---

---

UNITED STATES

SECURITIES AND EXCHANGE
COMMISSION

WASHINGTON, D.C. 20549

_________________

FORM 10-Q

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

For the Quarterly
Period Ended May 31, 2003

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
0-16006

COGNOS INCORPORATED(Exact Name Of
Registrant As Specified In Its Charter)

|CANADA                          | 98-0119485                       
|------------------------------- | ---------------------------------
|(State Or Other Jurisdiction Of | (IRS Employer Identification No.)
|Incorporation Or Organization) 

|3755 Riverside Drive, 
P.O. Box 9707, Station T, 
Ottawa, Ontario, Canada(Address Of Principal Executive
Offices) | K1G 4K9(Zip Code)
|----------------------------------------------------------------------------------------------------------------- | -----------------

(613) 738-1440(Registrants
Telephone Number, Including Area Code)

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X  
  NO

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange
Act of 1934). YES X    NO

The number of shares outstanding of
the registrants only class of Common Stock as of June 30, 2003, was 89,126,827.

---

---

# COGNOS INCORPORATED

# INDEX

|PAGE                          
|------------------------------
|PART I - FINANCIAL
INFORMATION
|Item 1.                       
|                              
|                              
|                              
|                              
|Item 2.                       
|Item 3.                       
|Item 4.                       
|PART II -
OTHER INFORMATION   
|Item 1.                       
|Item 4.                       
|Item 6.                       
|Signature                     
|Certifications                

2

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PART I  FINANCIAL INFORMATION

|Item 1. |  | Consolidated
Financial Statements
|------- |  | ---------------------------------

COGNOS INCORPORATEDCONSOLIDATED STATEMENTS OF INCOME
(US$000s except share amounts, U.S. GAAP)
(Unaudited)

|                                         |  | Three months ended May 31, |  
|---------------------------------------- |  | -------------------------- | -
|                                         |  | 2003                       |  
|                                        
|Revenue                                  |  |                            |  
|Product license                          |  | $   57,801                 |  
|Product support                          |  | 64,127                     |  
|Services                                 |  | 28,635                     |  
|                                        
|Total revenue                            |  | 150,563                    |  
|                                        
|Cost of revenue                          | 
|Cost of product license                  |  | 1,111                      |  
|Cost of product support                  |  | 6,855                      |  
|Cost of services                         |  | 20,859                     |  
|                                        
|Total cost of revenue                    |  | 28,825                     |  
|                                        
|Gross margin                             |  | 121,738                    |  
|                                        
|Operating expenses                       | 
|Selling, general, and administrative     |  | 80,436                     |  
|Research and development                 |  | 23,294                     |  
|Amortization of intangible assets        |  | 1,907                      |  
|                                        
|Total operating expenses                 |  | 105,637                    |  
|                                        
|Operating income                         |  | 16,101                     |  
|Interest expense                         |  | (171                       | )
|Interest income                          |  | 1,044                      |  
|                                        
|Income before taxes                      |  | 16,974                     |  
|Income tax provision                     |  | 4,583                      |  
|                                        
|Net income                               |  | $   12,391                 |  
|                                        
|Net income per share                     | 
|Basic                                    |  | $       0.14               |  
|                                        
|Diluted                                  |  | $       0.14               |  
|                                        
|Weighted average number of shares (000s) | 
|Basic                                    |  | 88,527                     |  
|                                        
|Diluted                                  |  | 90,924                     |  
|                                        

(See accompanying
notes)

3

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COGNOS INCORPORATEDCONSOLIDATED BALANCE
SHEETS
(US$000s, U.S. GAAP)

|                                          |  | May 31,2003 |   | February 28,2003 |  
|----------------------------------------- |  | ----------- | - | ---------------- | -
|                                         
|Assets                                    |  | (Unaudited  | ) |                  |  
|Current assets                            |  |             |   |                  |  
|Cash and cash equivalents                 |  | $ 200,670   |   | $ 162,588        |  
|Short-term investments                    |  | 63,226      |   | 79,670           |  
|Accounts receivable                       |  | 105,235     |   | 139,116          |  
|Prepaid expenses and other current assets |  | 12,732      |   | 8,884            |  
|Deferred tax assets                       |  | 5,241       |   | 5,427            |  
|                                         
|                                          |  | 387,104     |   | 395,685          |  
|Fixed assets                              |  | 68,864      |   | 63,467           |  
|Intangible assets                         |  | 27,501      |   | 29,408           |  
|Goodwill                                  |  | 170,099     |   | 169,991          |  
|                                         
|                                          |  | $ 653,568   |   | $ 658,551        |  
|                                         
|Liabilities                               | 
|Current liabilities                       | 
|Accounts payable                          |  | $   25,772  |   | $   33,310       |  
|Accrued charges                           |  | 30,050      |   | 34,192           |  
|Salaries, commissions, and related items  |  | 35,401      |   | 48,916           |  
|Income taxes payable                      |  | 2,850       |   | 4,395            |  
|Deferred revenue                          |  | 139,754     |   | 146,008          |  
|                                         
|                                          |  | 233,827     |   | 266,821          |  
|Long-term liabilities                     |  | --          |   | 1,647            |  
|Deferred income taxes                     |  | 12,712      |   | 13,561           |  
|                                         
|                                          |  | 246,539     |   | 282,029          |  
|                                         
|Stockholders' Equity                      | 
|Capital stock                             | 
|Common shares (May 31, 2003 - 88,990,745; | 
|February 28, 2003 - 88,124,914)           |  | 185,963     |   | 173,363          |  
|Treasury shares (May 31, 2003 - 43,500;   | 
|February 28, 2003 - 22,500)               |  | (1,065      | ) | (501             | )
|Deferred stock-based compensation         |  | (1,208      | ) | (1,243           | )
|Retained earnings                         |  | 225,918     |   | 213,527          |  
|Accumulated other comprehensive loss      |  | (2,579      | ) | (8,624           | )
|                                         
|                                          |  | 407,029     |   | 376,522          |  
|                                         
|                                          |  | $ 653,568   |   | $ 658,551        |  
|                                         

(See accompanying notes)

4

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COGNOS INCORPORATEDCONSOLIDATED STATEMENTS OF CASH FLOWS
(US$000s, U.S. GAAP)
(Unaudited)

|                                                                  |  | Three months endedMay 31,
|----------------------------------------------------------------- |  | -------------------------
|                                                                 
|                                                                  |  | 2003                     
|                                                                 
|Cash flows from operating activities                              | 
|Net income                                                        |  | $   12,391               
|Non-cash items                                                    | 
|Depreciation and amortization                                     |  | 7,148                    
|Amortization of deferred stock-based compensation                 |  | 169                      
|Amortization of other deferred compensation                       |  | 62                       
|Deferred income taxes                                             |  | (2,954                   
|Loss on disposal of fixed assets                                  |  | 454                      
|                                                                 
|                                                                  |  | 17,270                   
|Change in non-cash working capital                                | 
|Decrease in accounts receivable                                   |  | 37,006                   
|Increase in prepaid expenses and other current assets             |  | (3,088                   
|Decrease in accounts payable                                      |  | (8,625                   
|Decrease in accrued charges                                       |  | (5,809                   
|Decrease in salaries, commissions, and related items              |  | (15,793                  
|Decrease in income taxes payable                                  |  | (138                     
|Decrease in deferred revenue                                      |  | (10,282                  
|                                                                 
|Net cash provided by operating activities                         |  | 10,541                   
|                                                                 
|Cash flows from investing activities                              | 
|Maturity of short-term investments                                |  | 63,752                   
|Purchase of short-term investments                                |  | (44,700                  
|Additions to fixed assets                                         |  | (6,730                   
|Acquisition costs                                                 |  | (108                     
|                                                                 
|Net cash provided by investing activities                         |  | 12,214                   
|                                                                 
|Cash flows from financing activities                              | 
|Issue of common shares                                            |  | 12,466                   
|Purchase of treasury shares                                       |  | (564                     
|Repurchase of shares                                              |  | --                       
|Decrease in long-term debt and long-term liabilities              |  | (1,697                   
|                                                                 
|Net cash provided by (used in) financing activities               |  | 10,205                   
|                                                                 
|Effect of exchange rate changes on cash                           |  | 5,122                    
|                                                                 
|Net increase in cash and cash equivalents                         |  | 38,082                   
|Cash and cash equivalents, beginning of period                    |  | 162,588                  
|                                                                 
|Cash and cash equivalents, end of period                          |  | 200,670                  
|Short-term investments, end of period                             |  | 63,226                   
|                                                                 
|Cash, cash equivalents, and short-term investments, end of period |  | $ 263,896                
|                                                                 

(See accompanying notes)

5

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

|1. | Basis
of Presentation
|-- | ---------------------

| | The
accompanying unaudited consolidated financial statements have been prepared by the
Corporation in United States (U.S.) dollars and in accordance with generally accepted
accounting principles (GAAP) in the U.S. with respect to interim financial statements,
applied on a consistent basis. Accordingly, they do not include all of the information and
footnotes required for compliance with GAAP in the U.S. for annual financial statements.
These unaudited condensed notes to the consolidated financial statements should be read in
conjunction with the audited financial statements and notes included in the
Corporations Annual Report for the fiscal year ended February 28, 2003.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
preparation of these unaudited consolidated financial statements requires management to
make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and the accompanying notes. In the opinion of Management, these
unaudited consolidated financial statements reflect all adjustments (which include only
normal, recurring adjustments) necessary to state fairly the results for the periods
presented. Actual results could differ from these estimates and the operating results for
the interim periods presented are not necessarily indicative of the results expected for
the full year.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | All
information is presented in U.S. dollars, unless otherwise stated. Consolidated financial
statements prepared in accordance with Canadian GAAP, in U.S. dollars, are made available
to all shareholders, and filed with various regulatory authorities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Revenue
Recognition
|-- | -------------------

| | The
Corporation recognizes revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition, issued by the American Institute of Certified Public
Accountants.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Substantially
all of the Corporations product license revenue is earned from licenses of
off-the-shelf software requiring no customization. Revenue from these licenses is
recognized when all of the following criteria are met: persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectibility is probable. If a license includes the right to return the product for
refund or credit, revenue is deferred, until the right of return lapses.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue
from product support contracts is recognized ratably over the life of the contract.
Incremental costs directly attributable to the acquisition of product support contracts,
and that would not have been incurred but for the acquisition of that contract, are
deferred and expensed in the period the related revenue is recognized. These costs include
commissions payable on sales of support contracts.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

| | Revenue
from education, consulting, and other services is recognized at the time such services
are rendered.
| | ------------------------------------------------------------------------------------------------------------

| | For
contracts with multiple obligations (e.g. deliverable and undeliverable products, support
obligations, education, consulting, and other services), the Corporation allocates revenue
to each element of the contract based on objective evidence, specific to the Corporation,
of the fair value of the element.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Stock
Based Compensation
|-- | ------------------------

| | The
Corporation applies APB Opinion 25 in accounting for its stock option, stock purchase, and
restricted share unit plans. Where the exercise price of stock options is equal to the
market price of the stock on the trading day preceding the date of grant, no compensation
cost has been recognized in the financial statements for its stock option and stock
purchase plans. However, for certain options assumed on the acquisition of Adaytum, Inc.,
under purchase accounting methodology, compensation cost has been recognized in the
financial statements. The fair value of each restricted share unit is calculated at the
date of grant. Compensation cost relating to the restricted share unit plan is recognized
in the financial statements over the vesting period.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002 FASB issued Statement No. 148, Accounting for Stock-Based Compensation
 Transition and Disclosure (SFAS 148). This statement provides
alternative methods of transition for a voluntary change to the fair value based method of
accounting for stock-based compensation. The statement also requires new and more
prominent disclosures about the effects of stock-based compensation on reported results
which are provided below. The Corporation has chosen to continue to apply APB Opinion 25
to account for stock-based compensation.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

| | If
the fair values of the options granted had been recognized as compensation expense on a
straight-line basis over the vesting period of the grant, stock-based compensation costs
would have reduced net income, basic net income per share and diluted net income per share
as indicated in the table below (000s, except per share amounts):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                              |  | Three months endedMay 31, |  
|--------------------------------------------- |  | ------------------------- | -
|                                             
|                                              |  | 2003                      |  
|                                             
|Net income:                                   | 
|As reported                                   |  | $ 12,391                  |  
|Add: Stock-based employee compensation        | 
|included above                                |  | 169                       |  
|Less: Stock-based employee compensation using | 
|fair value based method                       |  | (6,249                    | )
|                                             
|Pro forma                                     |  | $   6,311                 |  
|                                             
|Basic net income per share:                   | 
|As reported                                   |  | $      0.14               |  
|Add: Stock-based employee compensation        | 
|included above                                |  | --                        |  
|Less: Stock-based employee compensation using | 
|fair value based method                       |  | (0.07                     | )
|                                             
|Pro forma                                     |  | $      0.07               |  
|                                             
|Diluted net income per share:                 | 
|As
reported                                   |  | $      0.14               |  
|Add: Stock-based employee compensation        | 
|included above                                |  | --                        |  
|Less: Stock-based employee compensation using | 
|fair value based method                       |  | (0.07                     | )
|                                             
|Pro forma                                     |  | $      0.07               |  
|                                             
|Weighted average number of shares:            | 
|Basic                                         |  | 88,527                    |  
|                                             
|Diluted                                       |  | 90,924                    |  
|                                             

8

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

| | The
fair value of the options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 |  | Three
months endedMay 31,
|-------------------------------- |  | -------------------------
|                                
|                                 |  | 2003                     
|                                
|Risk-free interest rates         |  | N/A*                     
|Expected life of options (years) |  | N/A*                     
|Expected volatility              |  | N/A*                     
|Dividend yield                   |  | N/A*                     

*
During the three months ended May 31, 2003 no options were granted

|4. | Goodwill
|-- | --------

| | During
the three months ended May 31, 2003 and May 31, 2002 there were additions to goodwill of
$108,000 and $40,000 respectively related to additional consideration paid to the former
shareholders of Teijin Cognos Incorporated (TCI). This additional consideration was based
on the net revenue of TCI during each quarter. The Corporation has designated the
beginning of its fiscal year as the date for the annual impairment test, and performed the
required test as of March 1, 2003. Based on this test, goodwill is not considered to be
impaired.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  | Three months
endedMay 31,
|----------------- |  | -------------------------
|                 
|                  |  | 2003                     
|                 
|Beginning balance |  | $169,991                 
|Additions         |  | 108                      
|                 
|Closing balance   |  | $170,099                 
|                 

9

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

| |  | 
| |  | 

|5. | Intangible
Assets
|-- | -----------------

|                          |  | As at May 31,2003 |   | As at February 28,2003  
|------------------------- |  | ----------------- | - | ------------------------
|                         
|                          |  | Cost              |   | Accumulated Amortization
|                         
|                          |  | ($000s)           |   | ($000s)                 
|Acquired Technology       |  | $ 33,381          |   | $13,423                 
|Deferred Compensation     |  | 8,945             |   | 8,824                   
|Contractual Relationships |  | 7,800             |   | 378                     
|                          |  |                   |   |                         
|                          |  | 50,126            |   | $22,625                 
|                          |  |                   |   |                         
|                          |  | (22,625           | ) |                         
|                          |  |                   |   |                         
|Net book value            |  | $ 27,501          |   |                         
|                          |  |                   |   |                         

| | Amortization
of intangible assets was $1,907,000 and $877,000 in the quarters ended May 31, 2003 and
May 31, 2002, respectively. The estimated amortization expense related to intangible
assets is as follows ($000s):
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2004 (Q2 to Q4)     |  | 5,583 | 
| | ------------------- |  | ----- | 
| | 2005                |  | 4,922 | 
| | 2006                |  | 4,915 | 
| | 2007                |  | 4,915 | 
| | 2008                |  | 4,375 | 
| | 2009                |  | 975   | 
| | 2010 and thereafter |  | 1,816 | 

|6. | Income
Taxes
|-- | ------------

| | The
Corporation provides for income taxes in its quarterly unaudited financial statements
based on the estimated effective tax rate for the full fiscal year.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

|7. | Net
Income per Share
|-- | --------------------

| | The
reconciliation of the numerator and denominator for the calculation of basic and diluted
net income per share is as follows: (000s except per share amounts)
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                       |  | Three months endedMay 31, | 
|------------------------------------------------------ |  | ------------------------- | 
|                                                      
|                                                       |  | 2003                      | 
|                                                      
|Basic Net Income per Share                             | 
|Net income                                             |  | $12,391                   | 
|                                                      
|Weighted average number of shares outstanding          |  | 88,527                    | 
|                                                      
|Basic net income per share                             |  | $     0.14                | 
|                                                      
|Diluted Net Income per Share                           | 
|Net income                                             |  | $12,391                   | 
|                                                      
|Weighted average number of shares outstanding          |  | 88,527                    | 
|Dilutive effect of stock options                       |  | 2,397                     | 
|                                                      
|Adjusted weighted average number of shares outstanding |  | 90,924                    | 
|                                                      
|Diluted net income per share                           |  | $     0.14                | 
|                                                      

|8. | Comprehensive
Income
|-- | --------------------

| | Comprehensive
income includes net income and other comprehensive income (OCI). OCI refers to changes in
net assets from transactions and other events, and circumstances other than transactions
with stockholders. These changes are recorded directly as a separate component of
Stockholders Equity and excluded from net income. The only other comprehensive
income item for the Corporation relates to foreign currency translation adjustments
pertaining to those subsidiaries not using the U.S. dollar as their functional currency
net of derivative gains or losses.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

| | The
components of comprehensive income were as follows ($000s):
| | ----------------------------------------------------------------

|                                         |  | Three
months endedMay 31,
|---------------------------------------- |  | -------------------------
|                                        
|                                         |  | 2003                     
|                                        
|Net income                               |  | $12,391                  
|Other comprehensive income:              | 
|Foreign currency translation adjustments |  | 6,045                    
|                                        
|Comprehensive income                     |  | $18,436                  
|                                        

|9. | Segmented
Information
|-- | ---------------------

| | The
Corporation has one reportable segmentcomputer software products.
| | ----------------------------------------------------------------------

|10. | StockholdersEquity
|--- | -------------------

| | The
Corporation issued 866,000 common shares valued at $12.5 million during the three months
ended May 31, 2003, and issued 296,000 shares valued at $3.8 million during the three
months ended May 31, 2002. The issuance of shares in both periods was pursuant to our
stock purchase plan and the exercise of stock options by employees, officers, and
directors. During the three month period ended May 31, 2003, the Corporation did not
repurchase shares in the open market. The Corporation repurchased 388,000 shares at a
value of $10.0 million during the three months ended May 31, 2002.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

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COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

|11. | Liabilities
in Connection with Acquisition
|--- | ------------------------------------------

| | The
Corporation undertook a restructuring plan in conjunction with the acquisition of Adaytum
during January 2003. In accordance with Emerging Issues Task Force (EITF) No. 95-3,
Recognition of Liabilities in Connection with a Business Combination (EITF 95-3)
the liability associated with this restructuring is considered a liability assumed in the
purchase price allocation. This restructuring primarily relates to involuntary employee
separations of approximately 90 employees of Adaytum, accruals for abandoning leased
premises of Adaytum, and related write-downs of leasehold improvements as well as asset
write-downs of Adaytum. The employee separations impact all functional groups and
geographic regions of Adaytum. The remaining accrual is included on the balance sheet as
accrued charges and salaries, commissions, and related items and is expected to be paid
during fiscal 2004. The Corporation does not believe that any unresolved contingencies,
purchase price allocation issues, or additional liabilities exist that would result in a
material adjustment to the acquisition cost allocation.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                |  | Employee separations |   | Other restructuring accruals |   | Total accrual |   | Asset write- downs |   | Total   |  
|------------------------------- |  | -------------------- | - | ---------------------------- | - | ------------- | - | ------------------ | - | ------- | -
|                               
|Restructuring                   |  | $ 3,888              |   | $ 3,976                      |   | $ 7,864       |   | $ 768              |   | $ 8,632 |  
|Cash payments                   |  | (248                 | ) | (11                          | ) | (259          | ) | --                 |   | (259    | )
|Asset write-downs               |  | --                   |   | --                           |   | --            |   | (768               | ) | (768    | )
|                               
|Balance as at February 28, 2003 |  | $ 3,640              |   | $ 3,965                      |   | $ 7,605       |   | $   --             |   | $ 7,605 |  
|Cash payments                   |  | (1,103               | ) | (14                          | ) | (1,117        | ) | --                 |   | (1,117  | )
|                               
|Balance as at May 31, 2003      |  | $ 2,537              |   | $ 3,951                      |   | $ 6,488       |   | $   --             |   | $ 6,488 |  
|                               

|12. | Comparative
Results
|--- | -------------------

| | Certain
of the prior periods figures have been reclassified in order to conform to the
presentation adopted during the current fiscal year. We have updated our income statement
presentation to segregate from selling, general, and administrative expenses $15,547,000
for the three months ended May 31, 2002, and created a new line item for, the cost of
providing services. Additionally we have segregated from selling, general, and
administrative expenses $877,000 for the three months ended May 31, 2002 and created a new
line item for, amortization of intangible assets within operating expenses. This
reclassification was made to provide more information to the users of our financial
statements. This change in presentation does not affect previously reported assets,
liabilities, or results of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

COGNOS INCORPORATED

CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in United States
dollars, unless otherwise stated)
(In accordance with
U.S. GAAP)

|13. | New
Accounting Pronouncements
|--- | -----------------------------

| | In
April 2003 the Financial Accounting Standards Board (FASB) issued FASB Statement No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities
(SFAS 149). SFAS 149 is intended to amend and clarify financial accounting for reporting
for derivative instruments, including derivatives embedded in other contracts and hedging
activities. The amendments improve financial reporting by: requiring that contracts with
comparable characteristics be accounted for similarly; clarifying the circumstances under
which a contract with an initial net investment meets the characteristics of a derivative;
and clarifying when a derivative contains a financing component that requires special
reporting in the statement of cash flows. SFAS 149 is effective for contracts entered
into, or modified after, June 30, 2003. The Corporation does not believe that the adoption
of SFAS 149 will have a material effect on its business, results of operations, and
financial condition.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

---

Item 2.

# COGNOS INCORPORATED

# MANAGEMENTS
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

(in United States
dollars, unless otherwise indicated, and in accordance with U.S. GAAP)

The following information should be
read in conjunction with the unaudited Consolidated Financial Statements and Notes
included in Item 1 of this Quarterly Report and can also be read in conjunction with the
audited Consolidated Financial Statements and Notes, and Managements Discussion and
Analysis of Financial Condition and Results of Operations contained in our Annual Report
for the fiscal year ended February 28, 2003 (fiscal 2003).

# OVERVIEW

Cognos is a leading global provider
of business intelligence software. Our solution helps improve business performance by
enabling effective decision-making at all levels of the organization through the
consistent reporting and analysis of data derived from various sources. Using our
software, customers can gain valuable insights that can be used to improve operational
effectiveness, enhance customer satisfaction, accelerate corporate response times and,
ultimately, increase revenues and profits. Our integrated solution consists of our suite
of business intelligence components, analytical applications, and performance management
applications. To complement this solution, on January 10, 2003 we acquired privately-held
Adaytum, Inc., a leading global provider of enterprise performance planning software.

Our customers can strategically apply
our software solution across the extended enterprise to address their need for corporate
performance management (CPM). By allowing timely analysis of data from disparate systems,
CPM enables organizations to measure execution against business strategy to ensure the two
are aligned at all levels. Our solution for CPM allows users to effectively manage the
full business cycle with planning, budgeting, reporting, analysis, and scorecarding
products.

# APPLICATION OF
CRITICAL
POLICIES AND ESTIMATES

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

The following critical accounting
policies and significant estimates are used in the preparation of our consolidated
financial statements:

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Revenue Recognition We
recognize revenue in accordance with Statement of Position (SOP) 97-2, Software Revenue
Recognition. Our product license revenue is earned from licenses of off-the-shelf
software not requiring significant production, modification or customization. Revenue from
these licenses is recognized when all of the following criteria are met: (1) persuasive
evidence of an arrangement exists (our standard business practice is that persuasive
evidence exists when we have a binding contract with a customer), (2) delivery has
occurred, (3) the fee is fixed or determinable, and (4) collectibility is probable. If a
license includes the right to return the product for refund or credit, revenue is
deferred, until the right of return lapses.

Product support includes the right to
receive support services and unspecified upgrades or enhancements. Unspecified upgrades
and enhancements are product support only if they are offered on a when-and-if-available
basis. Revenue from product support contracts is recognized ratably over the life of the
contract. Incremental costs directly attributable to the acquisition of product support
contracts, and that would not have been incurred but for the acquisition of that contract,
are deferred and expensed in the period the related revenue is recognized. These costs
include commissions payable on sales of support contracts.

Service revenue from education,
consulting, and other services is recognized at the time the services are rendered. Many
of our sales include both software and services. Where the service is (1) not essential to
the functionality of any other element of the transaction and (2) stated separately such
that the total price of the arrangement is expected to vary as a result of the inclusion
or exclusion of the service, the software element is accounted for separately from the
service element. Where these two criteria are not met, the entire arrangement is accounted
for using the percentage of completion method in accordance with SOP 81-1, Accounting
for Performance of Construction Type and Certain Production Type Contracts.

For those contracts with multiple
obligations, that is, deliverable and undeliverable products, support obligations,
education, consulting, and other services, we allocate revenue to each element of the
contract based on vendor specific objective evidence (VSOE) of the fair value of the
element. VSOE of fair value is assigned using the residual method as outlined in SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions. For product support elements of a contract VSOE is the renewal rate.
VSOE for service elements is the normal pricing and discounting practices for those
products when they are sold separately; the residual is then assigned to the license
element of the contract.

Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. We regularly review our
accounts receivable and use judgment to assess the collectibility of specific accounts and
based on this assessment, an allowance is maintained for 100% of all accounts deemed to be
uncollectible. For those receivables not specifically identified, an allowance is
maintained for a specific percentage of those receivables based on the aging of the
accounts, our historical collection experience, and current economic conditions. If the
financial condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required.

Deferred Tax Assets We
record a valuation allowance to reduce our deferred tax assets to the amount that is more
likely than not to be realized. We have considered future taxable income and ongoing
prudent and feasible tax planning strategies in assessing the need for the valuation
allowance. In the event we were to subsequently determine that we would be able to realize
our deferred tax assets in the future in excess of our net recorded amount, an adjustment
to the

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deferred tax asset would increase income in the period such determination was made,
except for loss carryforwards related to acquisitions. In the event we were to
subsequently determine that we would be able to realize deferred tax assets related to
acquisitions in excess of the purchase price allocated to those deferred tax assets, we
would record a credit to goodwill. Should we determine that we would not be able to
realize all or part of our net deferred tax asset in the future, an adjustment to the
deferred tax asset would reduce income in the period such determination was made.

Goodwill and Acquired Intangible
Assets We account for acquisitions of companies in accordance with Statement of
Financial Accounting Standards Board Statement (SFAS) No. 141, Business
Combinations. We allocate purchase price to tangible assets, intangible assets, and
liabilities based on fair values with the excess of purchase price amount being allocated
to goodwill.

Acquired technology is initially
recorded at fair value based on the present value of the estimated net future
income-producing capabilities of the software products acquired. Acquired technology is
amortized over its estimated useful life on a straight-line basis. We evaluate the
expected future net cash flows of the acquired technology at each reporting date, and
adjust to estimated fair value if the value of the asset is impaired. Contractual
relationships represent contractual and separable relationships that we have with certain
customers and partners which we acquired through acquisitions. These contractual
relationships were initially recorded at their fair value based on the present value of
expected future cash flows and are amortized over their estimated useful life. Deferred
compensation includes consideration associated with acquisitions. Deferred compensation is
recorded when its future payment is determinable and is payable contingent upon the
continued tenure of the principals of the acquired companies who have become our
employees. Under generally accepted accounting principles these amounts are accounted for
as compensation rather than as a component of purchase price. We adopted FASB Statement
No. 142 Goodwill and Other Intangible Assets (SFAS 142) beginning March 1, 2002 and
accordingly we evaluate the remaining useful life of our intangible assets being amortized
each reporting period to determine whether events or circumstances warrant a revision to
the estimated remaining amortization period.

Also, in accordance with SFAS 142
goodwill is not amortized, but is subject to annual impairment tests, or on a more
frequent basis if events or conditions indicate that goodwill may be impaired. Goodwill is
tested for impairment at a level of reporting referred to as a reporting unit. We have one
reporting unit. Quoted market prices in active markets are considered the best evidence of
fair value. Therefore the first step of our annual test is to compare the fair value of
our shares on the Nasdaq Stock Market, to the carrying value of our net assets. If we
determine that our carrying value exceeds our fair value we would conduct a second step to
the goodwill impairment test. The second step compares the implied fair value of the
goodwill (determined as the excess fair value over the fair value assigned to our other
assets and liabilities) to the carrying amount of goodwill. When the carrying amount of
goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized.

Historically our acquisitions have
resulted in the recognition of significant amounts of goodwill and acquired intangible
assets. The allocation of purchase price to these intangible assets and goodwill requires
that we make estimates and judgments usually based on assumptions about the future income
producing capabilities of these assets and related future expected cash flows. We also
make estimates about the useful lives of the acquired intangible assets. Should different

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conditions prevail, we could incur
write-downs of goodwill, write-downs of intangible assets, or changes in the estimation
of useful lives of those intangible assets.

# NEW
ACCOUNTING
PRONOUNCEMENTS

In April 2003 the Financial
Accounting Standards Board (FASB) issued FASB Statement No. 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities(SFAS 149). SFAS 149 is intended to
amend and clarify financial accounting for reporting for derivative instruments, including
derivatives embedded in other contracts and hedging activities. The amendments improve
financial reporting by: requiring that contracts with comparable characteristics be
accounted for similarly; clarifying the circumstances under which a contract with an
initial net investment meets the characteristics of a derivative; and clarifying when a
derivative contains a financing component that requires special reporting in the statement
of cash flows. SFAS 149 is effective for contracts entered into or modified after June 30,
2003. We do not believe that the adoption of SFAS 149 will have a material effect on our
business, results of operations, and financial condition.

# SHAREHOLDER
PROPOSAL

At our Annual General Meeting on June
19, 2003 our shareholders voted in favor of a proposal requesting that our Board of
Directors establish a policy to expense in our annual income statement the costs of all
future stock options issued to our senior executives. As permitted by GAAP (See note 3 of
the Notes to the Consolidated Financial Statements), we do not record any expense in
respect of stock options on the face of our consolidated statement of income. However, in
the notes to these statements we do disclose our net income and earnings per share on a
pro-forma basis after amortizing the fair value of options, determined as of the grant
date, over the vesting period. Thus the information requested in the shareholder proposal
is provided, albeit not on the face of the financial statements.

FASB and other accounting standard
bodies are studying the options issue with a view to developing an internationally
accepted method by which option expense will be required to be deducted in determining net
income. It is expected that this may be effected in the near term. In considering the
shareholder proposal, the Board will consider whether it is in the interest of
shareholders for us to unilaterally adopt a policy of expensing options prior to the
establishment of the international standard thus rendering our results non-comparable with
those of most other companies in the industry.

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# RESULTS OF
OPERATIONS

|(000s, except per share amounts) |  | Three months endedMay 31, |   | Percentage Change Three months ended May 31, |  
|-------------------------------- |  | ------------------------- | - | -------------------------------------------- | -
|                                
|                                 |  | 2003                      |   | 2002                                         |  
|                                
|Revenue                          |  | $150,563                  |   | $120,130                                     |  
|Cost of revenue                  |  | 28,825                    |   | 20,694                                       |  
|                                 |  |                           |  
|Gross margin                     |  | 121,738                   |   | 99,436                                       |  
|Operating expenses               |  | 105,637                   |   | 86,416                                       |  
|                                 |  |                           |  
|Operating income                 |  | $  16,101                 |   | $  13,020                                    |  
|Gross margin percentage          |  | 80.9                      | % | 82.8                                         | %
|Operating margin percentage      |  | 10.7                      | % | 10.8                                         | %
|Net income                       |  | $  12,391                 |   | $    9,911                                   |  
|                                 |  |                           |  
|Basic net income per share       |  | $       0.14              |   | $       0.11                                 |  
|                                 |  |                           |  
|Diluted net income per share     |  | $       01.4              |   | $       0.11                                 |  
|                                 |  |                           |  

Revenue for the quarter ended May 31,
2003 was $150.6 million, a 25% increase from revenue of $120.1 million for the same
quarter last year. Pretax income for the quarter ended May 31, 2003 was $17.0 million,
compared to pretax income of $14.6 million in the same quarter last year. Net income for
the current quarter was $12.4 million, compared to net income of $9.9 million for the same
quarter last year. Diluted net income per share was $0.14 for the current quarter,
compared to diluted net income per share of $0.11 for the same quarter last year. Basic
net income per share was $0.14 and $0.11 for the quarters ended May 31, 2003 and May
31, 2002, respectively.

The improvement in operating
performance in the three months ended May 31, 2003 as compared to the same period in the
previous year reflects the strength of our business model which is designed to fully
engage the enterprise customer and the strength of our product offerings and strong sales
force execution in a tough economic environment. To enhance our CPM solution, during the
fourth quarter of fiscal 2003 we acquired Adaytum. Adaytum has been integrated into our
operations for the quarter ended May 31, 2003 and therefore our results include the
revenue and expenses related to Adaytum for the full quarter. Comparatively, the results
for the quarter ended May 31, 2002 reflect operations prior to this acquisition. To that
extent, our operations for the quarter ended May 31, 2003 are not identical to the
operations for the quarter ended May 31, 2002. Our intent with the acquisition of Adaytum
has been to fully integrate the product offerings and operations of Adaytum into our
product offerings and operations. With this integration of Adaytum essentially complete
we are no longer separately

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tracking the operations of Adaytum
and therefore we are not reporting separately on the effect of the acquisition on our
revenues, cost of revenues, or operating expenses.

Gross margin for the quarter ended
May 31, 2003 was $121.7 million, an increase of 22% over gross margin of $99.4 million for
the same quarter last year. Gross margin percentage for the quarter ended May 31, 2003 was
81% as compared to 83% for the comparative quarter of the previous fiscal year. Total
operating expenses for the quarter ended May 31, 2003 were $105.6 million, a 22% increase
from operating expenses of $86.4 million for the same quarter last year. The operating
margin for both the quarters ended May 31, 2003 and May 31, 2002 was 11%.

We operate internationally, with a
substantial portion of our business conducted in foreign currencies. Accordingly, our
results are affected by year-over-year exchange rate fluctuations of the United States
dollar relative to various European currencies, to the Canadian dollar, and to a lesser
extent, other foreign currencies. The effect of foreign exchange rate fluctuations
improved the overall revenue growth by approximately eight percentage points for the
quarter ended May 31, 2003. The effect of foreign exchange rate fluctuations increased the
growth in cost of revenue by eight percentage points and increased growth in operating
expenses by nine percentage points for the quarter ended May 31, 2003.

The following table sets out, for the
periods indicated, the percentage that each income and expense item bears to revenue, and
the percentage change of each item as compared to the indicated prior period.

|                                     |  | Percentage of Revenue     | Percentage Change        
|------------------------------------ |  | ------------------------- | -------------------------
|                                    
|                                     |  | Three months endedMay 31, | Three months endedMay 31,
|                                     |  | 2003                      | 2002                     
|                                    
|Revenue                              |  | 100                       | .0%                      
|                                     |  |                          
|Cost of revenue                      |  | 19                        | .1                       
|                                     |  |                          
|Gross margin                         |  | 80                        | .9                       
|                                     |  |                          
|Operating expenses                   | 
|Selling, general, and administrative |  | 53                        | .5                       
|Research and development             |  | 15                        | .5                       
|Amortization of intangible assets .  |  | 1                         | .2                       
|                                     |  |                          
|Total operating expenses             |  | 70                        | .2                       
|                                     |  |                          
|Operating income                     |  | 10                        | .7                       
|Interest expense                     |  | (0                        | .1)                      
|Interest income                      |  | 0                         | .7                       
|                                     |  |                          
|Income before taxes                  |  | 11                        | .3                       
|Income tax provision                 |  | 3                         | .1                       
|                                     |  |                          
|Net income                           |  | 8                         | .2%                      
|                                     |  |                          

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# REVENUE

|($000s)                       |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|----------------------------- |  | ------------------------- | -------------------------------------------
|                             
|                              |  | 2003                      | 2002                                       
|                             
|Business intelligence         |  | $143,684                  |                                            
|Application development tools |  | 6,879                     |                                            
|                              |  |                          
|Revenue                       |  | $150,563                  |                                            
|                              |  |                          

Our total revenue was $150.6 million
for the quarter ended May 31, 2003, an increase of $30.4 million or 25%, compared to the
quarter ended May 31, 2002. Our total revenue was derived primarily from our suite of
business intelligence products, principally Web versions of PowerPlay® and
Impromptu®. Contributing to a lesser extent were Cognos Enterprise Planning Series
(formerly Adaytum Enterprise Planning), Cognos Metrics Manager, Cognos ReportNet,
DecisionStream, Cognos Finance, NoticeCast, and Cognos Visualizer. During the
quarter ended May 31, 2003 we released Cognos Series 7 Version 2, which builds on the
end-to-end business intelligence value of Cognos Series 7. Cognos Series 7 is a fully
integrated enterprise business intelligence solution. We believe that enterprise-wide
deployment of business intelligence products is the trend in the industry and that it will
continue to increase as a percentage of our total revenue. An emerging trend in the market
for business intelligence is the growing demand for pre-packaged solutions that shorten
time to implementation and results. Our Analytic Applications address this trend as they
extend the value of investments in Enterprise Resource Planning (ERP) and other
operational systems. Total revenue (license, support, and services revenue) derived from
our business intelligence products was $143.7 million in the quarter ended May 31, 2003,
an increase of $32.1 million or 29% when compared to the corresponding period in the prior
fiscal year. Total revenue from these business intelligence products was 95% and 93% of
total revenue for the quarters ended May 31, 2003 and May 31, 2002,
respectively.

Total revenue (license, support, and
services revenue) from our application development tools, PowerHouse® and Axiant®,
was $6.9 million for the quarter ended May 31, 2003, a decrease of $1.7 million or 19%
compared to the corresponding period in the prior fiscal year. We believe that, in both
the short and long-term, revenues from these products will continue to decline.

The overall change in total revenue
from our three revenue categories in the quarter ended May 31, 2003 from May 31, 2002
was as follows: a 16% increase in product license revenue, a 33% increase in product
support revenue, and an 29% increase in services revenue.

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The following table sets out, for
each fiscal year indicated, the revenue attributable to each of our three main geographic
regions and the percentage change in the dollar amount in each region as compared to the
prior fiscal year.

|($000s)       |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|------------- |  | ------------------------- | -------------------------------------------
|             
|              |  | 2003                      | 2002                                       
|             
|North America |  | $  90,117                 |                                            
|Europe        |  | 47,043                    |                                            
|Asia/Pacific  |  | 13,403                    |                                            
|              |  |                          
|Total         |  | $150,563                  |                                            
|              |  |                          

In the quarter ended May 31, 2003 the
percentage of revenue from our three geographic regions, North America (includes Latin
America), Europe (consisting of UK and Continental Europe), and Asia/Pacific (consisting
of Australia and countries in the Far East) was 60%, 31%, and 9%, respectively as compared
to 66%, 28%, and 6%, respectively for the comparative quarter ended May 31, 2002. During
the quarter ended May 31, 2003 revenue from North America increased 14%, revenue from
Europe increased 40%, and revenue from Asia/Pacific increased by 79%.

Our growth rate in Asia/Pacific for
the three months ended May 31, 2003 reflects the growth in Japan and the Australia/New
Zealand region during the quarter. Our growth rate in Europe for the quarter reflects
growth in the UK as well as Germany and Belgium.

# Product License Revenue

|($000s)                     |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|--------------------------- |  | ------------------------- | -------------------------------------------
|                           
|                            |  | 2003                      | 2002                                       
|                           
|Product license revenue     |  | $57,801                   |                                            
|Percentage of total revenue |  | 38.4                      | %                                          

Product license revenue was $57.8
million in the quarter ended May 31, 2003, an increase of $8.0 million or 16%. The
increase in product license revenue during the three months ended May 31, 2003 as compared
to the same period in the prior year reflects the strength of our business model, our
product offerings, and strong sales execution in what has been a challenging market.
Customer purchasing behavior remains challenging in the current economic environment,
however we believe that the long-term prospects for the business intelligence market are
promising. Product license revenue accounted for 38% of total revenue in the three months
ended May 31, 2003 compared to 41% for the corresponding period in the prior fiscal year.

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Product license revenue from the
business intelligence products was $56.7 million for the quarter ended May 31, 2003, an
increase of $8.7 million or 18% compared to the corresponding period in the prior fiscal
year. Product license revenue from business intelligence products accounted for 98% and
96% of total product license revenue for the quarters ended May 31, 2003 and 2002.

Product license revenue from
application development tools was $1.1 million for the quarter ended May 31, 2003, a
decrease of $0.8 million or 40% compared to the corresponding period in the prior fiscal
year. We believe in both the short and long term, the trend of decreasing product license
revenue from these products will continue.

# Product Support Revenue

|($000s)                     |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|--------------------------- |  | ------------------------- | -------------------------------------------
|                           
|                            |  | 2003                      | 2002                                       
|                           
|Product support revenue     |  | $64,127                   |                                            
|Percentage of total revenue |  | 42.6                      | %                                          

Product support revenue was $64.1
million in the quarter ended May 31, 2003, an increase of $15.9 million or 33% compared to
the corresponding periods in the prior fiscal year. The increase in the dollar amounts was
the result of the positive rate of renewal of support contracts and the expansion of our
customer base.

Product support revenue accounted for
43% and 40% of our total revenue in the quarters ended May 31, 2003 and 2002,
respectively.

Product support revenue from the
business intelligence products comprised 91% and 87% of the product support revenue for
the quarters ended May 31, 2003 and 2002, respectively. Support revenue from the business
intelligence products increased by 40% in the quarter ended May 31, 2003, and support
revenue from the application development tools decreased by 12%, compared to the
corresponding quarter in the prior fiscal year.

# Services Revenue

|($000s)                     |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|--------------------------- |  | ------------------------- | -------------------------------------------
|                           
|                            |  | 2003                      | 2002                                       
|                           
|Product services revenue    |  | $28,635                   |                                            
|Percentage of total revenue |  | 19.0                      | %                                          

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Services revenue (training,
consulting, and other revenue) was $28.6 million in the quarter ended May 31, 2003, an
increase of $6.5 million or 29% compared to the corresponding period in the prior fiscal
year. Services revenue accounted for 19% of our total revenue for the three months ended
May 31, 2003 as compared to 18% for the corresponding period in the prior fiscal year.

In the quarter ended May 31, 2003,
services revenue associated with the business intelligence products contributed $28.5
million, an increase of $6.7 million or 30%. The increase was primarily attributable to an
increase in consulting revenue. Education revenue remained relatively consistent with the
prior period. Customer purchasing behavior remains challenging in the current economic
environment, however we believe that the long-term prospects for the business intelligence
market are promising. Total services revenue associated with our application development
tools for the quarter was immaterial for the quarter ended May 31, 2003 a $0.2 million
decrease from the corresponding period in the prior fiscal year.

Service revenue associated with
business intelligence products contributed 99% of the total services revenue for both the
quarter ended May 31, 2003 and the quarter ended May 31, 2002.

# COST OF REVENUE

# Cost of Product License

|($000s)                       |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|----------------------------- |  | ------------------------- | -------------------------------------------
|                             
|                              |  | 2003                      | 2002                                       
|                             
|Cost of product license       |  | $1,111                    |                                            
|Percentage of license revenue |  | 1.9                       | %                                          

The cost of product license consists
primarily of royalties for technology licensed from third parties, as well as the costs of
materials and distribution related to licensed software.

The cost of product license revenue
was $1.1 million, an increase of $0.4 million or 51% in the quarter ended May 31, 2003
compared to the corresponding period in the prior fiscal year. These costs represented 2%
of product license revenue for the quarter ended May 31, 2003, as compared to 1% of
product license revenue for the quarter ended May 31, 2002. The increase in these costs
was the result of increases in royalties and materials and distribution costs.

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# Cost of Product Support

|($000s)                       |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|----------------------------- |  | ------------------------- | -------------------------------------------
|                             
|                              |  | 2003                      | 2002                                       
|                             
|Cost of product support       |  | $6,855                    |                                            
|Percentage of support revenue |  | 10.7                      | %                                          

The cost of product support includes
the costs associated with resolving customer inquiries and other telesupport and
websupport activities, royalties in respect of technological support received from third
parties, and the cost of materials delivered in connection with enhancement releases.

The cost of product support revenue
was $6.9 million, an increase of $2.4 million or 55% in the quarter ended May 31, 2003
compared to the corresponding period in the prior fiscal year.

The cost of product support
represented 11% of total product support revenue for the quarter ended May 31, 2003 as
compared to 9% for the corresponding period in prior fiscal year. The increase in the cost
of product support is the result of increases in telesupport and websupport costs as we
brought in additional staffing to enhance our customer service through the web and
telephonic support systems through the third and fourth quarters of fiscal 2003 as well as
the quarter ended May 31, 2003. Contributing to the staffing level increases was the
integration of the Adaytum staff into our support organization.

# Cost of Services

|($000s)                       |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|----------------------------- |  | ------------------------- | -------------------------------------------
|                             
|                              |  | 2003                      | 2002                                       
|                             
|Cost of services              |  | $20,859                   |                                            
|Percentage of service revenue |  | 72.8                      | %                                          

The cost of services includes the
costs associated with delivering education, consulting, and other services in relation to
our products.

The cost of services was $20.9
million, an increase of $5.3 million or 34% in the quarter ended May 31, 2003 compared to
the corresponding period in the prior fiscal year.

The cost of services increased as a
percentage of services revenue representing 73% for the quarter ended May 31, 2003
as compared to 70% for the corresponding period in prior fiscal year. The increase in
cost of services, in dollar terms is the result of increases in compensation related
costs and increases in costs for services purchased externally. The average number of
employees within services increased by 15% in the three months ended May 31, 2003 when

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compared to the corresponding period
in the prior fiscal year. Contributing to the increase, but to a lesser extent, were
increases in travel costs.

# OPERATING EXPENSES

# Selling, General, and
Administrative

|($000s)                              |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|------------------------------------ |  | ------------------------- | -------------------------------------------
|                                    
|                                     |  | 2003                      | 2002                                       
|                                    
|Selling, general, and administration |  | $80,436                   |                                            
|Percentage of total revenue          |  | 53.4                      | %                                          

Selling, general, and administrative
(SG&A) expenses were $80.4 million, an increase of $14.6 million or 22% in the quarter
ended May 31, 2003, compared to the corresponding period in the prior fiscal year. These
costs decreased as a percentage of revenue, representing 53% for the three months ended
May 31, 2002 respectively compared to 55% for the corresponding period in the prior fiscal
year.

The increase in these expenses in the
three months ended May 31, 2003 was predominantly the result of increases in staff related
costs due to both external recruiting and the integration of Adaytum selling, general, and
administration staff. Contributing to the increase, but to a lesser extent, were increases
in travel and living and marketing costs. The average number of employees within selling,
general, and administrative increased by 16% in the three months ended May 31, 2003 when
compared to the corresponding period in the prior fiscal year.

# Research and Development

|($000s)                     |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|--------------------------- |  | ------------------------- | -------------------------------------------
|                           
|                            |  | 2003                      | 2002                                       
|                           
|Research and development    |  | $23,294                   |                                            
|Percentage of total revenue |  | 15.5                      | %                                          

Research and development (R&D)
costs were $23.3 million, an increase of $3.6 million or 18% in the quarter ended May 31,
2003 compared to the corresponding period in the prior fiscal year. The increase for the
quarter was predominantly the result of increases in compensation costs, partially offset
by a decrease in services purchased externally. R&D costs were 15% of revenue for the
quarter ended May 31, 2003 as compared to 16% of revenue for the corresponding period in
the prior year. The average number of employees within R&D increased 9% for the three
months ended May 31, 2003 when compared to the corresponding periods of the prior year.

26

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During the quarter ended May 31,
2003, we continued to invest in R&D activities for our next generation of business
intelligence solutions which are the foundation of our CPM vision. During the quarter
ended May 31, 2003 we released Cognos Series 7 Version 2 which builds on the end-to-end
business intelligence value of Cognos Series 7. Cognos Series 7 is a fully integrated
enterprise business intelligence solution offering flexible scoreboards, dashboards,
managed reporting, analysis, ad hoc query, and event detection and notification,
visualization, and data integration. We also completed the initial integration of Adaytum
Enterprise Planning (now Cognos Enterprise Planning Series) into our CPM solution. We also
continued our investment in our next generation of reporting products, Cognos
ReportNet. Cognos ReportNet is a global, scalable, reporting product, which provides
ad-hoc query, business intelligence reporting, managed reporting and production reporting
with large distribution capability. Cognos ReportNet was available for sale during the
quarter ended May 31, 2003.

We currently do not have any software
development costs capitalized on our balance sheet. Software development costs are
expensed as incurred unless they meet generally accepted accounting criteria for deferral
and amortization. Software development costs incurred prior to the establishment of
technological feasibility do not meet these criteria, and are expensed as incurred.
Capitalized costs are amortized over a period not exceeding 36 months. No costs were
deferred in the quarters ended May 31, 2003 and May 31, 2002. Costs were not deferred in
the period because either no projects met the criteria for deferral or, if met, the period
between achieving technological feasibility and the general availability of the product
was short, rendering the associated costs immaterial.

# Amortization of
Intangible Assets

|($000s)                           |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|--------------------------------- |  | ------------------------- | -------------------------------------------
|                                 
|                                  |  | 2003                      | 2002                                       
|                                 
|Amortization of intangible assets |  | $1,907                    |                                            

Amortization of intangible assets was
$1.9 million, an increase of $1.0 million or 117% for the quarter ended May 31, 2003
compared to the corresponding period in the prior year. The increase in these expenses in
the three months ended May 31, 2003 was due to the amortization of acquired technology and
contractual relationships as a result of the acquisition of Adaytum during the fourth
quarter of fiscal 2003.

# Interest Income and
Expense

|($000s)             |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|------------------- |  | ------------------------- | -------------------------------------------
|                   
|                    |  | 2003                      | 2002                                       
|                   
|Net interest income |  | $873                      |                                            

Net interest income was $0.9
million, a decrease of $0.7 million or 44% in the quarter ended May 31, 2003 compared to
the corresponding period in the prior fiscal year. The decrease was

27

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primarily attributable to a decrease
in the average portfolio size. The average portfolio size decreased as compared the same
period in the prior fiscal year as a result of the acquisition of Adaytum for $157.1
million of cash consideration during the fourth quarter of fiscal 2003. Contributing to
the decrease in interest income, but to a lesser extent, was a decrease in average
effective interest rates as compared to the same period in the prior fiscal year.

# Income Tax Provision

|($000s)            |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|------------------ |  | ------------------------- | -------------------------------------------
|                  
|                   |  | 2003                      | 2002                                       
|                  
|Tax expense        |  | $4,583                    |                                            
|Effective tax rate |  | 27.0                      | %                                          

Our tax rate is affected by the
relative profitability of our operations in various geographic regions. In the three
months ended May 31, 2003 we recorded an income tax provision of $4.6 million representing
an effective income tax rate of 27%. Comparatively, in the three months ended May 31, 2002
we recorded an income tax provision of $4.7 million representing an effective income tax
rate of 32%. The decrease in effective tax rate reflects the expected geographical mix of
our earnings throughout the current fiscal year.

28

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# LIQUIDITY AND
CAPITAL
RESOURCES

|($000s)                                            |  | As atMay 31, 2003 | As atFebruary 28, 2003 | Percentage Change
|-------------------------------------------------- |  | ----------------- | ---------------------- | -----------------
|                                                  
|Cash, cash equivalents, and short-term investments |  | $263,896          |                        | $ 242,258        
|Working capital                                    |  | 153,277           |                        | 128,864          
|Long-term liabilities                              |  | --                |                        | (1,647           

|($000s, except DSO)             |  | Three months endedMay 31, | Percentage ChangeThree months ended May 31,
|------------------------------- |  | ------------------------- | -------------------------------------------
|                               
|                                |  | 2003                      | 2002                                       
|                               
|Net cash provided by (used in): |  |                           |                                            
|Operating activities            |  | $10,541                   |                                            
|Investing activities            |  | 12,214                    |                                            
|Financing activities            |  | 10,205                    |                                            
|Days sales outstanding (DSO)    |  | 63                        |                                            

# Cash, Cash Equivalents,
and Short-term Investments

As of May 31, 2003, we held $263.9
million in cash, cash equivalents, and short-term investments, an increase of $21.6
million from February 28, 2003. Cash and cash equivalents include investments which are
highly liquid and held to maturity. Cash equivalents typically include commercial paper
and term deposits, bankers acceptances and bearer deposit notes issued by major
North American banks. All cash equivalents have terms to maturity of ninety days or less.
Short-term investments are investments that are highly liquid and held to maturity with
terms to maturity greater than ninety days, but less than twelve months. Short-term
investments typically consist of commercial paper and corporate bonds.

# Working Capital

Working capital represents our
current assets less our current liabilities. As of May 31, 2003, working capital was
$153.3 million, an increase of $24.4 million from February 28, 2003. The increase can be
attributed to higher levels of cash and cash equivalents, and lower levels of accounts
payable, accruals, and salaries, commissions, and related items, and deferred revenue.
Offsetting this increase were decreases in accounts receivable and short-term investments.

29

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Days sales outstanding (DSO) was 63
days at May 31, 2003 as compared to 60 days as at May 31, 2002. We calculate our days
sales outstanding ratio based on ending accounts receivable balances and quarterly
revenue.

# Long-term Liabilities

As at May 31, 2003, we had no
long-term liabilities, a decrease of $1.6 million from February 28, 2003. The decrease was
the result of movement from long-term classification to short-term classification of a
payment due in relation to the patent litigation settlement agreement during the quarter
ended May 31, 2003. All remaining payments under the settlement are now current.

# Cash Provided by
Operating Activities

Cash provided by operating activities
(after changes in non-cash working capital items) for the three months ended May 31, 2003
was $10.5 million, a decrease of $19.9 million compared to the comparative period last
year. Although net income increased during the quarter ended May 31, 2003 compared to the
same quarter last year, this increase was offset by greater change in deferred revenue
balances and larger payments of salaries, commissions, and related items as compared to
the same period last year.

# Cash Provided by Investing
Activities

Cash provided by investing activities was
$12.2 million for three months ended May 31, 2003, a decrease in investment of $49.1
million compared to the comparative period in the prior fiscal year. During the quarter
ended May 31, 2003 we had a decrease in the net investment in short-term investments from
the comparative quarter in the prior fiscal year. In the quarter ended May 31, 2003, the
proceeds on the maturity of our short-term investments were in excess of purchases of
short-term investments by $19.1 million. In comparison during the quarter ended May 31,
2002, our investments in short-term investments, net of maturities, were $65.6 million.

# Cash Provided by (Used
in) Financing Activities

Cash provided by financing activities
was $10.2 million for the three months ended May 31, 2003, compared to a use of cash in
financing activities of $6.2 million during the comparative period of the prior fiscal
year. We issued 866,000 common shares, valued at $12.5 million, during the three months
ended May 31, 2003, compared to the issue of 296,000 shares valued at $3.8 million during
the corresponding period in the prior fiscal year. The issuance of shares in both periods
was pursuant to our stock purchase plan and the exercise of stock options by employees,
officers, and directors. Financing activities for the three month period ended
May 31, 2003 did not include the repurchase of shares in the open market.
Comparatively we repurchased 388,000 shares at a value of $10.0 million in the
corresponding period in the prior fiscal year.

In October 2002, we adopted a program
that enables us to purchase up to 4,398,820 common shares (not more than 5% of those
issued and outstanding) between October 9, 2002 and October 8, 2003. Purchases will be
made on the Nasdaq Stock Market or the Toronto Stock Exchange at prevailing open market
prices and paid out of general corporate funds. This program does not commit us to make
any share repurchases. All repurchased shares will be cancelled.

30

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# Contracts and Commitments

We have arranged an unsecured credit
facility. The credit facility permits us to borrow funds or issue letters of credit or
guarantee up to Cdn$12.5 million (U.S.$9.1 million), subject to certain covenants. As of
May 31, 2003 and 2002, there were no direct borrowings under this facility.

We do not enter into off-balance
sheet financing as a matter of practice except for the use of operating leases for office
space, computer equipment, and vehicles. In accordance with GAAP, neither the lease
liability nor the underlying asset is carried on the balance sheet, as the terms of the
leases do not meet the thresholds for capitalization.

Our policy with respect to foreign
currency exposure is to manage our financial exposure to certain foreign exchange
fluctuations with the objective of neutralizing some of the impact of foreign currency
exchange movements. To achieve this objective, we enter into foreign exchange forward
contracts to hedge portions of the net investment in our various subsidiaries. As a
result, the exchange gains or losses recorded on translation of the subsidiaries financial
statements are partially offset by gains and losses attributable to the applicable foreign
exchange forward contract. Realized and unrealized gains and losses from effective hedges
are not included in income but are shown in the cumulative translation adjustment account
included in other comprehensive income. Typically the forward contracts are between the
United States dollar and the euro, the British pound, the Swiss franc, the Japanese yen,
and the Australian dollar. We enter into these foreign exchange forward contracts with
major Canadian chartered banks, and therefore we do not anticipate non-performance by
these counterparties. The amount of the exposure on account of any non-performance is
restricted to the unrealized gains in such contracts. As of May 31, 2003, we had foreign
exchange forward contracts, with maturity dates on or before August 28, 2003, to exchange
various foreign currencies in the amount of $3.1 million.

As consideration for the patent
litigation settlement agreement with Business Objects we agreed to pay the sum of $24.0
million. During the quarter ended May 31, 2003, $1.8 million was paid, and $1.8 million
will be paid every quarter for the next four quarters. The remaining principal amount is
recorded in accrued charges.

In connection with the acquisition of
Adaytum, we undertook a restructuring plan in conjunction with the business combination.
The restructuring primarily relates to involuntary employee separations of approximately
90 employees of Adaytum, accruals for abandoning leased premises of Adaytum and related
write-downs of leasehold improvements as well as asset write-downs of Adaytum. During the
quarter ended May 31, 2003 the total cash payments made in relation to the accrual were
$1.1 million, and cash payments remaining at May 31, 2003 were $6.5 million. The remaining
accrual is included in the balance sheet as accrued charges and salaries, commissions, and
related items and is expected to be paid during fiscal 2004.

We have never declared or paid any
cash dividends on our common shares. Our current policy is to retain our earnings to
finance expansion and to develop, license, and acquire new software products, and to
otherwise reinvest in Cognos.

We believe that our current cash,
cash equivalents, and short-term investments balance and funds generated from operations,
if any, will be adequate to finance operations and meet any capital requirements through
fiscal 2004.

31

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Inflation has not had a significant
impact on our results of operations.

# CERTAIN
FACTORS
THAT
MAY
AFFECT
FUTURE
RESULTS

This report contains forward-looking
statements, including statements regarding the future success of our business and
technology strategies, and future market opportunities. These statements are neither
promises nor guarantees, but involve known and unknown risks and uncertainties that may
cause our actual results, levels of activity, performance, or achievements to be
materially different from any future results, levels of activity, performance, or
achievements expressed in or implied by these forward-looking statements. These risks
include risks related to our revenue growth, operating results, industry, products, and
litigation, as well as the other factors discussed below and elsewhere in this report.
Readers should not place undue reliance on any such forward-looking statements, which
speak only as of the date they were made. We disclaim any obligation to publicly update or
revise any such statements to reflect any change in our expectations or in events,
conditions, or circumstances on which any such statements may be based, or that may affect
the likelihood that actual results will differ from those set forth in the forward-looking
statements.

# Risks related to Our
Business

Our revenue may not
continue to grow at historical rates, could stop growing or decline.

We rely predominantly on revenue from
our business intelligence products. Although we have experienced revenue growth with
respect to our business intelligence products over the past few fiscal years, we cannot
assure you that revenue from these products will continue to grow. Revenue associated with
these products may, in the future, stop growing or decline. In addition, our growth rate
may be adversely affected by global economic conditions generally, and economic conditions
in Canada, the U.S. or Europe, in particular. Our growth rate in revenue may also be
affected by external economic factors such as currency fluctuations.

Our ability to adjust our
expenses in the near term is limited, which could cause our profits to decrease.

During periods of unfavorable
economic conditions in recent fiscal years, we reduced overall discretionary spending
levels but continued to incur expenditures selectively in areas that we viewed as
necessary to strengthen our position in the marketplace. This resulted in an increase in
our operating expenses. The economic environment remains challenging and external economic
factors such as currency fluctuations may affect our expenses. We expect to continue to
incur expenditures selectively in areas that we view as necessary for new revenue growth
and expand global market coverage. We base our operating expense budgets on projections of
future revenues that are more difficult to make in periods of economic uncertainty. As a
result, our operating expense budgets may be based on inaccurate assumptions. If we do not
meet our future revenue projections, operating expenses would increase as a percentage of
our revenues and our profits would decrease.

32

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Currency fluctuations may
adversely affect us.

A substantial portion of our revenues
are earned in currencies other than U.S. dollars, such as the euro, and similarly, a
substantial portion of our operating expenses are incurred in currencies other than U.S.
dollars, such as the Canadian dollar and the euro. Revenues and expenses generated in
foreign currencies are translated at exchange rates during the month in which the
transaction occurs. The resulting gains or losses from this translation are included in
net income. We cannot predict the effect of foreign exchange fluctuations in the future.
Therefore, fluctuations in the exchange rate between the U.S. dollar and other currencies,
such as the Canadian dollar and the euro, may have a material adverse effect on our
business, financial condition, and operating results.

As a result of our international
operations a substantial portion of our financial instruments is held in currencies other
than the United States dollar. Our policy with respect to foreign currency exposure, as it
relates to financial instruments, is to manage financial exposure to certain foreign
exchange fluctuations with the objective of neutralizing some of the impact of foreign
currency exchange movements. We enter into foreign exchange forward contracts to hedge
portions of the net investment in various subsidiaries, typically between the U.S. dollar
and the euro, the British pound, the Swiss franc, the Japanese yen, and the Australian
dollar.

Our quarterly and annual
operating results are volatile and difficult to predict, and if we fail to meet the
expectations of securities analysts or investors, our share price could decline
significantly.

Historically, our quarterly operating
results have varied from quarter to quarter, and we anticipate this pattern to continue.
We typically realize a larger percentage of our annual revenue and earnings in the fourth
quarter of each fiscal year, and lower revenue and earnings in the first quarter of the
following fiscal year. In addition, in each quarter we typically close a larger percentage
of sales transactions near the end of that quarter. Because our quarterly and annual
operating results may be significantly affected by large, enterprise-wide sales, our
inability to close one or more such sales before the end of the applicable period may
adversely affect our operating results. It is possible that in one or more future
quarters, our operating results may be below the expectations of public market analysts
and investors. In that event, the price of our common shares may fall. Our quarterly and
annual operating results may be adversely affected by a wide variety of factors,
including:

|o |  | our
ability to achieve and maintain revenue growth or to anticipate a decline in revenue from
any of our products;
|- |  | ------------------------------------------------------------------------------------------------------------------

|o |  | the
impact of global economic conditions on our sales cycle;
|- |  | ------------------------------------------------------------

|o |  | our
ability to obtain and close sales, particularly large enterprise transactions;
|- |  | ----------------------------------------------------------------------------------

|o |  | changes
in product mix and our ability to anticipate changes in shipment patterns;
|- |  | ----------------------------------------------------------------------------------

|o |  | our
ability to identify and develop new technologies and to incorporate those technologies
into new products;
|- |  | -------------------------------------------------------------------------------------------------------------

|o |  | our
ability to select appropriate business models and strategies;
|- |  | -----------------------------------------------------------------

|o |  | our
ability to position ourselves to achieve growth;
|- |  | ----------------------------------------------------

|o |  | our
ability to identify,  hire, train, motivate,  and retain highly qualified personnel,  and
to achieve targeted productivity          levels;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

33

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|o |  | our
ability to identify, develop, introduce, and deliver in a timely manner new and enhanced
versions of our products which anticipate market demand and address customer needs;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | market
acceptance of business intelligence software and of new and enhanced versions of our
products;
|- |  | -----------------------------------------------------------------------------------------------------

|o |  | our
ability to establish and maintain a competitive advantage;
|- |  | --------------------------------------------------------------

|o |  | changes
in our pricing policies or those of our competitors and other competitive pressures on
selling prices;
|- |  | --------------------------------------------------------------------------------------------------------------

|o |  | size,
 timing,  and execution of customer orders and shipments,  including  delays,  deferrals,
 or  cancellations of customer          orders;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|o |  | number,
 timing,  and  significance  of product  enhancements  and new product and  technology
 announcements  by us or by our competitors;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------

|o |  | our
reliance on third-party distribution channels as part of our sales and marketing strategy;
|- |  | ----------------------------------------------------------------------------------------------

|o |  | the
timing and provisions of pricing protections and exchange from our distributors;
|- |  | ------------------------------------------------------------------------------------

|o |  | changes
in foreign currency exchange rates; and
|- |  | -----------------------------------------------

|o |  | our
ability to enforce our intellectual property rights.
|- |  | --------------------------------------------------------

These factors could materially
adversely affect our share price and our business, results of operations, and financial
condition.

We depend on our direct sales
force to sell our products, and if we fail to retain or hire and train new sales
personnel, our future growth will be impaired.

We sell our products primarily
through our direct sales force, and we expect to continue to do so in the future. Our
ability to achieve revenue growth in the future will depend on our ability to recruit,
train, and retain qualified direct sales personnel. We have in the past and may in the
future experience difficulty in recruiting and retaining qualified sales personnel. Our
inability to maintain and improve the productivity of our direct sales force could impair
our growth and cause our share price to fall.

We rely, in part, on
others to market and distribute our products, and their failure to do so successfully
could significantly harmour ability to maintain and expand our customer base, which
would adversely affect our growth strategy.

Our sales and marketing strategy
includes multi-tiered channels of third-party distributors, resellers, and OEMs. We have
developed a number of these relationships and intend to continue to develop new ones. Our
inability to attract effective third-party distributors or their inability to penetrate
their respective market segments, or the loss of any of our third-party distributors as a
result of competitive products offered by other companies, or products developed
internally by them or otherwise, could harm our ability to maintain and expand our
customer base. In addition, if a third-party distributor fails to install our product
successfully, we could lose existing and potential customers. If these events were to
occur, our business could grow more slowly than forecasted, or not at all, or we could
incur additional, unanticipated expenses.

34

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We may lose sales, or
sales may be delayed, due to the long sales and implementation cycles for our products,
which would reduce our revenues.

Our customers typically invest
substantial time, money, and other resources researching their needs and available
competitive alternatives before deciding to license our software products. Typically, the
larger the potential sale, the more time, money, and other resources will be invested. As
a result, we may wait many months after our first contact with a customer before a sale
can actually be completed. The time required for implementation of our products varies
among our customers and may last several months, depending on our customers needs
and the products deployed. In particular, it may be difficult to install our products if
the customer has complicated operational requirements, such as integrating databases,
hardware, and software from different vendors.

During these long sales
and implementation cycles, events may occur that affect the size or timing of the order
or even cause it to be cancelled. For example:

|o |  | purchasing
decisions may be postponed, or large purchases reduced, during periods of economic
uncertainty;
|- |  | ----------------------------------------------------------------------------------------------------------

|o |  | we
or our competitors may announce or introduce new products; or
|- |  | ----------------------------------------------------------------

|o |  | the
customer's own budget and purchasing priorities may change.
|- |  | ---------------------------------------------------------------

If these events were to occur, sales
of our products may be cancelled or delayed, which would reduce our revenues.

If we do not protect our
intellectual property, our products may lose any competitive advantage, and even if we
are successful, protecting our intellectual property could be time consuming and
expensive.

Our success depends in part on our
ability to protect our rights in our intellectual property. We rely on various
intellectual property protections, including contractual provisions, patents, copyright,
trademark and trade secret laws, to preserve our intellectual property rights. Despite our
precautions, it may be possible for third parties to obtain and use our intellectual
property without our authorization. Policing unauthorized use of intellectual property is
difficult, and some foreign laws do not protect proprietary rights to the same extent as
the laws of Canada or the United States.

To protect our intellectual property,
we may become involved in litigation, which could result in substantial expenses, divert
the attention of our management, and materially disrupt the conduct of our business.

35

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Intellectual property
claims brought against us could be time consuming and costly to defend, and if we are
unsuccessful, our ability to sell products
incorporating the disputed intellectual property could be limited or we may have to pay
license fees, royalties, or damages.

We may become increasingly subject to
claims by third parties that our technology infringes their property rights due to the
growth of software products in our target markets and the overlap in functionality of
these products. Regardless of their merit, any such claims could:

|o |  | be
time consuming;
|- |  | ------------------

|o |  | be
expensive to defend;
|- |  | -----------------------

|o |  | divert
management's attention and focus away from the business;
|- |  | ---------------------------------------------------------------

|o |  | cause
product shipment delays; and
|- |  | ----------------------------------

|o |  | require
us to enter into costly royalty or licensing agreements or to stop using such technology.
|- |  | -------------------------------------------------------------------------------------------------

The loss of our rights to
use software currently licensed to us by third parties could significantly increase our
operating expenses by forcing us to seek alternative technology and adversely affect
our ability to compete.

We license certain technologies used
in our products from third parties, generally on a non-exclusive basis. The termination of
any of these licenses, or the failure of the licensors to adequately maintain or update
their products, could delay our ability to ship our products while we seek to implement
alternative technology offered by other sources. In addition, alternative technology may
not be available on commercially reasonable terms. In the future, it may be necessary or
desirable to obtain other third-party technology licenses relating to one or more of our
products, or relating to current or future technologies, to enhance our product offerings.
We cannot assure you that we will be able to obtain licensing rights to the needed
technology on commercially reasonable terms, if at all.

If a successful product
liability claim were made against us, our business could be seriously harmed.

Our license agreements with our
customers typically contain provisions designed to limit our exposure to potential product
liability claims. Despite this, it is possible that such limitation of liability
provisions may not be effective as a result of existing or future laws or unfavorable
judicial decisions. We have not experienced any product liability claims to date. However,
the sale and support of our products may entail the risk of such claims, which are likely
to be substantial in light of the use of our products in business-critical applications. A
successful product liability claim could result in significant monetary liability and
could seriously disrupt our business.

We face significant
operational and financial risks associated with our international operations.

We derive a significant portion of
our total revenues from international sales. International sales are subject to
significant risks, including:

|o |  | unexpected
changes in legal and regulatory requirements and policies in foreign markets affecting
our international sales;
|- |  | --------------------------------------------------------------------------------------------------------------------------

36

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|o |  | changes
in tariffs and other trade barriers;
|- |  | --------------------------------------------

|o |  | fluctuations
in currency exchange rates;
|- |  | ----------------------------------------

|o |  | political
and economic instability;
|- |  | -----------------------------------

|o |  | longer
payment cycles and other difficulties in accounts receivable collection;
|- |  | -------------------------------------------------------------------------------

|o |  | difficulties
in managing foreign distributors and representatives;
|- |  | ------------------------------------------------------------------

|o |  | difficulties
in staffing and managing foreign operations;
|- |  | ---------------------------------------------------------

|o |  | difficulties
in protecting our intellectual property internationally; and
|- |  | -------------------------------------------------------------------------

|o |  | potentially
adverse consequences arising from changes in tax laws.
|- |  | ------------------------------------------------------------------

Each of these factors could
materially impact our international operations and adversely affect our business as a
whole.

Pursuing, completing, and
integrating recent and potential acquisitions could divert managements attention
and financial resources and may negatively affect our operating results.

In the past we have made acquisitions
of products and businesses and in fiscal 2003 we acquired privately held Adaytum, Inc. In
the future, we may engage in additional acquisitions of other products or businesses that
we believe are complementary to ours. We cannot assure you that we will be able to
identify additional suitable acquisition candidates available for sale at reasonable
prices, consummate any acquisition, or successfully integrate any acquired product or
business into our operations. Further, acquisitions may involve a number of other risks,
including:

|o |  | diversion
of management's attention;
|- |  | ------------------------------------

|o |  | disruption
to our ongoing business;
|- |  | -----------------------------------

|o |  | failure
to retain key acquired personnel;
|- |  | -----------------------------------------

|o |  | difficulties
in assimilating acquired operations, technologies, products, or personnel;
|- |  | ---------------------------------------------------------------------------------------

|o |  | unanticipated
expenses, events, or circumstances;
|- |  | -------------------------------------------------

|o |  | assumption
of disclosed and undisclosed liabilities; and
|- |  | --------------------------------------------------------

|o |  | the
risk that we will not be able to value the acquired in-process research and development,
or an entire acquired business, appropriately.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------

If we do not successfully address
these risks or any other problems encountered in connection with an acquisition, the
acquisition could have a material adverse effect on our business, results of operations,
and financial condition. Problems with an acquired business could have a material adverse
effect on our performance or our business as a whole. In addition, if we proceed with an
acquisition, our available cash may be used to complete the transaction, diminishing our
liquidity and capital resources, or shares may be issued which could cause a dilution to
existing shareholders.

Failure to manage our
growth successfully may adversely impact our operating results.

The expansion of our business and
customer base has placed, and will continue to place, increased demands on our
management, operating systems, internal controls, and financial resources. If not managed
effectively, these increased demands may adversely affect the products and services we
provide to our existing clients. In addition, our personnel, systems, procedures, and
controls may be inadequate to support our future operations. Consequently, in order to
manage our growth effectively, we may be required to increase expenditures to expand,

37

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train, and manage our employee base,
improve our management, financial and information systems, and controls, or make other
capital expenditures. Our results of operations and financial condition could be harmed
if we encounter difficulties in effectively managing our growth.

Our executive management
and other key personnel are essential to our business, and if we are not able to recruit
and retain qualified personnel, our ability to develop, market, and support our
products and services could be harmed.

We depend on the services of our key
technical and management personnel. The loss of the services of any of these persons could
have a material adverse effect on our business, results of operations, and financial
condition. Our success is highly dependent on our continuing ability to identify, hire,
train, motivate, and retain highly qualified management, technical, sales, and marketing
personnel. Competition for such personnel can be intense, and we cannot assure you that we
will be able to attract, assimilate, or retain highly qualified technical and managerial
personnel in the future. Our inability to attract and retain the necessary management,
technical, sales, and marketing personnel may adversely affect our future growth and
profitability.

# Risks Related to Our
Industry

Economic uncertainty and
downturns in the software market may lead to decreases in our revenues and margins.

The market for our products depends
on economic conditions affecting the broader software market. Downturns in the economy may
cause businesses and governments to delay or cancel software projects, reduce their
overall information technology budgets, or reduce or cancel orders for our products. In
this environment, customers may experience financial difficulty, fail to purchase or defer
the budget for the purchase of our products, or cease operations. This, in turn, may lead
to longer sales cycles, delays, or failures in payment and collection, and price
pressures, causing us to realize lower revenues and margins. In particular, acts of
terrorism, military action, or war have created an uncertain economic environment and we
cannot predict the impact of such events on our customers or business. We believe that, in
light of such events, some businesses and governments may delay, curtail, or eliminate
capital spending on information technology generally, or in certain sectors of information
technology in particular. If capital spending in our markets declines, it may be necessary
for us to gain significant market share from our competitors in order to achieve our
financial goals and maintain profitability, and there is no assurance we would be able to
do so.

If our products contain
material defects, our ability to attract and retain customers may be harmed.

Software products are complex and
may contain errors or defects, particularly when first introduced, when new versions or
enhancements are released, or when configured to individual customer computing systems.
We currently have known errors and defects in our products. Despite testing conducted by
us, additional defects and errors found in current versions, new versions, or
enhancements of our products after commencement of commercial shipment could result in
the loss of revenues or a delay in market acceptance. If, as a result of such a defect or
error, our products cannot be effectively integrated with other hardware, software and
database and networking systems, our ability to attract and retain customers could
suffer. The occurrence

38

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of any of these events could cause
us to lose customers or require us to pay damages to existing customers and, therefore,
could seriously harm our business, operating results, and financial condition.

We face intense
competition, and if we fail to compete successfully, our business could be seriously
harmed and our revenues could grow more slowly than expected, stop growing, or decline.

We face substantial competition
throughout the world, primarily from software companies located in the United States,
Europe, and Canada. Some of our competitors have been in the software business longer than
we have and have substantially greater financial and other resources with which to pursue
research and development, manufacturing, marketing, and distribution of their products. We
expect our existing competitors and future competitors to continue to improve the
performance of their current products and to introduce new products or new technologies.
In addition, some of our larger existing competitors may in the future devote more
resources to the business intelligence market. New product introductions by our competitors could cause a
decline in sales, a reduction in the sales price, or a loss of market acceptance of our
existing products. To the extent that we are unable to effectively compete against our
current and future competitors, our ability to sell products could be harmed and our
market share reduced. Any erosion of our competitive position could have a material
adverse effect on our business, results of operations, and financial condition.

If we do not respond
effectively and on a timely basis to rapid technological change, our products and
services may become obsolete and we could lose customers.

The markets for our products are
characterized by:

|o |  | rapid
and significant technological change;
|- |  | -------------------------------------------

|o |  | frequent
new product introductions and enhancements;
|- |  | ----------------------------------------------------

|o |  | changing
customer demands; and
|- |  | ------------------------------

|o |  | evolving
industry standards.
|- |  | ----------------------------

We cannot assure you that our
products and services will remain competitive in light of future technological change or
respond to market demands and developments or new industry standards. If we are unable to
identify a shift in market demand or industry standards quickly enough, we may not be able
to develop products to meet those new demands or standards, or bring them to market in a
timely way. In addition, failure to respond successfully to technological change may
render our products and services obsolete and thus harm our ability to attract and retain
customers.

# Risks Related to
External Conditions

Our share price will
fluctuate.

The market price of our common shares
may be volatile and could be subject to wide fluctuations due to a number of factors,
including:

|o |  | actual
or anticipated fluctuations in our results of operations;
|- |  | ----------------------------------------------------------------

|o |  | changes
in estimates of our future results of operations by us or securities analysts;
|- |  | --------------------------------------------------------------------------------------

39

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|o |  | announcements
of technological innovations or new products by us or our competitors;
|- |  | ------------------------------------------------------------------------------------

|o |  | general
industry changes in the business intelligence tools or related markets; or
|- |  | ----------------------------------------------------------------------------------

|o |  | other
events or factors.
|- |  | ------------------------

In addition, the financial markets
have experienced significant price and volume fluctuations that have particularly affected
the market prices of equity securities of many technology companies and that sometimes
have been unrelated to the operating performance of these companies. Broad market
fluctuations, as well as economic conditions generally and in the software industry
specifically, may adversely affect the market price of our common shares. In the past,
following periods of volatility in the market price of a particular companys
securities, securities class action litigation has often been brought against that
company. Similar litigation may occur in the future with respect to us, which could result
in substantial costs, divert managements attention and other company resources, and
have a material adverse effect upon our business, results of operations, and financial
condition.

40

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|Item 3. |  | Quantitative and Qualitative Disclosure about Market Risk
|------- |  | ---------------------------------------------------------

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

# Interest Rate Risk

Our exposure to market rate risk for
changes in interest rates relates primarily to our investment portfolio. The investment of
cash is regulated by our investment policy of which the primary objective is security of
principal. Among other selection criteria, the investment policy states that the term to
maturity of investments cannot exceed two years in length. We do not use derivative
financial instruments in our investment portfolio.

Interest income on our cash, cash
equivalents, and short-term investments is subject to interest rate fluctuations, but we
believe that the impact of these fluctuations does not have a material effect on our
financial position due to the short-term nature of these financial instruments. We have no
long-term debt. Our interest income and interest expense are most sensitive to the general
level of interest rates in Canada and the United States. Sensitivity analysis is used to
measure our interest rate risk. For the quarter ending May 31, 2003, a 100 basis-point
adverse change in interest rates would not have had a material effect on our consolidated
financial position, earnings, or cash flows.

# Foreign Currency Risk

We operate internationally;
accordingly, a substantial portion of our financial instruments are held in currencies
other than the United States dollar. Our policy with respect to foreign currency exposure
is to manage financial exposure to certain foreign exchange fluctuations with the
objective of neutralizing some of the impact of foreign currency exchange movements. To
achieve this objective, we enter into foreign exchange forward contracts to hedge portions
of the net investment in various subsidiaries. The forward contracts are typically between
the United States dollar and the British pound, the euro, and the Australian dollar.
Sensitivity analysis is used to measure our foreign currency exchange rate risk. As of May
31, 2003, a 10% adverse change in foreign exchange rates versus the U.S. dollar would not
have had a material effect on our reported cash, cash equivalents, and short-term
investments.

As we operate internationally, a
substantial portion of our business is also conducted in foreign currencies other than the
U.S. dollar. Accordingly, our results are affected, and may be affected in the future, by
exchange rate fluctuations of the United States dollar relative to the Canadian dollar, to
various European currencies, and, to a lesser extent, other foreign currencies. Revenues
and expenses generated in foreign currencies are translated at exchange rates during the
month in which the transaction occurs. The resulting gains and losses from this
translation are included in net income. We cannot predict the effect of foreign exchange
losses in the future; however, if significant foreign exchange losses are experienced,
they could have a material adverse effect on our business, results of operations, and
financial condition.

41

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|Item  4. |  | Controls and Procedures
|-------- |  | -----------------------

|a) |  | Evaluation
of disclosure controls and procedures.
|-- |  | -------------------------------------------------

Under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief Financial
Officer, we have evaluated the disclosure controls and procedures as of a date within 90
days before the filing date of this quarterly report. Based on this evaluation the Chief
Executive Officer and Chief Financial Officer conclude that the disclosure controls and
procedures (as defined in Rule 13a-14(c) of the Securities Exchange Act of 1934)
effectively ensure that information required to be disclosed in our filings and
submissions under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commissions rules and
forms.

|b) |  | Changes
in internal controls
|-- |  | ----------------------------

There have been no significant
changes in our internal controls or in other factors that could significantly affect these
controls subsequent to the evaluation of the internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.

42

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PART II  OTHER
INFORMATION

|Item 1. |  | Legal Proceedings
|------- |  | -----------------

The Corporation is not a party to any
litigation that, in the opinion of management, could reasonably be expected to have
material adverse impact on the Corporations financial position.

In addition, we and our subsidiaries
may, from time to time be involved in other legal proceedings, claims, and litigation that
arise in the ordinary course of business.

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

|a) |  | The
Corporation held its Annual Meeting of Shareholders on June 19, 2003.
|-- |  | -------------------------------------------------------------------------

|b) |  | At
the meeting, it was resolved that those persons nominated as indicated below           be
elected as directors of the Corporation and that Ernst & Young LLP be
          reappointed as the Corporations Auditors for the fiscal year ending
          February 28, 2004. Shareholders also approved the adoption of the Cognos
          Incorporated, 2003-2008 Stock Option Plan and shareholders voted in favor of a
          proposal requesting our Board of Directors establish a policy to expense in our
          annual income statement the costs of all future stock options issued to our
          senior executives. The voting results of the meeting are presented in the
          following table:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Voting Results
Annual Meeting of Shareholders
June 19, 2003

|                                         
|-----------------------------------------
|                                         
|                                         
|Election of Directors                    
|                                         
|John E. Caldwell                         
|                                         
|Paul D. Damp                             
|                                         
|Pierre Y. Ducros                         
|                                         
|Robert W. Korthals                       
|                                         
|John Rando                               
|                                         
|William Russell                          
|                                         
|James M. Tory                            
|                                         
|Renato Zambonini                         
|                                         
|Reappointment of Auditors                
|                                         
|Adoption of Stock Option Plan            
|                                         
|Shareholder Proposal Expensing of Options
|                                         

43

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

|a) |  | Exhibits
|-- |  | --------
|   |  | 10.23   
|   |  | 99      
|   |  | 99.1    
|   |  | 99.2    
|   |  | 99.3    

|b) |  | Reports
on Form 8-K
|-- |  | -------------------

The Corporation filed a Form 8-K/A,
on March 12, 2003 pursuant to Items 2 and 7, Acquisition or Disposition of Assets, and
Financial Statements and Pro Forma Financial Information, and Exhibits,respectively. This Form 8-K/A related to the Corporations Acquisition of
Adaytum, Inc. during fiscal 2003. The Corporation filed a Form 8-K on April 2, 2003
pursuant to Items 7 and 12, Financial Statements and Exhibits and Disclosure of
Results of Operations and Financial Condition,respectively.This Form 8-K
related to the release of the Corporations results for the quarter and fiscal year
ended February 28, 2003.

44

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SIGNATURE

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

|COGNOS INCORPORATED
|-------------------
|(Registrant)       
|                   
|                   
|July 11, 2003      
|                   
|Date               
|                   
|                   
|                   
|                   

45

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CERTIFICATIONS

I, Renato Zambonini, Chief Executive
Officer, certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Cognos Incorporated;
|-- | --------------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
          statement of a material fact or omit to state a material fact necessary to make
          the statements made, in light of the circumstances under which such statements
          were made, not misleading with respect to the period covered by this quarterly
          report;
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | designed
such disclosure controls and procedures to ensure that material           information
relating to the registrant, including its consolidated subsidiaries,           is made
known to us by others within those entities, particularly during the           period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | evaluated
the effectiveness of the registrants disclosure controls and           procedures
as of a date within 90 days prior to the filing date of this           quarterly report
(the Evaluation Date); and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) |  | presented
in this quarterly report our conclusions about the effectiveness of           the
disclosure controls and procedures based on our evaluation as of the           Evaluation
Date;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | all
significant deficiencies in the design or operation of internal controls           which
could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | any
fraud, whether or not material, that involves management or other employees           who
have a significant role in the registrants internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
          quarterly report whether or not there were significant changes in internal
          controls or in other factors that could significantly affect internal controls
          subsequent to the date of our most recent evaluation, including any corrective
          actions with regard to significant deficiencies and material weaknesses.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              |  |                        
|------------- |  | -----------------------
|              |  |                        
|July 11, 2003 |  | /s/ Renato Zambonini   
|              |  |                        
|Date          |  | Renato Zambonini,      
|              |  | Chief Executive Officer

46

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I, Tom Manley, Senior Vice President,
Finance & Administration and Chief Financial Officer (Principal Financial Officer and
Chief Accounting Officer), certify that:

|1. | I have reviewed this quarterly report on Form 10-Q of Cognos Incorporated;
|-- | --------------------------------------------------------------------------

|2. | Based on my knowledge, this quarterly report does not contain any untrue
          statement of a material fact or omit to state a material fact necessary to make
          the statements made, in light of the circumstances under which such statements
          were made, not misleading with respect to the period covered by this quarterly
          report;
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | designed
such disclosure controls and procedures to ensure that material           information
relating to the registrant, including its consolidated subsidiaries,           is made
known to us by others within those entities, particularly during the           period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | evaluated
the effectiveness of the registrants disclosure controls and           procedures
as of a date within 90 days prior to the filing date of this           quarterly report
(the Evaluation Date); and
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c) |  | presented
in this quarterly report our conclusions about the effectiveness of           the
disclosure controls and procedures based on our evaluation as of the           Evaluation
Date;
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | all
significant deficiencies in the design or operation of internal controls           which
could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) |  | any
fraud, whether or not material, that involves management or other employees           who
have a significant role in the registrants internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
          quarterly report whether or not there were significant changes in internal
          controls or in other factors that could significantly affect internal controls
          subsequent to the date of our most recent evaluation, including any corrective
          actions with regard to significant deficiencies and material weaknesses.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|              |  |                                                  
|------------- |  | -------------------------------------------------
|              |  |                                                  
|July 11, 2003 |  | /s/ Tom Manley                                   
|              |  |                                                  
|Date          |  | Tom Manley                                       
|              |  | Senior Vice President, Finance &                 
|              |  | Administration and Chief Financial Officer       
|              |  | (Principal Financial Officer and Chief Accounting
|              |  | Officer)                                         

47

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EXHIBIT INDEX

|EXHIBIT NO. |  | DESCRIPTION                                                                                                                                   |  | PAGE  | 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | ----- | 
|           
|10.23       |  | 2003 - 2008 Stock
Option Plan (Incentive and Non-Qualified)                                                                                   |  | 49-56 | 
|           
|99          |  | Selected Consolidated
Financial Statements and Notes in U.S. Dollars and in accordance with Canadian
Generally Accepted Accounting Principles |  | 57-67 | 
|           
|99.1        |  | Management's Discussion and
Analysis of Financial Condition and Results of Operations - Canadian Supplement                                   |  | 68-69 | 
|           
|99.2        |  | Certification Pursuant to 18 U.S.C
Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002                         |  | 70   
|           
|99.3        |  | Certification Pursuant to 18 U.S.C Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002                         |  | 71   

48