%          18%       19%      24%
  General and administrative         8%          8%           8%           7%           8%           8%       11%      31%(3)
  Amortization of goodwill          --          --            1%           7%          24%          21%       23%      30%
  In-process research and
    development and other charges   --          --           --           39%          --           --        --       --
-----------------------------------------------------------------------------------------------------------------------------
    Total operating expenses        92%         87%          82%         125%         106%          97%      101%     149%
-----------------------------------------------------------------------------------------------------------------------------
Loss from operations               (11%)        (6%)         (2%)        (44%)        (28%)        (20%)     (25%)    (80%)

Interest and other income            4%          6%           5%           3%           2%           3%        4%       6%
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes   (7%)        --            3%         (41%)        (26%)        (17%)     (21%)    (74%)

Income taxes                         1%          1%           1%           1%           -            1%        -        1%
-----------------------------------------------------------------------------------------------------------------------------
Net income (loss)                   (8%)        (1%)          2%         (42%)        (26%)        (18%)     (21%)    (75%)
=============================================================================================================================
</TABLE>

(1)  Cost of revenues for services and maintenance  increased  during the fourth
     quarter  as  a  result  of  increased  numbers  of  technical  support  and
     maintenance contracts we obtained as our customer base grew.
(2)  During the  fourth  quarter  ended  June 30,  2001,  we  increased  program
     spending which caused sales and marketing costs to increase as a percentage
     of revenue.  These costs are expected to remain  approximately  the same in
     the first  quarter of fiscal 2002. We will continue to examine the level of
     sales and marketing costs based on revenue projections.
(3)  Fourth quarter general and  administrative  expenses  includes $3.6 million
     for non recurring  charges  which  related to the  impairment of long lived
     assets and an additional provision for doubtful accounts.

                                       49
<PAGE>
For the  years  ended  June 30,  1999 and 2000 we  experienced  an  increase  in
revenues  during our fourth  fiscal  quarter,  which we  believe  was  primarily
related to sales  compensation  policies and annual  objectives.  We believe the
decrease  in revenue in the  quarter  ended June 30,  2001 is due to the current
economic  slowdown and related  reluctance  of companies to acquire  significant
software and systems at this time. In addition,  a pattern of reduced  buying by
European customers during July and August has resulted in lower European license
revenues in the quarters ended September 30.

We incurred  operating  losses as we increased  the level of  investment  in all
facets  of  our  business.  Our  quarterly  operating  results  have  fluctuated
significantly  in the past and will  continue  to  fluctuate  in the future as a
result of a number of factors,  many of which are outside of our  control.  As a
result of our  limited  operating  history  and recent  acquisitions,  we cannot
forecast operating expenses based on historical  results.  Accordingly,  we base
our anticipated level of expense in part on future revenue projections.  Most of
our  expenses  are  fixed in the  short-term  and we may not be able to  quickly
reduce  spending if revenues  are lower than we have  projected.  Our ability to
forecast  our  quarterly  revenues  accurately  is  limited  given  our  limited
operating  history,  length  of the  sales  cycle  of our  solutions  and  other
uncertainties in our business.  If revenues in a particular  quarter do not meet
projections,  our net losses in a given quarter would be greater than  expected.
As a result, we believe that our quarter-to-quarter comparisons of our operating
results are not necessarily meaningful. Investors should not rely on the results
of one quarter as an indication of future performance.

LIQUIDITY AND CAPITAL RESOURCES

At June 30,  2001,  we had $13.2  million  in cash and cash  equivalents,  $55.5
million in short term investments and $58.4 million in working  capital.  During
the quarter  ended  December  31,  2000,  we  successfully  concluded  an equity
financing  in Canada,  generating  $51.8  million,  net of expenses and brokers'
commissions.

Our cash and cash  equivalents  and  short-term  investments  increased to $68.7
million as of June 30, 2001 from $35.5 million as of June 30, 2000.  Our working
capital  increased to $58.4  million at June 30, 2001 from $28.3 million at June
30, 2000. The increase is partly  attributable to the equity financing completed
November 28, 2000,  which  generated  $51.8 million,  net of expenses and broker
commissions, offset by acquisitions and working capital requirements.

Net cash used in operating  activities for the year ended June 30, 2001 was $4.5
million  compared to net cash  generated  of $4.9  million in the same period in
2000.

Net cash used in investing  activities  was $43.2  million and $54.3 million for
the year ended June 30, 2001 and 2000, respectively. During the years ended June
30, 2001 and 2000, we used $24.7 million and $30.8  million,  respectively,  for
net  purchases of short-term  investments.  Capital  expenditures  totalled $6.8
million  and  $6.1  million  for  the  years  ended  June  30,  2001  and  2000,
respectively.  Long-term  investments  and other assets totaled $6.3 million and
$2.9  million for the years ended June 30, 2001 and 2000,  respectively.  During
the year ended June 30, 2001,  we used $5.4  million  (net of cash  acquired) on
acquisitions  including Ionysys,  Project One , Software  Spectrum,  and Inform.
During  the year  ended  June  30,  2000,  we used  $14.5  million  (net of cash
acquired) on the acquisitions of Transitif, Exactium and Simba.

Cash  provided by financing  activities  was $56.2 million and $44.8 million for
the years  ended June 30,  2001 and 2000,  respectively.  Net cash  provided  by
financing activities resulted from the issuance of common shares.

Our  principal  source  of  liquidity  at  June  30,  2001  was our  cash,  cash
equivalents  and  short-term  investments  of  $68.7  million.  We have a credit
facility  with a  Canadian  chartered  bank  which  includes  a  revolving  term
operating  line of $2.0  Million  (CDN $3.0  Million),  bearing  interest at the
bank's  prime rate plus 1% per year,  secured by a charge on all our current and
future  personal  property.  As of June  30,  2001 and  2000,  no  amounts  were
outstanding under the credit facility.

O ur accounts  receivable at June 30, 2001,  were 101 days of sales outstanding,
which is above  our  target  range of 76 to 80 days.  Days of sales  outstanding
increased because our international  revenues represented a higher percentage of
total revenue.  International  receivables,  on average,  tend to lag over North
American  receivables.  In addition,  our accounts  receivables included amounts
with extended payment terms that were not due at June 30, 2001.

In June 2000, we entered into a $723,000 (Cdn. $ 1.1 million) irrevocable letter
of credit with a Canadian  chartered bank. The letter of credit expired June 19,
2001.  Subsequent to June 30, 2001, we entered into a new irrevocable  letter of
credit  with the same bank for  $2.5 Million  (Cdn $3.8  million). The letter of
credit,  which expires July 3, 2002,  collaterizes  our  obligations  to a third
party for tenant improvement costs.

We believe that the total  amount of cash and cash  equivalents  and  short-term
investments,  along with the credit  facilities,  will be sufficient to meet our
anticipated  cash needs for working  capital or other  purposes at least for the
next twelve months. Thereafter, depending on the development of our business, we
may need to raise additional cash for working capital or other expenses. We also
may encounter  opportunities for acquisitions or other business initiatives that
require significant cash commitments, or unanticipated problems or expenses that
could result in a requirement  for additional  cash before that time. If we need
to raise  additional  cash,  financing  may not be  available to us on favorable
terms, or at all.
                                       50
<PAGE>


AUDIT COMMITTEE

We have established an Audit Committee of the Board of Directors, the charter of
which is to oversee the  activities of management  and our external  auditors as
they relate to the financial reporting process.  Currently,  the Audit Committee
was comprised of Robin Louis, Jeremy Jaech and Steven Gordon. In particular, the
Audit Committee's role includes  ensuring that management  properly develops and
adheres to a sound system of internal controls,  and that our external auditors,
through  their own  review,  assess  the  effectiveness  of those  controls  and
management's adherence to them.

In fulfilling their  responsibilities,  the Audit Committee  conducted  regular,
quarterly  meetings with our external  auditors.  In these  meetings,  the Audit
Committee  discussed with  management and our external  auditors the quality and
acceptability  of accounting  policies and  significant  transactions  or issues
encountered  during the period.  In addition,  the Audit  Committee met with our
external  auditors  independent  of  management to provide for  independent  and
confidential  assessment of management and the internal  controls as they relate
to the quality and  reliability of our financial  statements.  In the year ended
June 30, 2001, we adopted an Audit  Committee  Charter as required by the Nasdaq
Stock  Exchange,  Inc. in  compliance  with the Nasdaq  Stock  Exchange,  Inc.'s
Marketplace  Rules.  We are committed to  supporting  this process and the Audit
Committee in  fulfilling  their role of ensuring  the  integrity of our internal
controls and financial reporting.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to financial  market risks,  including  changes in interest rates
and foreign currencies.

FOREIGN CURRENCY RISK

We have  operations  in Canada and a number of  countries  outside of the United
States  and  therefore  we are  subject  to risks  typical  of an  international
business including, but not limited to differing economic conditions, changes in
political climate, differing tax structures,  other regulations and restrictions
and foreign exchange rate volatility.  Accordingly,  our future results could be
materially adversely affected by changes in these or other factors.

Our sales and  corresponding  receivables  are  substantially  in U.S.  dollars.
Through  our  operations  in Canada  and  outside  North  America,  we incur the
majority  of  our  research  and   development,   customer   support  costs  and
administrative expenses in Canadian and other local currencies.  We are exposed,
in  the  normal  course  of  business,   to  foreign  currency  risks  on  these
expenditures.  We have evaluated our exposure to these risks and have determined
that our only  significant  foreign  currency  exposure  at this  time is to the
Canadian  dollar  through  our  operations  in Canada.  At this time,  we do not
believe our exposure to other currencies is material.

We use forward  contracts to minimize  the risks  associated  with  transactions
originating in Canadian dollars.  We have not designated these forward contracts
to be hedging  instruments,  therefore,  all gains or losses  resulting from the
change in fair value of these  contracts  have been  included in earnings in the
current period.

If we were to designate these types of forward contracts or other derivatives as
hedges in the future and such  derivatives  satisfy  the  criteria  for  hedging
instruments,  then  depending  on the nature of the  hedge,  changes in the fair
value of the  derivatives  will be offset  against  the  change in fair value of
assets, liabilities, or firm commitments through earnings (fair value hedges) or
recognized  in other  comprehensive  income  until the  related  hedged  item is
recognized in earnings  (cash flow hedges).  Any change in fair value related to
the ineffective  portion of a derivative will be recognized in earnings  through
periodic mark to market adjustments.

Prior to the year ended June 30, 1999, we did not engage in hedging transactions
and our gains and losses on foreign currency transactions were not significant.

In addition to the use of foreign exchange forward  contracts noted above,  from
time to time we may also purchase  Canadian  dollars in the open market and hold
these funds in order to satisfy  forecasted  operating needs in Canadian dollars
for the next operating period, which is generally limited to six months or less.

                                       51
<PAGE>

At June 30, 2001, we had no outstanding  currency  forward  exchange  contracts,
because forward contracts  generally mature at the end of a quarterly period. As
of June 30, 2000, we had outstanding currency forward exchange contracts of $5.5
million.  During the year ended June 30,  2001,  we recorded a foreign  exchange
gain of $65,000  compared to a loss of $168,000 from the unhedged portion of our
foreign currency exposure during the year ended June 30, 2000.

INTEREST RATE RISK

We invest our cash in a variety of short-term financial  instruments,  including
government bonds,  commercial paper and money market instruments.  Our portfolio
is diversified and consists primarily of investment grade securities to minimize
credit risk. These investments are typically  denominated in U.S. dollars.  Cash
balances in foreign  currencies are operating  balances and are only invested in
demand or short-term deposits of the local operating bank.

Investments  in both fixed rate and floating rate interest  earning  instruments
carry a degree of interest rate risk.  Fixed rate securities may have their fair
market  value  adversely  impacted  because of a rise in interest  rates,  while
floating rate securities may produce less income than expected if interest rates
fall. Due in part to these factors,  our future investment income may fall short
of expectations  because of changes in interest rates or we may suffer losses in
principal if forced to sell securities which have seen a decline in market value
because of changes in interest rates.

Our investments are made in accordance with an investment policy approved by our
Board of Directors.  Under this policy,  all short term investments must be made
in investment grade securities with original maturities of less than one year at
the time of acquisition.

We do not attempt to reduce or  eliminate  our  exposure  to interest  rate risk
through the use of derivative financial instruments due to the short-term nature
of the investments. Based on a sensitivity analysis performed on our balances as
of June 30, 2001, the fair value of our short term  investment  portfolio  would
not be  significantly  impacted by either a 100 basis point increase or decrease
in interest rates.



                                       52
<PAGE>



ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT


To the Shareholders of
Pivotal Corporation

We  have  audited  the  accompanying  consolidated  balance  sheets  of  Pivotal
Corporation as of June 30, 2001 and 2000 and the related consolidated statements
of operations,  shareholders'  equity and cash flows for each of the three years
in the  period  ended  June 30,  2001.  Our audit also  included  the  financial
statement  schedule  listed  in the  Index  at Item  14(a).  These  consolidated
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.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Pivotal
Corporation  as of June 30, 2001 and 2000 and the results of its  operations and
its cash flows for each of the three years in the period  ended June 30, 2001 in
conformity with accounting principles generally accepted in the United States of
America.  Also, in our opinion,  the related financial statement schedule,  when
considered in relation to the basic consolidated financial statements taken as a
whole,  present  fairly  in all  material  respects  the  information  set forth
therein.



/s/ Deloitte & Touche LLP

Vancouver, Canada
July 20, 2001



                                       53
<PAGE>


                               PIVOTAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
         (Expressed in United States dollars; all amounts in thousands)


<TABLE>
                                                                                             June 30,
                                                                                  -----------------------------
                                                                                       2001             2000
                                                                                  --------------    -----------
<S>                                                                                 <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                        $  13,247        $   4,734
   Short-term investments                                                              55,468           30,788
   Accounts receivable                                                                 26,610           16,764
   Prepaid expenses                                                                     2,691            1,859
                                                                                  --------------    -----------
Total current assets                                                                   98,016           54,145
Property and equipment, net                                                             9,183            7,231
Goodwill, intangibles and other assets, net                                            61,244           60,569
                                                                                  --------------    -----------
Total assets                                                                        $ 168,443        $ 121,945
                                                                                  ==============    ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued liabilities                                         $  25,324        $  16,877
   Deferred revenue                                                                    13,810            8,971
   Current portion of obligations under capital leases and
     long-term debt                                                                       516                -
                                                                                  --------------    -----------
Total current liabilities                                                              39,650           25,848

Non-current portion of obligations under capital leases and
   long-term debt                                                                         592                -
                                                                                  --------------    -----------
Total liabilities                                                                     40,242           25,848
Commitments and contingencies (Note 9)

Shareholders' equity:
   Preferred shares, undesignated, no par value, authorized
     shares - 20,000 at June 30, 2001 and June 30, 2000; no shares
     issued and outstanding                                                                 -                -
   Common shares and additional paid-in capital, no par value,
     authorized shares - 200,000 at June 30, 2001 and June 30, 2000;
     issued and outstanding shares - 23,933 and 22,057 at June 30, 2001
     and June 30, 2000, respectively                                                  176,728          112,078
   Deferred share-based compensation                                                      (81)            (193)
   Accumulated other comprehensive loss                                                  (203)               -
   Accumulated deficit                                                                (48,243)         (15,788)
                                                                                  --------------    -----------
Total shareholders' equity                                                            128,201           96,097
                                                                                  --------------    -----------
Total liabilities and shareholders' equity                                          $ 168,443        $ 121,945
                                                                                  ==============    ===========
</TABLE>


        See accompanying Notes to the Consolidated Financial Statements.



                                       54
<PAGE>


                               PIVOTAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (Expressed in United States dollars;
                all amounts in thousands except per share data)



<TABLE>
                                                                              Years ended June 30,
                                                                   -----------------------------------------
                                                                      2001            2000           1999
                                                                   ----------      ----------     ----------
<S>                                                                <C>             <C>            <C>
Revenues:
   License                                                         $  58,510       $  37,384      $  18,819
   Services and maintenance                                           36,780          15,555          6,508
                                                                   ----------      ----------     ----------
Total revenues                                                        95,290          52,939         25,327
                                                                   ----------      ----------     ----------
Cost of revenues:
   License                                                             3,800           2,141            536
   Services and maintenance                                           20,166           8,147          3,078
                                                                   ----------      ----------     ----------
Total cost of revenues                                                23,966          10,288          3,614
                                                                   ----------      ----------     ----------
Gross profit                                                          71,324          42,651         21,713
                                                                   ----------      ----------     ----------
Operating expenses:
   Sales and marketing                                                51,230          31,165         16,830
   Research and development                                           18,750           8,906          4,958
   General and administrative                                         13,567           4,190          2,466
   Amortization of goodwill                                           23,062           1,409              -
   In process research and development and other charges                   -           6,979              -
                                                                   ----------      ----------     ----------
Total operating expenses                                             106,609          52,649         24,254
                                                                   ----------      ----------     ----------
Loss from operations                                                 (35,285)         (9,998)        (2,541)
Interest and other income (loss)                                       3,333           2,193            (24)
                                                                   ----------      ----------     ----------
Loss before income taxes                                             (31,952)         (7,805)        (2,565)
Income taxes                                                             503             557            243
                                                                   ----------      ----------     ----------
Net loss for the year                                              $ (32,455)      $  (8,362)     $  (2,808)
                                                                   ==========      ===========    ==========
Loss per share
   Basic and diluted                                               $   (1.40)      $   (0.45)     $   (0.72)
   Pro forma basic and diluted                                                     $   (0.39)     $   (0.18)

Weighted average number of shares used to
  calculate loss per share:
   Basic and diluted                                                  23,173          18,643          3,888
   Pro forma basic and diluted                                                        21,339         15,940

</TABLE>



        See accompanying Notes to the Consolidated Financial Statements.


                                       55
<PAGE>


                               PIVOTAL CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                      (Expressed in United States dollars;
                all amounts in thousands except per share data)



<TABLE>
                                           Common Shares
                                                and
                             Class A        Additional
                           Convertible        Paid-in        Class B                  Accumulated
                         Preferred Shares     Capital     Common Shares   Deferred        Other                       Total
                          -------------- ---------------- -------------  Share-based  Comprehensive  Accumulated   Shareholders'
                          Shares  Amount Shares   Amount  Shares Amount Compensation      Loss         Deficit     Equity (Deficit)
                          ------  ------ ------  -------- ------ ------ ------------  -------------  -----------   ---------------
<S>                       <C>     <C>    <C>     <C>      <C>    <C>     <C>          <C>             <C>           <C>
Balance, June 30, 1998    2,000   $ 83    3,853   $    80     -   $  -      $     -     $       -     $ (4,618)       $  (4,455)
Issuance of common
 shares on exercise
 of stock options             -      -       78        14     -      -            -             -            -               14
Conversion of common
 shares into Class B
 common shares                -      -     (477)       (4)  477      4            -             -            -                -
Deferred share-based
 compensation                 -      -        -       473     -      -         (473)            -            -                -
Amortization of
 share-based
 compensation                 -      -        -         -     -      -           57             -            -               57
Net loss                      -      -        -         -     -      -            -             -       (2,808)          (2,808)
                          ------  ------ ------  -------- ------ ------ ------------  -------------  -----------   ---------------
Balance, June 30, 1999    2,000     83    3,454       563   477      4         (416)            -       (7,426)          (7,192)
Conversion of
 Class B common shares
 into common shares           -      -      477         4  (477)    (4)           -             -            -                -
Conversion of
 Class A preferred
 shares into common
 shares                  (2,000)   (83)   2,000        83     -      -            -             -            -                -
Conversion of redeemable
 convertible preferred
 shares  into common
 shares                       -      -   10,052    17,500     -      -            -             -            -           17,500
Issuance of common shares
 on exercise of
 stock options                -      -      375       995     -      -            -             -            -              995
Issuance of common shares
 on initial public
 offering, net of
 offering costs               -      -    3,975    43,101     -      -            -             -            -           43,101
Issuance of common shares
 related to Employee
 Stock Purchase Plan          -      -       69       707     -      -            -             -            -              707
Acquisitions                  -      -    1,655    49,125     -      -            -             -            -           49,125
Amortization of
 share-based
 compensation                 -      -        -         -     -      -          223             -            -              223
Net loss                      -      -        -         -     -      -            -             -       (8,362)          (8,362)
                          ------  ------  ------   ------ ------ ------ ------------  -------------  -----------   ---------------
Balance, June 30, 2000        -      -   22,057   112,078     -      -         (193)            -      (15,788)          96,097
Tax benefit from employee
 stock option plans           -      -        -       876     -      -            -             -            -              876
Issuance of common shares
 on exercise of
 stock options                -      -      506     3,109     -      -            -             -            -            3,109
Issuance of common shares
 related to Employee Stock
 Purchase Plan                -      -       72     1,440     -      -            -             -            -            1,440
Acquisitions                  -      -      298     7,404     -      -            -             -            -            7,404
Amortization of
 share-based
 compensation                 -      -        -         -     -      -          112             -            -              112
Compensation related to
 stock options                -      -        -        65     -      -            -             -            -               65
Issuance of common shares
 on equity financing,
 net of offering costs        -      -    1,000    51,756     -      -            -             -            -           51,756
Unrealized loss on
 available-for-sale
 investment                   -      -        -         -     -      -            -          (203)           -             (203)
Net loss                      -      -        -         -     -      -            -             -      (32,455)         (32,455)
                          ------  ------ ------  -------- ------ ------ ------------  -------------  -----------   ---------------
Balance, June 30, 2001        -  $   -   23,933  $176,728         $  -      $   (81)    $    (203)    $(48,243)       $ 128,201
                          ======  ====== ======  ======== ====== ====== ============  =============  ===========   ===============
</TABLE>
        See accompanying Notes to the Consolidated Financial Statements.

                                       56
<PAGE>


                               PIVOTAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
         (Expressed in United States dollars; all amounts in thousands)



<TABLE>
                                                                                            Years ended June 30,
                                                                              -------------------------------------------
                                                                                  2001           2000            1999
                                                                              ------------   ------------    ------------
<S>                                                                            <C>             <C>            <C>
Cash flows from operating activities:
   Net loss for the year                                                       $ (32,455)      $ (8,362)      $  (2,808)
   Adjustments to reconcile net loss to net cash provided
     by (used in) operating activities:
        Amortization of goodwill                                                  23,062          1,409               -
        Depreciation                                                               4,556          2,215           1,017
        In process research and development and other charges                          -          6,979               -
        Tax benefit from employee stock option plans                                 876              -               -
        Impairment loss on property and equipment                                    948              -              52
        Amortization of deferred share-based compensation                            112            223              57
        Non-cash share-based compensation expense                                     65              -               -
        Change in operating assets and liabilities                                (1,368)         2,469           4,196
                                                                              ------------   ------------    ------------
   Net cash (used in) provided by operating activities                            (4,204)         4,933           2,514
                                                                              ------------   ------------    ------------
Cash flows for investing activities:
   Purchases, sales and maturities of short-term investments, net                (24,680)       (30,788)              -
   Purchase of property and equipment                                             (6,833)        (6,110)         (2,392)
   Purchase of long-term investments and other assets                             (6,276)        (2,921)              -
   Acquisitions (net of cash acquired)                                            (5,682)       (14,520)              -
                                                                              ------------   ------------    ------------
Net cash used in investing activities                                            (43,471)       (54,339)         (2,392)
                                                                              ------------   ------------    ------------
Cash flows from financing activities:
   Net proceeds from equity financing                                             51,756              -               -
   Net proceeds from initial public offering of common shares                          -         43,101               -
   Proceeds from issuance of common shares                                         4,550          1,701              14
   Repayment of long-term debt                                                      (118)             -               -
   Proceeds from issuance of redeemable convertible preferred shares                   -              -           8,000
                                                                              ------------   ------------    ------------
Net cash provided by financing activities                                         56,188         44,802           8,014
                                                                              ------------   ------------    ------------
Net increase (decrease) in cash and cash equivalents                               8,513         (4,604)          8,136
Cash and cash equivalents, beginning of period                                     4,734          9,338           1,202
                                                                              ------------   ------------    ------------
Cash and cash equivalents, end of period                                       $  13,247       $  4,734       $   9,338
                                                                              ============   ============    ============
Supplemental cash flow disclosure:
   Income taxes (recovered) paid                                               $    (132)      $    324       $     137
                                                                              ============   ============    ============
   Interest paid                                                               $      10      $       1      $        -
                                                                              ============   ============    ============
Supplemental non-cash investing disclosure:
   Issuance of common shares and options on acquisitions                         $ 7,404       $ 49,125       $       -
                                                                              ============   ============    ============
Supplemental non-cash financing disclosure:
   Issuance of common shares and options on acquisitions                         $ 7,404       $ 49,125       $       -
                                                                              ============   ============    ============
   Conversion of preferred shares into common shares                             $     -       $ 17,583       $       -
                                                                              ============   ============    ============
</TABLE>



        See accompanying Notes to the Consolidated Financial Statements.


                                       57
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description of the Company

     Pivotal Corporation enables large and medium-sized  businesses worldwide to
     make,  serve,  and  manage  customers   efficiently  and  intelligently  by
     providing  customer   relationship   management  and  electronic   business
     solutions  based on Microsoft  standards.  Pivotal helps  companies  manage
     collaborative  relationships  between  customers,  business  partners,  and
     employees;   guides  intelligent  commerce   transactions  across  multiple
     channels;  and  seamlessly  integrates the demand side of business with the
     supply side.  Pivotal's software  solutions include Pivotal  eRelationship,
     developed to manage business relationships,  Pivotal eSelling,  designed to
     sell complex products over the Internet,  and Pivotal ePower, an integrated
     Internet application platform that is built on best-in-class resources.

     Principals of Consolidation

     These consolidated financial statements have been prepared by management in
     accordance  with  accounting  principles  generally  accepted in the United
     States of America  (U.S.  GAAP) and include the accounts of Pivotal and its
     wholly owned subsidiaries.  All intercompany accounts and transactions have
     been eliminated.

     Revenue Recognition

     The Company recognizes revenue in accordance with accounting  standards for
     software  companies  including  Statement of Position  No.  97-2,  Software
     Revenue Recognition, as amended by Statement of Position No. 98-9, Software
     Revenue Recognition with Respect to Certain Arrangements.

     Pivotal  generates  revenues through two sources:  (1) license revenues and
     (2)  services  and  maintenance  revenues.  License  revenues  are normally
     generated from licensing with end-users,  value-added  resellers (VARs) and
     application service providers and, to a lesser extent, through distribution
     of third party  products.  When  software  licenses are sold  indirectly to
     end-users through VARs,  Pivotal recognizes as revenue only the fee payable
     from the reseller upon  sell-through  to the  end-customer by the reseller.
     Service  revenues are generated  from  consulting  services,  education and
     maintenance.

     Revenues from software  license  agreements are recognized upon delivery of
     software if persuasive  evidence of an  arrangement  exists,  collection is
     probable, the fee is fixed or determinable,  and vendor-specific  objective
     evidence  exists to allocate the total fee to elements of the  arrangement.
     Vendor-specific  objective evidence is typically based on the price charged
     when an element is sold  separately,  or, in the case of an element not yet
     sold separately,  the price established by authorized management,  if it is
     probable that the price,  once  established,  will not change before market
     introduction.  Elements  included in multiple  element  arrangements  could
     consist of software  products,  upgrades,  enhancements,  customer  support
     services,  or consulting  services.  If an  acceptance  period is required,
     revenues  are  recognized  upon the earlier of customer  acceptance  or the
     expiration  of  the  acceptance  period.   Pivotal's  agreements  with  its
     customers and resellers do not contain product return rights.  Revenues for
     license  arrangements  with  payment  terms  extending  beyond one year are
     recognized   periodically  as  payments  become  due,  provided  all  other
     conditions for revenue recognition are met.

     Maintenance  revenues are recognized ratably over the term of the contract,
     typically  one  year.   Consulting   revenues  are  primarily   related  to
     implementation  services  performed  on a  time-and-materials  basis  under
     separate  service  arrangements  related  to the  installation  and  use of
     Pivotal's  software  products.   Revenues  from  consulting  and  education
     services  are  recognized  as  services  are  performed.  If a  transaction
     includes  both  license and service  elements,  license  fee  revenues  are
     recognized separately on 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 on acceptance of services,
     Pivotal  defers  recognition  of  revenues  from both the  license  and the
     service elements until the acceptance criteria are met.




                                       58
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Revenue Recognition (Continued)

     During the fourth quarter of fiscal 2001,  Pivotal adopted Staff Accounting
     Bulletin No. 101, Revenue Recognition in Financial  Statements,  (SAB 101).
     The  adoption  of SAB 101 did  not  have a  material  effect  on  Pivotal's
     consolidated financial position or results of operations.

     Pivotal's customers include a number of suppliers. On occasion, Pivotal has
     purchased  goods or services for  Pivotal's  operations  from vendors on or
     about  the  same  time   Pivotal  has   licensed   its  software  to  these
     organizations. These transactions are separately negotiated and recorded at
     amounts and terms Pivotal considers to be at arm's-length.

     Cost of Revenues

     Cost of license revenues consists primarily of media, product packaging and
     shipping,  documentation  and  other  production  costs,  and  third  party
     royalties.  Cost of services and maintenance revenues consists primarily of
     salaries,  benefits and allocated  overhead  costs  related to  consulting,
     training  and global  services  personnel,  including  the cost of services
     provided by third-party consultants engaged by Pivotal.

     Use of Estimates

     The  preparation of  consolidated  financial  statements in conformity with
     generally  accepted  accounting  principles  requires  management  to  make
     estimates and  assumptions  that affect the reported  amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the date
     of the  consolidated  financial  statements,  and the  reported  amounts of
     revenues and expenses during the reporting periods. Estimates are used for,
     but not limited to, the accounting for doubtful accounts,  depreciation and
     amortization,  income taxes and  contingencies.  Actual  results may differ
     from those estimates.

     Cash and Cash Eqivalents

     Cash  equivalents  consist of highly  liquid  short-term  investments  with
     original  maturities at the date of  acquisition of 90 days or less and are
     recorded at cost.

     Short-Term Investments

     Under  Financial  Accounting  Standard  ("SFAS")  No. 115,  Accounting  for
     Certain  Investments in Debt and Equity Securities,  management  classifies
     investments  as  available-for-sale  or  held-to-maturity  at the  time  of
     purchase and  re-evaluates  such designation as of each balance sheet date.
     Investments  classified  as  held-to-maturity   securities  are  stated  at
     amortized cost with corresponding  premiums or discounts  amortized against
     interest income over the life of the investment.

     Marketable  equity and debt  securities not classified as  held-to-maturity
     are classified as available-for-sale and reported at fair value. Unrealized
     gains and losses on these  investments,  net of any related tax effect, are
     included in equity as a separate component of shareholders' equity.

     Short-term  investments consist of money market instruments with maturities
     of  less  than  one  year.  As  at  June  30,  2001,  Pivotal's  short-term
     investments  consisted  solely of  held-to-maturity  investments  and their
     carrying value was substantially the same as their market value.

     Investments in Public Companies

     At June 30, 2001,  Pivotal held an investment in a publicly  traded company
     in which it has less than 20% of the voting rights and in which it does not
     exercise  significant  influence.  The  investment is included in goodwill,
     intangibles  and other  assets  and is  recorded  at fair  value,  which is
     determined  based on quoted market prices,  with net  unrealized  gains and
     losses included in accumulated other comprehensive loss.




                                       59
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Investments in Non-Public Companies

     Pivotal has certain  investments in non-publicly  traded companies in which
     it has less than 20% of the voting rights and in which it does not exercise
     significant influence. These investments are included in goodwill and other
     assets and are carried at cost.  Pivotal  monitors  these  investments  for
     impairment  and  makes  appropriate  reductions  in  carrying  values  when
     necessary.

     Fair Value of Financial Instruments

     At June 30, 2001 and 2000, Pivotal has the following financial instruments:
     cash and cash equivalents,  short-term  investments,  accounts  receivable,
     investments  in public  and  non-public  companies,  accounts  payable  and
     accrued  liabilities,  and at June 30, 2001,  long-term  debt. The carrying
     value  of cash  and  cash  equivalents,  short-term  investments,  accounts
     receivable and accounts payable and accrued liabilities  approximates their
     fair value based on their liquidity or based on their short-term nature. At
     June 30, 2001, the carrying value of long-term debt also  approximates fair
     value.

     The fair values of investments in publicly traded  companies are determined
     using  quoted  market  prices  for  those  securities.  The fair  values of
     investments in non-publicly traded companies are not readily determinable.

     Property and Equipment

     Property and equipment are recorded at cost less accumulated  depreciation.
     Depreciation  of property  and  equipment is provided  using the  following
     rates and methods:

           Computer software                  2 year straight line
           Computer hardware and equipment    30% declining balance or 3 year
                                                straight line
           Furniture and fixtures             20% declining balance

     Leasehold  improvements are amortized using the  straight-line  method over
     three to five years.

     Goodwill, Intangibles and other Assets

     Goodwill,  core technology and other intangible  assets are carried at cost
     less  accumulated  amortization  and are being amortized on a straight-line
     basis over the economic lives of the  respective  assets,  generally  three
     years.

     Impairment of Long-Lived Assets

     Long-lived assets and certain identifiable intangible assets to be held and
     used  are  reviewed   for   impairment   whenever   events  or  changes  in
     circumstances  indicate that the carrying  amount of such assets may not be
     recoverable.  Determination  of  recoverability  is based on an estimate of
     undiscounted  future cash flows resulting from the use of the asset and its
     eventual  disposition.  Measurement  of an impairment  loss for  long-lived
     assets and certain  identifiable  intangible assets that management expects
     to hold and use are based on the fair value of the asset. Long-lived assets
     and certain  identifiable  intangible assets to be disposed of are reported
     at the lower of carrying  amount or fair value less costs to sell. In 2001,
     Pivotal  recorded an impairment  loss of $948 related to long-lived  assets
     having  carrying values in excess of the cash flows expected to result from
     their disposal.  No such  impairment  losses had been identified by Pivotal
     for the years ended June 30, 2000 and 1999.



                                       60
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Research and Development

     Research  and  development  costs,  which  consist  primarily  of  software
     development  costs, are expensed as incurred.  SFAS No. 86,  Accounting for
     the Costs of Computer  Software to be Sold,  Leased or Otherwise  Marketed,
     provides for the capitalization of certain software development costs after
     technological  feasibility of the software is established.  Under Pivotal's
     current  practice  of  developing  new  products  and   enhancements,   the
     technological  feasibility  of the underlying  software is not  established
     until  substantially  all product  development  is complete,  including the
     development of a working model. No such costs have been capitalized because
     the impact of capitalizing such costs would not be material.

     Concentration of Credit Risk

     Financial  instruments that potentially  subject Pivotal to a concentration
     of credit risk consist principally of cash and cash equivalents, short-term
     investments  and  accounts  receivable.   Cash  and  cash  equivalents  are
     custodied  with   high-quality   financial   institutions   and  short-term
     investments are made in investment grade securities to mitigate exposure to
     credit risk.  Pivotal's  customer base is dispersed  across many  different
     geographic areas throughout North America,  Europe and the Asia Pacific and
     consists of companies in a variety of industries.  Pivotal performs ongoing
     credit  evaluations  of its  customers  and does not require  collateral or
     other security to support credit sales.  Pivotal  provides an allowance for
     bad debts based on historical experience and specifically identified risks.
     During 2001, 2000 and 1999, no single customer  accounted for more than 10%
     of revenues.

     Derivation Financial Instruments

     Pivotal's use of derivative financial  instruments is limited to short-term
     foreign  currency  forward  exchange  contracts also referred to as forward
     contracts,  used to manage exposure  related to certain  Canadian  currency
     transactions.  Pivotal does not enter into derivative financial instruments
     for  trading   purposes.   Pivotal   identifies  future  Canadian  currency
     commitments  and  enters  into  forward  contracts  to  hedge  exposure  to
     fluctuations in the Canadian dollar.  Gains and losses on forward contracts
     that are  designated  and  effective  as  hedges of firm  foreign  currency
     commitments  are  recognized  when the related  transaction  is recognized.
     Gains  and  losses  not  meeting  the  criteria  for hedge  accounting  are
     recognized in operations in the current period.

     As of June 30, 2001, Pivotal had no outstanding forward contracts.

     As at June 30, 2000, Pivotal had outstanding  forward contracts to purchase
     Canadian  dollars  for  U.S.$5.5  million.  The  unrealized  loss on  these
     contracts at June 30, 2000 was $79.

     Foreign Currency Translation

     The functional currency of Pivotal and its subsidiaries is the U.S. dollar.
     Assets  and  liabilities  denominated  in other  than the U.S.  dollar  are
     translated  using the exchange rates  prevailing at the balance sheet date.
     Revenues  and  expenses  are  translated   using  average   exchange  rates
     prevailing  during  the  period.  Gains  and  losses  on  foreign  currency
     transactions and translation are recorded in the consolidated statements of
     operations.

     Advertising

     Pivotal  expenses  advertising  costs  as they  are  incurred.  Advertising
     expense is included in sales and marketing expenses and amounted to $1,305,
     $924 and $538 in 2001, 2000 and 1999, respectively.

     Income Taxes

     Pivotal  accounts  for income taxes under the  provisions  of SFAS No. 109,
     Accounting  for Income  Taxes.  This  statement  provides  for a  liability
     approach  under  which  deferred  income  taxes  are  provided  based  upon
     currently enacted tax laws and rates. Valuation allowances are established,
     when necessary, to reduce deferred tax assets to the amounts expected to be
     realized.




                                       61
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Share-Based Compensation

     As permitted under SFAS No. 123,  Accounting for Stock-Based  Compensation,
     Pivotal  has  accounted  for  employee  stock  options in  accordance  with
     Accounting  Principles  Board (APB)  Opinion No. 25,  Accounting  for Stock
     Issued to  Employees,  and has made the pro forma  disclosures  required by
     SFAS No. 123 in Note 11.

     Deferred compensation charges arise from those situations where options are
     granted  at an  exercise  price  lower  than the  deemed  fair value of the
     underlying  common  shares.  These  amounts  are  amortized  as  charges to
     operations, over the vesting periods of the individual stock options.

     Loss per common share

     Basic loss per share is computed by dividing  net loss  available to common
     shareholders  by the weighted  average number of common shares  outstanding
     for the period.  Diluted  earnings per share amounts  reflect the potential
     dilution by  including  other  common share  equivalents,  including  stock
     options  and  redeemable  convertible  preferred  shares,  in the  weighted
     average number of common shares outstanding for a period, if dilutive.

     Pro forma loss per share is computed by dividing  net loss by the  weighted
     average  number of  common  shares  outstanding  and the  weighted  average
     redeemable  convertible  preferred shares and Class A convertible preferred
     shares  outstanding as if such shares were converted into common shares and
     had been  outstanding  at the beginning of the fiscal year. No  convertible
     preferred shares were outstanding during the year ended June 30, 2001.

     Pivotal had a net loss for all periods presented herein; therefore, none of
     the stock options  outstanding  during each of the periods  presented  were
     included  in the  computation  of  diluted  loss  per  share  as they  were
     antidilutive.

     The following  table sets forth the  computation of basic and diluted,  and
     pro forma basic and diluted loss per share:

<TABLE>
                                                                            Years ended June 30,
                                                                  --------------------------------------
                                                                     2001          2000          1999
                                                                  ----------    ----------    ----------
    <S>                                                           <C>           <C>           <C>
     Net loss (A)                                                 $ (32,455)    $  (8,362)    $  (2,808)
                                                                  ==========    ==========    ==========
     Weighted average number of
        common shares outstanding (B)                                23,173        18,643         3,888
                                                                  ==========
     Pro forma adjustment for convertible preferred shares                          2,696        12,052
                                                                                ----------    ----------
     Pro forma basic and diluted weighted average
        number of shares (C)                                                       21,339        15,940
                                                                                ==========    ==========
     Loss per share
        Basic and diluted (A/B)                                   $   (1.40)    $   (0.45)    $   (0.72)
        Pro forma basic and diluted (A/C)                                       $   (0.39)    $   (0.18)
</TABLE>



                                       62
<PAGE>



                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Recent Accounting Pronouncements

     In July 2001, the Financial  Accounting  Standards Board (FASB) issued SFAS
     No.  141,  Business  Combinations  and SFAS No.  142,  Goodwill  and  Other
     Intangible  Assets.  SFAS No. 141  addresses  the initial  recognition  and
     measurement of goodwill and other intangible  assets acquired in a business
     combination  and  SFAS  No.  142  addresses  the  initial  recognition  and
     measurement of intangible assets acquired outside of a business combination
     whether  acquired  individually  or with a group  of  other  assets.  These
     standards  require all future  business  combinations  to be accounted  for
     using  the  purchase  method  of  accounting.  Goodwill  will no  longer be
     amortized  but  instead  will be  subject  to  impairment  tests  at  least
     annually.

     Pivotal is required to adopt SFAS No. 141 and 142 on a prospective basis as
     of July 1, 2002,  but is  permitted  to adopt them in the first  quarter of
     2002. Pivotal is currently evaluating the impact that the adoption of these
     pronouncements   may  have  on  its  financial   position  and  results  of
     operations;  however, due to these pronouncements being issued in late July
     2001 and due to the Pivotal's expectations that the FASB will issue further
     guidance with respect to adoption of both SFAS No. 141 and No. 142, Pivotal
     is  currently  unable to  determine  the impact that the  adoption of these
     pronouncements may have on its financial position or results of operations.

     Reclasifications

     Certain  prior  period  amounts  have been  reclassified  to conform to the
     current period presentation.


2.   BUSINESS COMBINATIONS

     During  the years  ended  June 30,  2001 and 2000,  Pivotal  completed  the
     acquisitions  described  below which were  accounted for using the purchase
     method of  accounting.  Accordingly,  the  results  of  operations  of each
     acquisition are included in the consolidated  statement of operations since
     the acquisition  date, and the related assets and liabilities were recorded
     based upon their respective fair values at the date of acquisition.

     Fiscal 2001

     Ionysys Technology Corporation

     On  October  16,  2000,   Pivotal  acquired  100%  of  Ionysys   Technology
     Corporation,   a  privately   held   company   providing   consulting   and
     implementation  services related to Internet  solutions based in Vancouver,
     British  Columbia.  Pivotal paid an aggregate cash purchase price of $1,014
     including acquisition related expenditures of $360.

     Project One Business Technologies Inc.

     On  October  31,  2000,  Pivotal  acquired  100% of  Project  One  Business
     Technologies  Inc.,  a privately  held  company  providing  consulting  and
     implementation  services specifically designed for the health care industry
     based in North  Vancouver,  British  Columbia.  Pivotal  paid an  aggregate
     purchase  price of $1,364  consisting of 19 common shares and cash of $460,
     which includes acquisition related expenditures of $380.

     The  agreement  for the  acquisition  of  Project  One  also  provided  for
     additional  consideration to a maximum of approximately 96 common shares to
     be paid based on achieving certain targets over the next 3 years. All share
     consideration will be recorded as additional purchase price when issued. No
     shares were required to be issued in  connection  with the  acquisition  of
     Project One during the period ended June 30, 2001.



                                       63
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


2.   BUSINESS COMBINATIONS (Continued)

     Sofware Spectrum CRM, Inc.

     On December 5, 2000,  Pivotal acquired 100% of Software Spectrum CRM, Inc..
     Software  Spectrum,   based  in  Dallas,   Texas,  delivers  solutions  and
     consulting  expertise  in  multi-channel   contact  centers,  and  customer
     relationship management to help organizations increase revenue and customer
     satisfaction. Pivotal paid an aggregate purchase price of $7,474 consisting
     of 138 common shares and cash of $1,925, which includes acquisition related
     expenditures of $1,175.

     Inform Inc.

     On June 22, 2001,  Pivotal  acquired 100% of Inform Inc., a company located
     in Toronto,  Ontario, which specializes in implementation  services for the
     financial  services  industry.  Pivotal paid an aggregate purchase price of
     $1,310  consisting  of 45 common  shares and cash of $359,  which  includes
     acquisition related expenditures of $266.

     Other

     Other acquisitions consist of asset acquisitions of implementation services
     business during the third quarter ended March 31, 2001.

     The total consideration,  including  acquisition costs, was allocated based
     on estimated fair values on the acquisition date as follows:

<TABLE>
                                                        Project     Software
                                              Ionysys   One         Spectrum     Inform     Other      Total
                                              -------   -------     ----------    --------   -------    -------
     <S>                                      <C>       <C>          <C>          <C>         <C>       <C>
     Tangible assets acquired                 $   86    $    62      $ 2,697      $ 1,374    $  103    $ 4,322

     Liabilities assumed                           -     (1,008)      (2,534)      (2,022)     (413)    (5,977)
                                              -------   -------     ----------    --------   -------    -------
     Net identifiable assets (liabilities)
        acquired                                  86       (946)         163         (648)     (310)    (1,655)
     Goodwill and other intangibles              928      2,310        7,311        1,958     2,606     15,113
                                              -------   -------     ----------    --------   -------    -------
     Purchase price                           $1,014    $ 1,364      $ 7,474      $ 1,310    $2,296    $13,458
                                              =======   =======     ==========    ========   =======    ========
     Consideration (inclusive of cash
        received of $372)
          Cash                                $1,014    $   460      $ 1,925      $   359    $2,296    $ 6,054
          Fair value of common shares
          issued                                   -        904        5,549          951         -      7,404
                                              -------   -------     ----------    --------   -------    -------
                                              $1,014    $ 1,364      $ 7,474      $ 1,310    $2,296    $13,458
                                              =======   =======     ==========    ========   =======    ========
</TABLE>

     The fair value of the common shares of Pivotal  issued in  connection  with
     the  acquisitions  was  determined  by taking an average of the opening and
     closing  trading  price of the common shares for a short period just before
     and just after the terms of the  transaction  were agreed to by the parties
     and announced to the public or the closing price on the acquisition dates.



                                       64
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


2.   BUSINESS COMBINATIONS (Continued)

     Pro Forma Information

     Unaudited  pro forma results of  operations  assuming  Pivotal had acquired
     Ionysys, Project One, Software Spectrum,  Inform and Other at the beginning
     of the 2001  fiscal  year have not been  presented  because  the effects of
     these  acquisitions  were not material on either an individual or aggregate
     basis.


     Fiscal 2000

     Transitif S.A.

     Effective  December 3, 1999,  Pivotal  acquired  100% of Transitif  S.A., a
     French  corporation  that  distributed  customer  relationship   management
     solutions.  Transitif  deploys  Pivotal  solutions  through  its network of
     systems  integrators  throughout  France.  Pivotal paid an  aggregate  cash
     purchase price of $1,266,  including  acquisition  related  expenditures of
     $120  with  additional  consideration  payable  based on the net  after-tax
     earnings of Transitif and license  revenues  received by Transitif from the
     future sale of licenses  for Pivotal  products to June 2002.  All  earn-out
     payments will be recorded as additional  purchase  price when  determinable
     and Pivotal may elect to pay up to fifty percent of the additional purchase
     price, if any, in Pivotal common shares.  Pivotal made earn-out payments of
     $239 during the year ended June 30, 2001.

     Exactium Ltd.
     Effective June 2, 2000,  Pivotal acquired 100% of Exactium Ltd., an Israeli
     company  based in Atlanta,  Georgia that provides  e-selling  solutions for
     internet and Microsoft standards.  Pivotal paid an aggregate purchase price
     of $45,140  consisting  of 1,225 common shares and stock  options,  cash of
     $13,150  including a shareholder  loan repayment of $5,402 and  acquisition
     related expenditures of $775.

     Simba Digital Technologies Inc.
     On June 26, 2000, Pivotal acquired 100% of Simba Digital Technologies Inc..
     Pivotal  paid an  aggregate  purchase  price of $17,590  consisting  of 837
     common shares and stock options,  and acquisition  related  expenditures of
     $455.



                                       65
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


2.   BUSINESS COMBINATIONS (Continued)

     The total consideration,  including  acquisition costs, was allocated based
     on estimated fair values on the acquisition date as follows:

<TABLE>
                                                                 Transitif     Exactium        Simba           Total
                                                               ------------- -------------  -------------  -------------
<S>                                                            <C>           <C>             <C>            <C>
         Assets acquired
            In process research and development                $       -      $   2,830      $   1,890      $   4,720
            Core developed technology                                  -            290              -            290
            Acquired workforce                                         -            770            560          1,330
            Other assets                                           1,146            370            720          2,236
                                                               ------------- -------------  -------------  -------------
                                                                   1,146          4,260          3,170          8,576
         Liabilities assumed                                      (1,050)          (926)          (683)        (2,659)
                                                               ------------- -------------  -------------  -------------
         Net identifiable assets acquired                             96          3,334          2,487          5,917
         Goodwill                                                  1,170         41,806         15,103         58,079
                                                               ------------- -------------  -------------  -------------
         Purchase price                                        $   1,266      $  45,140      $  17,590      $  63,996
                                                               ============= =============  =============  =============
         Consideration (inclusive of cash received of $351)
            Cash                                               $   1,266      $  13,150      $     455      $  14,871
            Fair value of common shares and
              stock options issued                                     -         31,990         17,135         49,125
                                                               ------------- -------------  -------------  -------------
                                                               $   1,266      $  45,140      $  17,590      $  63,996
                                                               ============= =============  =============  =============
</TABLE>


     The fair value of the common shares of Pivotal issued in  conjunction  with
     the  acquisitions  was  determined  by taking an average of the opening and
     closing  trading  price of the common shares for a short period just before
     and just after the terms of the  transaction  were agreed to by the parties
     and  announced  to the public.  The  purchase  price was  increased  by the
     estimated  fair value of the stock  options of  Pivotal  exchanged  for the
     Exactium and Simba options outstanding.

     Purchased in Process Research and Development

     Purchased  in  process   research  and   development   charges   relate  to
     acquisitions of companies  accounted for under the purchase method in which
     a portion  of the  purchase  price was  allocated  to  acquired  in process
     technology.  During 2000,  Pivotal acquired Exactium and Simba and included
     in the  purchase  price was an  aggregate  amount of  purchased  in process
     research and development of $4,720.




                                       66
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


2.   BUSINESS COMBINATIONS (Continued)

     Purchased in Process Research and Development (Continued)

     Independent  valuations  were  performed  to assess and allocate a value to
     purchased in process  research and  development. The value  allocated to in
     process  research and development  was based upon the forecasted  operating
     after-tax  cash flows from the  technology  acquired,  giving effect to the
     stage of completion at the acquisition  date.  These  forecasted cash flows
     were then  discounted  at a rate  commensurate  with the risk  involved  in
     completing  the  acquired   technology   taking  into   consideration   the
     characteristics  and  applications  of each  product,  existing  and future
     markets, and assessments of the life cycle stage of each product.  Based on
     this  analysis,  the  existing  technology  that had reached  technological
     feasibility  was  capitalized.  Existing  technology,  that had not reached
     technological  feasibility and for which no future alternative use existed,
     was expensed.  Future cash flows were adjusted for the value contributed by
     any core technology and development  efforts  expected to be completed post
     acquisition.  Research and development costs to bring the products from the
     acquired companies to technological  feasibility are not expected to have a
     material impact on Pivotal's future results of operations or cash flows.

     The  forecasted  data employed in the analysis was based upon both forecast
     information  maintained  by the  management  of  Exactium  and  Simba,  and
     Pivotal's estimate of the future potential of the acquired technology.  The
     inputs  used by Pivotal in  analyzing  purchased  in process  research  and
     development were based upon assumptions that management believes reasonable
     but which are inherently uncertain and unpredictable. These assumptions may
     be  incomplete  or   inaccurate,   and  no  assurance  can  be  given  that
     unanticipated events and circumstances will not occur. Accordingly,  actual
     results may vary from the forecasted  results.  While  management  believes
     that  all of the  development  projects  will  be  successfully  completed,
     failure  of any of these  projects  to achieve  technological  feasibility,
     and/or  any  variance  from  forecasted  results,  may result in a material
     adverse effect on Pivotal's financial condition and results of operations.

     A description of the purchased in process research and development for each
     acquisition is set forth below.

     Exactium

     The allocation to in process  research and  development  was related to the
     Exactium eSelling  technology.  At the time of acquisition,  a prototype of
     Exactium's  product existed and it was being used in limited  trials.  This
     prototype  was not stable or  sufficiently  developed  to be scalable on an
     enterprise-wide basis.  Forecasted revenues used in the valuation reflected
     historical  growth  rates of software  sales for the  eBusiness  management
     market  and  Pivotal,  and  contemplated  revenues  related  to the sale of
     products  incorporating Exactium technology commencing during the summer of
     2000 and increasing  thereafter.  Pivotal estimated that the technology was
     approximately  80% complete as of the acquisition date. Net cash flows were
     discounted  to  net  present  value  at  the  acquisition   date  using  an
     appropriate tax adjusted rate reflecting the risk of unproven but partially
     developed  software  products.  The Exactium  technology  was  subsequently
     completed and the eSelling product was released in late June 2000.

     Simba

     The allocation to in process  research and  development  was related to the
     Simba electronic  marketing product. At the time of acquisition,  Simba did
     not  have  a   first-generation   product   and  there  were   considerable
     uncertainties as to completion of the product. The valuation of acquired in
     process research and development was prepared using the income approach and
     contemplated  that revenues  related to the sale of products  incorporating
     the Simba technology  would commence in late 2000 and increase  thereafter.
     Revenue  increases were based upon the  historical  growth rate of software
     sales for the electronic  marketing market and Pivotal.  Net after tax cash
     flows were discounted to their present value at the acquisition  date using
     an appropriate after-tax risk-adjusted discount rate reflecting the risk of
     unproven but partially  developed software products.  To date, progress and
     development  costs incurred on the Simba  technology have been in line with
     the Company's initial expectation.

     In addition to the charge for in-process research and development,  Pivotal
     recorded a write-down of other assets of Pivotal made redundant as a result
     of the acquisitions in the amount of $2,259.



                                       67
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


2.   BUSINESS COMBINATIONS (Continued)

     Pro Forma Information

     The following  table presents the unaudited pro forma results of operations
     for informational purposes assuming Pivotal had acquired Exactium and Simba
     at the beginning of the 1999 fiscal year.

<TABLE>
                                                                          June 30,
                                                              ----------------------------------
                                                                    2000               1999
                                                              ----------------------------------
        <S>                                                     <C>                  <C>
         Net revenues                                           $  58,602            $  30,594

         Net loss                                               $ (33,943)           $ (25,905)

         Basic and diluted loss per share                       $   (1.68)           $   (4.67)
</TABLE>


     The pro forma  results of  operations  give  effect to certain  adjustments
     including  amortization of purchased intangibles and goodwill.  Included in
     the pro forma net loss for the year ended June 30, 2000 is a $6,979  charge
     for in-process  research and development and other charges by Pivotal.  The
     information  may not  necessarily  be  indicative  of the  future  combined
     results of operations of Pivotal, Exactium and Simba. The pro forma results
     of operations have not been presented for the Transitif transaction because
     the  effect  of this  acquisition  was not  considered  to be  material  to
     Pivotal.


3.   ACCOUNTS RECEIVABLE

     Accounts receivable are net of an allowance for doubtful accounts of $2,200
     and $740 at June 30, 2001 and 2000, respectively.


4.   PROPERTY AND EQUIPMENT

                                                               June 30,
                                                       -------------------------
                                                          2001           2000
                                                       -----------   -----------
     Computer software and equipment                   $  11,619       $ 6,889
     Furniture and fixtures                                2,944         2,389
     Leasehold improvements                                2,054         1,695
                                                       -----------   -----------
                                                          16,617        10,973
     Accumulated depreciation                             (7,434)       (3,742)
                                                       -----------   -----------
     Net book value                                    $   9,183       $ 7,231
                                                       ===========   ===========



                                       68
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


5.   GOODWILL, INTANGIBLES AND OTHER ASSETS

                                                               June 30,
                                                       -------------------------
                                                          2001           2000
                                                       -----------   -----------

     Goodwill                                          $  75,408       $58,079
     Acquired intangibles                                  1,620         1,620
     Other assets                                          8,698         2,288
                                                       -----------   -----------
                                                          85,726        61,987
     Accumulated amortization                            (24,482)       (1,418)
                                                       -----------   -----------
     Net book value                                    $  61,244       $60,569
                                                       ===========   ===========

     Other assets in the amount of $8,698 consist of prepaid long-term royalties
     and   long-term   investments.   Amortization   of  $24,482   includes  the
     amortization of goodwill and acquired intangibles.


6.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     The components of accounts payable and accrued liabilities were as follows:

                                                               June 30,
                                                       -------------------------
                                                          2001           2000
                                                       -----------   -----------

     Accounts payable                                  $  12,721       $ 9,369
     Accrued compensation                                  3,867         3,020
     Accrued acquisition costs                             5,227         1,229
     Other accrued liabilities                             3,509         3,259
                                                       -----------   -----------
                                                       $  25,324       $16,877
                                                       ===========   ===========

7.   LINE OF CREDIT

     Pivotal has a credit facility with a Canadian chartered bank which includes
     a revolving term operating line of $1,982 (Cdn.$3,000), bearing interest at
     the bank's prime rate plus 1% per year,  secured by a charge on all current
     and future personal  property of Pivotal.  As of June 30, 2001 and 2000, no
     amounts were outstanding under the facility.




                                       69
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


8.   OBLIGATIONS UNDER CAPITAL LEASES AND LONG-TERM DEBT

     Obligations under capital leases and long-term debt were as follows:

<TABLE>
                                                                                      June 30,
                                                                          -------------------------------
                                                                              2001               2000
                                                                          ------------       ------------
     <S>                                                                  <C>                  <C>
     Obligation under capital lease with an interest rate of 5%             $  625              $     -

     Note payable, non-interest bearing, unsecured, repaid
      subsequent to year-end                                                   365

     Other obligations                                                         118
                                                                          ------------       ------------
                                                                             1,108                    -
Less:  Current portion                                                        (516)                   -
                                                                          ------------       ------------
                                                                           $   592              $     -
                                                                          ============       ============
</TABLE>

     As of June 30,  2001,  future  annual  minimum  lease  payments for capital
     leases were $500, including $89 of imputed interest.


9.   COMMITMENTS AND CONTINGENCIES

     Operating Leases

     Pivotal leases office  facilities  under  operating  leases which generally
     require  Pivotal  to pay a share of  operating  costs,  including  property
     taxes,  insurance and  maintenance.  Pivotal also leases certain  equipment
     under operating leases.

     Future  minimum  operating  lease  payments  for the years  ending  June 30
     pursuant to leases outstanding as of June 30, 2001 are as follows:

                  2002                                             $9,253
                  2003                                              6,839
                  2004                                              4,176
                  2005                                              3,736
                  2006                                              2,912
                                                                -----------
                                                                  $26,916
                                                                ===========

     Rent expense totaled  approximately  $4,755, $2,237 and $1,075 in the years
     ended June 30, 2001,  2000 and 1999,  respectively.  Certain of these lease
     obligations have been secured by irrevocable letters of credit for $799, $0
     and $50 at June 30, 2001, 2000 and 1999, respectively.

     Other Letters of Credit

     Subsequent  to June 30,  2001,  the Company  arranged a letter of credit of
     $2,477  (Cdn.$3,750).  The letter of credit,  which  expires  July 3, 2002,
     secures  Pivotal's  obligations  to a third  party for  tenant  improvement
     costs.


     Legal Proceedings

     Pivotal is  currently  in  arbitration  with one of its  business  partners
     related to a breach of  contract  claim  against the  Company.  The Company
     believes the claim is without merit and has made a counterclaim.  While the
     results of the  arbitration  and claims cannot be predicted with certainty,
     the Company  believes that the final outcome of this matter will not have a
     material adverse effect on Pivotal's business, financial condition, results
     of operations or cash flows.




                                       70
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


10.  REDEEMABLE CONVERTIBLE PREFERRED SHARES

     During the year ended June 30,  1999,  Pivotal's  shareholders  approved an
     increase in the authorized  capital of Pivotal by authorizing 1,288 Class F
     preferred  shares which were issued during that year for total  proceeds of
     $8,000.

     The holders of each class of preferred shares had the right to one vote for
     each common share into which the preferred shares could be converted.

     All  of  the  redeemable   preferred   shares  had  the  right  to  receive
     non-cumulative  dividends  at amounts as  determined  by the  directors  of
     Pivotal.  When dividends were paid on any other outstanding class of shares
     of  Pivotal,  the  holders  of the  Class B,  Class D,  Class E and Class F
     preferred shares were entitled to an amount per share equal to that paid on
     the  other  class  of  shares,  as  determined  on a basis as if all of the
     outstanding  redeemable  preferred  shares had been  converted  into common
     shares.

     The Class B, Class D, Class E and Class F preferred  shares were redeemable
     at  Pivotal's  option  with  the  approval  of  the  holders  of 75% of the
     outstanding  shares of the applicable  class,  and were  retractable at the
     holder's  option  on or after  June 30,  2001 at the issue  price  plus any
     declared and unpaid dividends.

     Each class of  redeemable  preferred  shares was  convertible  into  common
     shares at any time at the option of the  holder,  using the formula of 0.95
     to 1.00 for the Class B preferred shares and one-for-one for Class D, Class
     E and Class F preferred shares as provided in the Articles of Pivotal.  All
     classes of preferred shares were also automatically convertible into common
     shares  at the  conversion  price in  certain  circumstances.  All of these
     shares were  converted  into common  shares  during the year ended June 30,
     2000.


11.  SHAREHOLDERS' EQUITY

     Initial Public Offering

     On  August  4,  1999,  Pivotal's   registration   statement  on  Form  F-1,
     Registration No. 333-92971,  became effective. The offering date was August
     5,  1999.  The  offering  was  terminated  as a result of all of the shares
     offered  being sold.  The managing  underwriters  were Merrill Lynch & Co.,
     Bear,  Stearns & Co. Inc.  and Dain  Rauscher  Incorporated.  The  offering
     consisted  of 3,975  common  shares of Pivotal,  which  included 475 common
     shares  offered  pursuant to the subsequent  exercise of the  underwriters'
     over allotment option on August 19, 1999. The aggregate price of the shares
     offered and sold was $47.7 million. Proceeds to Pivotal, after $3.3 million
     in  underwriting  discounts  and  commissions  and  $1.3  million  in other
     expenses,  were  $43.1  million.  Simultaneous  with  the  closing  of  the
     Offering,  all  outstanding  preferred  shares were  converted  into common
     shares.

     Equity Financing

     On November 21, 2000,  Pivotal  completed an equity  financing in Canada of
     one million  common  shares for  aggregate  proceeds of  approximately  $55
     million.  Proceeds to Pivotal  were $51.8  million,  after $2.2  million in
     underwriting  discounts and commissions and $1.0 million in other expenses.
     This  transaction was exempt from Securities Act  registration  pursuant to
     the  exclusion  from  registration  provided  by  Regulation  S  under  the
     Securities Act.



                                       71
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


11.  SHAREHOLDERS' EQUITY

     Preferred Shares, Common Shares and Class B Common Shares

     On December 16, 1998, Pivotal's  shareholders approved the redesignation of
     common shares without par value to Class A common shares without par value.
     Pivotal's  shareholders also approved the increase in authorized capital by
     creating 600 Class B common shares with a par value of Cdn.$0.03 each.

     In December 1998 and January 1999, Pivotal issued an aggregate of 477 Class
     B  common  shares  in  exchange  for 477  Class A common  shares.  Prior to
     completion  of  the  initial  public  offering,   all  of  the  issued  and
     outstanding Class A convertible  preferred shares and Class B common shares
     were exchanged for common shares on a one-for-one basis.

     On June 17, 1999, Pivotal's shareholders approved an increase in the number
     of authorized  Class A common shares from 50,000 to 200,000 and an increase
     in authorized  capital by creating 20,000 unissued preferred shares without
     par value.  Pivotal's shareholders also approved the redesignation of Class
     A common  shares,  both issued and unissued,  to common shares  without par
     value.

     The holder of each  common  share has the right to one vote per share.  The
     preferred  shares  could at any time and from time to time be issued in one
     or more  series and the Board of  Directors  could  determine  the  special
     rights and restrictions of each series  including any dividend,  conversion
     or  redemption  rights,  subject  to the  approval  of at least  75% of the
     holders of any outstanding Class A, B, D, E and F preferred shares.

     The holders of the Class A  preferred  shares had the right to one vote for
     each common share into which the preferred  shares could be converted.  The
     Class A preferred  shares had the same rights to receive  dividends  as the
     redeemable preferred shares discussed in Note 10, and were convertible into
     common shares on a one-for-one  basis,  subject to adjustment under certain
     circumstances.  The  Class  A  preferred  shares  were  not  redeemable  or
     retractable.

     On June 17, 1999,  Pivotal's  shareholders  also  approved,  subject to the
     conversion of the  redeemable  convertible  preferred  shares,  the Class A
     convertible  preferred  shares and the Class B common  shares  into  common
     shares, the cancellation of the authorized Class B common share capital and
     the authorized Class A, B, D, E, and F preferred share capital.

     Employee Stock Option Plan

     Under the terms of the 1999 Pivotal Incentive Stock Option Plan, as amended
     (the "Plan"),  the Board of Directors may grant incentive and non-qualified
     stock options to employees,  officers,  directors,  independent consultants
     and  contractors  of  Pivotal  and  subsidiaries,  partnerships,  and joint
     ventures  including  directors  thereof.  Generally,  Pivotal  grants stock
     options with exercise prices equal to the quoted market value of the common
     shares  on the date of grant,  as  determined  by the  Board of  Directors.
     Options generally vest over a four-year period,  but the Board of Directors
     may provide for different vesting  schedules in particular  cases.  Options
     generally expire five years from the date of grant.

     On June 17, 1999, Pivotal's  shareholders approved changes to the Plan that
     increase the number of shares reserved for issuance pursuant to the Plan by
     (a) 1,076 common shares plus (b) an automatic  increase on the first day of
     each  fiscal  year  beginning  on July 1, 2001,  equal to the lesser of 800
     shares or 4% of the average number of common shares  outstanding as used to
     calculate fully diluted earnings per share for the preceding year.

     On October 25, 2000,  Pivotal's  shareholders  approved an amendment to the
     Plan that  increased  the  maximum  number of common  shares  reserved  for
     issuance  under the Plan by 1,500 common shares to 6,576 in order to ensure
     sufficient  options are  available  to permit the  Company to maintain  its
     policy of granting options to employees.



                                       72
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


11.  SHAREHOLDERS' EQUITY (Continued)

     Employee Stock Option Plan (Continued)

     Pivotal has assumed certain options granted to former employees of acquired
     companies (the "Acquired  Options").  The Acquired  Options were assumed by
     Pivotal  outside of the Plan, but all are  administered  as if issued under
     the Plan. All of the Acquired  Options have been adjusted to give effect to
     the   conversion   under  the  terms  of  the   Agreements   and  Plans  of
     Reorganization  between  Pivotal and the companies  acquired.  The Acquired
     Options generally become  exercisable over a four year period and generally
     expire  either  five or ten  years  from the date of grant.  No  additional
     options will be granted under any of the acquired companies' plans.

     A summary of stock option  activity and  information  concerning  currently
     outstanding and exercisable options is as follows:

<TABLE>
                                                                                   Options Outstanding
                                                                            ------------------------------
                                                               Options       Number of        Weighted
                                                              Available        Common         Average
                                                              for Grant        Shares      Exercise Price
                                                             -----------    -----------    ---------------
                                                                                            (Expressed in
                                                                                              Canadian
                                                                                           dollars, except
                                                                                             as noted)
     <S>                                                     <C>            <C>              <C>
     Balances, June 30, 1998                                       758            742         Cdn.$0.94
                                                             -----------    -----------    ---------------
        Options authorized                                       2,576              -                 -
        Options granted                                           (866)           866              9.71
        Options exercised                                            -            (78)             0.28
        Options cancelled                                           75            (75)             3.74
                                                             -----------    -----------    ---------------
     Balances, June 30, 1999                                     2,543          1,455         Cdn.$6.07
                                                             -----------    -----------    ---------------
        Options authorized                                         408              -                 -
        Options granted                                         (1,837)         1,837             23.12
        Options exercised                                            -           (375)             2.96
        Options cancelled                                          270           (270)            10.37

     Balances, June 30, 2000                                     1,384          2,647          US$16.95
                                                             -----------    -----------    ---------------
        Options authorized                                       1,500              -                 -
        Options granted                                         (2,341)         2,341             26.34
        Options exercised                                            -           (506)             6.14
        Options cancelled (net)                                    724           (811)            25.80
                                                             -----------    -----------    ---------------
     Balances, June 30, 2001                                     1,267          3,671          US$22.87
                                                             ===========    ===========    ==============
</TABLE>

                                       73
<PAGE>

                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


11.  SHAREHOLDERS' EQUITY (Continued)

     Employee Stock Option Plan (Continued)

     The  U.S.  dollar  equivalents  of  the  weighted  average  exercise  price
     calculated  using the year end  exchange  rates were as follows:  $4.12 and
     $0.64 as of June 30, 1999 and 1998, respectively.

     The following  tables  summarize  information  concerning  outstanding  and
     exercisable options at June 30, 2001:

<TABLE>
                                                                                      Options Exercisable
                                                                                 ----------------------------
                                                                  Weighted                         Weighted
                                                Average            Average                          Average
                                               Remaining          Exercise                         Exercise
       Exercise Prices         Number          Contractual         Price             Number         Price
          per Share          Outstanding     Life (in years)      per Share       Exercisable      per Share
      ----------------       -----------     ---------------    --------------    -----------    -------------
     <S>                    <C>               <C>              <C>                <C>           <C>
       $ 0.00 - $ 5.85          395               3.8           $   2.52            229           $  1.35
       $ 5.85 - $11.70          868               9.5               9.31             29              7.90
       $11.70 - $17.55          358               8.7              12.67             43             13.32
       $17.55 - $23.40           48               8.9              21.25             10             20.76
       $23.40 - $29.25          815               9.0              25.38            162             25.81
       $29.25 - $35.10          329               9.0              31.20             35             31.87
       $35.10 - $40.95          287               9.3              36.17             28             36.53
       $40.95 - $46.80          231               8.9              43.39             13             41.50
       $46.80 - $52.65          240               8.9              50.57             42             51.05
       $52.65 - $58.50          100               9.3              58.50              3             58.50
      ----------------       -----------     ---------------    --------------    -----------    -------------
       $ 0.00 - $58.50        3,671               9.0           $  22.87            594           $ 17.68
      ================       ===========     ===============    ==============    ===========    =============
</TABLE>

     Employee Stock Purchase Plan

     On June 17,  1999,  Pivotal's  shareholders  approved  the  adoption  of an
     employee  stock  purchase plan and  authorized  the issuance of up to 1,000
     common  shares under the plan with  amendments as the Board of Directors of
     Pivotal may deem  desirable.  Under the  employee  stock  purchase  plan, a
     qualified  employee may  authorize  payroll  deductions of up to 10% of the
     employee's compensation (as defined) to a maximum of $25 to purchase common
     stock at 85% of the lower of fair market  value at the  beginning or end of
     the related subscription period.

     Common Shares Reserved for Future Issuance

     Pivotal has reserved common shares as of June 30, 2001 as follows:

     Exercise of stock options                                    4,937
     Employee Stock Purchase Plan                                   859
                                                                ---------
                                                                  5,796
                                                                =========

                                       74
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


11.  SHAREHOLDERS' EQUITY (Continued)

     Employee Stock Option Plan (Continued)

     Under APB Opinion No. 25, because the exercise price of Pivotal's  employee
     stock options  generally  equals the fair value of the underlying  stock on
     the  date  of  grant,  no  compensation  expense  is  recognized.  Deferred
     compensation  expense of $473 was recorded during 1999 for those situations
     where the exercise  price of an option was lower than the deemed fair value
     for  financial  reporting  purposes of the  underlying  common  stock.  The
     deferred  compensation  is being  amortized  over the vesting period of the
     underlying options.  Amortization of the deferred share-based  compensation
     balance  of $81 at June 30,  2001 will  approximate  $58 and $23 during the
     fiscal years ending June 30, 2002 and 2003, respectively.

     An  alternative  method of  accounting  for stock  options is SFAS No. 123,
     Accounting for Stock-Based Compensation. Under SFAS No. 123, employee stock
     options  are  valued at the grant date  using the  Black-Scholes  valuation
     model and the resultant  compensation  cost is recognized  ratably over the
     vesting period.  Had compensation cost for Pivotal's share option plan been
     determined based on the  Black-Scholes  value at the grant dates for awards
     as prescribed by SFAS No. 123, the pro forma net loss and basic and diluted
     loss per share would have been as follows:

<TABLE>
                                                            Years Ended June 30,
                                                  --------------------------------------
                                                      2001          2000         1999
                                                  ------------  ------------ ------------
    <S>                                            <C>           <C>         <C>
     Net loss
        As reported                                 $ (32,455)    $ (8,362)   $ (2,808)
        SFAS No. 123 pro forma                        (48,901)     (10,541)     (2,849)

     Basic and diluted loss per share
        As reported                                 $   (1.40)    $  (0.45)   $  (0.72)
        SFAS No. 123 pro forma                          (2.11)       (0.57)      (0.73)
</TABLE>


     Compensation  expense recognized in providing pro forma disclosures may not
     be  representative  of the effects on pro forma  earnings  for future years
     since SFAS No. 123 applies only to options granted after 1996.

     The weighted  average  Black-Scholes  option pricing model value of options
     granted  under the share  option plan during the years ended June 30, 2001,
     2000 and 1999 were  U.S.$20.76,  U.S.$15.45 and Cdn.$1.92  (U.S.$1.30)  per
     share, respectively.  The fair value for these options was estimated at the
     date of grant using the following weighted average assumptions:


<TABLE>
                                                            Years Ended June 30,
                                                  --------------------------------------
                                                      2001          2000         1999
                                                  ------------  ------------ ------------
    <S>                                            <C>           <C>         <C>
    Assumptions
    Volatility factor of expected
      market price of Pivotal's shares               121.2%         85.0%           0.0%
    Dividend yield                                     0.0%          0.0%           0.0%
    Weighted average expected
      life of stock options (years)               4.0 years     4.0 years      4.0 years
    Risk free interest rate                           5.0%           7.0%           5.6%
</TABLE>



                                       75
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


12.  INCOME TAXES

     Details of the income tax provision (recovery) were as follows:


<TABLE>
                                                            Years Ended June 30,
                                                  --------------------------------------
                                                      2001          2000         1999
                                                  ------------  ------------ ------------
    <S>                                            <C>           <C>         <C>
    Current
      Canadian                                     $   (547)      $       -     $   (47)
      Foreign                                         1,050             557         290
                                                  ------------  ------------ ------------
                                                        503             557         243
    Deferred
      Canadian                                            -               -           -
                                                  ------------  ------------ ------------
    Income tax provision                           $    503       $     557     $   243
                                                  ============  ============ ============
</TABLE>


     The  reported  income tax  provision  differs  from the amount  computed by
     applying the Canadian basic statutory rate to the loss before income taxes.
     The reasons for this difference and the related tax effects are as follows:

<TABLE>
                                                            Years Ended June 30,
                                                  --------------------------------------
                                                      2001          2000         1999
                                                  ------------  ------------ ------------
    <S>                                            <C>           <C>         <C>
    Canadian basic statutory tax rate                   45%            45%           45%
                                                  ------------  ------------ ------------
    Expected income tax recovery                  $(14,378)      $ (3,512)      $(1,154)
    Foreign tax rate differences                      (137)          (155)         (144)
    Goodwill amortization and other
      non-deductible expenses                       10,087          2,661            56
    Research and development tax credits              (470)          (127)          (47)
    Benefit of losses not tax affected               3,407            389         1,484
    Benefit of temporary differences
      not recognized                                 1,994          1,301            48
                                                  ------------  ------------ ------------
                                                  $    503       $    557       $   243
                                                  ============  ============ ============

</TABLE>



                                       76
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


12.  INCOME TAXES (Continued)

     Deferred income taxes result principally from temporary  differences in the
     recognition  of certain  revenue and expense items for financial and income
     tax reporting  purposes.  Significant  components of Pivotal's deferred tax
     assets and liabilities as of June 30, 2001 and 2000 are as follows:

<TABLE>
                                                                          2001             2000
                                                                       ----------       ----------
    <S>                                                                <C>               <C>
     Deferred income tax assets
        Net operating tax loss carry-forwards                          $  6,158          $  4,547
        Research and development expenses                                   220                85
        Book and tax base differences on assets                           2,388                 -
        Other                                                                87                80
                                                                       ----------       ----------
     Total deferred income tax assets                                     8,853             4,712
     Valuation allowance for deferred income tax assets                  (8,831)           (4,547)
                                                                       ----------       ----------
     Net deferred income tax assets                                          22               165

     Deferred income tax liabilities
        Book and tax base differences on assets                               -               187
                                                                       ----------       ----------
     Net deferred income tax liabilities included in accounts
        payable and accrued liabilities                                $     22          $     22
                                                                       ==========       ==========
</TABLE>


     Due to the  uncertainty  surrounding the realization of the deferred income
     tax  assets in future  income tax  returns,  Pivotal  has a 100%  valuation
     allowance  against its  deferred  income tax assets.  The net change in the
     total valuation  allowance for the years ended June 30, 2001 and 2000 was a
     provision of $(4,284) and $1,346, respectively.

     As of June 30, 2001,  Pivotal has tax loss  carry-forwards of approximately
     $13,685  available to reduce future  years' income for tax purposes.  These
     carry-forward losses expire at various dates between 2003 to 2007.


13.  COMPREHENSIVE LOSS

     The components of comprehensive loss were as follows:

<TABLE>
                                                             Years ended June 30,
                                                 -----------------------------------------
                                                    2001           2000           1999
                                                 ----------     ----------     -----------
    <S>                                          <C>             <C>            <C>
     Net loss                                    $(32,455)       $(8,362)       $(2,808)
     Change in unrealized loss on
        available-for-sale securities                (203)             -              -
                                                 ----------     ----------     -----------
     Total                                       $(32,658)       $(8,362)       $(2,808)
                                                 ==========     ==========     ===========
</TABLE>



                                       77
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)


14.  CHANGE IN OPERATING ASSETS AND LIABILITIES

     The change in operating assets and liabilities was as follows:

<TABLE>
                                                             Years ended June 30
                                                 -----------------------------------------
                                                    2001           2000           1999
                                                 ----------     ----------     -----------
    <S>                                          <C>             <C>            <C>
    Accounts receivable                          $(9,156)        $(7,511)       $(1,188)
    Prepaid expenses                                (761)           (545)          (323)
    Accounts payable and accrued liabilities       4,141           7,260          4,370
    Deferred revenue                               4,408           3,265          1,337
                                                 ----------     ----------     -----------
                                                 $(1,368)        $ 2,469        $ 4,196
                                                 ==========     ==========     ===========
</TABLE>


15.  RELATED PARTY TRANSACTIONS

     During the year ended June 30, 2000,  Pivotal  entered into an agreement to
     license  software  from a company  with a former  director in common  under
     which Pivotal paid $350.

     During the year ended June 30, 2001,  Pivotal loaned a total of $320 to two
     officers of the Company. One of these loans is secured by certain shares of
     a private company and the other is unsecured.  Both loans are  non-interest
     bearing and are due within one year.


16.  SEGMENTED INFORMATION

     Pivotal operates in one business segment, the development,  marketing,  and
     supporting of Internet and corporate  network-based  software  applications
     used for managing customer and selling partner relationships.

     Pivotal  licenses and markets its products  internationally.  The following
     table presents a summary of revenues by geographical region:


<TABLE>
                                                             Years ended June 30
                                                 -----------------------------------------
                                                    2001           2000           1999
                                                 ----------     ----------     -----------
    <S>                                          <C>             <C>            <C>
    United States                                $ 52,409        $ 32,591       $  18,779
    Canada                                         11,435           5,574           1,463
    International                                  31,446          14,774           5,085
                                                 ----------     ----------     -----------
                                                 $ 95,290        $ 52,939       $  25,327
                                                 ==========     ==========     ===========
</TABLE>


     Pivotal  attributes  revenue  among  the  geographical  areas  based on the
     location of the customers involved.



                                       78
<PAGE>


                               PIVOTAL CORPORATION

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                      (Expressed in United States dollars;
               all amounts in thousands except amounts per share)



16.  SEGMENTED INFORMATION (Continued)

     The  following  table  presents  a summary of  property  and  equipment  by
     geographic region:

                                                           June 30,
                                                 ------------------------------
                                                     2001             2000
                                                 ------------    --------------
     Property and equipment
       United States                                $1,012           $1,395
       Canada                                        5,836            4,624
       International                                 2,335            1,212
                                                 ------------    --------------
                                                    $9,183           $7,231
                                                 ============    ==============




Schedule II -- Valuation and Qualifying Accounts Years ended June 30, 2001, 2000
and 1999 (in thousands) Allowance for Doubtful Accounts

<TABLE>
<S>             <C>                     <C>               <C>           <C>                <C>

              Balance at         Additions           Additions
             beginning of    charged to costs       charged to                       Balance at
 Year            year          and expenses       other accounts    Write-offs       end of Year
--------     -----------      -------------       --------------    -----------      ------------
2001             $740            3,312                  --            1,792            $2,260
2000            $ 334              626                  --              220              $740
1999            $  91              243                  --               --              $334

</TABLE>





                                       79
<PAGE>



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

Not applicable.


                                    PART III



ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT



EXECUTIVE OFFICERS AND DIRECTORS


The table below  provides the names,  ages,  and  positions  with Pivotal of our
executive officers and directors:

<TABLE>
<S>               <C>                        <C>                              <C>
                  NAME                       AGE                        POSITION
-----------------------------------------   ----                ---------------------
Kent Roger (Bo) Manning......................43    President,.Chief.Executive.Officer and Director
Norman B. Francis............................52    Chairman of the Board of Directors
Keith R. Wales ............................. 56    Executive Vice President, Corporate Projects and
                                                   Director
Vincent D. Mifsud............................34    Chief Operating Officer, Chief Financial Officer
                                                   and Executive Vice President
Robert A. Runge..............................47    Chief Marketing Officer
Kirk T. Herrington ..........................43    Chief Technical Oficer & Exectuive Vice
                                                   President, Product Development
Martin Palacios..............................38    Chief Information Officer
Jeremy A. Jaech .............................46    Director
Robert J. Louis..............................56    Director
Douglas J. Mackenzie ........................41    Director
Steven M. Gordon.............................42    Director
</TABLE>

-----------

     KENT ROGER (BO) MANNING has served as President,  Chief  Executive  Officer
and a director since August 2001. Prior to joining  Pivotal,  Mr. Manning served
as co-founder and Chief  Executive  Officer of Roundarch,  a CRM solutions joint
venture between Deloitte Consulting, BroadVision, and WPP Group (holding company
for Ogilvy & Mather, Young & Rubicam Inc., J. Walter Thompson),from January 2000
to August 2001. Mr. Manning served as Global CRM Practice  Leader,  for Deloitte
Consulting,  from 1995 to 1999.  Mr.  Manning  also  served as a  Consultant  to
Deloitte  Consulting  from 1987 to 1995.  Prior to that,  Mr.  Manning served as
General  Manager  of  Infopro  from  1984 to 1987.  Mr.  Manning  holds a triple
Bachelor of Arts degree from the  University of Michigan in business,  economics
and psychology and received his MBA in 1987, from Northwestern University with a
double major in marketing and finance.

     NORMAN B.  FRANCIS  co-founded  Pivotal  in 1990 and has  served a director
since December 1990 and as President and Chief  Executive  Officer from December
1990 to August  2001.  Mr.  Francis'  experience  prior to  co-founding  Pivotal
includes  co-founding Basic Software Group Inc., an accounting software company,
in 1979. Mr. Francis served as Basic Software Group's Vice President, Operations
until the company was  acquired by Computer  Associates  International,  Inc., a
software company, in 1985. Mr. Francis served as Vice President,  Micro Products
Division  of  Computer  Associates  International  Inc.  from 1985 to 1990.  Mr.
Francis  holds a  bachelor  of  science  degree  in  Computer  Science  from the
University of British Columbia, Canada and is a Chartered Accountant.

                                       80
<PAGE>

     KEITH R.  WALES  co-founded  Pivotal  in 1990 and has  served as a director
since December 1990 and as Executive Vice  President,  Corporate  Projects since
January 2001.  Mr. Wales also served as Chief  Technical  Officer from July 1999
through  December  2000 and as Vice  President,  Research and  Development  from
December 1990 through July 1999.  Mr.  Wales'  experience  prior to  co-founding
Pivotal includes  co-founding Basic Software Group Inc., an accounting  software
company,  in 1979.  Mr. Wales served as Basic Software  Group's Vice  President,
Research and Development  until the company was acquired by Computer  Associates
International,  Inc. in 1985.  Mr. Wales served as  Divisional  Vice  President,
Research and Development of Computer Associates International, Inc. from 1985 to
1986. Mr. Wales holds a bachelor of science degree in Mathematics and a master's
of science degree in Computer  Science from the University of British  Columbia,
Canada.

     VINCENT D. MIFSUD has served as Chief Operating Officer since January 2001,
Chief  Financial  Officer since December 1998 and Executive Vice President since
July 2000. Mr. Mifsud also served as Vice  President,  Operations  from December
1998 to July 2000.  Prior to joining  Pivotal,  Mr. Mifsud served as Controller,
Vice President,  Finance and Chief Financial Officer of Rand Technology, Inc., a
software  developer  and value added  reseller of mechanical  design  automation
tools and services,  from May 1993 to December  1998.  Prior to this, Mr. Mifsud
worked for three years with Arthur  Andersen LLC in their  Enterprise  Division.
Mr.  Mifsud  holds a  bachelor's  degree  in  Commerce  and  Economics  from the
University of Toronto, Canada and is a Chartered Accountant.

     ROBERT A. RUNGE has served as Chief Marketing  Officer since July 2000. Mr.
Runge also served as Vice President,  Worldwide Marketing from September 1997 to
July 2000. Before joining Pivotal, Mr. Runge served as Vice President, Marketing
of BroadVision,  Inc., an Internet  marketing  software company,  from September
1995 to September  1997.  Mr.  Runge served as Director of Product  Marketing of
Sybase,  a software  company,  from September 1990 to September  1995.  Prior to
joining  Sybase,  Mr. Runge  served as Director of Education  Services of Oracle
Corporation,  a software  company,  from July 1988 to September  1990. Mr. Runge
holds two bachelors'  degrees from the University of Illinois,  Champagne-Urbana
and a master's degree in Business Administration (Marketing) from the University
of Illinois, Chicago.

     KIRK  T.  HERRINGTON  has  served  as  Executive  Vice  President,  Product
Development  since July 2001,  Chief  Technical  Officer  since January 2001 and
Deputy Chief  Technical  Officer from June 2000 to January 2001. Mr.  Herrington
co-founded and served as Chief Executive Officer of Simba  Technologies  Inc., a
leader in ODBC  connectivity  for  proprietary  data stores and OLAP data access
solutions,  from January 1998 to June 2000,  when Simba was acquired by Pivotal.
Mr.  Herrington  also served as Vice  President and Chief  Technical  Officer of
Simba  from  July  1992 to  December  1997.  Prior  to  co-founding  Simba,  Mr.
Herrington  co-founded  Paradigm  Development  Corporation  and  served  as Vice
President,  Research & Development from March 1989 to June 1992. Mr.  Herrington
also served as Software  Development  Manager of Synex Systems  Corporation from
1982 to  1989.  Mr.  Herrington  holds  a  bachelor's  degree  in  Science  from
University of British Columbia, Canada and has completed the Advanced Technology
Management Program at Simon Fraser University, Canada.

     MARTIN E.  PALACIOS has served as Chief  Information  Officer since January
2001.  Before  joining  Pivotal,   Mr.  Palacios  served  as  Vice-President  of
Information  Technology  and  Facilities of Seagate  Software from April 1998 to
February 2000. Mr. Palacios also served as Director of Information Technology of
Seagate Software from December 1995 to April 1998. Prior to joining Seagate, Mr.
Palacios  served as  Director  of  Telecommunications  and  Networks of Memorial
Health Systems from December 1994 to November 1995. Mr.  Palacios also served as
Manager of  Information  Systems  of Florida  Hospital  Healthcare  System  from
September  1989 to December  1994.  Mr.  Palacios  holds a  bachelors  degree in
Science and Math from Technical Institute of Higher Studies of Monterey,  Mexico
and an Associate of Science in Industrial  Electronics  with a Computer  Science
Specialty from Santa Fe Community College, Gainesville, Florida.

     JEREMY A.  JAECH has  served as a  director  since  July  1996.  Mr.  Jaech
currently  serves as Managing Member,  Poseidon  Ventures LLC. Prior to Poseidon
Ventures,  Mr. Jaech served as Vice President for the Business Tools Division at
Microsoft   Corporation.   Prior  to  Microsoft,   Mr.  Jaech  co-founded  Visio
Corporation  in  September   1990,  a  supplier  of   enterprise-wide   business
diagramming  and technical  drawing  software for Microsoft  Windows,  which was
later sold to  Microsoft.  Prior to  co-founding  Visio  Corporation,  Mr. Jaech
co-founded Aldus Corporation in 1984 and served as Vice President,  Engineering.
Aldus  Corporation  was purchased by Adobe Systems  Incorporation  in 1989.  Mr.
Jaech holds a bachelor's degree in Mathematics and a master's degree in Computer
Science from the University of Washington.

     ROBERT J. LOUIS has served as a director since June 1995. Since March 1999,
Mr. Louis has served as President of Ventures  West  Management  Ltd., a venture
capital firm which he joined as an Executive Vice President in January 1991. Mr.
Louis earned a bachelor of science degree and a master's  degree in Science from
the University of Victoria, British Columbia, Canada and a Ph.D. in Physics from
the University of British Columbia, Canada.

                                       81
<PAGE>

     DOUGLAS  J.  MACKENZIE  has  served as a  director  since  July  1992.  Mr.
Mackenzie has served as a Limited Partner of Kleiner, Perkins, Caufield & Byers,
a venture capital firm specializing in high-tech companies,  since June 1989 and
a General  Partner since April 1994. Mr.  Mackenzie also serves as a director of
Marimba,  Inc. and E.piphany,  Inc. Mr.  Mackenzie holds a bachelor's  degree in
Economics  and  a  master's  degree  in  Industrial  Engineering  from  Stanford
University  and a  master's  degree  in  Business  Administration  from  Harvard
University.

     Steven M. Gordon has served as a director  since  November 2000. Mr. Gordon
currently  serves  as  Strategic  Advisor  to  Wavelink  Corporation.  Prior  to
Wavelink,  Mr. Gordon has served as Vice President of Microsoft Corporation from
January  2000 to August  2000,  as Senior  Vice  President  and Chief  Financial
Officer  of Visio  Corporation  from  February  1997 to  January  2000,  as Vice
President and Chief Financial  Officer of Data I/O Corporation from October 1993
to February 1997, as Vice President,  Finance of Data I/O  Corporation  from May
1992 to October 1993 and as Corporate  Controller of Data I/O  Corporation  from
April  1989 to May  1992.  Mr.  Gordon  holds a  Bachelor  of Arts  degree  from
Washington State University and is a Certified Public Accountant.

ITEM 11.          EXECUTIVE COMPENSATION

The following  table  describes the  compensation we paid to, or that was earned
by, our Chief Executive Officer,  President and our four most highly compensated
executive officers during the fiscal year ended June 30, 2001.


                           SUMMARY COMPENSATION TABLE
<TABLE>
<S>                                                      <C>            <C>              <C>                           <C>
                                                                                                                    LONG TERM
                                                                             ANNUAL COMPENSATION                  COMPENSATION
                                                          -------------------------------------------------------------------------
                                                                                                                    SECURITIES
     NAME AND PRINCIPAL POSITION                        YEAR        SALARY             BONUS         OTHER          UNDERLYING
                                                                                                                      OPTIONS
-----------------------------------------------------------------------------------------------------------------------------------
Norman B. Francis                                       2001     Cdn.$175,000      Cdn.$    19,689       --             25,000
  President and Chief                                   2000     Cdn.$175,000      Cdn.$    78,983       --             25,000
  Executive Officer (1)                                 1999     Cdn.$120,000                   --       --               --
-----------------------------------------------------------------------------------------------------------------------------------
Keith R. Wales                                          2001     Cdn.$112,500      Cdn.$     9,063       --             25,000
  Executive Vice President, Corporate Projects (2)      2000     Cdn.$150,000      Cdn.$    35,931       --             25,000
                                                        1999     Cdn.$120,000      Cdn.$    37,064       --                --
-----------------------------------------------------------------------------------------------------------------------------------
Vincent D. Mifsud                                       2001     Cdn.$225,000      Cdn.$   108,532       --            250,000
  Chief Operating Officer, Chief Financial Officer      2000     Cdn.$175,000      Cdn.$   103,755       --             20,000
  and Executive Vice President                          1999     Cdn.$85,192       Cdn.$    47,068   Cdn.$14,269       160,000
-----------------------------------------------------------------------------------------------------------------------------------
Robert A. Runge                                         2001     US$190,000                     --       --             70,000
  Chief Marketing Officer                               2000     US$160,000        US$      53,665       --             20,000
                                                        1999     US$141,282        US$      39,651       --             60,000
-----------------------------------------------------------------------------------------------------------------------------------
Kirk Herrington                                         2001     Cdn.$125,000                   --       --             10,000
  Chief Technical Officer and Executive Vice            2000           --                       --       --             80,636
  President, Product Development (3)
------------------
</TABLE>


(1)  On August 27, 2001 Mr.  Francis  resigned as President and Chief  Executive
     Officer  and Kent Roger (Bo)  Manning  was  appointed  President  and Chief
     Executive Officer
(2)  We hired Mr.  Mifsud in  December  1998.  Mr.  Mifsud's  annual  salary was
     Cdn.$150,000 of which Cdn. $85,192 was paid to Mr. Mifsud during the fiscal
     year  ended  June 30,  2000.  Mr.  Mifsud's  guaranteed  annual  bonus  was
     Cdn.$57,750 of which  Cdn.$32,799  was paid to Mr. Mifsud during the fiscal
     year ended June 30, 1999. We also have accrued a performance-based bonus of
     Cdn.$14,269 to Mr. Mifsud for the year ended June 30, 1999.
(3)  Mr. Herrington's salary is from September 1, 2000 to June 30, 2001.

OPTION GRANTS IN LAST FISCAL YEAR

The following  table provides  information  regarding stock option grants to our
chief executive officer and our named executive  officers during the fiscal year
ended June 30, 2001. The potential realizable value of the options is calculated
based on the  assumption  that the common  shares  appreciate at the annual rate
shown, compounded annually, from the date of grant until the expiration of their
term.

                                       82
<PAGE>

These  numbers  are  calculated  based on  Securities  and  Exchange  Commission
requirements and do not reflect our projection or estimate of future share price
growth. Potential realizable values are computed by:

--   multiplying  the number of common  shares  subject to a given option by the
     exercise price

-    assuming  that the  aggregate  share value  derived  from that  calculation
     compounds at the annual 5% or 10% rate shown in the table
     for the entire term of the option; and

--   subtracting from that result the aggregate option exercise price.


<TABLE>

<S>                      <C>                <C>          <C>             <C>                      <C>
                                       INDIVIDUAL GRANTS
                        ------------------------------------------------------------
                                                                                            POTENTIAL REALIZABLE VALUE AT
                                        % OF TOTAL                                          ASSUMED ANNUAL RATES OF SHARE
                          NUMBER OF      OPTIONS                                           PRICE APPRECIATION FOR OPTION TERM
                         SECURITIES     GRANTED TO         EXERCISE                       ----------------------------------------
                         UNDERLYING     EMPLOYEES IN       PRICE PER     EXPIRATION
       NAME                OPTIONS      FISCAL YEAR         SHARE          DATE                 5%                10%
------------------    --------------- ----------------  -------------- --------------  -------------------   ---------------
Norman B. Francis         25,000             1.06%          $ 35.375   Jul. 26, 2010        $  556,179         $1,409,466
Keith R. Wales            25,000             1.06%          $ 35.375   Jul. 26, 2010        $  556,179         $1,409,466
Vincent D. Mifsud         20,000             0.85%          $ 35.375   Jul. 26, 2010        $  444,943         $1,127,573
                          80,000             3.40%          $ 50.00    Nov. 13, 2010        $2,515,579         $6,374,970
                          20,000             0.85%          $ 23.75    Jan.  8, 2011        $  298,725         $  757,028
                         130,000             5.53%          $ 9.4375   Apr.  3, 2011        $  771,575         $1,955,323
Robert A. Runge           20,000             0.85%          $ 35.375   Jul. 26, 2010        $  444,943         $1,127,573
                          20,000             0.85%          $ 29.8125  Jan. 25, 2011        $  374,978         $  950,269
                          20,000             0.85%          $ 22.00    Apr. 26, 2011        $  276,714         $  701,247
                          10,000             0.43%          $ 9.4375   April 3, 2011        $   59,352         $  150,409
Kirk Herrington           10,000             0.43%          $ 9.375    Apr.  3, 2011        $   59,352         $  150,409

</TABLE>

OPTION EXERCISES AND FISCAL YEAR-END VALUES

The following  table provides  information  regarding the exercise of options to
purchase  common shares by our Named  Executive  Officers during the fiscal year
ended June 30, 2001. The value of unexercised  in-the-money  options is based on
the closing price of our common shares on the Nasdaq  National Market on July 2,
2001 of $18.20, minus the exercise price per share.



              AGGREGATED OPTIONS EXERCISED DURING 2001 FISCAL YEAR
                      AND FINANCIAL YEAR-END OPTION VALUES

<TABLE>
<S>                             <C>               <C>             <C>            <C>                    <C>
                                                                 NUMBER OF SECURITIES                   VALUE OF UNEXERCISED
                                                                UNDERLYING UNEXERCISED                 IN-THE-MONEY OPTIONS AT
                                                              OPTIONS AT FISCAL YEAR-END                   FISCAL YEAR-END
                          SHARES ACQUIRED       VALUE         --------------------------               -----------------------
       NAME                 ON EXERCISE       REALIZED       EXERCISABLE       UNEXERCISABLE        EXERCISABLE      UNEXERCISABLE
------------------    --------------------- -----------  -----------------  ------------------  ----------------- ----------------
Norman B. Francis                --                  --        50,762              47,088            $738,307         $  113,244
Keith R. Wales                   --                  --         9,375              40,625                                 $   --
Vincent D. Mifsud            52,500          $1,068,983        28,750             308,750            $127,752         $1,905,635
Robert A. Runge              15,000          $  503,538        10,000             102,500            $     --         $  382,695
Kirk Herrington               1,442          $   84,761        20,157              69,037            $ 22,495         $  132,631
</TABLE>

------------------------

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No  interlocking   relationships   exist  between  our  board  of  directors  or
compensation  committee and the board of directors or compensation  committee of
any other company, nor has any interlocking relationship existed in the past.

DIRECTOR COMPENSATION

We do not currently pay cash  compensation to directors for serving on our board
of  directors,  but we do reimburse  directors  for  out-of-pocket  expenses for
attending  board  and  committee   meetings.   We  do  not  provide   additional
compensation for committee  participation or special assignments of the Board of
Directors. Of our directors, Messrs. MacKenzie, Jaech, Gordon, Francis and Wales
received stock options for their participation on our board of directors for the
year ended June 30, 2001. Messrs. Francis and Wales received options to purchase
25,000 common shares at a price of $35.375 per share. Messrs.  MacKenzie,  Jaech
and Gordon  received  options to  purchase  40,000  common  shares at a price of
$36.25 per share.

                                       83
<PAGE>

EMPLOYMENT CONTRACTS

We entered into an employment contract with Robert Runge on August 14, 1997. Mr.
Runge's current base salary is $200,000, with a potential incentive compensation
of  $90,000.  Mr.  Runge's  salary  is  reviewed  annually  by the  Compensation
Committee.  Mr. Runge was also granted  options to purchase common shares and is
eligible to receive further grants in the future.

We entered into an employment contract with Vincent Mifsud on November 16, 1999.
Mr. Mifsud's current base salary is Cdn.  $300,000,  with a potential  incentive
compensation  of US$150,000.  Mr.  Mifsud's  salary is reviewed  annually by the
Compensation  Committee.  Mr. Mifsud was also granted options to purchase common
shares and is eligible to receive further grants in the future.

We entered into an employment contract with Kirk Herrington on June 7, 2000. Mr.
Herrington's  current base salary is Cdn.$150,000.  Mr.  Herrington's  salary is
reviewed annually by the Compensation Committee. Mr. Herrington was also granted
options to purchase  common shares in Pivotal and is eligible to receive further
grants in the future.

We entered into an  employment  contract  with Kent Roger (Bo) Manning on August
22,  2001.  Mr.  Manning's  current base salary is  US$350,000  with a potential
incentive compensation of US$300,000.  Mr. Manning's salary is reviewed annually
by the Compensation Committee. Mr. Manning was also granted 1,000,000 options to
purchase common shares and is eligible to receive further grants in the future.

REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE

The Compensation  Committee  currently consists of Jeremy A. Jaech and Robert J.
Louis.  The committee is responsible  for  establishing  and monitoring our long
range plans and programs for  attracting,  training,  developing  and motivating
employees.  The committee reviews recommendations for the appointment of persons
to  senior  executive  positions,  considers  terms  of  employment,   including
succession planning and matters of compensation, and recommends awards under our
incentive stock option plan and the employee share purchase plan.

Our  compensation  policies and programs  are  designed to be  competitive  with
similar customer  relationship  management  companies in the electronic commerce
environment and to recognize and reward  executive  performance  consistent with
the success of our business. These policies and programs are intended to attract
and retain capable and experienced people.

In  addition  to  industry  comparables,  the  Committee  considers a variety of
factors when determining both compensation  policies and programs and individual
compensation  levels.  These factors include our long-range  interests,  overall
financial  and  operating  performance  and the  committee's  assessment of each
executive's  individual  performance and contribution  towards meeting goals and
objectives.

The total compensation plan for executive officers is comprised of the following
three  components:  competitive  base  salary,  annual  cash  bonuses  and stock
options.

Base Salary.  In  establishing  base  salaries of all  executive  officers,  the
committee reviews  competitive  market data for each of the executive  positions
and determines placement at an appropriate level in a range. Compensation levels
are typically negotiated with the candidate for the position prior to his or her
final  selection as an executive  officer.  Additionally,  a review of the chief
executive  officer's  performance  and a general  review of our stock  price are
considered.  The  compensation  range  for  executive  officers  normally  moves
annually to reflect  external  factors such as  inflation.  The chief  executive
officer's  annual base salary  remained  the same at  Cdn$175,000  for the years
ended June 30, 2001 and 2000. The base salary of the chief executive  officer is
set at an amount the  committee  believes is  competitive  with salaries paid to
executives of companies of  comparable  size in similar  industries  and located
within the local area.

Bonuses. Cash bonuses are used to reward executive officers for meeting specific
performance  targets as mutually agreed upon on an annual basis. During the year
ended June 30,  2001,  the chief  executive  officer  was awarded a bonus in the
amount of Cdn$19,689. This bonus was paid to the chief executive officer for his
ongoing contributions to Pivotal during the past fiscal year.

Stock Option Grants. We provide our executive  officers and other employees with
long-term  incentives through our incentive stock option plan, which is intended
to  emphasize  management's  commitment  to our  growth and the  enhancement  of
shareholder  value. The committee relies on a variety of subjective factors when
granting options,  including the responsibilities of the individual officers and
their  expected  future  contribution.  In the year ended June 30, 2001,  Norman
Francis,  the chief  executive  officer,  was granted options to purchase 25,000
common shares as an incentive for his continued commitment to the our success.

PERFORMANCE GRAPH

The following graph shows a comparison of cumulative  total  shareholder  return
for  Pivotal,  the S&P 500 Index,  theXCI and TSE.  The graph shows the value of
$100 invested on August 5, 1999 in our common shares, the S&P 500 Index, XCI and
TSE.
                                       84
<PAGE>

                           [PERFORMANCE GRAPH OMITTED]

--------------------------------------------------------------------------------
                             August 5, 1999     August 4, 2000   August 3,  2001

--------------------------------------------------------------------------------
Pivotal Corporation               $ 100.00        $ 275.52           $72.85
S&P 500                           $ 100.00        $ 129.15           $92.44
XCI                               $ 100.00        $ 147.21           $80.94
TSE                               $ 100.00        $ 153.01          $112.13







                                       85
<PAGE>



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table provides information  concerning the beneficial ownership of
our common shares as of September 1, 2001:

     --   our chief executive officer;

     --   all officers whose annual compensation was more than US$100,000 during
          fiscal 2001;

     --   each of our directors;

     --   each  shareholder  that we know owns  more than 5% of our  outstanding
          common shares; and

     --   all our directors and executive officers as a group.

The principal  address of each of the shareholders  below is 224 West Esplanade,
Suite 300, North Vancouver,  BC, Canada V7M 3M6, except where another address is
listed.

<TABLE>
<S>      <C>                             <C>                      <C>                       <C>
                                                             NUMBER OF SHARES       PERCENT OF COMMON
       NAME AND ADDRESS OF BENEFICIAL OWNER                 BENEFICIALLY OWNED         SHARES OWNED
-------------------------------------------------       ------------------------- ------------------
Kent Roger (Bo) Manning..........................                       0                      0%
Norman B. Francis (1)............................               2,026,843                   8.43%
Keith R. Wales (2)...............................                 991,424                   4.13%
Vincent D. Mifsud (3)............................                  64,750                   0.27%
Jeremy A. Jaech (4)..............................                 120,556                    0.5%
Robert J. Louis (5)..............................               1,559,458                    6.5%
Douglas J. Mackenzie (6).........................                 865,365                   3.61%
Steven M. Gordon.................................                       0                      0%
Robert A. Runge (7)..............................                  29,592                   0.12%
Kirk Herrington (8)..............................                  46,665                   0.19
Ventures West Capital Limited (9)................               1,559,458                    6.5%
Kleiner Perkins Caufield & Byers VI (10).........                 865,365                   3.61%
    2750 Sand Hill Road
    Menlo Park, CA 94025
Integral Capital Partners II, L.P. (11)..........               1,350,415                   5.63%
    2750 Sand Hill Road
    Menlo Park, CA 94025
All directors and executive officers as a group
(11 persons) (12)................................               7,055,068                  29.08%
---------
</TABLE>


     (1)  Includes  (a)  400,800  shares  held of record by The  Francis  Family
          Trust,  a family  trust for the  benefit of Mr.  Francis and his three
          children;  (b)  697,143  shares held of record by  Boardwalk  Ventures
          Inc.,  a  holding  company  owned  50% by Mr.  Francis  and 50% by his
          spouse;  and (c) 60,243 shares  subject to options  exercisable by Mr.
          Francis within 60 days of September 1, 2001.

     (2)  Includes (a) 378,572 shares held of record by Daybreak  Software Inc.,
          a holding  company owned solely by Mr.  Wales,  of which Mr. Wales has
          sole voting power; (b) 15,624 shares subject to options exercisable by
          Mr. Wales within 60 days of  September  1, 2001.  Mr. Wales  disclaims
          beneficial ownership of any shares held by his former spouse, Patricia
          Wales.

     (3)  Includes 63,750 shares subject to options  exercisable  within 60 days
          of September 1, 2001.

     (4)  Includes 65,000 shares subject to options  exercisable  within 60 days
          of September 1, 2001.

     (5)  Includes (a) 363,514 shares held of record by Bank of Montreal Capital
          Corporation  which is managed by Ventures West Management TIP Inc., an
          entity wholly owned by Ventures  West Capital Ltd.;  and (b) 1,195,944
          shares held of record by VW B.C.  Technology  Investment  Fund Limited
          Partnership,  of which  Ventures  West  Management  B.C.  Ltd.  is the
          general partner. Ventures West Management B.C. Ltd. is wholly owned by
          Ventures  West Capital Ltd. Mr.  Louis,  as President of Ventures West
          Capital  Ltd.,  a venture  capital firm with  controlled  subsidiaries
          which  include

                                       86
<PAGE>

          Ventures West  Management TIP Inc. and Ventures West  Management  B.C.
          Ltd.,  disclaims  beneficial  ownership  of such shares  except to the
          extent of his pecuniary interest.


     (6)  Includes (a) 795,296 shares held by Kleiner  Perkins  Caufield & Byers
          VI, an entity  affiliated  with  Kleiner  Perkins  Caufield & Byers of
          which Mr.  Mackenzie is a limited  partner.  Mr.  Mackenzie  disclaims
          beneficial  ownership  of such  shares  except  to the  extent  of his
          pecuniary interest. Brook Byers, L. John Doerr, Vinod Khosla, E. Floyd
          Kvamme,  Joseph Lacob,  Bernie  Lacroute and Jim Lally are the General
          Partners of KPCB VI Associates, the General Partner of Kleiner Perkins
          Caufield  and  Byers  Vi and  (b)  5,000  shares  subject  to  options
          exercisable by Mr. Mackenzie within 60 days of September 1, 2001.

     (7)  Includes 28,750 shares subject to an option exercisable within 60 days
          of September 1, 2001.  Of the shares held by Mr.  Runge,  up to 31,250
          shares are  subject to  repurchase  by Pivotal at the option  exercise
          price paid by Mr. Runge if Mr. Runge's employment is terminated.

     (8)  Includes 22,849 shares subject to an option exercisable within 60 days
          of September 1, 2001.

     (9)  Includes (a) 363,514 shares held of record by Bank of Montreal Capital
          Corporation  which is managed by Ventures West Management TIP Inc., an
          entity wholly owned by Ventures  West Capital Ltd.;  and (b) 1,195,944
          shares held of record by VW B.C.  Technology  Investment  Fund Limited
          Partnership,  of which  Ventures  West  Management  B.C.  Ltd.  is the
          general partner. Ventures West Management B.C. Ltd. is wholly owned by
          Ventures  West Capital Ltd. Mr.  Louis,  as President of Ventures West
          Capital  Ltd.,  a venture  capital firm with  controlled  subsidiaries
          which  include   Ventures  West   Management  TIP  and  Ventures  West
          Management B.C. Ltd.,  disclaims  beneficial  ownership of such shares
          except to the extent of his pecuniary interest.

     (10) Includes  795,296 shares held by Kleiner Perkins  Caufield & Byers VI,
          an entity  affiliated with Kleiner Perkins Caufield and Byers of which
          Mr. Mackenzie is a limited partner. Mr. Mackenzie disclaims beneficial
          ownership  of  such  shares  except  to the  extent  of his  pecuniary
          interest.  Brook Byers, L. John Doerr,  Vinod Khosla, E. Floyd Kvamme,
          Joseph Lacob,  Bernie Lacroute and Jim Lally are the General  Partners
          of KPCB VI Associates, the General Partner of Kleiner Perkins Caufield
          and Byers VI.

     (11) Includes  (a)  1,025,608  shares  held of record by  Integral  Capital
          Partners II, L.P.; (b) 324,807 shares held of record by
         Integral Capital Partners International II C.V.

     (12) Includes 261,216 shares subject to options  exercisable within 60 days
          of September 1, 2001.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the year ended June 30, 2001, we loaned a total of $320,000 to two of our
officers.  Of the  $320,000,  $250,000  was  loaned  to  Vincent  Mifsud,  Chief
Operating  Officer,  Chief Financial  Officer and Executive Vice President.  The
loan to Mr. Mifsud is non-interest  bearing,  due within one year and is secured
by certain shares of a private company. The other loan is non-interest  bearing,
due within one year and is unsecured.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Financial Statements and Financial Statement Schedules

         1.       Index to Consolidated Financial Statements


<TABLE>
<S>                             <C>                                                      <C>
                                                                                         Page
                  Independent Auditor's Report........................................    53
                  Consolidated Balance Sheets.........................................    54
                  Consolidated Statements of Operations...............................    55
                  Consolidated Statements of Shareholders' Equity                         56
                  Consolidated Statements of Cash Flows...............................    57
                  Notes to Consolidated Financial Statements..........................    58
</TABLE>

                                       87
<PAGE>
<TABLE>
<S>                                                                                      <C>

         2.       Index to Financial Statement Schedules
                                                                                         Page
                  Schedule II - Valuation and Qualifying Accounts.....................    79
</TABLE>

(b)      Reports on Form 8-K


         Not Applicable

(c) Exhibits

EXHIBIT  NO.   DESCRIPTION
------------   -------------
2.1(1)         Share  Purchase  Agreement  by and  between  Pivotal  and  Pierre
               Marcel,  Marc  Bahda,  Bernard  Wach and  Other  Shareholders  of
               Transitif S.A., dated December 3, 1999

2.2(2)         Stock Purchase Agreement among Pivotal and Industrial & Financial
               Systems AB and Eli Barak,  Alon Hod and Tony Topaz concerning all
               of the Shares of Exactium Ltd. dated April 11, 2000

2.3(3)         Share Purchase Agreement among Pivotal and David Pritchard,  Kirk
               Herrington,  Michael Satterfield,  Calvin Mah, VW B.C. Technology
               Investment Fund, LP, Venrock  Associates,  Venrock Associates II,
               LP, Working Ventures Canadian Fund Inc., Bank of Montreal Capital
               Corporation,  Sussex Capital Inc. and the Other  Shareholders  of
               Simba  Technologies  Inc.  concerning  all of the Shares of Simba
               Technologies Inc. dated May 29, 2000

3.2(4)         Memorandum and Articles

4.1(4)         Specimen of common share certificate

4.2(4)         Registration Rights (included in Exhibit 10.15)

4.3(2)         Registration Rights Agreement dated June 2, 2000 (included in
               Exhibit 2.2)

4.4(3)         Registration Rights Agreement dated June 26, 2000 (included in
               Exhibit 2.3)

4.5            Specimen of common share certificate as of August 17, 2000

10.1(4)        Employee Share Purchase Plan

10.2(4)        Lease dated as of July 18, 1997 between Sodican (B.C.) Inc. and
               Pivotal for premises located in North Vancouver, B.C.

10.3(4)        Lease dated as of May 26, 1998 between Novo Esplanade Ltd. and
               Pivotal for premises located in North Vancouver, B.C.

10.4(4)        Lease(1) dated as of December 14, 1998 between B.C. Rail Ltd. and
               Pivotal for premises located in North Vancouver, B.C.

10.5(4)        Lease(2) dated as of December 14, 1998, between B.C. Rail Ltd.
               and Pivotal with respect to premises located in North Vancouver,
               B.C.

                                       88
<PAGE>

10.6(4)        Lease dated as of December  11, 1998  between The Plaza at Yarrow
               Bay Inc.  (previously Yarrow Bay Office III Limited  Partnership)
               and  Pivotal  with  respect  to  premises  located  in  Kirkland,
               Washington

#10.7(4)       Letter  agreement  dated  November 21, 1997  between  Pivotal and
               Robert A. Runge  granting  an option to purchase  250,000  common
               shares

10.8(4)        Canadian  Imperial  Bank  of  Commerce  Cdn$2,000,000   Committed
               Installment Loan dated March 18, 1998

10.9(4)        Canadian Imperial Bank of Commerce  Cdn$3,000,000  Operating Line
               of Credit dated March 18, 1998

10.10(4)       Security  Agreement with Canadian Imperial Bank of Commerce dated
               for reference April 15, 1998

10.11(4)       Contract  Relative to Special Security under the Bank Act between
               Canadian  Imperial  Bank of Commerce and Pivotal  dated April 30,
               1998

10.12(4)       Canadian  Imperial  Bank of Commerce  Schedule - Standard  Credit
               Terms dated March 18, 1998

10.13(4)       Canadian Imperial Bank of Commerce Schedule-Standard Credit Terms
               dated March 18, 1998

10.14(4)       Form of Indemnity Agreement between Pivotal and directors and
               officers of Pivotal

10.15(4)       Investors' Rights Agreement dated January 15, 1999

10.16(5)       Assignment Agreement dated July 12, 2000 between Pivotal and Meta
               Creations  International  Limited for premises located in Dublin,
               Republic of Ireland;  Sub-Lease  dated September 22, 1999 between
               The H.W.  Wilson  Company Inc. and Meta  Creations  International
               Limited for premises located in Dublin, Republic of Ireland

10.17(5)       Lease dated April 14, 2000 among  Deramore  Holdings  Limited(1),
               Pivotal  Corporation  (NI)  Limited (2) and Pivotal for  premises
               located in Belfast, Northern Ireland

#10.18(5)      Employment  Agreement  between  Vince  Mifsud and  Pivotal  dated
               November 10, 1998

10.19(6)       Exactium Ltd. 1999 Stock Option Plan

10.20(7)       Simba Technologies Incentive Stock Option Plan, as amended

10.21          Amended and Restated Incentive Stock Option Plan

10.22          Restated  Offer to Lease dated July 28,  2000  between CB Richard
               Ellis  Limited and Pivotal  with  respect to premises  located in
               Vancouver, B.C.

10.23          First Amendment to Restated Offer to Lease dated October 16, 2000
               between PCI Properties Corp. and Pivotal with respect to premises
               located in Vancouver, B.C.

                                       89
<PAGE>

10.24          Second  Amendment  to Restated  Offer to Lease dated May 18, 2001
               between PCI Properties Corp. and Pivotal with respect to premises
               located in Vancouver, B.C.

10.25          Lease  dated  June 3,  1996  between  Yonge  Wellington  Property
               Limited  and Simba  Technologies  Incorporated  with  respect  to
               premises located in Vancouver, B.C.

10.26          Sublease dated January 1, 1999 between Brewster Transport Company
               Limited  and Simba  Technologies  Incorporated  with  respect  to
               premises located in Vancouver, B.C.

10.27          Lease dated  September  1, 2000  between  Landgem  Office I, Ltd.
               (previously  Dallas Office Portfolio L.P.) and Software  Spectrum
               CRM, Inc. for premises located in Dallas, Texas

10.28          Lease dated  December  19, 2000 between 485  Properties,  LLC and
               Pivotal for premises located in Atlanta, Georgia

10.29          Lease  dated as of  November  24, 2000  between  Scholl  Consumer
               Products  Limited  and  Pivotal  for  premises  located in Luton,
               England

#10.30         Employment  Agreement  between Kirk  Herrington and Pivotal dated
               June 7, 2000

#10.31         Employment  Agreement between Kent Roger (Bo) Manning and Pivotal
               dated August 22, 2001

10.32          Amendment No.1 dated June 19, 2001 to the Canadian  Imperial Bank
               of Commerce  Cdn$3,000,000  Operating  Line of Credit dated March
               18, 1998

10.33          Amendment  No.2 dated July 3, 2001 to the Canadian  Imperial Bank
               of Commerce  Cdn$3,000,000  Operating  Line of Credit dated March
               18, 1998

21.1           Subsidiaries of Pivotal

23.1           Consent of Deloitte & Touche

24.1           Powers of Attorney (included on signature page)

99.1           Notice of Meeting and Management Information and Proxy Circular
               for the Annual General Meeting to be held on Thursday, November
               15, 2001.

#    Indicates management contract.

(1)  Incorporated by reference to Pivotal's Form 8-K filed on January 25, 2000.
(2)  Incorporated by reference to Pivotal's Form 8-K filed on June 19, 2000.
(3)  Incorporated by reference to Pivotal's Form 8-K filed on July 11, 2000.
(4)  Incorporated by reference to Pivotal's  Registration  Statement on Form F-1
     (No. 333-82871).
(5)  Incorporated  by reference to Pivotal's  Annual Report on Form 10-K for the
     year ended June 30, 2000.
(6)  Incorporated by reference to Pivotal's  Registration  Statement on Form S-8
     (No. 333-39922).
(7)  Incorporated by reference to Pivotal's  Registration  Statement on Form S-8
     (No. 333-42460).




                                       90
<PAGE>





                                   SIGNATURES

         Registrant.  Pursuant to the requirements of Section 13 or 15(d) of the
Securities  Exchange Act of 1934,  the Registrant has duly caused this report to
be signed on its  behalf  by the  undersigned,  thereunto  duly  authorized,  in
Vancouver, British Columbia, Canada, on September 28, 2001.

                                    PIVOTAL CORPORATION
                                     (Registrant)


                                    By: /s/ Kent Roger (Bo) Manning
                                       ----------------------------
                                       Kent Roger (Bo) Manning
                                      (President and Chief Executive Officer)






                                       91
<PAGE>




                               POWERS OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears  below  constitutes  and appoints Kent Roger (Bo) Manning and Vincent D.
Mifsud, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution  and  resubstitution,  for him and in his name, place
and stead,  in any and all  capacities,  to sign any and all  amendments to this
Report,  and to file the same, with all exhibits  thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said  attorneys-in-fact and agents and each of them, full power and authority to
do and perform each and every act and thing  requisite  and necessary to be done
in and about the  premises,  as fully to all intents and purposes as he might or
could do in person,  hereby ratifying and confirming all said  attorneys-in-fact
and agents of them or their substitute or substitutes,  may lawfully do or cause
to be done by virtue thereof.


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the date(s) indicated.

<TABLE>
<S>                      <C>                               <C>                    <C>

                    SIGNATURE                              TITLE                  DATE
-------------------------------------------------- ------------------------     -----------
                                                   President, Chief Executive   September 28, 2001
        /s/ Kent Roger (Bo) Manning                Officer and Director
--------------------------------------------------
          Kent Roger (Bo) Manning

                                                   Chief Operating Officer,     September 28, 2001
           /s/ Vincent D. Mifsud                   Executive Vice President
--------------------------------------------------
             Vincent D. Mifsud

                                                   Executive Vice President,    September 28, 2001
            /s/ Keith R. Wales                     Director
--------------------------------------------------
              Keith R. Wales

           /s/ Norman B. Francis                   Director                     September 28, 2001
--------------------------------------------------
              Norman B. Francis

            /s/ Jeremy A. Jaech                    Director                     September 28, 2001
--------------------------------------------------
               Jeremy A. Jaech

         /s/ Douglas J. Mackenzie                  Director                     September 28, 2001
--------------------------------------------------
             Douglas J. Mackenzie

            /s/ Robert J. Louis                    Director                     September 28, 2001
--------------------------------------------------
               Robert J. Louis

           /s/ Steven M. Gordon                    Director                     September 28, 2001
--------------------------------------------------
               Steven M. Gordon

</TABLE>

<PAGE>


EXHIBIT  NO.   DESCRIPTION
------------   -------------
2.1(1)         Share  Purchase  Agreement  by and  between  Pivotal  and  Pierre
               Marcel,  Marc  Bahda,  Bernard  Wach and  Other  Shareholders  of
               Transitif S.A., dated December 3, 1999

2.2(2)         Stock Purchase Agreement among Pivotal and Industrial & Financial
               Systems AB and Eli Barak,  Alon Hod and Tony Topaz concerning all
               of the Shares of Exactium Ltd. dated April 11, 2000

2.3(3)         Share Purchase Agreement among Pivotal and David Pritchard,  Kirk
               Herrington,  Michael Satterfield,  Calvin Mah, VW B.C. Technology
               Investment Fund, LP, Venrock  Associates,  Venrock Associates II,
               LP, Working Ventures Canadian Fund Inc., Bank of Montreal Capital
               Corporation,  Sussex Capital Inc. and the Other  Shareholders  of
               Simba  Technologies  Inc.  concerning  all of the Shares of Simba
               Technologies Inc. dated May 29, 2000

3.2(4)         Memorandum and Articles

4.1(4)         Specimen of common share certificate

4.2(4)         Registration Rights (included in Exhibit 10.15)

4.3(2)         Registration Rights Agreement dated June 2, 2000 (included in
               Exhibit 2.2)

4.4(3)         Registration Rights Agreement dated June 26, 2000 (included in
               Exhibit 2.3)

4.5            Specimen of common share certificate as of August 17, 2000

10.1(4)        Employee Share Purchase Plan

10.2(4)        Lease dated as of July 18, 1997 between Sodican (B.C.) Inc. and
               Pivotal for premises located in North Vancouver, B.C.

10.3(4)        Lease dated as of May 26, 1998 between Novo Esplanade Ltd. and
               Pivotal for premises located in North Vancouver, B.C.

10.4(4)        Lease(1) dated as of December 14, 1998 between B.C. Rail Ltd. and
               Pivotal for premises located in North Vancouver, B.C.

10.5(4)        Lease(2) dated as of December 14, 1998, between B.C. Rail Ltd.
               and Pivotal with respect to premises located in North Vancouver,
               B.C.


<PAGE>

10.6(4)        Lease dated as of December  11, 1998  between The Plaza at Yarrow
               Bay Inc.  (previously Yarrow Bay Office III Limited  Partnership)
               and  Pivotal  with  respect  to  premises  located  in  Kirkland,
               Washington

#10.7(4)       Letter  agreement  dated  November 21, 1997  between  Pivotal and
               Robert A. Runge  granting  an option to purchase  250,000  common
               shares

10.8(4)        Canadian  Imperial  Bank  of  Commerce  Cdn$2,000,000   Committed
               Installment Loan dated March 18, 1998

10.9(4)        Canadian Imperial Bank of Commerce  Cdn$3,000,000  Operating Line
               of Credit dated March 18, 1998

10.10(4)       Security  Agreement with Canadian Imperial Bank of Commerce dated
               for reference April 15, 1998

10.11(4)       Contract  Relative to Special Security under the Bank Act between
               Canadian  Imperial  Bank of Commerce and Pivotal  dated April 30,
               1998

10.12(4)       Canadian  Imperial  Bank of Commerce  Schedule - Standard  Credit
               Terms dated March 18, 1998

10.13(4)       Canadian Imperial Bank of Commerce Schedule-Standard Credit Terms
               dated March 18, 1998

10.14(4)       Form of Indemnity Agreement between Pivotal and directors and
               officers of Pivotal

10.15(4)       Investors' Rights Agreement dated January 15, 1999

10.16(5)       Assignment Agreement dated July 12, 2000 between Pivotal and Meta
               Creations  International  Limited for premises located in Dublin,
               Republic of Ireland;  Sub-Lease  dated September 22, 1999 between
               The H.W.  Wilson  Company Inc. and Meta  Creations  International
               Limited for premises located in Dublin, Republic of Ireland

10.17(5)       Lease dated April 14, 2000 among  Deramore  Holdings  Limited(1),
               Pivotal  Corporation  (NI)  Limited (2) and Pivotal for  premises
               located in Belfast, Northern Ireland

#10.18(5)      Employment  Agreement  between  Vince  Mifsud and  Pivotal  dated
               November 10, 1998

10.19(6)       Exactium Ltd. 1999 Stock Option Plan

10.20(7)       Simba Technologies Incentive Stock Option Plan, as amended

10.21          Amended and Restated Incentive Stock Option Plan

10.22          Restated  Offer to Lease dated July 28,  2000  between CB Richard
               Ellis  Limited and Pivotal  with  respect to premises  located in
               Vancouver, B.C.

10.23          First Amendment to Restated Offer to Lease dated October 16, 2000
               between PCI Properties Corp. and Pivotal with respect to premises
               located in Vancouver, B.C.


<PAGE>

10.24          Second  Amendment  to Restated  Offer to Lease dated May 18, 2001
               between PCI Properties Corp. and Pivotal with respect to premises
               located in Vancouver, B.C.

10.25          Lease  dated  June 3,  1996  between  Yonge  Wellington  Property
               Limited  and Simba  Technologies  Incorporated  with  respect  to
               premises located in Vancouver, B.C.

10.26          Sublease dated January 1, 1999 between Brewster Transport Company
               Limited  and Simba  Technologies  Incorporated  with  respect  to
               premises located in Vancouver, B.C.

10.27          Lease dated  September  1, 2000  between  Landgem  Office I, Ltd.
               (previously  Dallas Office Portfolio L.P.) and Software  Spectrum
               CRM, Inc. for premises located in Dallas, Texas

10.28          Lease dated  December  19, 2000 between 485  Properties,  LLC and
               Pivotal for premises located in Atlanta, Georgia

10.29          Lease  dated as of  November  24, 2000  between  Scholl  Consumer
               Products  Limited  and  Pivotal  for  premises  located in Luton,
               England

#10.30         Employment  Agreement  between Kirk  Herrington and Pivotal dated
               June 7, 2000

#10.31         Employment  Agreement between Kent Roger (Bo) Manning and Pivotal
               dated August 22, 2001

10.32          Amendment No.1 dated June 19, 2001 to the Canadian  Imperial Bank
               of Commerce  Cdn$3,000,000  Operating  Line of Credit dated March
               18, 1998

10.33          Amendment  No.2 dated July 3, 2001 to the Canadian  Imperial Bank
               of Commerce  Cdn$3,000,000  Operating  Line of Credit dated March
               18, 1998

21.1           Subsidiaries of Pivotal

23.1           Consent of Deloitte & Touche

24.1           Powers of Attorney (included on signature page)

99.1           Notice of Meeting and Management Information and Proxy Circular
               for the Annual General Meeting to be held on Thursday, November
               15, 2001.

#    Indicates management contract.

(1)  Incorporated by reference to Pivotal's Form 8-K filed on January 25, 2000.
(2)  Incorporated by reference to Pivotal's Form 8-K filed on June 19, 2000.
(3)  Incorporated by reference to Pivotal's Form 8-K filed on July 11, 2000.
(4)  Incorporated by reference to Pivotal's  Registration  Statement on Form F-1
     (No. 333-82871).
(5)  Incorporated  by reference to Pivotal's  Annual Report on Form 10-K for the
     year ended June 30, 2000.
(6)  Incorporated by reference to Pivotal's  Registration  Statement on Form S-8
     (No. 333-39922).
(7)  Incorporated by reference to Pivotal's  Registration  Statement on Form S-8
     (No. 333-42460).