---

---

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 August 31, 2004

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 Exchange
Act). YES X    NO

The number of shares outstanding of
the registrants only class of Common Stock as of September 15, 2004, was 90,469,103.

---

---

# COGNOS INCORPORATED

# INDEX

|                               |  |                                                                                                              |  | PAGE | 
|------------------------------ |  | ------------------------------------------------------------------------------------------------------------ |  | ---- | 
|PART I 
FINANCIAL INFORMATION
|                              
|Item 1.                        |  | Unaudited Consolidated Financial Statements                                                                  |  |      | 
|                               |  | Consolidated Statements of Income for the three and six months ended August 31, 2004 and August 31, 2003     |  | 3    | 
|                               |  | Consolidated Balance Sheets as of August 31, 2004 and February 29, 2004                                      |  | 4    | 
|                               |  | Consolidated Statements of Cash Flows for the three and six months ended August 31, 2004 and August 31, 2003 |  | 5    | 
|                               |  | Condensed Notes to the Consolidated Financial Statements                                                     |  | 6    | 
|Item 2.                        |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations                        |  | 16   | 
|Item 3.                        |  | Quantitative and Qualitative Disclosure about Market Risk                                                    |  | 46   | 
|Item 4.                        |  | Controls and Procedures                                                                                      |  | 47   | 
|                              
|PART II  OTHER
INFORMATION   
|                              
|Item 1.                        |  | Legal Proceedings                                                                                            |  | 48   | 
|Item 2.                        |  | Changes in Securities,
Use of Proceeds and Issuer
Purchases of Equity Securities                             |  | 48   | 
|Item 6.                        |  | Exhibits and Reports on Form 8-K                                                                             |  | 49   | 
|Signature                      |  |                                                                                                              |  | 50   | 

2

---

PART I  FINANCIAL
INFORMATION

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

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

|                                         |  | Three months endedAugust 31, |   | Six months endedAugust 31, |  
|---------------------------------------- |  | ---------------------------- | - | -------------------------- | -
|                                        
|                                         |  | 2004                         |   | 2003                       |  
|                                        
|Revenue                                  |  |                              |   |                            |  
|Product license                          |  | $   75,362                   |   | $   62,234                 |  
|Product support                          |  | 76,156                       |   | 66,162                     |  
|Services                                 |  | 33,702                       |   | 29,785                     |  
|                                        
|Total revenue                            |  | 185,220                      |   | 158,181                    |  
|                                        
|Cost of revenue                          | 
|Cost of product license                  |  | 546                          |   | 1,106                      |  
|Cost of product support                  |  | 7,074                        |   | 6,887                      |  
|Cost of services                         |  | 27,457                       |   | 21,503                     |  
|                                        
|Total cost of revenue                    |  | 35,077                       |   | 29,496                     |  
|                                        
|Gross margin                             |  | 150,143                      |   | 128,685                    |  
|                                        
|Operating expenses                       | 
|Selling, general, and administrative     |  | 90,230                       |   | 81,495                     |  
|Research and development                 |  | 25,382                       |   | 21,714                     |  
|Amortization of intangible assets        |  | 1,369                        |   | 1,991                      |  
|                                        
|Total operating expenses                 |  | 116,981                      |   | 105,200                    |  
|                                        
|Operating income                         |  | 33,162                       |   | 23,485                     |  
|Interest expense                         |  | (8                           | ) | (154                       | )
|Interest income                          |  | 1,781                        |   | 1,543                      |  
|                                        
|Income before taxes                      |  | 34,935                       |   | 24,874                     |  
|Income tax provision                     |  | 7,336                        |   | 6,716                      |  
|                                        
|Net income                               |  | $   27,599                   |   | $   18,158                 |  
|                                        
|Net income per share                     | 
|Basic                                    |  | $0.31                        |   | $0.20                      |  
|                                        
|Diluted                                  |  | $0.30                        |   | $0.20                      |  
|                                        
|Weighted average number of shares (000s) | 
|Basic                                    |  | 90,382                       |   | 89,181                     |  
|                                        
|Diluted                                  |  | 92,849                       |   | 91,806                     |  
|                                        

(See accompanying notes)

3

---

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

|                                                               |  | August 31,2004 |   | February 29,2004 |  
|-------------------------------------------------------------- |  | -------------- | - | ---------------- | -
|                                                              
|Assets                                                         |  | (Unaudited)    |   | (Note 1)         |  
|Current assets                                                 |  |                |   |                  |  
|Cash and cash equivalents                                      |  | $364,782       |   | $224,830         |  
|Short-term investments                                         |  | 75,628         |   | 163,411          |  
|Accounts receivable                                            |  | 114,824        |   | 152,859          |  
|Prepaid expenses and other current assets                      |  | 16,495         |   | 16,668           |  
|Deferred tax assets                                            |  | 1,815          |   | 2,445            |  
|                                                              
|                                                               |  | 573,544        |   | 560,213          |  
|Fixed assets                                                   |  | 69,048         |   | 71,292           |  
|Intangible assets                                              |  | 21,431         |   | 23,643           |  
|Goodwill                                                       |  | 172,323        |   | 172,323          |  
|                                                              
|                                                               |  | $836,346       |   | $827,471         |  
|                                                              
|Liabilities                                                    | 
|Current liabilities                                            | 
|Accounts payable                                               |  | $  23,741      |   | $  30,698        |  
|Accrued charges                                                |  | 23,349         |   | 25,483           |  
|Salaries, commissions, and related items                       |  | 52,231         |   | 59,903           |  
|Income taxes payable                                           |  | 5,550          |   | 5,875            |  
|Deferred revenue                                               |  | 155,759        |   | 178,752          |  
|                                                              
|                                                               |  | 260,630        |   | 300,711          |  
|Deferred income taxes                                          |  | 20,176         |   | 18,098           |  
|                                                              
|                                                               |  | 280,806        |   | 318,809          |  
|                                                              
|Stockholders Equity                                           | 
|Capital stock                                                  | 
|Common shares and additional paid-in capital                   | 
|(August 31, 2004 - 90,417,883; February 29, 2004 - 89,902,895) |  | 224,676        |   | 206,499          |  
|Treasury shares                                                | 
|(August 31, 2004 - 46,375; February 29, 2004 - 43,500)         |  | (1,199         | ) | (1,065           | )
|Deferred stock-based compensation                              |  | (771           | ) | (730             | )
|Retained earnings                                              |  | 334,608        |   | 305,399          |  
|Accumulated other comprehensive loss                           |  | (1,774         | ) | (1,441           | )
|                                                              
|                                                               |  | 555,540        |   | 508,662          |  
|                                                              
|                                                               |  | $836,346       |   | $827,471         |  
|                                                              

(See accompanying notes)

4

---

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

|                                                                  |  | Three months endedAugust 31, |   | Six months endedAugust 31, |  
|----------------------------------------------------------------- |  | ---------------------------- | - | -------------------------- | -
|                                                                 
|                                                                  |  | 2004                         |   | 2003                       |  
|                                                                 
|Cash flows from operating activities                              |  |                              |   |                            |  
|Net income                                                        |  | $  27,599                    |   | $  18,158                  |  
|Non-cash items                                                    | 
|Depreciation and amortization                                     |  | 6,504                        |   | 7,318                      |  
|Amortization of deferred stock-based compensation                 |  | 220                          |   | 221                        |  
|Amortization of other deferred compensation                       |  | --                           |   | 62                         |  
|Deferred income taxes                                             |  | 1,285                        |   | 7,007                      |  
|Loss on disposal of fixed assets                                  |  | 123                          |   | 9                          |  
|                                                                 
|                                                                  |  | 35,731                       |   | 32,775                     |  
|Change in non-cash working capital                                | 
|Decrease (increase) in accounts receivable                        |  | (8,472                       | ) | (5,109                     | )
|Decrease (increase) in prepaid expenses and other current assets  |  | (699                         | ) | (772                       | )
|Decrease in accounts payable                                      |  | (18                          | ) | (2,153                     | )
|Increase (decrease) in accrued charges                            |  | 1,298                        |   | (1,263                     | )
|Increase (decrease) in salaries, commissions, and related items   |  | 8,468                        |   | 2,005                      |  
|Increase (decrease) in income taxes payable                       |  | 2,048                        |   | 1,297                      |  
|Decrease in deferred revenue                                      |  | (8,942                       | ) | (5,069                     | )
|                                                                 
|Net cash provided by operating activities                         |  | 29,414                       |   | 21,711                     |  
|                                                                 
|Cash flows from investing activities                              | 
|Maturity of short-term investments                                |  | 99,081                       |   | 53,058                     |  
|Purchase of short-term investments                                |  | (85,566                      | ) | (88,339                    | )
|Additions to fixed assets                                         |  | (4,637                       | ) | (5,089                     | )
|Additions to intangible assets                                    |  | (460                         | ) | (365                       | )
|Business acquisition                                              |  | --                           |   | (122                       | )
|                                                                 
|Net cash provided by (used in) investing activities               |  | 8,418                        |   | (40,857                    | )
|                                                                 
|Cash flows from financing activities                              | 
|Issue of common shares                                            |  | 8,983                        |   | 5,643                      |  
|Purchase of treasury shares                                       |  | (335                         | ) | --                         |  
|Repurchase of shares                                              |  | (9,866                       | ) | --                         |  
|Decrease in long-term debt and long-term liabilities              |  | --                           |   | --                         |  
|                                                                 
|Net cash provided by (used in) financing activities               |  | (1,218                       | ) | 5,643                      |  
|                                                                 
|Effect of exchange rate changes on cash                           |  | 727                          |   | (985                       | )
|                                                                 
|Net increase (decrease) in cash and cash equivalents              |  | 37,341                       |   | (14,488                    | )
|Cash and cash equivalents, beginning of period                    |  | 327,441                      |   | 200,670                    |  
|                                                                 
|Cash and cash equivalents, end of period                          |  | 364,782                      |   | 186,182                    |  
|Short-term investments, end of period                             |  | 75,628                       |   | 98,260                     |  
|                                                                 
|Cash, cash equivalents, and short-term investments, end of period |  | $440,410                     |   | $284,442                   |  
|                                                                 

(See accompanying notes)

5

---

COGNOS INCORPORATED
CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. 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. The consolidated
balance sheet as at February 29, 2004 has been extracted from the audited consolidated
financial statements at that date. These consolidated financial statements 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 on Form 10-K for the fiscal
year ended February 29, 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 RevenueRecognition, 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

---

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

| | Services
revenue from education, consulting, and other services is recognized at the time such
services are rendered. Many of the Corporations 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 TypeContracts.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
contracts with multiple obligations (e.g., delivered and undelivered products, support
obligations, education, consulting, and other services), the Corporation allocates
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, SoftwareRevenue
Recognition, With Respect to Certain Transactions. VSOE is the renewal rate for
product support elements of a contract and, 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
Corporation applies Accounting Principles Board Opinion 25, Accounting for Stock
Issued to Employees 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. (Adaytum),
under purchase accounting methodology, compensation cost has been recognized in the
financial statements. For restricted share units, the fair value of each 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

COGNOS INCORPORATED 
CONDENSED NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(All amounts in U.S. 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 endedAugust 31, |   | Six months endedAugust 31, |  
| | ----------------------------------- |  | ---------------------------- | - | -------------------------- | -
| |                                    
| |                                     |  | 2004                         |   | 2003                       |  
| |                                    
| | Net income:                         |  |                              |   |                            |  
| | As reported                         |  | $27,599                      |   | $18,158                    |  
| | Add: Stock-based employee           | 
| | compensation included above         |  | 220                          |   | 221                        |  
| | Less: Stock-based employee          | 
| | compensation using fair value based | 
| | method                              |  | (3,428                       | ) | (5,813                     | )
| |                                    
| | Pro forma                           |  | $24,391                      |   | $12,566                    |  
| |                                    
| | Basic net income per share:         | 
| | As reported                         |  | $0.31                        |   | $0.20                      |  
| | Add: Stock-based employee           | 
| | compensation included above         |  | --                           |   | --                         |  
| | Less: Stock-based employee          | 
| | compensation using fair value based | 
| | method                              |  | (0.04                        | ) | (0.06                      | )
| |                                    
| | Pro forma                           |  | $0.27                        |   | $0.14                      |  
| |                                    
| | Diluted net income per share:       | 
| | As reported                         |  | $0.30                        |   | $0.20                      |  
| | Add: Stock-based employee           | 
| | compensation included above         |  | --                           |   | --                         |  
| | Less: Stock-based employee          | 
| | compensation using fair value based | 
| | method                              |  | (0.04                        | ) | (0.06                      | )
| |                                    
| | Pro forma                           |  | $0.26                        |   | $0.14                      |  
| |                                    
| | Weighted average number of shares:  | 
| | Basic                               |  | 90,382                       |   | 89,181                     |  
| |                                    
| | Diluted                             |  | 92,849                       |   | 91,806                     |  
| |                                    

8

---

COGNOS INCORPORATED

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

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

| |                                  |  |                              |   |                            |   |      |   |      |  
| | -------------------------------- |  | ---------------------------- | - | -------------------------- | - | ---- | - | ---- | -
| |                                  |  | Three months endedAugust 31, |   | Six months endedAugust 31, |  
| |                                 
| |                                  |  | 2004                         |   | 2003                       |   | 2004 |   | 2003 |  
| |                                 
| | Risk-free interest rates         |  | 3.2                          | % | 2.9                        | % | 3.2  | % | 2.9  | %
| | Expected volatility              |  | 51.0                         | % | 57.2                       | % | 51.0 | % | 57.2 | %
| | Dividend yield                   |  | 0.0                          | % | 0.0                        | % | 0.0  | % | 0.0  | %
| | Expected life of options (years) |  | 4.3                          |   | 4.3                        |   | 4.3  |   | 4.3  |  
| |                                  |  |                              |   |                            |   |      |   |      |  

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

| | During
the three and six months ended August 31, 2004, there were no additions to goodwill.
During the three and six months ended August 31, 2003, there were additions to goodwill
of $122,000 and $230,000, respectively. The additions during the three and six months
ended August 31, 2003 were 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 as per the terms of
the original purchase agreement. 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, 2004. Based on this test, goodwill is not considered to be impaired.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                   |  | Three months endedAugust 31, |  | Six months endedAugust 31, | 
| | ----------------- |  | ---------------------------- |  | -------------------------- | 
| |                  
| |                   |  | 2004                         |  | 2003                       | 
| |                  
| |                   |  | ($000s)                      |  | ($000s)                    | 
| | Beginning balance |  | $172,323                     |  | $170,099                   | 
| | Additions         |  | --                           |  | 122                        | 
| |                  
| | Closing balance   |  | $172,323                     |  | $170,221                   | 
| |                  

9

---

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

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

| |                           |  | As at August 31,2004 |                          | As at February 29,2004 |                          |                   |   |         |  |              |  
| | ------------------------- |  | -------------------- | ------------------------ | ---------------------- | ------------------------ | ----------------- | - | ------- |  | ------------ | -
| |                          
| |                           |  | Cost                 | Accumulated Amortization | Cost                   | Accumulated Amortization | Amortization Rate
| |                          
| |                           |  | ($000s)              |                          | ($000s)                |                          |                   |   |         |  |              |  
| | Acquired technology       |  | $ 33,381             |                          | $20,131                |                          | $ 33,381          |   | $18,161 |  | 20           | %
| |                           |  |                      |                          |                        |                          |                   |   |         |  | Compensation
| | Deferred compensation     |  | 8,945                |                          | 8,945                  |                          | 8,945             |   | 8,938   |  | Period      
| | Contractual relationships |  | 7,800                |                          | 1,597                  |                          | 7,800             |   | 1,109   |  | 12.5         | %
| | Trademarks and patents    |  | 4,149                |                          | 2,171                  |                          | 3,620             |   | 1,895   |  | 20           | %
| |                           |  |                      |                          |                        |                          |                   |   |         | 
| |                           |  | 54,275               |                          | $32,844                |                          | 53,746            |   | $30,103 | 
| |                           |  |                      |                          |                        |                          |                   |   |         | 
| |                           |  | (32,844              | )                        |                        |                          | (30,103           | )
| |                           |  |                      |                          |                        |                          |                  
| | Net book value            |  | $ 21,431             |                          |                        |                          | $ 23,643          |  
| |                           |  |                      |                          |                        |                          |                  

| | Amortization
of intangible assets was $1,369,000 and $1,991,000 in the quarters ended August 31, 2004
and August 31, 2003, respectively, and was $2,741,000 and $4,096,000 in the six months
ended August 31, 2004 and August 31, 2003, respectively. The estimated amortization
expense related to intangible assets is as follows ($000s):
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2005 (Q3 to Q4)     |  | $2,771 | 
|------------------- |  | ------ | 
|2006                |  | 5,500  | 
|2007                |  | 5,388  | 
|2008                |  | 4,734  | 
|2009                |  | 1,207  | 
|2010                |  | 990    | 
|2011 and thereafter |  | 841    | 

10

---

COGNOS INCORPORATED

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

|6. |  | Commitments
and Contingencies
|-- |  | -----------------------------

| | Customer
Indemnification
| | ------------------------

| | The
Corporation has entered into licensing agreements with customers that include limited
intellectual property indemnification clauses. These clauses are typical in the software
industry and require the Corporation to compensate the customer for certain liabilities
and damages incurred as a result of third party intellectual property claims arising from
these transactions. The Corporation has not made any significant indemnification payments
as a result of these clauses and, in accordance with Financial Accounting Standards Board
(FASB) Interpretation No. 45, Guarantors Accounting and Disclosure
Requirementsfor Guarantees, Including Indirect Guarantees of Indebtedness of
Others, has not accrued any amounts in relation to these indemnification clauses.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Legal
Proceedings
| | -----------------

| | The
Corporation and its subsidiaries may, from time to time, be involved in legal
proceedings, claims, and litigation that arise in the ordinary course of business. In the
event that any such claims or litigation are resolved against Cognos, such outcomes or
resolutions could have a material adverse effect on the business, financial condition, or
results of operations of the Corporation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. |  | 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. |  | Stockholders Equity
|-- |  | --------------------

| | The
Corporation issued 467,000 common shares for $9.0 million, and 360,000 common shares for
$5.6 million during the quarters ended August 31, 2004, and August 31, 2003,
respectively. The Corporation issued 1,102,000 common shares for $19.3 million and
1,226,000 common shares for $18.1 million during the six months ended August 31, 2004,
and August 31, 2003, respectively. The issuance of shares in all periods was pursuant to
the Corporations stock purchase plan and the exercise of stock options by employees
and officers.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three months ended August 31, 2004, the Corporation repurchased 287,000 shares in the
open market at a value of $9.9 million under its share repurchase program and 10,000
shares at a value of $0.3 million under its restricted share unit plan. During the six
months ended August 31, 2004, the Corporation repurchased 587,000 shares in the open
market at a value of $19.9 million under its share repurchase program and 10,000 shares
at a value of $0.3 million under its restricted share unit plan. During the three months
ended August 31, 2003, the Corporation did not repurchase shares and, during the
six-month period ended August 31, 2003, the Corporation repurchased 21,000 shares at a
value of $0.6 million under the Corporations restricted share unit plan.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

---

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

| | 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 endedAugust 31, |  | Six months endedAugust 31, | 
| | --------------------------------------------- |  | ---------------------------- |  | -------------------------- | 
| |                                              
| |                                               |  | 2004                         |  | 2003                       | 
| |                                              
| | Basic Net Income per Share                    |  |                              |  |                            | 
| | Net income                                    |  | $27,599                      |  | $18,158                    | 
| |                                              
| | Weighted average number of shares outstanding |  | 90,382                       |  | 89,181                     | 
| |                                              
| | Basic net income per share                    |  | $0.31                        |  | $0.20                      | 
| |                                              
| | Diluted Net Income per Share                  | 
| | Net income                                    |  | $27,599                      |  | $18,158                    | 
| |                                              
| | Weighted average number of shares outstanding |  | 90,382                       |  | 89,181                     | 
| | Dilutive effect of stock options              |  | 2,467                        |  | 2,625                      | 
| |                                              
| | Adjusted weighted average number of shares    | 
| | outstanding                                   |  | 92,849                       |  | 91,806                     | 
| |                                              
| | Diluted net income per share                  |  | $0.30                        |  | $0.20                      | 
| |                                              

|9. |  | 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 not
included in net income and other than transactions with stockholders. These changes are
recorded directly as a separate component of Stockholders Equity. 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---

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

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

| |                                          |  | Three months endedAugust 31, |  | Six months endedAugust 31, | 
| | ---------------------------------------- |  | ---------------------------- |  | -------------------------- | 
| |                                         
| |                                          |  | 2004                         |  | 2003                       | 
| |                                         
| | Net income                               |  | $27,599                      |  | $18,158                    | 
| | Other comprehensive income (loss):       | 
| | Foreign currency translation adjustments |  | 1,382                        |  | 291                        | 
| |                                         
| | Comprehensive income                     |  | $28,981                      |  | $18,449                    | 
| |                                         
| |                                          | 

|10. |  | Segmented
Information
|--- |  | ---------------------

| | The
Corporation operates in one business segmentcomputer software solutions.
| | -----------------------------------------------------------------------------

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

| | The
Corporation undertook a restructuring plan in conjunction with the acquisition of Adaytum
in January 2003. In accordance with Emerging Issues Task Force No. 95-3, Recognition
of Liabilities in Connection witha Business Combination, the liability
associated with this restructuring is considered a liability assumed in the purchase
price allocation. The Corporation recorded restructuring costs of approximately $9.2
million in relation to this restructuring plan. These restructuring costs primarily
relate to involuntary employee separations of approximately 90 employees of Adaytum,
accruals for vacating 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. All
amounts excluding lease payments are expected to be paid in fiscal 2005. Outstanding
balances for lease payments will be paid over the lease term unless settled earlier. 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

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

| | The
following table sets forth the activity in the Corporations restructuring accrual
for the six-month period ended August 31, 2004: ($000s)
| | ----------------------------------------------------------------------------------------------------------------------------------------------

| |                                                          |  | Employee separations | Other restructuring accruals | Total accrual
| | -------------------------------------------------------- |  | -------------------- | ---------------------------- | -------------
| |                                                         
| | Balance as at February 29, 2004                          |  | $ 945                |                              | $3,498       
| | Cash payments during the first six months of fiscal 2005 |  | (563                 | )                            | (193         
| |                                                         
| | Balance as at August 31, 2004                            |  | $ 382                |                              | $3,305       
| |                                                          |  |                     

|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. This change in presentation does not
affect previously reported assets, liabilities, or results of operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities (FIN 46). FIN 46 expands upon existing guidance
that addresses when a company should include in its financial statements the assets,
liabilities, and activities of another company. A variable interest entity is any legal
structure used for business purposes that either (a) does not have equity investors or
has equity investors that lack characteristics of control; or (b) the equity investment
at risk does not provide sufficient financial resources for the entity to support its
activities. Under FIN 46, a variable interest entity must be consolidated by a company if
that company is expected to absorb a majority of the entitys expected losses or to
receive a majority of the entitys expected residual returns. The consolidation
requirements are currently applicable to variable interests created after January 31,
2003. For variable interest entities created before January 31, 2003, the consolidation
requirements became applicable for reporting periods ending after March 15, 2004. FIN 46
also requires certain disclosures about variable interest entities where those entities
are not required to be consolidated. The Corporation has determined that it owns a
minority interest in an undercapitalized distributor that qualifies as a variable
interest entity. The Corporation adopted FIN 46 on May 31, 2004 for this variable
interest entity which was created prior to February 1, 2003. The adoption of FIN 46 did
not have a material impact on the Corporations financial condition or results of
operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

---

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

|14. |  | Subsequent
Event
|--- |  | ----------------

| | Acquisition
of Frango AB
| | ------------------------

| | On
August 24, 2004, the Corporation made an offer to acquire all of the Series A shares and
Series B shares outstanding in Frango AB, a Stockholm-based company specializing in
consolidation and financial reporting solutions. The offer was adjusted on September 21,
2004 to eliminate a premium initially offered on the Series A shares. The total amount of
the offer did not change. Under the terms of the adjusted offer, Frango shareholders will
receive SEK 85.5 in cash for each Series A and Series B share outstanding. The total
value of all shares outstanding is approximately $53.1 million. The Board of Directors of
Frango unanimously recommended that the shareholders of Frango accept the offer.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
acceptance period for the Corporations offer ended on September 27, 2004. As of
September 29, 2004, the Corporation controlled approximately 97% of the capital and
approximately 98% of the votes of Frango. Payment of the offer price to shareholders who
tendered their shares pursuant to the offer commenced on October 1, 2004. The Corporation
intends to acquire all of the remaining shares of Frango through a compulsory acquisition
process.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Corporation is acquiring Frango primarily to add Frangos consolidation and financial
reporting software to its product suite and also to access Frangos distribution
channels in Europe and Asia.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Because
the acquisition was completed in such close proximity to the date of filing of this
quarterly report, the Corporation has not had an opportunity to determine the fair value
of the assets acquired and liabilities assumed. Accordingly, it is not practicable to
provide a purchase price allocation or the valuation of acquired intangible assets at
this time. The Corporation is currently in the process of completing this analysis and
expects to include the purchase price allocation in its next Quarterly Report on Form
10-Q for the period ended November 30, 2004. The operating results of Frango will be
included in the Corporations consolidated financial results from the date of
acquisition.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

---

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)

FORWARD-LOOKING
STATEMENTS/SAFE HARBOR

Managements Discussion and
Analysis of Financial Condition and Results of Operations (MD&A)
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 MD&A contained in our
Annual Report on Form 10-K for the fiscal year ended February 29, 2004 (fiscal
2004). MD&A contains forward-looking statements including statements
concerning future revenues and earnings; product demand and growth opportunities; business
outlook and business momentum; purchasing environment; new product
introductions/development and customer reaction and acceptance of such products, including
the Cognos ReportNetTMproduct; research and development investment; market
positioning and conditions, business model and technology strategies and execution; the
growth, strategic importance and acceptance of corporate performance management, business
intelligence, prepackaged solutions and solution standardization; the impact of the
acquisition of Frango AB; and market position. These forward-looking statements are
neither promises nor guarantees, but involve risks and uncertainties, both known and
unknown, that may cause actual results to differ materially from those in the
forward-looking statements. Factors that may cause such differences include, but are not
limited to, our ability to maintain revenue growth or to anticipate a decline in revenue
from any of our products or services; our ability to develop and introduce new products
and enhancements that respond to customer requirements and rapid technological change; new
product introductions and enhancements by competitors; our ability to compete in an
intensely competitive market; our ability to select and implement appropriate business
models and strategies; fluctuations in our quarterly and annual operating results from
historical patterns; tax rate fluctuations; the impact of global economic conditions on
our business; unauthorized use of our intellectual property; claims by third parties that
our software infringes their intellectual property; the risks inherent in international
operations, such as currency exchange rate fluctuations; our ability to identify, hire,
train, motivate, and retain highly qualified management and other key personnel; our
ability to identify, pursue, complete and integrate acquisitions with desired business
results; our ability to efficiently integrate Frango and the ease in which Frango can be
integrated; the existence of regulatory barriers to integration; and our ability to retain
Frango personnel; as well as the risk factors discussed below and in other periodic
reports filed with the SEC. Readers should not place undue reliance on any such
forward-looking statements, which speak only as of the date they are made. We disclaim any
obligation to publicly update or revise any such statement 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
contained in the forward-looking statements.

# ABOUT
COGNOS

Cognos is a global leader in business
intelligence (BI) and corporate performance management
(CPM) software solutions. Our solutions help 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, management believes that customers gain valuable insights that can be used
to improve operational effectiveness, enhance customer satisfaction, reduce corporate
response times and, ultimately, increase revenues and profits. Our integrated software
solutions consist of our suite of BI components, analytical applications, and performance
management applications.

16

---

Our customers can also strategically
apply our software solutions across their extended enterprise to address their need for
CPM. By allowing timely analysis of data from disparate systems, CPM enables organizations
to measure execution against business strategy to ensure that the two are aligned at all
levels. Our integrated CPM solution enables customers to drive performance through
planning; monitor performance through scorecarding; and understand performance through BI.

Our revenue is derived primarily from
the licensing of our software and the provision of related services for BI solutions.
These related services include product support, education, and consulting. We generally
license software and provide services subject to terms and conditions consistent with
industry standards. For an annual fee, customers may contract with us for product support,
which includes product and documentation enhancements, as well as tele-support and
web-support.

# OVERVIEW OF THE
QUARTER

The second quarter of fiscal 2005 was
highlighted by solid revenue growth, improvements in operating margin and profitability,
and a strong balance sheet.

# Operating Performance

Revenue for the three-month period
ended August 31, 2004 was $185.2 million, an increase of 17% from $158.2 million for the
corresponding period last year. License revenue increased 21% to $75.4 million, compared
with $62.2 million in the second quarter of fiscal 2004. The increase in revenue for the
quarter is primarily attributable to increased sales of Cognos ReportNet and Enterprise
Planning.

Our operating margin for the quarter
ended August 31, 2004 was 17.9% compared to 14.8% a year ago. Net income for the three
month period ended August 31, 2004 was $27.6 million or $0.30 per share compared to net
income of $18.2 million or $0.20 per share for the same period last year. The improvement
in net income for the quarter can be attributed to the strength of our product portfolio,
our distribution channels, our sales organization, our customer relationships, and the
quality of our support and services. This is evidenced by the increase in license revenue
and overall improvement in operating results. Also contributing to the increase in net
income was diligent expense management and a lower effective tax rate.

Our balance sheet continues to
strengthen, ending the quarter with $440.4 million in cash, cash equivalents, and
short-term investments, an increase of $52.2 million from February 29, 2004.

We signed seven contracts in excess
of one million dollars during the quarter. In addition, the number of contracts greater
that $200,000 and $50,000 both increased by 22%, compared to the corresponding period last
year. We believe this increase in the number of large contracts is evidence of the
continuing growth and deepening strategic importance of CPM within our customers
businesses and the trend towards standardization on a single BI platform.

17

---

# Economic and Market
Factors

We believe that the IT purchasing
environment remains stable and that the market for BI products, in particular, is healthy.
The increasing attention to CPM and BI standardization among our customers and large
enterprises worldwide is contributing to our success. Our BI and Enterprise Planning
software, which we believe are the foundation for CPM, allow us to enter the market from
several key entry points and can assist our customers in delivering end-to-end
decision-making systems. We believe customers are receiving a return on their investment
in these products and witnessing evidence of our CPM vision in action.

The breadth of our solution is
allowing us to develop long-term strategic relationships with our customers which, in
turn, enables us to generate additional software licensing and ongoing maintenance
renewals. These relationships are a significant asset as approximately 62% of our license
revenue came from existing customers in the three-month period ended August 31, 2004.

# Offer to acquire Frango

On August 24, 2004, we made an offer
to acquire all of the Series A shares and Series B shares outstanding in Frango AB, a
Stockholm-based company specializing in consolidation and financial reporting solutions.
The offer was adjusted on September 21, 2004 to eliminate a premium initially offered on
the Series A shares. The total amount of the offer did not change. Under the terms of the
adjusted offer, Frango shareholders will receive SEK 85.5 in cash for each Series A and
Series B share outstanding. The total value of all shares outstanding is approximately
$53.1 million. The Board of Directors of Frango unanimously recommended that the
shareholders of Frango accept the offer.

The acceptance period for our offer
ended on September 27, 2004. As of September 29, 2004, we controlled approximately 97% of
the capital and approximately 98% of the votes of Frango. Payment of the offer price to
shareholders who tendered their shares pursuant to the offer commenced on October 1, 2004.
We intend to acquire all of the remaining shares of Frango through a compulsory
acquisition process.

We believe that Frangos
established customer base in Europe and Asia will assist us in growing in those strategic
markets. We also believe that Frangos consolidation and financial reporting products
are proven and market-ready and will be successfully introduced to the North American
market. Our view is that these products coupled with our BI, planning, and scorecarding
products will allow us to continue to deliver the broadest and deepest CPM offering in the
industry.

# Outlook for the balance
of the fiscal year

For the balance of fiscal 2005, we
expect continued growth in our revenue and earnings as we capitalize on our leadership
position in the CPM market. We believe that the trend in BI is towards standardization on
one vendor as evidenced by the growth in order size that we are experiencing. We believe
that we are well positioned to capitalize on this trend. We also intend to increase our
spending in targeted key areas, such as sales related staff, increased marketing spending
and further investment in our partner channel, in the upcoming months in order to increase
our presence in this growing market.

18

---

We will continue to focus on creating
innovative new products. We have recently released Cognos Series 7 (version 3) which
extends our Enterprise Business Intelligence Series. We have also recently released an
enhanced version of our Enterprise Planning Series. In fiscal 2006, we expect to release a
further upgrade to our Enterprise Business Intelligence Series that will continue to
expand the deployment of our new platform.

# APPLICATION OF
CRITICAL
ACCOUNTING
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 we believe 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:

| |  |  | Revenue
Recognition
| | - |  | -------------------

| |  |  | Allowance for Doubtful Accounts
| | - |  | -------------------------------

| |  |  | Accounting
for Income Taxes
| | - |  | ---------------------------

| |  |  | Goodwill
and Acquired Intangible Assets
| | - |  | ---------------------------------------

| |  |  | Impairment
of Goodwill and Long-lived Assets
| | - |  | --------------------------------------------

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.

19

---

Services 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, delivered and undelivered 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.

Accounting for Income Taxes As an entity which operates globally, we calculate our income tax liabilities in each
of the jurisdictions in which we conduct business. Our tax rate is therefore affected by
the relative profitability of our operations in various geographic regions. We employ tax
planning strategies which, by their nature, involve complicated transactions. Those
transactions are subject to review or audit by taxation authorities and the ultimate tax
outcome bears a measure of uncertainty. We must therefore make estimates and judgments and
it may take a considerable period of time for the ultimate tax outcome to be known.
Although we believe our estimates are reasonable, the ultimate tax outcome could differ
from the amounts recorded in our financial statements. These differences could have a
material effect on our financial position and our net income.

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 forecasted taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for a valuation allowance.

Our valuation allowance pertains
primarily to the net operating loss carryforwards resulting from the acquisition of
Adaytum during fiscal 2003. In the event we were to subsequently determine that we would
be able to realize deferred tax assets related to this acquisition in excess of the net
purchase price allocated to those deferred tax assets, we would record a credit to
goodwill.

If we were to determine that we would
be able to realize deferred tax assets unrelated to acquisitions in excess of the net
recorded amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made. Should we determine that we would not be able to
realize all or part of our net deferred tax assets in the future, an adjustment to the
deferred tax asset would reduce income in the period such determination was made.

20

---

We provide for withholding taxes on
the undistributed earnings of our foreign subsidiaries. The ultimate tax liability related
to the undistributed earnings could differ from the liabilities recorded in our financial
statements. These differences could have a material effect on our income tax liabilities
and our net income.

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.

Historically, our acquisitions have
resulted in the recognition of significant amounts of goodwill and acquired intangible
assets. In order to allocate a purchase price to these intangible assets and goodwill, we
make estimates and judgments 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
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.

In accordance with SFAS No. 142,
Goodwill and Other Intangible Assets (SFAS 142), goodwill is not
amortized, but is subject to annual impairment testing which is discussed in greater
detail below under Impairment of Long-lived Assets. Prior to our adoption of SFAS
142, we amortized goodwill over 5 years using the straight-line method.

Intangible assets include acquired
technology, contractual relationships, deferred compensation, and trademarks and patents.
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.
Contractual relationships represent contractual and separable relationships that we have
with certain customers and partners that 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 U.S. GAAP, these amounts are accounted for as compensation rather than as
a component of purchase price. Trademarks and patents are initially recorded at cost. Cost
includes legal fees and other expenses incurred in order to obtain these assets. They are
amortized over their estimated useful life on a straight-line basis.

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.

21

---

Impairment of Goodwill and
Long-lived Assets In accordance with SFAS 142, goodwill 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. Cognos as a whole is considered 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 would compare 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 would be recognized.

We evaluate all of our long-lived
assets, including intangible assets other than goodwill and fixed assets, periodically for
impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-lived Assets(SFAS 144). SFAS 144 requires that long-lived
assets be evaluated for impairment when events or changes in facts and circumstances
indicate that their carrying value may not be recoverable. If events or circumstances
indicate that the carrying value of an asset may not be recoverable, the amount of
impairment will be measured as the difference between the carrying value and the fair
value of the impaired asset. An impairment will be recorded as an operating expense in the
period of the impairment and as a reduction in the carrying value of that asset.

# NEW
ACCOUNTING
PRONOUNCEMENTS

In January 2003, the Financial
Accounting Standards Board (FASB) issued Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46). FIN 46
expands upon existing guidance that addresses when a company should include in its
financial statements the assets, liabilities, and activities of another company. A
variable interest entity is any legal structure used for business purposes that either (a)
does not have equity investors or has equity investors that lack characteristics of
control; or (b) the equity investment at risk does not provide sufficient financial
resources for the entity to support its activities. Under FIN 46, a variable interest
entity must be consolidated by a company if that company is expected to absorb a majority
of the entitys expected losses or to receive a majority of the entitys
expected residual returns. The consolidation requirements are currently applicable to
variable interests created after January 31, 2003. For variable interest entities created
before January 31, 2003, the consolidation requirements became applicable for reporting
periods ending after March 15, 2004. FIN 46 also requires certain disclosures about
variable interest entities where those entities are not required to be consolidated. We
have determined that Cognos owns a minority interest in an undercapitalized distributor
that qualifies as a variable interest entity. We adopted FIN 46 on May 31, 2004 for this
variable interest entity created prior to February 1, 2003. The adoption of FIN 46 did not
have a material impact on our financial condition or results of operations.

# SHAREHOLDER
PROPOSAL

In June 2003, the shareholders of
Cognos approved a proposal made by the Carpenters Union asking the Board of Cognos to
adopt a policy requiring Cognos to record the expense of all future stock options awarded
to senior executives in its annual income statement. At the time, the Board undertook to
study this issue and respond to Cognos shareholders before the next Shareholders
Meeting in June 2004.

22

---

The Board of Cognos has considered
this matter at length and has concluded that it agrees unequivocally with the principle
that all stock options, including those issued to non-executives, should be recorded as an
expense on the Corporations income statement. As with any other major accounting
policy, regulators first must develop uniform rules and guidance so that investors may
make informed comparisons between Cognos and its industry peers. Comprehensive standards
currently are in the advanced stages of formulation in the United States and uniform rules
for Canadian issuers have been issued. As we report under both U.S. and Canadian
accounting standards, changes to standards in both countries will apply to Cognos.

In October 2003, the Canadian
Institute of Chartered Accountants issued uniform rules relating to stock option expensing
requiring Cognos to comply not later than the start of the current fiscal year. However,
Cognos began expensing stock options in its Canadian GAAP financial statements in the
fourth quarter of fiscal 2004, retroactive to the beginning of the fiscal year.

In the United States, the FASB is
planning on implementing new rules in 2005. Our commitment to our shareholders is that
Cognos will expense stock options on its U.S. GAAP financial statements as soon as
practicable following FASB finalizing the appropriate standards. Should FASB introduce its
new rules, we expect that to occur on or before March 1, 2005.

We believe that expensing stock
options is the appropriate thing to do, but we also believe we have a responsibility to
implement stock option expensing only when uniform regulatory standards are in place so
that we can be compared with our industry peers on the same basis. See Note 3 of the
Condensed Notes to the Consolidated Financial Statements.

23

# RESULTS OF
OPERATIONS

|                                 |  |                              |   |                            |   | Percentage Change            
|-------------------------------- |  | ---------------------------- | - | -------------------------- | - | -----------------------------
|(000s, except per share amounts) |  | Three months endedAugust 31, |   | Six months endedAugust 31, |   | Three months ended August 31,
|                                
|                                 |  | 2004                         |   | 2003                       |   | 2004                         
|                                
|Revenue                          |  | $185,220                     |   | $158,181                   |   | $358,839                     
|Cost of revenue                  |  | 35,077                       |   | 29,496                     |   | 68,348                       
|                                 |  |                             
|Gross margin                     |  | 150,143                      |   | 128,685                    |   | 290,491                      
|Operating expenses               |  | 116,981                      |   | 105,200                    |   | 233,187                      
|                                 |  |                             
|Operating income                 |  | $  33,162                    |   | $  23,485                  |   | $  57,304                    
|                                
|Gross margin percentage          |  | 81.1                         | % | 81.4                       | % | 81.0                         
|Operating margin percentage      |  | 17.9                         | % | 14.8                       | % | 16.0                         
|                                
|Net income                       |  | $  27,599                    |   | $  18,158                  |   | $  47,724                    
|                                 |  |                             
|Basic net income per share       |  | $0.31                        |   | $0.20                      |   | $0.53                        
|                                 |  |                             
|Diluted net income per share     |  | $0.30                        |   | $0.20                      |   | $0.51                        
|                                 |  |                             

Revenue for the quarter ended August
31, 2004 was $185.2 million, a 17% increase from revenue of $158.2 million for the same
quarter last year. Net income for the current quarter was $27.6 million, compared to net
income of $18.2 million for the same quarter last year. Diluted net income per share was
$0.30 for the current quarter, compared to diluted net income per share of $0.20 for the
same quarter last year. Basic net income per share was $0.31 and $0.20 for the quarters
ended August 31, 2004 and August 31, 2003, respectively.

Revenue for the six months ended
August 31, 2004 was $358.8 million, a 16% increase from revenue of $308.7 million for the
same period last year. Net income for the current six-month period was $47.7 million,
compared to net income of $30.5 million for the same period last year. Diluted net income
per share was $0.51 for the current six-month period, compared to diluted net income per
share of $0.33 for the same period last year. Basic net income per share was $0.53 and
$0.34 for the six-month periods ended August 31, 2004 and August 31, 2003,
respectively.

Gross margin for the three months
ended August 31, 2004 was $150.1 million, an increase of 17% over gross margin of $128.7
million for the same quarter last year. Gross margin percentage was 81% for both the
quarters ended August 31, 2004 and August 31, 2003. Gross margin for the six months ended
August 31, 2004 was $290.5 million, an increase of 16% over gross margin of $250.4 million
for the same period last year. Gross margin percentage for both the six months ended
August 31, 2004 and August 31, 2003 was 81%.

24

---

Total operating expenses for the
quarter ended August 31, 2004 were $117.0 million, an 11% increase from operating expenses
of $105.2 million for the same quarter last year. The operating margin for the quarter
ended August 31, 2004 was 18% as compared to 15% for the corresponding quarter of the
previous fiscal year. Total operating expenses for the six months ended August 31, 2004
were $233.2 million, an 11% increase from operating expenses of $210.8 million for the
same period last year. The operating margin for the six months ended August 31, 2004 was
16% as compared to 13% for the same period last year.

We believe the improvement in net
income in the three and six months ended August 31, 2004, as compared to the same periods
in the previous year, reflects the strength of our product portfolio, our distribution
channels, our sales organization, our customer relationships, and the quality of our
support and services. This is evidenced by the increase in license revenue and the overall
improvement in operating results. Also contributing to the increase in net income was
diligent expense management and a lower effective tax rate.

We operate internationally and, as a
result, a substantial portion of our business is conducted in foreign currencies.
Accordingly, our results are affected by year-over-year exchange rate fluctuations of the
U.S. dollar relative to the Canadian dollar, to various European currencies, and, to a
lesser extent, other foreign currencies. The following table breaks down the
year-over-year percentage change in revenue and expenses between change attributable to
growth and change attributable to fluctuations in the value of the U.S. dollar.

# Year-over-year
Percentage Change in Revenue and Expenses

|                                       |  |                                             |  |                                           |  |           |  |        |  |                 |  |           | 
|-------------------------------------- |  | ------------------------------------------- |  | ----------------------------------------- |  | --------- |  | ------ |  | --------------- |  | --------- | 
|                                       |  | Three Months Ended August 31,2004 over 2003 |  | Six Months Ended August 31,2004 over 2003 | 
|                                      
|                                       |  | Growth                                      |  | ForeignExchange                           |  | NetChange |  | Growth |  | ForeignExchange |  | NetChange | 
|                                      
|Revenue                                |  | 12.8%                                       |  | 4.3%                                      |  | 17.1%     |  | 11.6%  |  | 4.6%            |  | 16.2%     | 
|Cost of Revenue and Operating Expenses |  | 8.7%                                        |  | 4.2%                                      |  | 12.9%     |  | 7.5%   |  | 4.5%            |  | 12.0%     | 

25

---

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 endedAugust 31, |   | Six months endedAugust 31,
|                                    
|                                     |  | 2004                         |   | 2003                      
|                                    
|Revenue                              |  | 100.0                        | % | 100.0                     
|                                     |  |                             
|Cost of revenue                      |  | 18.9                         |   | 18.6                      
|                                     |  |                             
|Gross margin                         |  | 81.1                         |   | 81.4                      
|                                     |  |                             
|Operating expenses                   | 
|Selling, general, and administrative |  | 48.7                         |   | 51.6                      
|Research and development             |  | 13.7                         |   | 13.7                      
|Amortization of intangible assets    |  | 0.8                          |   | 1.3                       
|                                     |  |                             
|Total operating expenses             |  | 63.2                         |   | 66.6                      
|                                     |  |                             
|Operating income                     |  | 17.9                         |   | 14.8                      
|Interest expense                     |  | 0.0                          |   | (0.1                      
|Interest income                      |  | 1.0                          |   | 1.0                       
|                                     |  |                             
|Income before taxes                  |  | 18.9                         |   | 15.7                      
|Income tax provision                 |  | 4.0                          |   | 4.2                       
|                                     |  |                             
|Net income                           |  | 14.9                         | % | 11.5                      
|                                     |  |                             

# REVENUE

|                |  |                              |  | Percentage Change         
|--------------- |  | ---------------------------- |  | --------------------------
|                |  |                              |  |                           
|($000s)         |  | Three months endedAugust 31, |  | Six months endedAugust 31,
|               
|                |  | 2004                         |  | 2003                      
|               
|Product License |  | $  75,362                    |  | $  62,234                 
|Product Support |  | 76,156                       |  | 66,162                    
|Services        |  | 33,702                       |  | 29,785                    
|               
|Total Revenue   |  | $185,220                     |  | $158,181                  
|               

Our total revenue was $185.2 million
for the quarter ended August 31, 2004, an increase of $27.0 million or 17%, compared to
the quarter ended August 31, 2003. Our total revenue was $358.8 million for the six months
ended August 31, 2004, an increase of $50.1 million or 16%, compared to the six months
ended August 31, 2003.

26

---

Our total revenue was derived
primarily from our suite of BI products, principally Cognos ReportNet, Web versions of
PowerPlay® and Impromptu®and the Cognos Enterprise Planning
Series. Contributing to a lesser extent were Cognos Metrics Manager, DecisionStream,
Cognos Visualizer, NoticeCast®and Cognos Analytic Applications. During the
quarter ended August 31, 2004, we released Cognos Series 7 (version 3) which extends
our Enterprise Business Intelligence Series by offering centralized information
distribution, enhanced security, and full scorecard and report integration. We also
released an enhanced version of our Enterprise Planning Series. This latest version has
added functionality allowing users to integrate spreadsheets into the enterprise plan.

Industry Trends and
Geographic Information

We believe that enterprise-wide
deployment of BI products is the trend in the industry as companies standardize on one BI
platform across their organizations. An emerging trend in the market for BI is the growing
demand for pre-packaged solutions that shorten time to implementation and results. Our
analytic applications (Cognos Planning, Cognos Finance, and Cognos Analytical
Applications) address this trend as they extend the value of investments in Enterprise
Resource Planning (ERP) and other operational systems.

We are seeing an increase in the
number of large contracts, and the strengthening of our relationships with some of the
worlds largest companies and our strategic partners. During the quarter, we signed
seven contracts in excess of one million dollars. The number of contracts greater than
$200,000 has increased to 109 in the second quarter of fiscal 2005, up 22% from the same
period one year ago and the number of contracts greater than $50,000 has also increased
22% to 655 over the same period. For the six months ended August 31, 2004, the number of
contracts greater that $200,000 and $50,000 has increased 36% and 25%, respectively.
Average order size for the quarter ended August 31, 2004 was approximately $94,000 an
increase of 6% from approximately $89,000 for the same quarter last year. For deals
greater than $50,000, the average order size for the three months ended August 31, 2004 was
approximately $176,000, up 10% from approximately $160,000 last fiscal year. We believe
that this growth in order size is another indication that we remain well positioned to
capitalize on the trend towards standardization on a single BI platform.

While we are seeing signs of an
improving market as evidenced by the increased number of large transactions, these larger
transactions are also subject to longer buying cycles as these larger investments
typically require greater scrutiny and longer decision cycles by our customers.

The breadth of our solution is also
allowing us to develop long-term strategic relationships with our customers which, in
turn, enables us to generate additional software licensing and ongoing maintenance
renewals. These relationships are a significant asset as approximately 62% of our license
revenue came from existing customers in the three-month period ended August 31, 2004.

The overall change in total revenue
from our three revenue categories in the quarter ended August 31, 2004 from August
31, 2003 was as follows: a 21% increase in product license revenue, a 15% increase in
product support revenue, and a 13% increase in services revenue. The change for the same
categories for the six months was as follows: 18%, 16%, and 14%, respectively.

27

---

The following table sets out, for
each fiscal period 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.

Revenue by Geography

|             |  |                              |  | Percentage Change         
|------------ |  | ---------------------------- |  | --------------------------
|             |  |                              |  |                           
|($000s)      |  | Three months endedAugust 31, |  | Six months endedAugust 31,
|            
|             |  | 2004                         |  | 2003                      
|            
|The Americas |  | $110,240                     |  | $  96,168                 
|Europe       |  | 57,952                       |  | 47,459                    
|Asia/Pacific |  | 17,028                       |  | 14,554                    
|             |  |                             
|Total        |  | $185,220                     |  | $158,181                  
|             |  |                             

This table sets out, for each fiscal
period indicated, the percentage of total revenue earned in each geographic region.

Revenue by Geography as a Percentage
of Total Revenue

|             |  | Three months endedAugust 31, |   | Six months endedAugust 31, |   |       |  
|------------ |  | ---------------------------- | - | -------------------------- | - | ----- | -
|            
|             |  | 2004                         |   | 2003                       |   | 2004  |  
|            
|The Americas |  | 59.5                         | % | 60.8                       | % | 59.9  | %
|Europe       |  | 31.3                         |   | 30.0                       |   | 31.5  |  
|Asia/Pacific |  | 9.2                          |   | 9.2                        |   | 8.6   |  
|             |  |                             
|Total        |  | 100.0                        | % | 100.0                      | % | 100.0 | %
|             |  |                             

The growth rates of our revenue in
Europe, Asia/Pacific and, to a much lesser extent, in the Americas were affected by
foreign exchange rate fluctuations. The following table breaks down the year-over-year
percentage change in revenue for the three and six months ended August 31, 2004 by
geographic area between change attributable to growth and change due to fluctuations in
the value of the U.S. dollar.

# Year-over-year
Percentage Change in Revenue by Geography

|             |  |                                             |  |                                           |  |           |  |        |  |                 |  |           | 
|------------ |  | ------------------------------------------- |  | ----------------------------------------- |  | --------- |  | ------ |  | --------------- |  | --------- | 
|             |  | Three Months Ended August 31,2004 over 2003 |  | Six Months Ended August 31,2004 over 2003 | 
|            
|             |  | Growth                                      |  | ForeignExchange                           |  | NetChange |  | Growth |  | ForeignExchange |  | NetChange | 
|            
|The Americas |  | 14.1%                                       |  | 0.5%                                      |  | 14.6%     |  | 14.8%  |  | 0.7%            |  | 15.5%     | 
|Europe       |  | 11.2%                                       |  | 10.9%                                     |  | 22.1%     |  | 9.3%   |  | 10.2%           |  | 19.5%     | 
|Asia/Pacific |  | 9.7%                                        |  | 7.3%                                      |  | 17.0%     |  | 0.8%   |  | 9.5%            |  | 10.3%     | 
|Total        |  | 12.8%                                       |  | 4.3%                                      |  | 17.1%     |  | 11.6%  |  | 4.6%            |  | 16.2%     | 

28

---

Our growth rate in Europe for the
three and six months ended August 31, 2004 primarily reflects strong growth in Northern
Europe. Since Asia/Pacific is a relatively small market for our products, our revenues in
that region tend to be more volatile from quarter to quarter. Our growth rate in
Asia/Pacific for the quarter reflects growth in the Australia/New Zealand region. As
indicated by the above table, the weakening of the U.S. dollar in relation to various
currencies in Europe and Asia/Pacific positively impacted the growth rates in those
regions for the three and six-month periods ended August 31, 2004. Changes in the
valuation of the U.S. dollar relative to other currencies will continue to impact our
revenues in the future.

Product License Revenue

|                            |  |                              |   | Percentage Change         
|--------------------------- |  | ---------------------------- | - | --------------------------
|                            |  |                              |   |                           
|($000s)                     |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                           
|                            |  | 2004                         |   | 2003                      
|                           
|Product license revenue     |  | $75,362                      |   | $62,234                   
|Percentage of total revenue |  | 40.7                         | % | 39.3                      

Product license revenue was $75.4
million in the quarter ended August 31, 2004, an increase of $13.1 million or 21% from the
quarter ended August 31, 2003; and was $141.4 million for the six months ended August 31,
2004, an increase of $21.4 million or 18% compared to the corresponding period in the
prior fiscal year. The increase in product license revenue during the three and six months
ended August 31, 2004 as compared to the same periods in the prior year reflects the
customer acceptance of Cognos ReportNet and Enterprise Planning and the realignment of our
sales and operations teams, which is helping us to better capitalize on selling
opportunities across product lines. License revenue growth rates for the three and six
months ended August 31, 2004 were positively affected by the favorable impact of exchange
rates (principally European exchange rates), relative to the US dollar. Product license
revenue accounted for 41% of total revenue in the three months ended August 31, 2004
compared to 39% for the corresponding quarter in the prior fiscal year, and for both the
six months ended August 31, 2004 and August 31, 2003.

We license our software through our
direct sales force and value-added resellers, system integrators, and OEMs. Direct sales
accounted for approximately 73% and 69% of our license revenue for the second quarter of
fiscal 2005 and 2004, respectively.

As enterprise-wide deployments become
more important to our customers, we believe that the direct sales channel is the most
effective method of penetrating the large enterprise market. However, in order to have
adequate market coverage for companies of all sizes, we continue to expend resources
developing our indirect sales activities. We also continue to commit management time and
financial resources to developing direct and indirect international sales and support
channels.

29

---

Product Support Revenue

|                            |  |                              |   | Percentage Change         
|--------------------------- |  | ---------------------------- | - | --------------------------
|                            |  |                              |   |                           
|($000s)                     |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                           
|                            |  | 2004                         |   | 2003                      
|                           
|Product support revenue     |  | $76,156                      |   | $66,162                   
|Percentage of total revenue |  | 41.1                         | % | 41.8                      

Product support revenue was $76.2
million in the quarter ended August 31, 2004, an increase of $10.0 million or 15% from the
quarter ended August 31, 2003; and was $150.9 million in the six months ended August 31,
2004, an increase of $20.7 million or 16% compared to the corresponding period in the
prior fiscal year. The increase in the dollar amounts was the result of the strong rate of
renewal of support contracts and the expansion of our customer base. Also contributing to
the increase in product support revenue for the quarter and the six months ended August
31, 2004 was the impact of exchange rate fluctuations.

Product support revenue accounted for
41% and 42% of our total revenue in the quarters ended August 31, 2004 and 2003,
respectively, and was 42% of total revenue in both the six months ended August 31, 2004
and August 31, 2003.

Services Revenue

|                            |  |                              |   | Percentage Change         
|--------------------------- |  | ---------------------------- | - | --------------------------
|                            |  |                              |   |                           
|($000s)                     |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                           
|                            |  | 2004                         |   | 2003                      
|                           
|Services revenue            |  | $33,702                      |   | $29,785                   
|Percentage of total revenue |  | 18.2                         | % | 18.8                      

Services revenue (training,
consulting, and other revenue) was $33.7 million in the quarter ended August 31, 2004, an
increase of $3.9 million or 13% from the quarter ended August 31, 2003; and was $66.5
million in the six months ended August 31, 2004, an increase of $8.0 million or 14%
compared to the corresponding period in the prior fiscal year. Services revenue accounted
for 18% and 19% of our total revenue for the three and six months ended August 31,
2004, respectively, as compared to 19% for both of the corresponding periods in the prior
fiscal year.

The increase for both the three and
six months ended August 31, 2004 was primarily attributable to an increase in education
revenue due to the demand for Cognos ReportNet and Enterprise Planning training. Exchange
rate fluctuations also had a favorable impact on services revenue for the quarter.

30

---

# COST OFREVENUE

Cost of Product License

|                              |  |                              |   | Percentage Change         
|----------------------------- |  | ---------------------------- | - | --------------------------
|                              |  |                              |   |                           
|($000s)                       |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                             
|                              |  | 2004                         |   | 2003                      
|                             
|Cost of product license       |  | $546                         |   | $1,106                    
|Percentage of license revenue |  | 0.7                          | % | 1.8                       

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 $0.5 million, a decrease of $0.6 million or 51% in the quarter ended August 31, 2004,
and was $1.2 million, a decrease of $1.1 million or 47% in the six months ended August 31,
2004 compared to the corresponding periods in the prior fiscal year. These costs
represented 1% of product license revenue for the three and six months ended August 31,
2004, as compared to 2% of product license revenue for both comparative periods in the
prior fiscal year. The decrease in these costs for both the three and six months ended
August 31, 2004 was the result of decreases in royalties as certain royalty agreements
have ended and a reduction in materials and distribution costs.

Cost of Product Support

|                              |  |                              |   | Percentage Change         
|----------------------------- |  | ---------------------------- | - | --------------------------
|                              |  |                              |   |                           
|($000s)                       |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                             
|                              |  | 2004                         |   | 2003                      
|                             
|Cost of product support       |  | $7,074                       |   | $6,887                    
|Percentage of support revenue |  | 9.3                          | % | 10.4                      

The cost of product support includes
the costs associated with resolving customer inquiries and other tele-support and
web-support 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 $7.1 million, an increase of $0.2 million or 3% in the quarter ended August 31, 2004,
and was $14.2 million, an increase of $0.5 million or 4% in the six months ended August
31, 2004 compared to the corresponding periods in the prior fiscal year.

31

---

The cost of product support
represented 9% of total product support revenue for both the three and six months ended
August 31, 2004 as compared to 10% and 11% for the corresponding periods in the prior
fiscal year. The increase in the cost of product support is the result of increases in
staff related costs and the unfavorable impact of foreign currency fluctuations relative
to the U.S. dollar, partially offset by a decrease in royalties and distribution costs.
The average number of employees within the support organization increased 5% and 3% in the
three and six months ended August 31, 2004, respectively, as compared to the same periods
last year.

Cost of Services

|                               |  |                              |   | Percentage Change         
|------------------------------ |  | ---------------------------- | - | --------------------------
|                               |  |                              |   |                           
|($000s)                        |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                              
|                               |  | 2004                         |   | 2003                      
|                              
|Cost of services               |  | $27,457                      |   | $21,503                   
|Percentage of services revenue |  | 81.5                         | % | 72.2                      

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 $27.5
million, an increase of $6.0 million or 28% in the quarter ended August 31, 2004 and was
$52.9 million, an increase of $10.6 million or 25% in the six months ended August 31, 2004
compared to the corresponding periods in the prior fiscal year. The cost of services
represented 81% and 80% of services revenue for the three and six months ended August 31,
2004, respectively, as compared to 72% and 73% for the corresponding periods in the prior
fiscal year.

The increase in cost of services is
the result of increases in staff related costs and costs for services purchased
externally. Subcontractors are engaged in instances where we can not staff services
engagements with Cognos employees. While we intend to hire in this area, we will continue
to fill any gaps in delivery by engaging subcontractors. Exchange rate fluctuations also
had an unfavorable impact on cost of services during the three and six months ended August
31, 2004. The average number of employees within the services organization increased 2%
and 1% in the three and six months ended August 31, 2004, respectively, as compared to the
same periods last year.

32

---

# OPERATINGEXPENSES

Selling, General, and Administrative

|                                     |  |                              |   | Percentage Change         
|------------------------------------ |  | ---------------------------- | - | --------------------------
|                                     |  |                              |   |                           
|($000s)                              |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                                    
|                                     |  | 2004                         |   | 2003                      
|                                    
|Selling, general, and administrative |  | $90,230                      |   | $81,495                   
|Percentage of total revenue          |  | 48.7                         | % | 51.6                      

Selling, general, and administrative
(SG&A) expenses include staff related costs and travel and living
expenditures for sales, marketing, management, and administrative personnel. These
expenses also include costs associated with the sale and marketing of our products,
professional services and other administrative costs.

SG&A expenses were $90.2 million,
an increase of $8.7 million or 11% in the quarter ended August 31, 2004, and were $180.7
million, an increase of $19.0 million or 12% in the six months ended August 31, 2004
compared to the corresponding periods in the prior fiscal year. These costs represented
49% and 50% of total revenue for the three and six months ended August 31, 2004,
respectively, as compared to 52% for both of the corresponding periods in the prior fiscal
year.

The increase in these expenses, in
dollar terms, in the three and six months ended August 31, 2004 was the result of
increases in staff related costs resulting from increases in salaries, bonuses and
commissions as well as associated benefits as compared to the same periods last year.
SG&A expenses were also unfavorably impacted by the effect of other foreign currencies
relative to the U.S. dollar. Contributing to a lesser extent to the increase for both the
three and six months ended August 31, 2004 were increases in finders fees and travel
and living costs. The increase in SG&A was partially offset by a reduction in the bad
debt expense as our accounts receivable reserve decreased due to our improved collection
experience. The average number of employees within selling, general, and administrative
increased by 1% in both the three and six months ended August 31, 2004, when compared to
the corresponding periods in the prior fiscal year.

33

---

Research and Development

|                            |  |                              |   | Percentage Change         
|--------------------------- |  | ---------------------------- | - | --------------------------
|                            |  |                              |   |                           
|($000s)                     |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                           
|                            |  | 2004                         |   | 2003                      
|                           
|Research and development    |  | $25,382                      |   | $21,714                   
|Percentage of total revenue |  | 13.7                         | % | 13.7                      

Research and development
(R&D) expenses are primarily staff related costs attributable to
the design and enhancement of existing products along with the creation of new products.

R&D costs were $25.4 million, an
increase of $3.7 million or 17% in the quarter ended August 31, 2004, and were $49.7
million, an increase of $4.7 million or 10% for the six months ended August 31, 2004
compared to the corresponding periods in the prior fiscal year. The increase for the three
and six months ended August 31, 2004 was the result of increases in staff related costs
and the unfavorable impact of other foreign currencies relative to the U.S. dollar.
R&D costs were 14% of revenue for both the three and six months ended August 31, 2004
as compared to 14% and 15% of revenue, respectively, for the corresponding periods in the
prior fiscal year. The average number of employees within R&D decreased by 2% and 1%
for the three and six months ended August 31, 2004, respectively, when compared to the
corresponding periods of the prior fiscal year.

We continue to invest significantly
in R&D activities for our next generation of BI solutions which are the foundation of
our CPM vision. During the quarter ended August 31, 2004, we released Cognos Series 7
(version 3) which extends our Enterprise Business Intelligence Series by offering
centralized information distribution, enhanced security and full scorecard and report
integration. We also released an enhanced version of our Enterprise Planning Series. This
latest version has added functionality allowing users to integrate spreadsheets into the
enterprise plan.

In the upcoming year, we expect to
release a further upgrade to our Enterprise Business Intelligence Series that continues to
expand the deployment of our new platform.

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 would be amortized over a period not exceeding 36 months. No costs were
deferred in the three and six months ended August 31, 2004 and August 31, 2003. Costs were
not deferred in the periods 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.

34

---

Amortization of
Intangible Assets

|                                  |  |                              |  | Percentage Change         
|--------------------------------- |  | ---------------------------- |  | --------------------------
|                                  |  |                              |  |                           
|($000s)                           |  | Three months endedAugust 31, |  | Six months endedAugust 31,
|                                 
|                                  |  | 2004                         |  | 2003                      
|                                 
|Amortization of intangible assets |  | $1,369                       |  | $1,991                    

Amortization of intangible assets was
$1.4 million, a decrease of $0.6 million or 31% for the quarter ended August 31, 2004 and
was $2.7 million, a decrease of $1.4 million or 33% for the six months ended August 31,
2004 compared to the corresponding periods in the prior year. The decrease in this expense
in the three and six months ended August 31, 2004 was due to certain intangible assets
being fully amortized.

Interest Income and
Expense

|                    |  |                              |  | Percentage Change         
|------------------- |  | ---------------------------- |  | --------------------------
|                    |  |                              |  |                           
|($000s)             |  | Three months endedAugust 31, |  | Six months endedAugust 31,
|                   
|                    |  | 2004                         |  | 2003                      
|                   
|Net interest income |  | $1,773                       |  | $1,389                    

Net interest income was $1.7 million,
an increase of $0.4 million or 28% in the quarter ended August 31, 2004 and was $3.1
million, an increase of $0.8 million or 37% in the six months ended August 31, 2004
compared to the corresponding periods in the prior fiscal year. The increase during the
three and six months ended August 31, 2004 was primarily attributable to an increase in
the average portfolio size as compared to the corresponding periods in the prior fiscal
year. This increase was partially offset by a decrease in the average effective interest
rates as compared to the same periods in the prior fiscal year.

35

---

Income Tax Provision

|                   |  |                              |   | Percentage Change         
|------------------ |  | ---------------------------- | - | --------------------------
|                   |  |                              |   |                           
|($000s)            |  | Three months endedAugust 31, |   | Six months endedAugust 31,
|                  
|                   |  | 2004                         |   | 2003                      
|                  
|Tax expense        |  | $7,336                       |   | $6,716                    
|Effective tax rate |  | 21.0                         | % | 27.0                      

As we operate globally, we calculate
our income tax provision in each of the jurisdictions in which we conduct business. Our
tax rate is therefore affected by the relative profitability of our operations in various
geographic regions. In the three and six months ended August 31, 2004, we recorded an
income tax provision of $7.3 million and $12.7 million, respectively, representing an
effective income tax rate of 21%. Comparatively, in the three and six months ended August
31, 2003, we recorded an income tax provision of $6.7 million and $11.3 million,
respectively, representing an effective income tax rate of 27%. The effective tax rate
decreased as compared to the corresponding periods last year but increased compared to the
effective tax rate of 16% for the full fiscal year 2004. This is due primarily to higher
investment tax credits (ITCs) in fiscal 2004 compared to fiscal 2005.
The increased amount of ITCs for fiscal 2004 resulted from changes in government
administrative practices regarding the type of expenses eligible for ITCs and, last year,
we were able to claim an amount not only for fiscal 2004 but for prior years as well. In
fiscal 2005, only current year ITCs can be claimed.

36

---

# LIQUIDITY AND
CAPITAL
RESOURCES

|($000s)                                            |  | As atAugust 31,2004 | As atFebruary 29,2004 | Percentage Change
|-------------------------------------------------- |  | ------------------- | --------------------- | -----------------
|                                                  
|Cash and cash equivalents                          |  | $364,782            |                       | $224,830         
|Short-term investments                             |  | 75,628              |                       | 163,411          
|                                                   |  |                    
|Cash, cash equivalents, and short-term investments |  | $440,410            |                       | $388,241         
|Working capital                                    |  | 312,914             |                       | 259,502          



|($000s)                         |  | Six months endedAugust 31, | Percentage changeSix months endedAugust 31,
|------------------------------- |  | -------------------------- | -------------------------------------------
|                               
|                                |  | 2004                       |                                            
|                               
|Net cash provided by (used in): |  |                            |                                            
|Operating activities            |  | $ 62,503                   |                                            
|Investing activities            |  | 79,474                     |                                            
|Financing activities            |  | (918                       | )                                          



|                             |  | As atAugust 31,2004 |  | As atAugust 31,2003
|---------------------------- |  | ------------------- |  | -------------------
|                            
|Days sales outstanding (DSO) |  | 56                  |  | 62                 

# Cash, Cash Equivalents,
and Short-term Investments

As of August 31, 2004, we held $440.4
million in cash, cash equivalents, and short-term investments, an increase of $52.2
million from February 29, 2004. 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.

Management groups cash and cash
equivalents with short-term investments when analyzing our total cash position. These
balances may fluctuate from quarter to quarter depending on the renewal terms of the
investments.

37

---

# Working Capital

Working capital represents our
current assets less our current liabilities. As of August 31, 2004, working capital was
$312.9 million, an increase of $53.4 million from February 29, 2004. The increase can be
attributed to higher levels of cash, cash equivalents, and short-term investments and
lower levels of accounts payable, accrued charges, salaries, commissions, and related
items, and deferred revenue. Partially offsetting this increase were decreases in accounts
receivable.

Days sales outstanding (DSO) was 56
days at August 31, 2004 as compared to 62 days as at August 31, 2003. We calculate our
days sales outstanding ratio based on ending accounts receivable balances and quarterly
revenue.

# Long-term Liabilities

As at August 31, 2004 and February
29, 2004, we had no long-term liabilities.

# Cash Provided by
Operating Activities

Cash provided by operating activities
(after changes in non-cash working capital items) for the six months ended August 31, 2004
was $62.5 million, an increase of $30.3 million compared to the comparative period last
year. The increase is attributable to higher net income, strong accounts receivable
collections, and smaller decreases of accounts payable, accrued charges, and salaries,
commissions, and related items, partially offset by changes in deferred revenue balances
for the six months ended August 31, 2004 as compared to the corresponding period last
year.

# Cash Provided by (Used
In) Investing Activities

Cash provided by investing activities
was $79.5 million for the six months ended August 31, 2004, compared to cash used in
investing activities of $28.6 million in the corresponding period in the prior fiscal
year. During the six months ended August 31, 2004, we decreased our net investment in
short-term investments from the comparative period in the prior fiscal year. In the six
months ended August 31, 2004, our proceeds on maturity of short-term investments, net of
purchases, were $87.7 million. In comparison, during the six months ended August 31, 2003,
our purchases of short-term investments were in excess of our maturities of short-term
investments by $16.2 million. In addition, during the six months ended August 31, 2004, we
spent $7.7 million on fixed asset additions as compared to $11.5 million in the
corresponding period last year. The additions for both periods related primarily to
computer equipment and software, office furniture and leasehold improvements.

# Cash Provided by (Used
in) Financing Activities

Cash used in financing activities was
$0.9 million for the six months ended August 31, 2004, compared to cash provided by
financing activities of $15.8 million during the comparative period of the prior fiscal
year. We issued 1,102,000 common shares, valued at $19.3 million, during the six months
ended August 31, 2004, compared to the issue of 1,226,000 shares valued at $18.1 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 and officers.

38

---

We paid $20.2 million during the six
months ended August 31, 2004 to repurchase 597,000 shares on the open market, 587,000 of
which were under our share repurchase plan and 10,000 under our restricted share unit
plan. Comparatively, we repurchased 21,000 shares for $0.6 million during the six-month
period ended August 31, 2003 under our restricted share unit plan.

In October 2003, we adopted a program
that enables us to purchase up to 5% of the issued and outstanding common shares of Cognos
between October 9, 2003 and October 8, 2004. Purchases can 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 are cancelled.

# Contracts and Commitments

We have an unsecured credit facility
which is provided to us at no cost. The credit facility permits us to borrow funds or
issue letters of credit or guarantee up to Cdn $12.5 million (U.S.$9.5 million), subject
to certain covenants. As of August 31, 2004 and 2003, 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.

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 vacating leased premises of Adaytum and related
write-downs of leasehold improvements as well as asset write-downs of Adaytum. During the
six months ended August 31, 2004, the total cash payments made in relation to the accrual
were $0.8 million, and cash payments remaining at August 31, 2004 were $3.7 million. The
remaining accrual is included in the balance sheet as accrued charges and salaries,
commissions, and related items. All amounts excluding lease payments are expected to be
paid during fiscal 2005. Outstanding balances for the lease payments will be paid over the
lease term unless settled earlier.

On August 24, 2004, we made an offer
to acquire all of the Series A shares and Series B shares outstanding in Frango AB, a
Stockholm-based company specializing in consolidation and financial reporting solutions.
The offer was adjusted on September 21, 2004 to eliminate a premium initially offered on
the Series A shares. The total amount of the offer did not change. Under the terms of the
adjusted offer, Frango shareholders will receive SEK 85.5 in cash for each Series A and
Series B share outstanding. The total value of all shares outstanding is approximately
$53.1 million.

The acceptance period for our offer
ended on September 27, 2004. As of September 29, 2004, we controlled approximately 97% of
the capital and approximately 98% of the votes of Frango. Payment of the offer price to
shareholders who tendered their shares pursuant to the offer commenced on October 1, 2004.
We intend to acquire all of the remaining shares of Frango through a compulsory
acquisition process.

Our contractual obligations have not
changed materially from those included in our Annual Report on Form 10-K for the year
ended February 29, 2004.

39

---

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.

Given our historical profitability
and our ability to manage expenses, we believe that our current resources are adequate to
meet our requirements for working capital and capital expenditures through the foreseeable
future.

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.

We face intense
competition and we may not compete successfully.

We face substantial competition
throughout the world, primarily from software companies located in the United States,
Europe, and Canada. We expect our competitors to continue to improve the performance of
their current products and to introduce new products or new technologies. The BI market
may continue to consolidate by merger or acquisition. If one or more of our competitors
merges or partners with another of our competitors, the change in the competitive
landscape could adversely affect our ability to compete. As well, competition may increase
by the entry or expansion of other software vendors into this market. These competitors
may have substantially greater financial and other resources with which to pursue research
and development, manufacturing, marketing, and distribution of their products. New product
announcements or 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.

40

---

If we do not respond
effectively to rapid technological change, our products may become obsolete.

The markets for our products are
characterized by: rapid and significant technological change; frequent new product
introductions and enhancements; changing customer demands; and evolving industry
standards. We cannot provide assurance that our products and services will remain
competitive in light of future technological change or that we will be able to 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 to timely bring them to market. 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.

We may not be able to
hire, integrate, or retain key personnel essential to our business.

We believe that our success depends
on senior management and other key employees to develop, market, and support our products
and manage our business. The loss of their services could have a material adverse effect
on our business. Our success is also highly dependent on our continuing ability to hire,
integrate, and retain highly qualified personnel. The failure to attract and retain key
personnel would adversely affect our future growth and profitability.

Our total revenue and
operating results may fluctuate.

We rely predominantly on revenue from
a single line of business, our BI products. Although we have experienced revenue growth
from these products in the past, we cannot provide assurance that revenue from these
products will continue to grow, or grow at previous rates or rates projected by
management. Anticipated revenue may be reduced by any one, or a combination of, unforeseen
market, economic, or competitive factors some of which are discussed in this section. We
have experienced and in the future may experience a shortfall in revenue or earnings or
otherwise fail to meet public market expectations, which could materially and adversely
affect our business and the market price of our common stock.

Our quarterly and annual
operating results may vary between periods.

Historically, our quarterly operating
results have varied from quarter to quarter, and we anticipate this pattern will 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. As well, in each quarter we typically close a larger percentage of
sales transactions near the end of that quarter. As a result, it is difficult to
anticipate the revenue and earnings that we will realize in any particular quarter until
near the end of the quarter. Some of the causes of this difficulty are explained in
subsequent risk factors  in particular those entitled Our sales forecasts
may not match actual revenues in a particular period, The length of
time required to complete a sales cycle may be lengthy and unpredictable and
Our expenses may not match anticipated revenues.

41

---

Our sales forecasts may
not match actual revenues in a particular period.

The basis of our business budgeting
and planning process is the estimation of revenues that we expect to achieve in a
particular quarter and is based on a common industry practice known as the
pipeline system. Under this system, information relating to sales prospects,
the anticipated date when a sale will be completed and the potential dollar amount of the
sale are tracked and analyzed to provide a pipeline of future business. These
pipeline estimates are not necessarily reliable predictors of revenues in a particular
quarter because of, among other things, the events identified in these risk factors, as
well as the subjective nature of the estimates themselves. In particular, a slowdown in
technology spending or a deterioration in economic conditions is likely to result in the
delay or cancellation of prospective orders in our pipeline. A variation from the expected
conversion rate of the pipeline could adversely affect our budget or planning and could
consequently materially affect our operating results.

The length of time
required to complete a sales cycle may be lengthy and unpredictable.

As our business evolves toward larger
transactions at the enterprise level, the presence or absence of one or more of these
large transactions in a particular period may have a material upwards or downwards effect
on the revenue estimates in that period. These significant transactions require a
considerable effort on the part of customers to assess alternative products and require
additional levels of management approvals before being concluded. These factors combine to
lengthen the typical sales cycle and increase the risk that the customers purchasing
decision may be postponed or delayed from one period to another subsequent or later period
or that the customer will alter its purchasing requirements. The service delivery scope
for larger transactions also places additional execution strain on our existing service
delivery personnel. These factors, along with any other foreseen or unforeseen event,
could result in lower than anticipated revenue for a particular period or in the reduction
of estimated revenue in future periods.

Our expenses may not
match anticipated revenues.

We base our operating expenses on
anticipated revenue trends. Since a high percentage of these expenses are relatively
fixed, a delay in recognizing revenue from license transactions could cause significant
variations in operating results from quarter to quarter and could result in operating
losses. If these expenses precede, or are not subsequently followed by, increased
revenues, our business, financial condition, or results of operations could be materially
and adversely affected.

Economic conditions could
adversely affect our revenue growth and ability to forecast revenue.

The revenue growth and profitability
of our business depends on the overall demand for BI products and services. Because our
sales are primarily to major corporate customers in the high technology,
telecommunications, financial services (including insurance), pharmaceutical, utilities,
and consumer packaged goods industries, our business depends on the overall
economic conditions and the economic and business conditions within these industries. A
weakening of one or more of the global economy, the information technology industry, or
the business conditions within the industries listed above may cause a decrease in our
software license revenues. A decrease in demand for computer software caused, in part, by
a continued weakening of the economy, domestically or internationally, or caused by our
customers increased attention to regulatory compliance including the Sarbanes-Oxley
Act and internal controls may result in a decrease in revenues and growth rates.

42

---

Hostilities or terrorist
attacks could harm our business.

Terrorist acts or the threat of
future outbreak or continued escalation of hostilities involving the United States or
other countries could adversely affect the growth rate of our software license revenue and
have an adverse effect on our business, financial condition, or results of operations. In
addition, any escalation in these events or similar future events may disrupt our
operations or those of our customers, distributors, and suppliers, which could adversely
affect our business, financial condition, or results of operations.

We operate
internationally and face risks attendant to those operations, in particular currency risk.

We earn a significant portion of our
total revenues from international sales generated through our foreign direct and indirect
operations. These sales operations face risks arising from local political, legal and
economic factors such as the general economic conditions in each country or region,
varying regulatory requirements, compliance with international and local trade, labor and
other laws, and reduced intellectual property protections in certain jurisdictions. We may
also face difficulties in managing our international operations, collecting receivables in
a timely fashion, and repatriating earnings. Any of these factors, either individually or
in combination, could materially impact our international operations and adversely affect
our business as a whole. Also, a substantial portion of both our revenues and expenditures
are generated in currencies other than the U.S. dollar, such as the Canadian dollar and
the euro. 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. Please see further discussion on
foreign currency risk included in the Quantitative and Qualitative Disclosure on Market
Risk in Item 3 of this Form 10-Q.

Making and integrating
acquisitions could impair our operating results.

We have acquired and, if appropriate,
will continue to seek to acquire additional products or businesses that we believe are
complementary to ours. Acquisitions involve a number of other risks, including: diversion
of managements attention; disruption of our ongoing business; difficulties in
integrating and retaining all or part of the acquired business and its personnel; and
assumption of disclosed and undisclosed liabilities. The individual or combined effect of
these risks could have a material adverse effect on our business. As well, in paying for
an acquisition we may deplete our cash resources or dilute our shareholder base by issuing
additional shares. Furthermore, there is the risk that our valuation assumptions and or
models for an acquired product or business may be erroneous or inappropriate due to
foreseen or unforeseen circumstances and thereby cause us to overvalue an acquisition
target. There is also the risk that the contemplated benefits of an acquisition may not materialize
 as planned or may not materialize within the time period or to the extent anticipated.

We may not realize the
benefits that we anticipated from our acquisition of Frango AB within the time periods or to
the extent that we expected because of integration and other challenges.

All of the risk factors referenced
above in Making and integrating acquisitions could impair our operating
results apply to our acquisition of Frango AB discussed elsewhere in this report
in greater detail. In addition, there is the risk that the contemplated benefits of the
Frango acquisition may not materialize as planned or may not materialize within the time
periods or to the extent anticipated. Factors that may cause such differences include, but
are not limited to, differences in the state of Frangos actual business, its
operations, and its product condition and capabilities from what we believe based on our
due diligence review; our ability to efficiently integrate Frango and the ease in which
Frango can be integrated; the state of Frangos internal controls and procedures; and
the existence of regulatory barriers to integration.

43

---

If we introduce a new
product, revenue from existing products may be eroded.

We may develop technology or a
product that constitutes a marked advance over both our own products and those of our
competitors. If we introduce such a product, we may experience a decline in revenues of
our existing products that is not fully matched by the new products revenue. In
addition, we may lose existing customers who choose a competitors product rather
than migrate to our new product. This could result in a temporary or permanent revenue
shortfall and materially affect our business.

We may have exposure to
greater than anticipated tax liabilities.

We are subject to income taxes and
non-income taxes in a variety of jurisdictions and our tax structure is subject to review
by both domestic and foreign taxation authorities. The determination of our worldwide
provision for income taxes and other tax liabilities requires significant judgment.
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from
the amounts recorded in our financial statements and may materially affect our financial
results in the period or periods for which such determination is made.

Our intellectual property
may be misappropriated or we may have to defend ourselves against other parties
claims.

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,
third parties may misappropriate our intellectual property causing us to lose potential
revenue and competitive advantage. As well, we may ourselves from time to time become
subject to claims by third parties that our technology infringes their intellectual
property rights. In either case, we may incur expenditures to police, protect, and defend
our interests and may become involved in litigation that could divert the attention of our
management. Responding to such claims could result in substantial expense and result in
damages, royalties, or injunctive relief, or require us to enter into licensing agreements
on unfavorable terms, or redesign or stop selling affected products which could materially
disrupt the conduct of our business.

We may face liability
claims if our software products or services fail to perform as intended.

The sale, servicing, and support of
our products entails the risk of product liability, performance or warranty claims, which
may be substantial in light of the use of our products in business-critical applications.
A successful product liability claim could seriously disrupt our business and adversely
affect our financial results. Software products are complex and may contain errors or
defects, particularly when first introduced, or when new versions or enhancements are
released, or when configured to individual customer requirements. We currently have in
place procedures and staff to exercise quality control over our products and respond to
defects and errors found in current versions, new versions, or enhancements of our
products. We also attempt to contractually limit our liability in accordance with industry
practices. However, defects and errors in our products could inhibit or prevent customer
deployment and cause us to lose customers or require us to pay penalties or damages.

44

---

Our share price may
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: actual or anticipated fluctuations in our results of operations; changes in
estimates of our future results of operations by us or securities analysts; announcements
of technological innovations or new products by us or our competitors; general industry
changes in the BI tools or related markets; or other events or factors.

New Accounting
Pronouncements may require us to change the way in which we account for our operational or business
activities.

The FASB and other bodies that have
jurisdiction over the form and content of our accounts are constantly discussing proposals
designed to ensure that companies best display relevant and transparent information
relating to their respective businesses. The effect of the pronouncements of FASB and
other bodies may have the effect of requiring us to account for revenues and/or expenses
in a different manner than at present. In particular, if the FASB or any other
standard-setting or regulatory body requires us to expense the fair value of stock
options, we would likely report increased expenses in our income statement and a reduction
of our net income and earnings per share. The impact of applying a fair value method of
accounting for stock options is disclosed in Note 3 of the Condensed Notes to the
Consolidated Financial Statements.

45

---

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 three and six months ending August 31, 2004, 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 U.S. 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. Sensitivity analysis is used to measure our foreign currency
exchange rate risk. As of August 31, 2004, a 10% adverse change in foreign exchange rates
versus the U.S. dollar would have decreased our reported cash, cash equivalents, and
short-term investments by approximately two to three percent.

Also, as we conduct a substantial
portion of our business in foreign currencies other than the U.S. dollar, our results are
affected, and may be affected in the future, by exchange rate fluctuations of the U.S.
dollar relative to the Canadian dollar, 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. We
cannot predict the effect foreign exchange fluctuations will have on our results going
forward; however, if significant foreign exchange losses are experienced, they could have
a material adverse effect on our business, results of operations, and financial condition.

46

---

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 the end of the
period covered by 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 Rules 13a-15(e) and 15(d)-15(e) 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 control over financial reporting.
|-- |  | -----------------------------------------------------

There have been no changes in the
Corporations internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the Corporations
internal control over financial reporting.

47

---

PART II  OTHER
INFORMATION

Item  1.    Legal Proceedings

Cognos is not a party to any legal
proceedings that, if resolved or determined adversely to Cognos, would have a material
adverse effect on Cognos business, financial condition, and results of operation.
Cognos, however, may become subject to claims and litigation in the ordinary course of
business. In the event that any such claims or litigation are resolved against Cognos,
such outcomes or resolutions could have a material adverse effect on Cognos
business, financial condition, or results of operations.

Item  2.    Changes in
Securities, Use of Proceeds and Issuer Purchases of Equity Securities

# PURCHASES OF EQUITY SECURITIES

|Period          |  | Total
Number of
Shares
Purchased |  | Average Price
Paid per Share |  | Total Number
of Shares
Purchased as
Part of
Publicly
Announced Plans |  | Approximate Number of Shares
or Dollar Value of Shares that
May Yet Be Purchased Under the
Plans (1) | 
|--------------- |  | -------------------------------- |  | ---------------------------- |  | -------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- | 
|                |  |                                  |  |                              |  |                                                                      |  |                                                                                                      | 
|June 1 to       |  |                                  |  |                              |  |                                                                      |  | 1,961,500 shares                                                                                     | 
|June 30, 2004   |  | 10,000                           |  | $33.51                       |  | 10,000                                                               |  | $30,314,000                                                                                          | 
|                |  |                                  |  |                              |  |                                                                      |  |                                                                                                      | 
|July 1 to       |  |                                  |  |                              |  |                                                                      |  | 1,961,500 shares                                                                                     | 
|July 31, 2004   |  | 287,500                          |  | $34.31                       |  | 287,500                                                              |  | $20,448,000                                                                                          | 
|                |  |                                  |  |                              |  |                                                                      |  |                                                                                                      | 
|August 1 to     |  |                                  |  |                              |  |                                                                      |  | 1,961,500 shares                                                                                     | 
|August 31, 2004 |  | Nil                              |  | Nil                          |  | Nil                                                                  |  | $20,448,000                                                                                          | 
|               
|Total           |  | 297,500                          |  | $34.28                       |  | 297,500                                                              | 
|               

(1)  Share amounts relate to the
restricted share unit plan and dollar figures relate to the stock repurchase program.

On September 25, 2002, the Board of
Directors of Cognos adopted a restricted share unit plan under which awards of restricted
share units can be granted to employees, officers and directors of Cognos up to an
aggregate of 2,000,000 restricted share units. Subject to the vesting provisions set out
in each participants award agreement, each restricted share unit can be exchangeable
for one common share of Cognos. The common shares for which the restricted share units may
be exchanged will be purchased on the open market by a trustee appointed and funded by
Cognos. This plan terminates on September 30, 2005. During the quarter ended August 31,
2004, Cognos repurchased 10,000 shares at an average price of $33.51 for the restricted
share unit plan.

On October 7, 2003, Cognos announced
that it had adopted a stock repurchase program authorizing the repurchase of up to
4,468,639 common shares (not more than 5% of the common shares outstanding on that date)
up to a maximum of $50,000,000 between October 9, 2003 and October 8, 2004. During the
quarter ended August 31, 2004, Cognos repurchased 287,500 shares at an average price of
$34.31 under the stock repurchase program.

48

---

Item  6.    Exhibits and
Reports on Form 8-K

|a) |  | Exhibits
|-- |  | --------

|3.1   |  | Articles of Incorporation and Amendments thereto  (incorporated by reference to Exhibit 3.1 of                                                         | 
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|      |  | Cognos' Form 10-Q filed for the quarter
ended  November 30, 2002 and Exhibit  3.1(i) of Cognos' 
  Form 10-Q filed for the quarter ended May 31, 2004) | 
|3.2   |  | By-Laws of Cognos  (incorporated  by  reference  to Exhibit 3.2 of Cognos' Form 10-K filed for                                                         | 
|      |  | the year ended February 28, 1997)                                                                                                                      | 
|10.24 |  | Amended and  Restated  2003-2008  Stock  Option  Plan  (filed as Exhibit  4.1 to  Registration                                                         | 
|      |  | Statement No. 333-117981 on Form S-8, filed on August 6, 2004)                                                                                         | 
|10.25 |  | Form of Option  Agreement  pursuant to the Cognos Amended and Restated                                                                                 | 
|      |  | 2003-2008 Stock Option Plan                                                                                                                            | 
|31.1  |  | Certification of Chief Executive Officer Pursuant to Rule 13a - 14(a) and 15d - 14(a) of the                                                           | 
|      |  | Securities   Exchange  Act  of  1934,  as  Adopted  Pursuant  to  Section  302  of  the
Sarbanes-Oxley   Act of 2002                                   | 
|31.2  |  | Certification  of Chief Financial  Officer Pursuant to Rule 13a - 14(a) and 15d - 14(a) of the                                                         | 
|      |  | Securities   Exchange  Act  of  1934,  as  Adopted  Pursuant  to  Section  302  of  the
Sarbanes-Oxley 
  Act of 2002                                  | 
|32    |  | Certification  of Chief Executive  Officer and Chief Financial  Officer  Pursuant to 18 U.S.C.                                                         | 
|      |  | Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002                                                                     | 
|99.1  |  | Selected  Consolidated  Financial  Statements in U.S.  Dollars and in accordance with Canadian                                                         | 
|      |  | Generally Accepted Accounting Principles                                                                                                               | 
|99.2  |  | Management's  Discussion  and  Analysis of  Financial
Condition  and Results of  Operations - 
  Canadian Supplement                                   | 

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

Cognos filed a Form 8-K on June 23,
2004 pursuant to Item 12, Disclosure of Results of Operations and Financial Condition.This Form 8-K related to the release of Cognos results for the first quarter of
the fiscal year ending February 28, 2005. Cognos also filed a Form 8-K pursuant to Item 8,
Other Eventson August 24, 2004. This Form 8-K related to the announcement by
Cognos that it had made a public offer to acquire all of the outstanding shares of Frango
AB, a Stockholm-based company specializing in consolidation and financial reporting
solutions.

49

---

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)                                                               | 
|                |  |                                                                            | 
|October 1, 2004 |  | /s/ Tom Manley                                                             | 
|                |  |                                                                            | 
|Date            |  | Tom Manley                                                                 | 
|                |  | Senior Vice President, Finance &Administration and Chief Financial Officer | 
|                |  | (Principal Financial Officer and Chief Accounting Officer)                 | 

50

---

EXHIBIT INDEX

|EXHIBIT NO. | DESCRIPTION | PAGE                                                                                                                                                                                                        
|----------- | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           
|10.25       |             | Form of Option Agreement pursuant to the Cognos Amended and Restated 2003-2008
 Stock Option Plan                                                                                                           
|           
|31.1        |             | Certification of Chief Executive Officer Pursuant to Rule 13a - 14(a) and 15d -
  14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of
  the Sarbanes-Oxley Act of 2002      
|           
|31.2        |             | Certification  of Chief  Financial  Officer  Pursuant  to Rule 13a - 14(a) and 15d -
  14(a) of the Securities  Exchange Act of 1934, as Adopted Pursuant to Section 302 of
  the Sarbanes-Oxley Act of 2002
|           
|32          |             | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18
 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act
 of 2002                             
|           
|99.1        |             | Selected Consolidated Financial Statements and Notes in U.S. Dollars and in
  accordance with Canadian Generally Accepted Accounting Principles                                                             
|           
|99.2        |             | Management's Discussion and Analysis of Financial Condition and Results of
  Operations - Canadian Supplement                                                                                               
|           

51