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

FORM 10-K

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|(X BOX) |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)

FOR THE FISCAL YEAR ENDED JUNE 30, 2001
OR

|      |  |                                                                                                           
|----- |  | ----------------------------------------------------------------------------------------------------------
|(BOX) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from ____________ to _____________.



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COMMISSION FILE NUMBER 0-26934

HYPERION SOLUTIONS CORPORATION(Exact name of registrant as specified in its charter)

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State or other jurisdiction of
incorporation or organization) |  | 77-0277772
(I.R.S. Employer
Identification No.)

1344 CROSSMAN AVENUE, SUNNYVALE, CALIFORNIA 94089
(Address of principal executive offices, including zip code)

Registrants telephone number, including area code: (408) 744-9500

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.001

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 BOX) NO (BOX)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X BOX)

As of September 10, 2001, there were 32,397,805 shares of the
registrants Common Stock, $.001 par value, outstanding. The aggregate market
value of the registrants voting stock held by nonaffiliates as of September
10, 2001 was approximately $488.2 million.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants Proxy Statement for its 2001 Annual Meeting of
Stockholders, scheduled to be held on November 14, 2001, are incorporated by
reference in Part III hereof.





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TABLE OF CONTENTS



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|ITEM 1. BUSINESS                                                                             
|ITEM 2. PROPERTIES                                                                           
|ITEM 3. LEGAL PROCEEDINGS                                                                    
|ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS            
|ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)           
|ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|ITEM 8. REPORT OF INDEPENDENT ACCOUNTANTS, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA       
|ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|ITEM 11. EXECUTIVE COMPENSATION                                                              
|ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|SIGNATURES                                                                                   
|ITEM 14(a)(2) AND ITEM 14(d). FINANCIAL STATEMENT SCHEDULE                                   
|EXHIBIT INDEX                                                                                
|EX-10.21                                                                                     
|EX-10.22                                                                                     
|EX-10.23                                                                                     
|EX-21.1                                                                                      
|EX-23.1                                                                                      



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HYPERION SOLUTIONS CORPORATION

FORM 10-K

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|Signatures                                                                                    |  | 43  

Essbase, Essbase Integration Server, Hyperion Analysis Tools, Hyperion Reports,
Hyperion Analyzer, Hyperion Planning, Hyperion Financial Management, Hyperion
Performance Scorecard, Balanced Scorecard, Hyperion Business Modeling, Hyperion
Activity Based Management, Hyperion Pillar, Hyperion Enterprise, Hyperion
Enterprise Reporting, and Hyperion Application Link are trademarks of Hyperion
Solutions Corporation. All other trademarks and company names mentioned are the
property of their respective owners. All rights reserved.

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FORWARD-LOOKING STATEMENTS

Certain information contained in this report on Form 10-K and the Annual Report
is forward-looking in nature. All statements included in this report on Form
10-K and the Annual Report or made by management of Hyperion Solutions
Corporation and its subsidiaries (Hyperion), other than statements of
historical fact, are forward-looking statements. Examples of forward-looking
statements include statements regarding Hyperions future financial results,
operating results, business strategies, projected costs, products, competitive
positions and plans and objectives of management for future operations. In some
cases, forward-looking statements can be identified by terminology such as
may, will, should, would, expects, plans, anticipates, intends,
believes, estimates, predicts, potential, continue, or the negative
of these terms or other comparable terminology. Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in the section below entitled
Risk Factors. These and many other factors could affect Hyperions future
financial and operating results, and could cause actual results to differ
materially from expectations based on forward-looking statements made in this
document or elsewhere by Hyperion or on its behalf. Hyperion does not
undertake an obligation to update its forward-looking statements to reflect
future events or circumstances.

PART I




ITEM 1. BUSINESS

GENERAL

Founded in 1991, Hyperion Solutions Corporation (Hyperion) develops, markets
and supports business intelligence software, which helps turn raw data into
business information. Hyperions products and services enable companies and
their employees to plan, manage, and execute business strategies to measure
performance and drive profitability, and ultimately create value for their
shareholders.

Hyperions products analyze the raw data captured in operational systems, which
improves the return on investment that organizations have made in enterprise
resource planning (ERP), supply chain management (SCM), customer
relationship management (CRM), marketing automation, Web and e-commerce
systems and data warehouses.

Hyperion provides applications and other extensive capabilities that enable the
creation of an enterprise-wide decision infrastructure. This decision
infrastructure covers analytical needs across a wide variety of functional
areas extending from front office to back office. Hyperion uses its best of
breed technology  Hyperion Essbase online analytical processing (OLAP)
Server  as the foundation of its comprehensive enterprise-wide business
intelligence platform. This platform provides extensive analytical application
development tools and components, as well as technologies which provide for the
integration of data and applications. This platform along with Hyperions
packaged business analysis applications, gives Hyperion one of the deepest and
broadest product offerings in the market. In addition, Hyperion offers highly
rated support and services from offices in 20 countries, and works with over
400 partners to provide solutions to more than 6,000 customer organizations
worldwide.

INDUSTRY BACKGROUND

In response to todays competitive pressures, most businesses need faster
revenue and profit growth, which ultimately leads to value creation. They also
need analysis support for the full business cycle, including its reporting,
analyzing, modeling and planning stages. They require systems and processes
that facilitate faster, better decisions in relation to opportunities and
threats, support for increasingly collaborative planning and help in driving
execution of those decisions and plans.

At the same time, organizations generate significant volumes of transaction
level data within their sales, marketing, service, support, development,
manufacturing, finance and administrative systems. This data is typically
captured in different formats in a variety of information systems. Web and
e-commerce initiatives have added another important but disparate source of
data about employees, customers, suppliers, partners and competitors. Data is
also obtained from external sources for use in applications such as competitive
benchmarking.

Business intelligence software helps turn this raw data into Business
Information. At its best, such software provides a full circle of analysis,
providing organizations with a 360-degree view of their customers from a number
of touch points, but it should not end there. The customer analysis should be
linked to analysis of other company data, including operational, supplier,
employee and financial. Organizations want the flexibility to start with their
most pressing analysis needs, such as financial or performance analysis, and
then incorporate customer analysis  as they complete the circle.

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Hyperion believes that customers will increasingly demand an integrated
platform approach that supports more effective decision-making and faster
revenue and profit growth. The technology foundation, applications and
associated tools and services which comprise a companys business intelligence
platform must be specifically designed to leverage the investment that
organizations have already made in raw data collection and operational systems.

This strategic approach is in contrast to the tactical manner in which some
organizations address analysis requirements today. Using standalone
applications, query and reporting tools and spreadsheets, for example,
employees in different functional areas conduct analyses that are potentially
incomplete or inaccurate. Deployment of a pervasive business intelligence
platform helps employees execute the basic management cycle of reporting,
analyzing, modeling and planning by providing consistent information.
Additionally, it allows an organization to create and execute strategic,
financial and operational plans that are in alignment.

To be useful, all of the data to be analyzed must also be accessed, cleansed,
transformed, extracted and then analyzed using an assortment of sophisticated
quantitative methods. It must be summarized, visualized and presented in a
variety of formats  from spreadsheets and specialized financial report
formats, to multidimensional views and graphical Web-based presentations  that
are meaningful and intuitive to users throughout the organization. Since most
global organizations use multiple operational systems that capture data in
different formats, integrating and interpreting this enterprise data is an
increasingly critical requirement. To take full advantage of the value of the
data stored in existing systems and accelerate decision-making requires
specific business intelligence software that provides data quality and
integrity, scalability and ease of use across the organization.

Hyperion believes that the business intelligence software market is developing
as a historical parallel to the relational database applications market. The
business intelligence software market includes two significant segments: the
buy market supported by packaged (or pre-built) analysis applications, and
custom-built analysis applications, in both cases based on key technologies
that include OLAP servers, data and application integration technologies, and
Web-enabled reporting, analysis, presentation and application development
tools. Organizations demand the availability of both custom-built and
pre-built solutions to accommodate current and future requirements.
Historically, companies initially purchased relational databases and developed
applications with in-house or third party resources. Later, as packaged
applications such as ERP and CRM suites became more fully functional and
general purpose in scope, the total life cycle cost of ownership decreased
sufficiently to create a commercial market opportunity. As expected,
organizations are increasingly buying packaged business intelligence
applications when feasible and OLAP tools and technologies to develop custom
analysis applications in-house to meet their more specialized needs.

Hyperion believes that, in the business intelligence software market as in the
relational database market, applications drag technologies and vice versa. Both
create network effects. Network effects, means that the greater the number of
solutions that are available on a platform, the more valuable that platform
becomes to customers. Hyperion believes that it must fully embrace partners to
maximize the number of third-party solutions available on the Hyperion business
intelligence platform to be successful in the business intelligence software
market.

Hyperions business intelligence platform is comprehensive, scalable, open and
enterprise-class and meets industry needs with a full suite and platform
approach specifically designed to leverage the investment organizations have
already made in raw data collection and operational systems. Business
intelligence software represents the next logical step in the evolution of
enterprise application software.

STRATEGY

Hyperions objective is to be the leading global provider of business
intelligence software products and services. These products and services give
our customers the power to leverage their information assets for strategic
purposes and enable organizations to measure performance and drive
profitability. Hyperion intends to accomplish this by continuing to enhance our
scalable, easy-to-use, open Hyperion Essbase OLAP technology (the keystone of
the Hyperion business intelligence platform), expanding its network of partners
delivering business intelligence capabilities on the platform, continuing to
deliver the best packaged financial applications available, and by providing
complementary highly rated support and services offerings. Either directly or
through partnerships, Hyperions business intelligence platform will also
deliver solutions for emerging market requirements such as performance
management, CRM analysis, SCM analysis, trading exchange analysis, workforce
and skills management analysis and industry-specific analyses.

Hyperion believes that a high level of customer service and customer
satisfaction is critical to the successful marketing and sales of its existing
and new products. We provide a broad range of worldwide consulting, training
and support services that help our customers and partners implement, customize,
enhance, support and extend its business intelligence platform. In response to
market conditions, Hyperion is committed to maintaining a world-class workforce
to deliver these offerings. Hyperion is also committed to supporting the more
than 400 partners that deliver complementary products and services, meeting a
wide variety of customer requirements. These solutions include additional
packaged business intelligence applications, data and application integration
technologies, tools, and training services, all of which use the Hyperion
business intelligence platform as the foundation. We believe that the number of

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partners offering solutions based on Hyperion applications and technology
coupled with sustained growth in new partnerships validate our business
intelligence platform as an emerging standard. These partner relationships
increase the network effects of Hyperions business intelligence platform,
enhance our market reach and provide Hyperion customers with comprehensive
solutions that deliver greater flexibility and choice.

Key elements of Hyperions strategy include:

Leverage Existing Market Leadership Position.Hyperion plans to enhance the
core component of its business intelligence platform, Hyperion Essbase OLAP
Server, with even greater scalability and ease of use features and tighter
integration with relational data sources. We intend to actively seek the
co-development of vertical and horizontal applications based on our business
intelligence platform with outside organizations. Hyperion also intends to
enable all of its packaged applications to fully exploit the business
intelligence platform, creating a key differentiation with competing products.
Hyperion believes that these activities will increase our ability and our
partners ability to deliver an integrated suite of business intelligence
applications across key market areas. Hyperion believes its key strengths are
its established distribution channels and the comprehensive strategic
technology in its business intelligence platform and also believes that its
proven domain expertise and credibility gained from market leadership in the
financial applications area can be leveraged to even more fully exploit the
substantial market opportunity that exists in the financial applications area.

Increase Focus and Penetration of Key Markets.Hyperion plans to focus its
intellectual capital and leverage its partners to provide best-of-breed
business intelligence solutions in key markets including financial and business
performance management, CRM analysis, supply-chain analysis, workforce
analysis, industry-specific solutions, general OLAP-based solutions, and data
warehousing.

Foster Strategic Partner Relationships.To accelerate the adoption of the
business intelligence platform, Hyperion has established over 400
relationships, including the following:



| |  | Application Partners include enterprise software companies such as ERP
providers that either integrate their enterprise packaged application
suite with Hyperion products to enhance business analysis
capabilities, and/or develop horizontal or vertical business
intelligence applications such as budgeting, sales forecasting, demand
planning or profitability analysis, using Hyperion products.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Tools Partners include developers of products and technologies that
integrate with the Hyperion product family for enterprise information
delivery and analysis. These tools include query and reporting,
application development, spreadsheets, visualization, statistics,
mapping and systems management.                                                                                            
| 
| |  | Data Integration Partners include developers of software that works
with Hyperion to provide data integration with data marts, data
warehouses or packaged application suites such as ERP and CRM
packages.                                                                                                                                                                                            
| 
| |  | Platform Partners manufacture and/or develop hardware platforms,
operating systems, and relational databases supported by Hyperion
products.                                                                                                                                                                                                                                                           
| 
| |  | Complementary Technology Partners focus on the resale, implementation
and support of complementary software technology that works with
Hyperions software products.                                                                                                                                                                                                                                   
| 
| |  | Service Partners include system integrators and consulting and
education partners that sublicense Hyperion products and/or provide
services including systems planning, analysis, design, development,
implementation, customization, systems integration and training
services to Hyperions customers and partners.                                                                                  
| 
| |  | Distribution Partners include worldwide and territory-specific
organizations that sell and support Hyperion products in a specific
geography.                                                                                                                                                                                                                                                          

Hyperions partner network enhances and expands its distribution channels, and
extends its business intelligence platform by providing a wider range of
choices for its customers.

Designed to Leverage the Web for Ease of Implementation and Ease of Use.
Hyperions new packaged application products are designed to leverage web-based
technologies and enable collaboration throughout the organization. By building
scalable, high performance applications that can be accessed via an intranet or
the internet, corporations can improve their business processes, gain
efficiencies, improve agility to respond to changing market conditions and
improve bottom line performance. By leveraging the web browser as a user
interface, a corporations information technology department can deploy and
maintain applications quickly and

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easily with reduced costs. From an end-user perspective, web-based
applications are easy to learn and enhance productivity, resulting in reduced
training costs and faster return on investment.

Maintain Sales and Support Relationships.Hyperion licenses its products to
customers throughout the world through a direct sales force as well as through
Original Equipment Manufacturers (OEMs), Value Added Resellers (VARs),
independent distributors and sales agents. Hyperion and its partners often
provide installation and post-sale consulting support to build long-term
customer relationships.

Generate Follow-on Revenues.Hyperion generates revenues from existing
customers through licensing for additional users, the cross selling of licenses
of new products and annual maintenance fees. In addition, sales of training and
consulting services to existing customers represents a significant portion of
Hyperions total service revenues. Follow-on revenues leverage sales and
marketing resources and strengthen relationships with our customers.

PRODUCTS AND SERVICES

Hyperion offers customers an open, scalable, flexible and integrated business
intelligence platform which consists of technology products and financial
applications. Technology products include: Hyperion Essbase (including the
OLAP server component) and Hyperion tools, incorporating domain-specific
business rules, data storage, integration, interoperability, and visualization
capabilities. Financial applications include financial and business
performance management products that provide customers the opportunity to
strategize, model, plan and measure performance. Taken together, Hyperion and
its partners offer a suite of business intelligence solutions that are
compelling in the industry and help customers measure performance and drive
profitability.

HYPERION BUSINESS INTELLIGENCE PLATFORM   TECHNOLOGY PRODUCTS

OLAP (Online Analytical Processing) is an enabling technology that supports a
wide variety of existing and emerging business intelligence applications. OLAP
technology allows data to be explored well beyond the capabilities of
traditional reporting systems. Using sophisticated statistical and mathematical
calculations, intuitive multidimensional views and a highly scalable
architecture, it supports interactive reporting, analysis, modeling, and
planning activities. Hyperion believes, based on independent industry analyst
product evaluations and market share estimates, that Hyperion Essbase is the
industrys leading OLAP technology.

Hyperion Essbase is the keystone of Hyperions strategic business intelligence
platform and is optimized for enterprise reporting, analysis, modeling and
planning applications. It supports multi-user read/write access, large-scale
data capacity, robust analytical calculations, and sophisticated queries.
Hyperion Essbase OLAP Server facilitates intuitive data navigation by providing
multidimensional views of both summary and detail data. Hyperion believes these
capabilities reduce the time and effort involved in training new users and
deliver consistent, rapid response times in network-centric computing
environments with large numbers of simultaneous users. In addition to
integration with standard desktop tools such as spreadsheets and Web browsers,
Hyperion Essbase works with a wide range of best-in-class tools and
applications from Essbase-Ready partners.

Essbase Integration Server is a suite of graphical tools and scalable data
integration services that dramatically reduce the time and expense needed to
create, deploy and manage business intelligence applications. Essbase
Integration Server uses centralized, reusable metadata to automate the process
of creating and managing business intelligence applications that use Hyperion
Essbase and draw data from relational sources such as data warehouses, data
marts, transaction processing applications, Web and e-commerce systems, ERP and
CRM packages and other front office automation and operational systems. Essbase
Integration Server allows users to navigate from summarized, calculated and
derived data managed by Hyperion Essbase to detail data stored in these
relational sources.

Hyperion Analysis Tools are designed to provide best-in-class solutions for a
broad range of enterprise analysis, reporting and information delivery needs.
Hyperion Analysis Tools range from solutions that work right out of the box,
through to an open, standards-based framework for assembling custom business
intelligence applications.

Hyperion Reports delivers highly formatted management reports to an enterprise.
Tightly integrated with Hyperion Essbase, Hyperion Reports provides versatile
query and reporting capabilities that allow users to create reports from data
in multiple sources. A scalable, cross-platform Report Server facilitates
deployment to large user communities. These features make Hyperion Reports an
appropriate solution for a wide range of enterprise reporting applications,
including profit-and-loss, balance sheet and statutory reporting.

Hyperion Analyzer delivers intuitive Web-based graphical presentation of OLAP
data and interactive analysis across all levels of an organization. Designed
for enterprise-wide deployment, Hyperion Analyzer can adapt to meet the
information requirements of employees in different functions and at different
levels of the organization. This makes it ideal for a broad range of sales,
marketing, and other ad-hoc business analysis applications such as sales
analysis, product profitability, and key performance measurement.

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Hyperion Application Builder is a Java-based development tool for building
enterprise-scalable custom business analysis applications. Developers use the
tool to rapidly build and deploy Web-centric, cross-platform applications that
leverage data from multiple Hyperion data sources and relational databases.

HYPERION BUSINESS INTELLIGENCE PLATFORM   FINANCIAL APPLICATION PRODUCTS

Hyperions financial and business performance management products provide
comprehensive support for the strategy setting, business modeling, planning,
performance measurement, reporting, and analysis needs of finance and operating
staff in organizations worldwide. Hyperions financial and business
performance management products complement existing ERP and transaction systems
- integrating data from multiple sources, providing a common view across the
organization, and enabling an integrated financial and performance management
process that aligns individual goals with corporate objectives.

Hyperion Planning is a Web-based business analysis application designed to
enable collaborative, event-based operational planning processes throughout an
organization and fulfill a wide range of financial and operational needs such
as budgeting, planning and forecasting. Hyperion Planning provides support for
the complete planning process and helps drive continuous business improvement.
Using Hyperion Planning, strategic and senior managers and front line
decision-makers can communicate a desired course of action to facilitate
effective collaboration so that the planning process is optimized and
efficient. When a material event occurs that changes a critical assumption,
planners can quickly adapt, ensuring that plans are relevant and useful.
Hyperion Planning can improve the effectiveness of virtually any operational
planning process. Hyperion Planning takes advantage of the Hyperion business
intelligence platform and is most appropriate for companies seeking a solution
that delivers real-time planning, sophisticated modeling, dynamic forecasting
and event-driven reallocation of resources to a large number of users.

Hyperion Financial Management is a centralized, scalable, financial management
and reporting solution. With Hyperion Financial Management, clients can unify
their financial information (actuals, budgets, forecasts, statistics), in a
single web-based application for one version of the truth. Hyperion Financial
Management is designed for diverse, multi-entity organizations with a
centralized approach to managing their financial management and reporting
processes and who are seeking to align their decision-making processes with
overall business goals. It is a financial reporting and analysis system that
can manage all financial information and deploy it enterprise-wide. Hyperion
Financial Management takes advantage of the Business Intelligence Platform and
is most appropriate for companies seeking a centralized approach to
comprehensive financial management unifying all decision makers across the
enterprise, leading to improved efficiencies, faster business cycle times and
greater company agility.

Hyperion Performance Scorecard is a Web-based business analysis application
designed to help employees throughout an organization gain a clear
understanding of organizational strategy and accountability. Organizations that
deploy Hyperion Performance Scorecard are better able to bridge the gap between
strategy and execution, engage a broader range of employees in planning
activities and respond more proactively to changing business conditions.
Hyperion Performance Scorecard embeds industry-leading metric libraries,
exposes world class benchmarking services and supports customized and standard
performance measurement frameworks, including the Balanced Scorecard.

Hyperion Business Modeling (previously called Hyperion Activity Based
Management) is a Web-enabled business analysis application that is designed to
help manage and optimize strategy by causing assumptions about strategy to be
constantly tested and revised. Using an operational approach rather than
strictly financial formulas, Hyperion Business Modeling builds sophisticated
models of activities within a business process in order to determine the true
cost of a customer, product or channel, for example, and promote a better
understanding of resource utilization and associated operational constraints.
Starting with requirements, the activity-based models determine how employees,
processes and resources should be deployed to fulfill these requirements most
efficiently.

Hyperion Pillar is a business analysis application for departmental budgeting
and planning. It is designed to increase the reliability and efficiency of a
hierarchically controlled bottom-up budgeting process. By facilitating
participation of line managers and business activity experts in this process,
Hyperion Pillar can improve an organizations ability to shorten cyclical
budget cycle times and deliver consistent budget revisions and projected
financial statements. Hyperion Pillar enables a company to increase usage and
decrease the maintenance of the budgeting and planning process. It is
appropriate for organizations seeking a budgeting solution supporting remote
users with limited IT resource requirements.

Hyperion Enterprise is a business analysis application designed to simplify the
collection, consolidation and reporting of financial results, reduce the time
organizations spend on these activities and improve financial analysis and
planning capabilities. It is appropriate for global organizations seeking a
comprehensive consolidation and reporting solution with many remote sites and
low IT support requirements. Complementing Hyperion Enterprise, Hyperion
Enterprise Reporting is an advanced financial reporting solution. An intuitive
graphical interface helps users create sophisticated production-quality
financial reports for printing or online access. Embedded process-specific
financial intelligence provides accurate and detailed financial information,
while a comprehensive library of financial functions and calculations allow
users to derive new metrics.

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Hyperion Application Link is a suite of graphical application integration
services designed to reduce the time and expense required to integrate data
from ERP systems, transaction-processing applications, data warehouses and
other sources with packaged business analysis applications.

Hyperion also provides integrated customer relationship management (CRM)
business rules that enable the rapid customization and deployment of CRM
analysis applications that complement operational customer relationship
management packages. Using the Hyperion business intelligence platform,
applications can deliver an end-to-end view of customer interactions and enable
further refinement of customer-facing business processes, increasing customer
satisfaction and loyalty and enhancing customer lifetime value. Hyperions
business intelligence platform capabilities allow sales, service and marketing
personnel to make more effective decisions based on the detailed analysis of
customer relationships. Hyperion customers can also integrate product,
financial and demographic data from other sources to enable richer customer
analyses that more accurately quantify a customers lifetime value and gain a
better understanding of their customers behaviors, needs and preferences
across all touch points and deliver a true 360-degree view of their customer
relationships. Hyperion believes that the information gained by using its
business intelligence platform for CRM analysis applications will drive
business process refinements that lead to more satisfied customers and stronger
customer relationships.

SERVICES AND SUPPORT

Hyperion believes that a high level of customer service and customer
satisfaction is important to the successful marketing and sale of its products.
Hyperion offers an extensive selection of worldwide training, consulting, and
technical support services to install, implement, and support its products.
Consulting and training services are not included in software license fees, but
are provided on a time and materials basis. Within the area of technical
support, enhanced support offerings are not included in the software license
fees. Hyperion believes that as a result of providing customers with the
flexibility to select and tailor the level of consulting, training, and
technical support services that best meets their needs, customer satisfaction
has remained high. Hyperions services and support organization consisted of
866 employees as of August 31, 2001. Hyperion has also established a global
network of partners who deliver implementation and training services.

Under the terms of Hyperions standard license agreement, customers may, at
their option, pay a maintenance fee annually. This maintenance fee entitles
customers to technical support, including telephone and Web-based support, and
to any updates and enhancements provided for their software.

SALES AND MARKETING

Hyperion markets and sells its products in the United States, Canada, Europe,
Asia and Latin America through its direct sales force and worldwide through
OEMs, VARs, independent distributors and sales agents. Hyperion supports its
sales force with lead generation and marketing programs which include
telemarketing, public relations, direct mail, advertising, seminars, trade
shows, education, ongoing customer communication programs, third-party
alliances and user group conferences. Worldwide and regional user conferences
are held annually. Regional user meetings and product-specific focus groups are
also scheduled periodically. Sales cycles generally last from three to nine
months. Hyperion has dedicated sales, marketing and technical alliance
resources designed to optimize its partner relationships. The direct sales
force is compensated for direct sales as well as sales made through indirect
channel partners to ensure appropriate cooperation with Hyperions OEMs and
VARs, independent distributors and sales agents. Hyperion has licensed its
software to more than 6,000 organizations worldwide, many of which are
multidivision and/or multilocation organizations with diverse information
management requirements. In the past three fiscal years, no one customer
accounted for more than 10% of total revenues.

Hyperions sales and marketing organization consisted of 758 employees as of
August 31, 2001. Hyperion has sales offices at its headquarters in Sunnyvale,
California and in other U.S. locations and international locations. U.S.
Locations include: Alexandria, Virginia; Baltimore, Maryland; Bellevue,
Washington; Bloomington, Minnesota; Charlotte, North Carolina; Cleveland, Ohio;
Dallas, Texas; Denver, Colorado; Irvine, California; Grand Rapids, Michigan;
Houston, Texas; Kennesaw, Georgia; Lisle, Illinois; New York, New York;
Orlando, Florida; Pittsburgh, Pennsylvania; San Diego, California; San
Francisco, California; Scottsdale, Arizona; St. Louis, Missouri; Stamford,
Connecticut and Waltham, Massachusetts. International locations include:
Calgary, Canada; Brussels, Belgium; Copenhagen, Denmark; Dublin, Ireland;
Egham, United Kingdom; Espoo, Finland; Frankfurt, Germany; Hong Kong, China;
Madrid, Spain; Manchester, United Kingdom; Milan, Italy; Montreal, Canada;
Munich, Germany; Oslo, Norway; Paris, France; Seoul, Korea; Singapore,
Singapore; Stockholm, Sweden; Sydney, Australia; Tokyo, Japan; Utrecht,
Netherlands; Vienna, Austria and Zurich, Switzerland. Product support and
training are available as well through many of these locations.

Hyperion has been able to leverage sales and marketing through its partnering
strategy with channel partners that distribute or resell Hyperions products in
their respective markets. Hyperion has license and distribution agreements with
independent distributors and sales agents in Argentina, Australia, Brazil,
Egypt, Greece, Israel, Japan, Korea, Malaysia, Mexico, New Zealand, Poland,
Russia,

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Singapore, South Africa, Taiwan and Turkey, as well as other territories of
North America, Europe, Asia and Latin America. The distributors generally
maintain sales and services personnel dedicated to Hyperions products. The
distribution agreements generally provide for the right to offer Hyperions
products within a territory in return for royalties typically equal to 50% of
license and renewal fees.

Revenues derived from indirect channel partners for fiscal 2001, 2000, and 1999
were 21.3%, 26.7%, and 25.2% of license revenues, respectively. Hyperions
channel partners include, but are not limited to: Arthur Andersen LLP;
Comshare, Incorporated; Deloitte & Touche LLP; Ernst & Young Technologies,
Inc.; Fujitsu Limited; International Business Machines Corporation; i2
Technologies, Inc.; KPMG Consulting Inc.; Immix Inc.; Lawson Associates, Inc.;
Mitsubishi Corporation; PeopleSoft, Inc.; SPSS Corporation; Software House
International; Vantage Source and Walker Interactive Systems, Inc.

In its 2001, 2000, and 1999 fiscal years, approximately 33.3%, 32.5%, and
35.0%, respectively, of Hyperions total revenues were derived from markets
outside of North America.

RESEARCH AND DEVELOPMENT

Hyperions products have been developed by its internal staff, contract
developers and through strategic acquisitions. Hyperions development efforts
are focused on new products, as well as on maintaining the competitiveness of
its current product line, including development of the next releases of
Hyperion Essbase OLAP Server, Hyperion Financial Management, Hyperion Planning,
Hyperion Enterprise, Hyperion Pillar, Hyperion Performance Measurement, and
Hyperion Business Modeling. As of August 31, 2001, Hyperions product
development was primarily performed by 421 employees located at its facilities
in Sunnyvale and Foster City, California; Stamford, Connecticut; Orlando,
Florida; Atlanta, Georgia and Toronto, Canada.

COMPETITION

The markets in which Hyperion competes are intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards. Hyperions current and potential competitors offer a variety of
reporting, analysis, modeling and planning software solutions and generally
fall within four categories: (i) vendors of OLAP server software that may also
be marketed as part of a platform offering; (ii) vendors of enterprise software
applications that support transaction processes and front/back office
automation; (iii) vendors of front-end information access tools; and (iv)
vendors of packaged business analysis applications. While competition is
intense on any individual business intelligence opportunity, Hyperion believes
that no other competitor currently has the singular focus and breadth of
products and services required to deliver enterprise-wide business intelligence
solutions. As markets continue to develop for business intelligence software
products, additional competitors may enter or expand into those markets and
competition may intensify.

Hyperion has experienced, and expects that it will continue to experience,
increased competition from current and potential competitors, some of whom have
significantly greater financial, technical, marketing and other resources than
Hyperion. Such competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than
Hyperion. Also, certain current and potential competitors may have greater name
recognition or more extensive customer bases that could be leveraged, thereby
gaining market share to Hyperions detriment. Hyperion expects additional
competition as other established and emerging companies enter into the
enterprise software market and new products and technologies are introduced. In
addition, as Hyperion develops and enhances its software and complementary
products, the resulting new functionality may duplicate the functionality of,
and thus compete with, other products offered by channel partners. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins and loss of market share, any of which would materially adversely
affect Hyperions business, operating results and financial condition.

Current and potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing the ability of their products to address the needs of Hyperions
existing and prospective customers. Further competitive pressures, such as
those resulting from competitors discounting of their products, may require
Hyperion to reduce the price of its software products, which would materially
adversely affect Hyperions business, operating results and financial
condition. There can be no assurance that Hyperion will be able to compete
successfully against current and future competitors, and the failure to do so
would have a material adverse effect upon Hyperions business, operating
results and financial condition. See Part I, Item 7, Factors That May Affect
Future Results.

PROPRIETARY RIGHTS AND LICENSES

Hyperion relies primarily on a combination of patent, copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. Despite Hyperions efforts to protect its
proprietary rights, unauthorized parties

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may attempt to copy aspects of Hyperions products or to obtain and use
information that Hyperion regards as proprietary. Policing unauthorized use of
Hyperions products is difficult and, while Hyperion is unable to determine the
extent to which piracy of its software products exists, software piracy is
expected to be a persistent problem. In addition, the laws of some foreign
countries do not protect Hyperions proprietary rights as fully as do the laws
of the United States. There can be no assurance that Hyperions means of
protecting its proprietary rights in the United States or abroad will be
adequate or that competitors will not independently develop similar technology.
Hyperion has entered into source code escrow agreements with a number of its
customers and indirect channel partners requiring release of source code under
certain conditions. Generally, such agreements provide that such parties will
have a limited, nonexclusive right to use such code in the event that there is
an undismissed bankruptcy proceeding by or against Hyperion, if Hyperion ceases
to do business or if Hyperion materially fails to meet its contractual
obligations. The release of source code may increase the likelihood of
misappropriation by third parties.

Hyperion currently has a small number of patents relating to its products,
including four United States patents, two foreign patents and a number of
patent applications pending in the United States and abroad. There can be no
assurance that Hyperions patents will not be invalidated, circumvented or
challenged, that the rights granted there under will provide competitive
advantages to Hyperion or that any of Hyperions pending or future patent
applications, whether or not being currently challenged by applicable
governmental patent examiners, will be issued with the scope of the claims
sought by Hyperion, if at all. Furthermore, there can be no assurance that
others will not develop technologies that are similar or superior to Hyperions
technology or design around the patents owned by Hyperion. In 1998, the U.S.
Patent and Trademark Office granted two requests for reexamination of
Hyperions U.S. Patent No. 5,359,724 (the 724 Patent). The reexamination
proceedings are currently pending. An adverse outcome of the reexamination
proceedings could involve loss of some or all of the claims of the patent. See
Item 3. Legal Proceedings. Hyperion has also received a complaint from
Timeline, Inc. (Timeline), which contends that certain Company products
infringe upon one or more patents owned by Timeline. While Timeline has filed a
patent infringement lawsuit against Hyperion concerning this matter in the U.S.
District Court in Seattle, Timeline has not yet served Hyperion or required it
to answer the complaint. Hyperion and Timeline are currently exploring
settlement of the complaint. Hyperion believes that the outcome of Timelines
complaint will not have a material adverse effect on the financial position of
Hyperion.

Hyperion expects that software product developers will increasingly be subject
to infringement claims as the number of products and competitors in Hyperions
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert managements attention
and resources, cause product shipment delays or require Hyperion to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to Hyperion, if at all. In
the event of a successful claim of product infringement against Hyperion and
failure or inability of Hyperion to license the infringed or similar
technology, Hyperions business, operating results and financial condition
would be materially adversely affected.

Hyperion relies upon certain software that it licenses from third parties,
including software that is integrated with Hyperions internally developed
software and used in Hyperions products to perform key functions. There can be
no assurance that these third party software licenses will continue to be
available to Hyperion on commercially reasonable terms. The loss of, or
inability to maintain, any such software licenses could result in shipment
delays or reductions until equivalent software could be developed, identified,
licensed and integrated, which would materially adversely affect Hyperions
business, operating results and financial condition.

Hyperion distributes its products under software license agreements that grant
customers a nonexclusive, nontransferable license to Hyperions products and
contain terms and conditions prohibiting the unauthorized reproduction or
transfer of Hyperions products. Generally, Hyperion does not provide end users
with the source code for its products except under the escrow arrangements as
described above.

EMPLOYEES

As of August 31, 2001, Hyperion employed a total of 2,361 employees. None of
Hyperions employees is represented by a labor union. Hyperion believes its
relations with employees are good.

The executive officers of Hyperion as of August 31, 2001, are as follows:

|                  |  |     |    |          |  |                                              
|----------------- |  | --- | -- | -------- |  | ---------------------------------------------
|Name              |  | Age |    | Position
|                  |  |     |    |         
|Jeffrey R. Rodek  |  |     | 48 |          |  | Chairman and Chief Executive Officer         
|                 
|                 
|                 
|                 
|Stephen V. Imbler |  |     | 49 |          |  | President and Chief Operating Officer        
|                 
|                 
|                 
|                 
|David W. Odell    |  |     | 38 |          |  | Chief Financial Officer                      
|                 
|                 
|                 
|                 
|W. Russell Wayman |  |     | 57 |          |  | Vice President, General Counsel and
Secretary

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Jeffrey R. Rodek has served as Chairman and Chief Executive Officer of Hyperion
since October 1999. He has been a member of Hyperions Board of Directors since
January 1998. Prior to joining Hyperion, Rodek served as President and
Worldwide Chief Operating Officer of Ingram Micro, a distributor of electronic
products, from January 1995 to October 1999.

Stephen V. Imbler is Hyperions President and Chief Operating Officer. Prior to
the merger between Arbor Software and Hyperion Software, he held the position
of Vice President and CFO at Arbor. He joined Arbor as its Chief Financial
Officer in 1995.

David W. Odell joined Hyperion as Chief Financial Officer and Corporate Vice
President in August 2000. He joined Hyperion from KPMG LLP, a public accounting
firm. He was with KPMG for over fifteen years, most recently as a partner in
the firms Sydney, Australia office.

W. Russell Wayman joined Hyperion as Corporate Vice President, General Counsel
and Secretary of Hyperion in January 2001. Prior to that he was Vice President
and General Counsel of Etec Systems, Inc, a semiconductor manufacturing
equipment company, from 1998 to 2000, and Vice President and General Counsel of
Storage Technology Corporation, a manufacturer of computer disk and tape
storage devices, from 1990 to 1998.




ITEM 2. PROPERTIES

Hyperions principal administrative, sales and services, marketing, and
research and development facilities are located in Sunnyvale and Irvine,
California; Stamford, Connecticut; Orlando, Florida; Kennesaw, Georgia; Lisle,
Illinois; Waltham, Massachusetts; Dallas, Texas and Toronto, Canada. Hyperion
occupies approximately 100,000 square feet at its headquarters in Sunnyvale,
California, pursuant to a lease which expires in December 2002. Hyperion also
owns and occupies approximately 230,000 square feet in Stamford, Connecticut.
Hyperion also leases office space throughout the world for its local sales and
services needs. Hyperion believes that its existing facilities are adequate for
its current needs. If additional space is needed in the future, Hyperion
believes that suitable space will be available on commercially reasonable
terms.




ITEM 3. LEGAL PROCEEDINGS

On July 11, 1997, Gentia Software filed a request for reexamination of
Hyperions U.S. Patent No. 5,359,724 with the United States Patent and
Trademark Office (the PTO) arguing that the 724 patent was anticipated and
obvious in light of certain prior art references. On September 11, 1997, the
PTO granted the request for reexamination. On February 27, 1998, Gentia
Software filed with the PTO a request for a second reexamination of the 724
patent based on additional prior art references. On May 22, 1998, the PTO
granted that request for reexamination, which was later consolidated with the
first reexamination. On March 31, 1999, the PTO issued a non-final office
action rejecting the claims of the `724 patent. Hyperion filed its response to
the office action on May 31, 1999. No final office action has been issued by
the PTO. Hyperion believes that the outcome of such action will not have a
material adverse effect on the financial position of Hyperion.

On June 30, 2000, Hyperion Software (UK) plc was named as a defendant in a
lawsuit in the Technology and Construction Court in England for damages of
approximately 1.1 million pounds sterling (UK) in connection with an OLAP and
Hyperion Enterprise implementation that the claimants claim failed to meet its
requirement. This case was settled in July 2001 and did not have a material
adverse impact on the financial condition of Hyperion.

From time to time, in the normal course of business, various claims are made
against Hyperion. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of Hyperion.




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

During the fourth quarter of the fiscal year covered by this report, no matter
was submitted to a vote of security holders through the solicitation of proxies
or otherwise.

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PART II




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

Hyperions common stock trades on the Nasdaq National Market under the symbol
HYSL. The following table sets forth, for the periods indicated, the high and
low sales prices of the common stock as reported on the Nasdaq National Market.

|               |  |      |        |     |  |   |        | 
|-------------- |  | ---- | ------ | --- |  | - | ------ | 
|FISCAL 2000:   |  | HIGH |        | LOW
|               |  |      |        |    
|First quarter  |  | $    | 24.375 |     |  | $ | 15.125 | 
|              
|              
|              
|              
|Second quarter |  |      | 44.000 |     |  |   | 18.625 | 
|              
|              
|              
|              
|Third quarter  |  |      | 65.000 |     |  |   | 28.375 | 
|              
|              
|              
|              
|Fourth quarter |  |      | 35.000 |     |  |   | 20.000 | 

|               |  |      |        |     |  |   |        | 
|-------------- |  | ---- | ------ | --- |  | - | ------ | 
|FISCAL 2001:   |  | HIGH |        | LOW
|               |  |      |        |    
|First quarter  |  | $    | 34.625 |     |  | $ | 22.938 | 
|              
|              
|              
|              
|Second quarter |  |      | 25.500 |     |  |   | 11.688 | 
|              
|              
|              
|              
|Third quarter  |  |      | 23.063 |     |  |   | 15.000 | 
|              
|              
|              
|              
|Fourth quarter |  |      | 17.200 |     |  |   | 13.250 | 

|                                  |  |      |        |     |  |   |        | 
|--------------------------------- |  | ---- | ------ | --- |  | - | ------ | 
|FISCAL 2002:                      |  | HIGH |        | LOW
|                                  |  |      |        |    
|First quarter (through August 31) |  | $    | 16.670 |     |  | $ | 13.050 | 

As of August 31, 2001, Hyperion had 217 stockholders of record and
approximately 10,000 beneficial holders of its common stock.

Hyperion has never declared or paid any cash dividends on its capital stock.
Hyperion currently intends to retain all earnings to finance future growth and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)

|                                       |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |        |      | 
|-------------------------------------- | ------- | --------------------------------- | ------- | --------------------------- | ----- | ---- | ------- | ------ | ---- | ---- | ------- | ------ | ---- | - | ------- | ------ | ---- | - | ------- | ------ | ---- | 
|                                       |         |                                   |         | FOR THE YEAR ENDED JUNE 30,
|                                       |         |                                   |         |                            
|STATEMENT OF INCOME DATA:              |         | 2001                              |         | 2000                        |       | 1999 |         | 1998   |      | 1997
|                                       |         |                                   |         |                             |       |      |         |        |      |     
|REVENUES                               |         | $                                 | 516,723 |                             |       | $    | 492,405 |        |      | $    | 424,885 |        |      | $ | 377,093 |        |      | $ | 270,213 |       
|                                      
|                                      
|                                      
|                                      
|COSTS AND EXPENSES (1) (2)             |         |                                   | 571,603 |                             |       |      | 454,008 |        |      |      | 409,763 |        |      |   | 324,802 |        |      |   | 245,011 |       
|                                      
|                                      
|                                      
|                                      
|OPERATING INCOME (LOSS)                |         |                                   | (54,880 | )                           |       |      | 38,397  |        |      |      | 15,122  |        |      |   | 52,291  |        |      |   | 25,202  |       
|                                      
|                                      
|                                      
|                                      
|NET INCOME (LOSS)                      |         | $                                 | (31,073 | )                           |       | $    | 28,819  |        |      | $    | 7,973   |        |      | $ | 34,757  |        |      | $ | 17,704  |       
|                                       |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |       
|EARNINGS (LOSS) PER SHARE              |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |       
|                                      
|                                      
|                                      
|                                      
|                                       |         | Basic earnings (loss) per share   |         | $                           | (0.95 | )    |         | $      | 0.91 |      |         | $      | 0.26 |   |         | $      | 1.19 |   |         | $      | 0.64 | 
|                                       |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |       
|                                       |         | Diluted earnings (loss) per share |         | $                           | (0.95 | )    |         | $      | 0.87 |      |         | $      | 0.26 |   |         | $      | 1.13 |   |         | $      | 0.61 | 
|                                       |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |       
|AVERAGE NUMBER OF SHARES OUTSTANDING   |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |       
|                                      
|                                      
|                                      
|                                      
|                                       | Basic   |                                   |         | 32,592                      |       |      |         | 31,665 |      |      |         | 30,196 |      |   |         | 29,121 |      |   |         | 27,537 |     
|                                      
|                                      
|                                      
|                                      
|                                       | Diluted |                                   |         | 32,592                      |       |      |         | 33,107 |      |      |         | 30,855 |      |   |         | 30,770 |      |   |         | 29,261 |     
|                                      
|                                      
|                                      
|                                      
|CASH GENERATED BY OPERATING ACTIVITIES |         | $                                 | 31,273  |                             |       | $    | 27,774  |        |      | $    | 43,160  |        |      | $ | 87,571  |        |      | $ | 49,703  |       
|                                      
|                                      
|                                      
|                                      
|BALANCE SHEET DATA:                    |         |                                   |         |                             |       |      |         |        |      |      |         |        |      |   |         |        |      |   |         |       
|                                      
|                                      
|                                      
|                                      
|Cash and short-term investments        |         | $                                 | 255,366 |                             |       | $    | 295,159 |        |      | $    | 271,856 |        |      | $ | 257,347 |        |      | $ | 95,910  |       
|                                      
|                                      
|                                      
|                                      
|Working capital                        |         |                                   | 239,838 |                             |       |      | 297,745 |        |      |      | 230,910 |        |      |   | 218,033 |        |      |   | 72,480  |       
|                                      
|                                      
|                                      
|                                      
|Total assets                           |         |                                   | 570,393 |                             |       |      | 589,891 |        |      |      | 512,894 |        |      |   | 476,665 |        |      |   | 278,228 |       
|                                      
|                                      
|                                      
|                                      
|Deferred revenue                       |         |                                   | 100,234 |                             |       |      | 88,828  |        |      |      | 81,089  |        |      |   | 63,724  |        |      |   | 50,573  |       
|                                      
|                                      
|                                      
|                                      
|Total long-term debt                   |         |                                   | 91,045  |                             |       |      | 102,518 |        |      |      | 103,752 |        |      |   | 107,314 |        |      |   | 8,102   |       
|                                      
|                                      
|                                      
|                                      
|Stockholders equity                   |         |                                   | 267,319 |                             |       |      | 309,861 |        |      |      | 240,776 |        |      |   | 213,225 |        |      |   | 155,609 |       



---

|(1) |  | Operating expenses for the year ended June 30, 2001, include a $42.8
million ($26.5 million after tax) charge related to restructuring and
non-recurring charges (see Note 11 of Notes to Consolidated Financial
Statements). Excluding this charge Hyperion would have had pro forma net
loss of $2.9 million or $0.09 per pro forma diluted share.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Operating expenses for the year ended June 30, 2000, include a $2.1
million ($1.3 million after tax) restructuring and non-recurring charge,
and a merger credit of $0.3 million ($0.2 million after tax). Excluding
these charges, Hyperion would have had pro forma net income of $30.6
million or $0.92 per pro forma diluted share.             
|   
|   
|   
|   
|(3) |  | Certain prior year balances have been reclassified to conform to the
current year presentation.                                                                                                                                                                                                                                                     




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

OVERVIEW

Hyperion develops, markets and supports business intelligence software, which
helps turn raw data into business information. Hyperions products and services
enable companies and their employees to plan, manage and execute business
strategies to measure performance and drive profitability, and ultimately
create value for their shareholders.

Hyperions products analyze the raw data captured in operational systems, which
improves the return on investment that organizations have made in ERP, SCM,
CRM, marketing automation, Web and e-commerce systems and data warehouses.

Hyperion offers customers an open, scalable, flexible and integrated business
intelligence platform which consists of technology products and financial
applications. Technology products include: Hyperion OLAP Essbase server, (its
OLAP server technology) Hyperion tools, incorporating domain-specific business
rules, data storage, integration, interoperability and visualization
capabilities. Financial applications include financial and business
performance management products that provide customers the opportunity to
strategize, model, plan and measure performance. Taken together, Hyperion and
its 400 partners offer a suite of business intelligence solutions that are
compelling in the industry and help customers measure performance and drive
profitability.

Hyperion derives revenues from licensing its software products and providing
related maintenance and support, product installation and implementation and
training services. Customers are billed an initial license fee for the software
upon delivery. An optional maintenance and support fee entitling customers to
routine support and product updates is billed annually. Services revenues
consist of product installation, implementation and training services and are generally
billed on a time-and-materials basis.

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During fiscal 2001, we undertook a company-wide initiative aimed at improving
operational efficiencies and strengthening the financial performance of the
business. In connection with this initiative, we recorded a restructuring
charge of $42.8 million in the fourth quarter of fiscal 2001.

RESULTS OF OPERATIONS

REVENUES

|                         |  |                     |         |          |  |      |       |          |  |      |         |          |  |  |       |   |  |      |         |  |  |  |       |  
|------------------------ |  | ------------------- | ------- | -------- |  | ---- | ----- | -------- |  | ---- | ------- | -------- |  |  | ----- | - |  | ---- | ------- |  |  |  | ----- | -
|                         |  | YEAR ENDED JUNE 30,
|                         |  |                    
|                         |  |                     |         |          |  | % of |       |          |  |      |         | % of     |  |  |       |   |  | % of
|(in thousands)           |  | 2001                |         | revenues |  | 2000 |       | revenues |  | 1999 |         | revenues
|                         |  |                     |         |          |  |      |       |          |  |      |         |         
|Software licenses        |  | $                   | 227,994 |          |  |      | 44.1  | %        |  | $    | 240,326 |          |  |  | 48.8  | % |  | $    | 205,991 |  |  |  | 48.5  | %
|                        
|                        
|                        
|                        
|Maintenance and services |  |                     | 288,729 |          |  |      | 55.9  | %        |  |      | 252,079 |          |  |  | 51.2  | % |  |      | 218,894 |  |  |  | 51.5  | %
|                         |  |                     |         |          |  |      |       |          |  |      |         |          |  |  |       |   |  |      |         |  |  |  |       |  
|Total Revenues           |  | $                   | 516,723 |          |  |      | 100.0 | %        |  | $    | 492,405 |          |  |  | 100.0 | % |  | $    | 424,885 |  |  |  | 100.0 | %
|                         |  |                     |         |          |  |      |       |          |  |      |         |          |  |  |       |   |  |      |         |  |  |  |       |  

Total revenues increased by 4.9% in fiscal 2001
compared to an increase of 15.9% in fiscal
2000. The increase in fiscal 2001 was due to the successful growth of
maintenance and services revenues offset by a 5.1% decline in license revenues.
Maintenance and services revenues for fiscal 2001 increased to $165.8 million
and $122.9 million, respectively, which represents a 7.4% and 25.9% increase
over fiscal 2000. The increase in fiscal 2000 total revenues was due to a
16.7% increase in license revenues and a 23.4% increase in maintenance
revenues, respectively. The change in foreign exchange rates from fiscal 2000
to fiscal 2001 negatively impacted fiscal 2001 results by approximately $14.4
million or 3% of total revenue due primarily to the decline in the Euro,
British Sterling and the Japanese Yen.

Software license revenues decreased by 5.1% in fiscal 2001 and increased by
16.7% in fiscal 2000. The decline in software license revenues in fiscal 2001,
in both absolute dollars and as a percentage of total revenues, was due to a
longer sales cycle caused by the continuing economic weakness in North American
sales. Channel revenues also declined as a percentage of total software
revenues in comparison to the prior year and financial application revenue
declined as a percentage of total software revenue as compared to the prior
year as our new products are still in the early stages of their product life
cycles. The growth in software license revenues in fiscal 2000, in both
absolute dollars and as a percentage of total revenues, was primarily due to an
increase in the number of licenses sold (unit volumes) versus price increases.
The growth in software sales in fiscal 2000 was led by increased sales force
productivity and demand for Hyperions business analysis software. Hyperion
appointed new sales leadership and expanded its sales training and lead
generation programs, resulting in sales productivity improving gradually each
quarter through the balance of fiscal 2000.

Maintenance and services revenue increased by 14.5% in fiscal 2001 and by 15.2%
in fiscal 2000. The increase in absolute dollars and as a percentage of total
revenues in fiscal 2001 was due primarily to the 25.9% increase in services
revenues related to the increase in technology product related services (e.g.
Essbase and related tools). Maintenance revenues increased in absolute
dollars and as a percentage of total revenues in fiscal 2001 due to a larger
installed base of customers receiving ongoing maintenance and support services.
Maintenance and services revenue grew in fiscal 2000, due to reduced license
revenue volumes in fiscal 1999 and the first half of fiscal 2000.

Hyperion markets its products through the direct sales force and indirect
channel partners. Historically, Hyperion has generated the majority of our
revenue from the direct sales force. Hyperion continues to focus on
complementing its direct sales channel with indirect channels, which consists
of OEMs, VARs, independent distributors and sales agents. Revenue from all
indirect channel partners comprised 21.3%, 26.7% and 25.2% of license revenue
in fiscal 2001, 2000 and 1999, respectively. The decline in channel revenues in
fiscal 2001 in absolute dollars and as a percentage of total revenues was
primarily due to a decrease in the number of licenses sold (unit volume).
Revenue from indirect partners for any period is subject to significant
variations. As a result, Hyperion believes that period-to-period comparisons of
indirect revenue are not necessarily meaningful and should not be relied upon
as an indication of future performance.

Total revenues generated from markets outside North America, including export
sales, for fiscal 2001, 2000 and 1999 were $172.1 million, $160.2 million and
$148.5 million, or 33.3%, 32.5% and 35.0% of total revenues, respectively.
Revenue growth was particularly strong in Germany, Switzerland, Japan and Latin
America in fiscal 2001, France, Italy and Scandinavia in fiscal 2000, and in
France, Italy and the Netherlands in fiscal 1999.

The split between technology products and financial application revenues was
54.7%-45.3% in fiscal 2001, 50.6%-49.4% in fiscal 2000 and 47.3%-52.7% in
fiscal 1999. In fiscal 2001, Hyperion signed more large deals with technology
products included whereas

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in fiscal 2000 Hyperion sold a significant number of
pure financial application product deals. In addition, Hyperion released new
financial applications (Hyperion Planning and Hyperion Financial Management) in
fiscal 2001 and these products are still in the early stages of their product
life cycles.

Hyperion derives revenues from licensing its software products and providing
related maintenance and support, product installation and implementation, and
training services. Hyperion records revenue from licensing of software
products to end-users when there is persuasive evidence of an arrangement, the
fee is fixed and determinable, collection is reasonably assured and delivery of
the product has occurred as prescribed by Statement of Position (SOP) No.
97-2, Software Revenue Recognition. When contracts contain multiple elements,
and for which vendor specific objective evidence (VSOE) of fair value exists
for the undelivered elements, Hyperion recognizes revenue for the delivered
elements based upon the residual method, in accordance with SOP No. 98-9,
Modifications of SOP 97-2 with Respect to Certain Transactions. Undelivered
elements consist primarily of maintenance and support and other services such
as consulting and training. VSOE of fair value for annual maintenance and
support contracts is established with the optional stated future renewal rates
included in the contracts. VSOE of fair value for the services element is based
upon the standard hourly rates Hyperion charges for services when such services
are sold separately. Services are generally not considered essential to the
functionality of the software. Hyperion recognizes revenue allocated to
maintenance and support ratably over the period of the maintenance and support
contracts, respectively, which is generally twelve months. For revenue related
to consulting and training services, Hyperion recognizes revenue as the related
services are performed. In instances where services are deemed essential to the
software, both the software license fee and consulting fees are recognized
using the percentage-of-completion method of contract accounting in accordance
with SOP No. 81, Accounting for Performance of Construction-Type and Certain
Product-Type Contracts and Accounting Research Bulletin (ARB) No. 45,
Long-Term Construction-Type Contracts.

Hyperion licenses its products throughout the world through a direct sales
force and through OEMs, VARs, independent distributors and sales agents,
including other technology and application software companies. Hyperion
includes in revenues its net share of revenues generated by channel partners.
In the event that an agent has facilitated the sale and Hyperion is the
licensor, the license revenue is reported gross and a commission charge is
recorded.

COST OF REVENUES

|                         |  |                     |         |          |  |       |      |          |  |      |         |          |  |  |      |   |  |       |         |  |  |  |      |  
|------------------------ |  | ------------------- | ------- | -------- |  | ----- | ---- | -------- |  | ---- | ------- | -------- |  |  | ---- | - |  | ----- | ------- |  |  |  | ---- | -
|                         |  | YEAR ENDED JUNE 30,
|                         |  |                    
|                         |  |                     |         |          |  | Gross |      |          |  |      |         | Gross    |  |  |      |   |  | Gross
|(in thousands)           |  | 2001                |         | Profit % |  | 2000  |      | Profit % |  | 1999 |         | Profit %
|                         |  |                     |         |          |  |       |      |          |  |      |         |         
|Software licenses        |  | $                   | 16,334  |          |  |       | 92.8 | %        |  | $    | 8,782   |          |  |  | 96.3 | % |  | $     | 7,799   |  |  |  | 96.2 | %
|                        
|                        
|                        
|                        
|Maintenance and services |  |                     | 149,834 |          |  |       | 48.1 | %        |  |      | 139,665 |          |  |  | 44.6 | % |  |       | 115,265 |  |  |  | 47.3 | %

Software Licenses. Cost of software license revenues consists primarily of
royalty expenses, cost of product packaging and documentation materials,
amortization of capitalized software costs, and amortization of certain
intangible assets related to business acquisitions. The amortization of
capitalized software costs begins upon the general release of the software to
customers. The increase in the cost of software license revenues in fiscal 2001
and 2000 of 86.0% and 12.6%, respectively, over the prior fiscal years
principally reflects royalty payments to third parties for software supplied by
them and distributed by Hyperion. The cost as a percentage of software
revenues was 7.2%, 3.7% and 3.8% for fiscal 2001, 2000 and 1999, respectively.

In the fiscal years ended 2001, 2000, and 1999, Hyperion capitalized $2.2
million, $2.6 million and $1.8 million of software development costs,
respectively, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. The amounts capitalized relate to Hyperions
development and localization of its OLAP server technology, tools and analytic
application solutions. Capitalized software costs are amortized over the
estimated economic life of the product, but generally not for more than three
years.

Maintenance and Services. The increases in the cost of maintenance and service
revenues for fiscal 2001 and 2000 were due primarily to additional staffing
expenses for both installation and ongoing support services. These staffing
expenses grew with the increase in headcount and utilization of independent
contractors to assist with the implementation of our technology products. In
addition, approximately $2.1 million of salaries were capitalized as software
in fiscal year 2000 associated with our eCRM efforts.

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##### Table of Contents



OPERATING EXPENSES

|                           |  |                     |         |          |  |      |      |          |  |      |         |          |  |  |      |   |  |      |         |  |  |  |      |  
|-------------------------- |  | ------------------- | ------- | -------- |  | ---- | ---- | -------- |  | ---- | ------- | -------- |  |  | ---- | - |  | ---- | ------- |  |  |  | ---- | -
|                           |  | YEAR ENDED JUNE 30,
|                           |  |                    
|                           |  |                     |         |          |  | % of |      |          |  |      |         | % of     |  |  |      |   |  | % of
|(in thousands)             |  | 2001                |         | revenues |  | 2000 |      | revenues |  | 1999 |         | revenues
|                           |  |                     |         |          |  |      |      |          |  |      |         |         
|Sales and marketing        |  | $                   | 208,286 |          |  |      | 40.3 | %        |  | $    | 189,164 |          |  |  | 38.4 | % |  | $    | 164,913 |  |  |  | 38.8 | %
|                          
|                          
|                          
|                          
|Research and development   |  |                     | 81,602  |          |  |      | 15.8 | %        |  |      | 70,199  |          |  |  | 14.3 | % |  |      | 63,813  |  |  |  | 15.0 | %
|                          
|                          
|                          
|                          
|General and administrative |  |                     | 72,762  |          |  |      | 14.1 | %        |  |      | 44,437  |          |  |  | 9.0  | % |  |      | 38,500  |  |  |  | 9.1  | %

During fiscal 2001, management has made conscious decisions to accelerate
product development, reinvigorate the sales force, expand market awareness and
upgrade the operating infrastructure. These investments have increased overall
operating costs, and adversely affected operating margins.

Sales and Marketing. Increases in absolute dollars of 10.1% and 14.7% in
fiscal 2001 and 2000, respectively, were primarily attributable to incentive
compensation payments to sales personnel, increases in compensation associated
with additional headcount, and increases in marketing and promotional expenses
associated with both a corporate branding advertising campaign and new product
launches. Sales and Marketing staff increased to 731 employees at June 30,
2001, from 678 employees at June 30, 2000. In connection with our recent
restructuring, we have consolidated marketing activities into a centralized
marketing organization to reduce overlap of marketing activities in an effort
to support future revenue growth while at the same time control related
expenses.

Research and Development. The increases in absolute dollars of 16.2% and 10.0%
in fiscal 2001 and 2000, respectively, over the corresponding prior periods, is
due to increases in compensation and independent contractors related to the
release of new products, enhanced versions of existing products and new
localizations of existing products. In addition, during fiscal 2000, we
capitalized $2.3 million of compensation associated with software development
in accordance with SFAS No. 86, Accounting for the Costs of Computer Software
to be Sold, Leased or Otherwise Marketed. The amounts capitalized related to
Hyperions development of enterprise-wide, packaged analytic application
solutions for client/server environments. We will continue to invest in the
development and expansion of our product offerings.

General and administrative. The significant increase in absolute dollars of
63.7% for fiscal 2001 over the corresponding period in fiscal 2000 was due
primarily to an increase in bad debt expense, fees related to the outsourcing
of our accounting function and professional services related to efforts to
reduce our days sales outstanding metric.

In fiscal 2001 Hyperion completed the process of migrating its internal
financial systems to an Enterprise Resource Planning (ERP) solution provided
through an outside firm, which began performing certain accounting functions
for Hyperion in July 2000.

The increase in general and administrative expenses for fiscal 2000 of 15.4%
from fiscal 1999 resulted, for the most part, from an increase in personnel
costs incurred to manage and support the growth of Hyperions overall
operations, partially offset by a $3.7 million reduction of reserves related to
product warranties for older product lines.

In June 2001, Hyperion announced a corporate restructuring plan designed to
bring costs more in line with revenues and strengthen the financial performance
of the business. The restructuring plan included a company-wide initiative to
align personnel with Hyperions new strategy, which resulted in a reduction of
Hyperions workforce by approximately 300 or 12% of the worldwide headcount.
Employee groups impacted by the restructuring include personnel involved in
corporate services, product business units, sales and customer support. In
addition, Hyperion plans to consolidate certain of its facilities and exit
other facilities. Finally, Hyperion is focused on reducing all other
discretionary expenditures with emphasis on travel costs and external
consulting costs across all functional areas. These expense control efforts
could adversely affect our ability to develop new products and market our
products effectively.

A summary of the restructuring and non-recurring charges are as follows (in
thousands):

|                            |                        |  |        |        | 
|--------------------------- | ---------------------- |  | ------ | ------ | 
|Restructuring:              |                        |  |        |       
|                           
|                           
|                           
|                           
|                            | Severance and benefits |  | $      | 8,674  | 
|                           
|                           
|                           
|                           
|                            | Accrued lease costs    |  |        | 17,227 | 
|                           
|                           
|                           
|                           
|                            | Asset impairments      |  |        | 6,157  | 
|                           
|                           
|                           
|                           
|                            | Other                  |  |        | 958    | 
|                            |                        |  |        |        | 
|Total Restructuring Charges |                        |  | 33,016 |       

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##### Table of Contents



|                                              |                                            |   |         |         |  
|--------------------------------------------- | ------------------------------------------ | - | ------- | ------- | -
|                                             
|                                             
|                                             
|                                             
|Non-Recurring:                                |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Asset write-downs to net realizable values |   |         | 4,851   |  
|                                             
|                                             
|                                             
|                                             
|                                              | Other charges                              |   |         | 4,918   |  
|                                              |                                            |   |         |         |  
|Total Non-Recurring Charges                   |                                            |   | 9,769   |        
|                                             
|                                             
|                                             
|                                             
|                                             
|Total restructuring and non-recurring charges |                                            |   | 42,785  |        
|                                              |                                            |   |         |         |  
|Less Reductions to Reserve:                   |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Cash paid                                  |   |         | (3,137  | )
|                                             
|                                             
|                                             
|                                             
|                                              | Non-cash                                   |   |         | (11,618 | )
|                                              |                                            |   |         |         |  
|Total Reductions to Reserve                   |                                            |   | (14,755 | )      
|                                              |                                            |   |         |         |  
|Reserve balance at June 30, 2001              |                                            | $ | 28,030  |        
|                                              |                                            |   |         |         |  

As of June 30, 2001, Hyperion communicated to all impacted employees regarding
employee separation benefits and the timing of separation. As of June 30, 2001,
all 300 positions have been separated or were currently in the separation
process, resulting in payments of $3.1 million. Remaining cash expenditures
associated with employee separations are estimated to be approximately $5.6
million. Employee separations are expected to be substantially complete by
September 30, 2001. All restructuring activities associated with the
consolidation of facilities are anticipated to be complete by June 30, 2002.
All restructuring activities related to the disposal of long-term assets were
completed as of June 30, 2001.

The $42.8 million of restructuring and non-recurring charges is included in
operating expense for the fiscal year ended June 30, 2001. Approximately $11.6
million did not require an outflow of cash and the remaining $31.2 million will
require the use of cash (primarily payments due under long-term lease
obligations), approximately $3.1 million of which had been disbursed at June
30, 2001. The accrued balance of $28.0 million, related primarily to future
lease obligations and employee separation payments, is included in Other
liabilities and Other long-term liabilities in the accompanying consolidated
balance sheets. Hyperion expects to substantially complete its restructuring
activities related to the restructuring plan described above during fiscal
2002, however payments due under long-term lease obligations will continue to
be made over the remaining lives of the leases. No events or circumstances
occurred subsequent to the announcement of the restructuring plan requiring
significant changes to managements original estimates. If we are unable to
maintain a cost structure that is in appropriate balance with revenue going
forward, whether due to failure to increase revenue adequately or failure to
keep costs down, we could find it necessary to further adjust our cost
structure through the execution of additional restructuring plans.

In fiscal 2000, Hyperion recorded a non-recurring charge to operations of
approximately $2.1 million, $1.3 million after taxes, associated with
restructuring our European operations and costs associated with outsourcing our
North American-based accounting department. This charge is comprised primarily
of severance costs. Substantially all of the cash associated with this item
had been expended at June 30, 2001.

The merger of Arbor Software Corporation (former name of Hyperion) and Hyperion
Software Corporation was completed on August 24, 1998. Hyperions fiscal 1999
financial statements have been restated to reflect the business combination,
which was accounted for as a pooling of interests. Hyperion charged $19.5
million, $17.4 million after taxes, to operations for non-recurring merger
costs incurred. These charges include direct transaction costs primarily for
financial advisory services and legal fees of $13.9 million, and costs of $5.6
million associated with combining the operations of the two companies,
including $3.4 million for restructuring (more specifically, $1.9 million for
the closing of duplicate offices, employee severance and relocations) and the
write down of certain intangible assets.

INTEREST INCOME AND EXPENSE

|                 |  |                     |        |        |  |      |      |        |  |      |        |   |  |  |      |   |  |   |        |  
|---------------- |  | ------------------- | ------ | ------ |  | ---- | ---- | ------ |  | ---- | ------ | - |  |  | ---- | - |  | - | ------ | -
|                 |  | YEAR ENDED JUNE 30,
|                 |  |                    
|                 |  |                     |        |        |  | %    |      |        |  |      |        | % |  |  |      |  
|(in thousands)   |  | 2001                |        | change |  | 2000 |      | change |  | 1999
|                 |  |                     |        |        |  |      |      |        |  |     
|Interest Income  |  | $                   | 12,987 |        |  |      | -0.2 | %      |  | $    | 13,010 |   |  |  | 18.0 | % |  | $ | 11,029 |  
|                
|                
|                
|                
|Interest Expense |  |                     | (5,502 | )      |  |      | -1.5 | %      |  |      | (5,588 | ) |  |  | 3.9  | % |  |   | (5,378 | )

Interest income consists of interest earnings on cash and short-term
investments. Interest income decreased slightly in fiscal 2001 due
to a decrease in cash available for investment resulting from the repurchase of
our common stock and debt, and reduced employee stock option exercises. These
factors were offset somewhat by higher interest rates. Interest income grew in
fiscal 2000 due to the increase in cash available for investment.

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Interest expense consists primarily of the interest and amortization of
issuance costs related to the convertible subordinated notes we issued in March
1998, and the interest on our mortgage payable. As discussed below, we
repurchased $11.3 million of the convertible notes during fiscal 2001, thus
reducing the amount of interest expense incurred for the year.

PROVISION FOR INCOME TAXES

Excluding the impact of restructuring and non-recurring charges, Hyperions
effective income tax rate remained substantially unchanged at approximately
38%.

EXTRAORDINARY GAIN

During the fiscal year 2001, Hyperion repurchased convertible long-term notes
with a face value of $11.3 million at a total cost of $8.7 million resulting in
an extraordinary gain of approximately $1.5 million, after income taxes, or
approximately $0.04 per share.

NET INCOME

As a result of the above factors, Hyperion had a net loss of $31.1 million or
$0.95 cents per basic and diluted shares for the fiscal year ended June 30,
2001, compared to net income for 2000 of $28.8 million, or $0.87 per diluted
share. Net income increased 261.5% from $8.0 million for 1999. Excluding the
merger costs, restructuring and non-recurring charges, Hyperion would have had
a net income (loss) of $(2.9) million, $30.6 million and $25.4 million for the
fiscal years ended June 30, 2001, 2000 and 1999, respectively.

Beginning in the fourth quarter of fiscal 2001, we focused on addressing four
key initiatives, which included simplifying our product offering, improving the
interoperability and the ease of use of our products, leveraging our indirect
channel better and reducing our cost structure. Our unified product strategy
is supported by a much simpler, unifying organization, with increased
accountability. However, given the continued softness in the global economy
and its impact on technology spending, we are taking a cautious approach with
our business planning. Accordingly, we anticipate flat revenue growth year
over year, and profitable results from operations over the first half of fiscal
2002.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, Business Combinations which addresses the financial accounting and
reporting for business combinations and supersedes Accounting Principles Board
(APB) Opinion No. 16, Business Combinations, and SFAS No. 38, Accounting
for Preacquisition Contingencies of Purchased Enterprises. SFAS No. 141
requires that all business combinations be accounted for by a single method,
the purchase method, which modifies the criteria for recognizing intangible
assets, and expands the disclosure requirements. The provisions of SFAS No.
141 apply to all business combinations initiated after June 30, 2001. We do
not expect the adoption of SFAS No. 141 will have a material effect on our
results of operations or statements of financial position.

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets which addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. SFAS No. 142 addresses how intangible assets that are
acquired individually or with a group of other assets should be accounted for
in financial statements upon their acquisition and after they have been initially
recognized in the financial statements. SFAS No. 142 requires that goodwill
and intangible assets that have indefinite useful lives not be amortized but
rather tested at least annually for impairment, and intangible assets that have
finite useful lives be amortized over their useful lives. SFAS No. 142
provides specific guidance for testing goodwill and intangible assets that will
not be amortized for impairment. In addition, SFAS No. 142 expands the
disclosure requirements about goodwill and other intangible assets in the years
subsequent to their acquisition. SFAS No. 142 is effective for our fiscal year
2003, with early adoption permitted at the beginning of our fiscal year 2002.
Impairment losses for goodwill and indefinite-life intangible assets that arise due to the
initial application of SFAS No. 142 are to be reported as resulting from a
change in accounting principle. However, goodwill and intangible assets
acquired after June 30, 2001 will be subject immediately to provisions of SFAS
142. Upon adoption of SFAS 142, on July 1, 2001, Hyperion will no longer
amortize goodwill, thereby eliminating annual goodwill amortization of
approximately $2.5 million, based on anticipated amortization for fiscal 2002.
Amortization for the fiscal years ended June 30, 2001, 2000 and 1999 was $3.0
million, $2.5 million and $1.4 million, respectively.

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LIQUIDITY AND CAPITAL RESOURCES

|                                                  |  |                     |         |        |  |      |        |        |  |      |         |   |  |  |       |   |  |   |         |  
|------------------------------------------------- |  | ------------------- | ------- | ------ |  | ---- | ------ | ------ |  | ---- | ------- | - |  |  | ----- | - |  | - | ------- | -
|                                                  |  | YEAR ENDED JUNE 30,
|                                                  |  |                    
|                                                  |  |                     |         |        |  | %    |        |        |  |      |         | % |  |  |       |  
|(in thousands)                                    |  | 2001                |         | change |  | 2000 |        | change |  | 1999
|                                                  |  |                     |         |        |  |      |        |        |  |     
|Working capital                                   |  | $                   | 239,838 |        |  |      | -19.4  | %      |  | $    | 297,745 |   |  |  | 28.9  | % |  | $ | 230,910 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Cash, cash equivalents and short-term investments |  |                     | 255,366 |        |  |      | -13.5  | %      |  |      | 295,159 |   |  |  | 8.6   | % |  |   | 271,856 |  
|                                                 
|                                                 
|                                                 
|                                                 
|Cash provided by operating activities             |  |                     | 31,273  |        |  |      | 12.6   | %      |  |      | 27,774  |   |  |  | -35.6 | % |  |   | 43,160  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Cash used in investing activities                 |  |                     | (38,959 | )      |  |      | 49.9   | %      |  |      | (25,986 | ) |  |  | -41.6 | % |  |   | (44,512 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Cash provided by (used in) financing activities   |  |                     | (18,106 | )      |  |      | -159.0 | %      |  |      | 30,672  |   |  |  | 108.9 | % |  |   | 14,681  |  

To date, Hyperion has financed its business through positive cash flow from
operations and, to a lesser extent, through the issuance of its capital stock
and convertible subordinated notes. During 2001 and 2000, we invested our cash
primarily in state and municipal bonds, U.S. government and agency obligations,
corporate notes and other highly liquid securities with maturities of three
months or less.

For fiscal years 2001, 2000 and 1999, Hyperion generated positive cash flow
from operations of $31.3 million, $27.8 million and $43.2 million,
respectively.

Cash used by investing activities amounted to $39.0 million, $26.0 million and
$44.5 million for fiscal 2001, 2000 and 1999, respectively. Our capital
expenditures for fiscal 2001 and 2000 consisted primarily of purchases of
resources to manage our operations including computer hardware and software and
leasehold improvements, offset slightly by net proceeds from the maturity of
our investments. The increase in fiscal 2001 over 2000 in capital expenditures
is attributable to the addition of several new critical business systems,
including Vantive, Callidus and our ERP platform. During the fourth quarter of
fiscal 1999, we invested $15.4 million to acquire all of the outstanding shares
of a software developer and marketer, Sapling Corporation. Hyperion anticipates
capital expenditures of approximately $25.0 million for its 2002 fiscal year.

Our financing activities for the year ended June 30, 2001 used cash of $18.1
million as compared to generating net cash of $30.7 million and $14.7 million
in fiscal 2000 and 1999, respectively. The negative cash flow from financing
activities in fiscal 2001 primarily resulted from the common stock repurchases
during this period and the redemption of debt. In November 2000, the Board of
Directors authorized Hyperion to repurchase up to $100.0 million of its
outstanding common stock at market prices over the next twelve months.
Pursuant to this repurchase program, Hyperion repurchased 1,389,000 shares
during the year, at a cost of approximately $23.8 million. During the second
quarter of fiscal 2001, Hyperion repurchased $11.3 million of convertible
long-term notes at a total cost of $8.7 million. This was offset by the
proceeds from the exercise of stock options and the employee stock purchase
plan that provided cash of $14.0 million for fiscal 2001. In connection with
the stock options exercised by certain of its employees, Hyperion recognized
(as a credit to additional paid-in capital) an income tax benefit of $1.5
million, $8.6 million and $2.9 million for the years ended June 30, 2001, 2000
and 1999, respectively. During fiscal 2000, Hyperion also made principal
payments of $4.5 million related to the loan agreement with the Connecticut
Development Authority (the CDA) governing the $9.5 million mortgage loan
issued to Hyperion by the CDA in 1995 to purchase an office and research
facility in Stamford, Connecticut.

From time to time, in the normal course of business, various claims are made
against Hyperion. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of Hyperion.

Hyperion believes that its current cash and short-term investment balances, and
the funds generated from its operations, if any, will be sufficient to finance
Hyperions business for at least the next year.

At June 30, 2001, Hyperions investment portfolio consisted of investment-grade
debt securities, excluding those classified as cash equivalents, of $24.5
million (see Notes 1 and 2 of the accompanying consolidated financial
statements). The portfolio is invested predominantly in short-term securities
to minimize interest rate risk and for liquidity purposes in the event of
immediate cash needs. Accordingly, if market interest rates were to increase
immediately and uniformly by 10% from levels as of June 30, 2001, the decline
in the fair value of the portfolio would not be material.

Hyperions long-term debt bears interest, for the most part, at a fixed rate
(see Note 6 of the accompanying consolidated financial statements) and,
therefore, relative to its long-term debt, an immediate 10% change in market
interest rates would not materially impact Hyperions financial statements.

19



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##### Table of Contents



RISK FACTORS

FACTORS THAT MAY AFFECT FUTURE RESULTS

Hyperion operates in a very competitive and rapidly changing environment that
involves numerous risks, some of which are beyond Hyperions control. The
following discussion highlights some of these risks.

GENERAL ECONOMIC CONDITIONS.The revenue growth and profitability of Hyperion
depends on the overall demand for computer software and services, which in turn
depends on general economic and business conditions. The nature and extent of
the effect of the current economic climate on Hyperions ability to sell its
products is uncertain. A softening of demand for computer software caused by
weakening of the economy may result in decreased revenues or lower growth
rates. There can be no assurance that Hyperion will be able to effectively
promote revenue growth rates in all economic conditions.

The attacks on the World Trade Center and the Pentagon are having at least two adverse
effects on Hyperion. First, customers are delaying purchasing decisions in light of the uncertainty of
the impact of the disasters on their businesses. Second, the inability of Hyperion employees to travel
to prospective customer sites is causing customers to delay their decisions because we are unable to
provide on-site sales demonstrations or other key sales efforts. The combination of these factors will
adversely impact our sales through at least the end of our first quarter, September 30, 2001. While
these adverse effects could be material to Hyperion, we are unable to estimate their extent at this time.

California has recently experienced ongoing power system shortages that have
resulted in rolling blackouts. Such disruptions, particularly at the end of a
quarter, could adversely affect quarterly revenues and net income by delaying
the closing of licensing transactions.

PRODUCT ENHANCEMENT AND NEW PRODUCT INTRODUCTIONS.Hyperion competes in a
market characterized by rapid technological advances in hardware and software
development, evolving standards in computer hardware and software technology
and frequent new product introductions and enhancements. Hyperion has recently
expanded and refreshed its product offerings to include newer features or
products. The introduction of new products has inherent risks, including, but
not limited to, product quality and the fit of the new products with the
customers needs, educating Hyperions sales, marketing, and consulting
personnel to work with the new products, competition from earlier and more
established entrants, general economic conditions, market acceptance of initial
product releases, marketing effectiveness and the accuracy of assumptions about
the nature of customer demand. Hyperions failure to successfully introduce,
market and sell new products or enhance and improve its existing products in a
timely manner, and position and/or price its products, undetected errors or
delays in new products or new versions of a product and/or the failure of
anticipated market growth could have a material adverse effect on Hyperions
business, results of operations or financial position.

SALES FORCE TRANSITION.Hyperion has restructured and made other adjustments to
its sales force operations in the past and may do so in the future. These
changes have historically resulted in temporary sales productivity issues in
the short term. The restructured sales force must deliver significantly greater
dollars of revenue per dollar of cost than it has in the recent past in order
to provide adequate operating margins to Hyperion. Failure of the organization
to make this improvement could materially impact Hyperions ability to
materially improve operating margins, which have not been adequate in the
recent past to support Hyperions profit targets.

COMPETITIVE ENVIRONMENT.The markets in which Hyperion competes are intensely
competitive, highly fragmented and characterized by rapidly changing technology
and evolving standards. Hyperion has experienced, and expects that it will
continue to experience, vigorous competition from both current and new
competitors, some of whom may have significantly greater financial, technical,
marketing and other resources than Hyperion. Hyperion expects additional
competition as other established and emerging companies enter into both the
OLAP and application parts of the enterprise business analysis software market.
This competition could result in price reductions, fewer customer orders,
reduced gross margins and loss of market share, any of which would materially
adversely affect Hyperions business, operating results and financial
condition.

PRICING.Intense competition in the various markets in which Hyperion competes
may put pressure on Hyperion to reduce prices on certain products, particularly
in the markets where certain vendors offer deep discounts in an effort to
recapture or gain market share or to sell other software or hardware products.
Moreover, any broadly based changes to Hyperions or its competitors pricing,
packaging or distribution models could lead to a decline or delay in sales as
Hyperions sales force and its customers adjust to the new models. Any such
price reductions and resulting lower license revenues could have a material
adverse effect on Hyperions business, results of operations or financial
position if Hyperion cannot offset these price reductions with a corresponding
increase in sales volumes or lower spending.

CONTINUED OPERATIONAL IMPROVEMENTS.As part of Hyperions focus on improving
its operating margins, it is driving toward continued efficiencies in not only
its sales force, but also its product development, finance, and other
administrative processes. The ability to continue to realize current
efficiencies, and find ways to improve on past performance is crucial to the
improvement of operating margins. Any increase in the relative cost of these
functions, or failure to continue to realize current efficiencies, could have a
material adverse effect on Hyperions profits.

BACK-ENDED QUARTERS.Quarterly revenues and operating results are highly
dependent on the volume and timing of the signing of licensing agreements and
product deliveries during the quarter, which are difficult to forecast.
Significant portions of Hyperions quarterly software licensing agreements are
concluded in the last month of the fiscal quarter, generally with a
concentration of such revenues earned in the final ten business days of that
month. Due to the relatively fixed nature of certain costs, including personnel
and facilities expenses, a decline or shortfall in quarterly and/or annual
revenues typically results in lower profitability or may result in losses.
Prior to the very end of any quarter, Hyperion must rely on its forecasts of
revenue for planning, modeling and other purposes. Forecasts are only estimates
and may not correlate to revenues in a particular quarter or over a longer
period of time. A significant discrepancy between actual results and sales
forecasts could cause Hyperion to improperly plan or budget and thereby
adversely affect its business or results of operations. Any publicly stated
revenue or earnings projections by Hyperion are especially subject to this
risk.

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##### Table of Contents



INTERNATIONAL OPERATIONS.A substantial portion of Hyperions revenues is
derived from international sales and is therefore subject to the related risks,
including the general economic conditions in each country, the overlap of
different tax structures, the difficulty of managing an organization spread
over various countries, changes in regulatory requirements, compliance with a
variety of foreign laws and regulations, longer payment cycles, volatilities of
exchange rates, import and export licensing requirements, trade restrictions
and changes in tariff rates. There can be no assurances that Hyperion will be
able to successfully address each of these challenges.

HIRING AND RETENTION OF EMPLOYEES.Hyperions future operating results depend
significantly upon the retention and hiring of technical and management
personnel. Competition for such personnel is intense, and there can be no
assurance that Hyperion will retain its key managerial or technical personnel
or attract such personnel in the future. Hyperion, either directly or through
personnel search firms, actively recruits qualified research and development,
financial and sales and marketing personnel. Hyperion has at times experienced
difficulty recruiting or retaining qualified personnel and there can be no
assurance that Hyperion will not experience such difficulties in the future,
which could have a material adverse effect on Hyperions business, operating
results and financial condition.

ORGANIZATIONAL AND PRODUCT INTEGRATION RELATED TO BUSINESS COMBINATIONS.
Hyperion has made and may in the future make acquisitions of, mergers with, or
significant investments in, businesses that offer complementary products,
services and technologies. There are risks involved in business combinations,
including but not limited to: the possibility that Hyperion pays more than the
value it derives from the acquisition; the difficulty of integrating the
operations and personnel of the acquired businesses; the possibility that all
aspects of the integration are not completed or that all of the anticipated
synergies of the acquisition are not realized; the potential product liability
associated with selling the acquired companys products; the potential
disruption of Hyperions ongoing business and the distraction of management
from Hyperions business. These factors could have a material adverse effect on
Hyperions business, results of operations or financial position, especially in
the case of a large acquisition.

POSSIBILITY OF INFRINGEMENT CLAIMS.Hyperion expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in Hyperions industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming to defend, result in
costly litigation, divert managements attention and resources, cause product
shipment delays or require Hyperion to enter into royalty or licensing
agreements. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to Hyperion, if at all. In the event of a
successful claim of product infringement against Hyperion and failure or
inability of Hyperion to license the infringed or similar technology,
Hyperions business, operating results and financial condition would be
materially adversely affected.

ENFORCEMENT OF HYPERIONS INTELLECTUAL PROPERTY RIGHTS.Hyperion relies
primarily on a combination of patent, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect its
proprietary rights. There can be no assurance that Hyperions means of
protecting its proprietary rights in the United States or abroad will be
adequate or that competitors will not independently develop similar technology.

POSSIBLE VOLATILITY OF STOCK PRICE.The market price of Hyperions Common Stock
has experienced significant fluctuations and may continue to fluctuate
significantly. The market price of the Common Stock may be significantly
affected by factors, including but not limited to, the announcement of new
products, product enhancements or technological innovation by Hyperion or its
competitors, changes in Hyperions or its competitors results of operations,
changes in revenue, revenue growth rates and revenue mix for Hyperion as a
whole or for specific geographic areas or business units, changes in earnings
estimates by market analysts and general market conditions or market conditions
specific to particular industries. Technology stocks have experienced wide
fluctuations in prices, which sometimes have been unrelated to their operating
performance. The market price of Hyperions Common Stock could be adversely
affected by such fluctuations.

21



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##### Table of Contents






ITEM 8. REPORT OF INDEPENDENT ACCOUNTANTS,
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of    Hyperion
Solutions Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 41 present fairly, in all material
respects, the financial position of Hyperion Solutions Corporation and its
subsidiaries (Hyperion) at June 30, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2001, in conformity with accounting principles generally accepted in
the United States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under Item 14(a)(2) on page 41
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the
responsibility of Hyperions management; our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

San Jose, California
July 25, 2001

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##### Table of Contents



Hyperion Solutions Corporation
Consolidated Balance Sheets
(in thousands)

|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|--------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | - | -------- | ------- | -------- | - | ------- | ------- | -
|                                                                                                                            |                                                                                                            |   | June 30, |         | June 30,
|                                                                                                                            |                                                                                                            |   | 2001     |         | 2000    
|                                                                                                                            |                                                                                                            |   |          |         |         
|ASSETS                                                                                                                      |                                                                                                            |   |          |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Current Assets:                                                                                                             |                                                                                                            |   |          |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Cash and cash equivalents                                                                                  |   | $        | 232,904 |          |   | $       | 262,408 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Short-term investments                                                                                     |   |          | 22,462  |          |   |         | 32,751  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accounts receivable  net of allowances of $12,476 and $16,250                                             |   |          | 156,835 |          |   |         | 161,883 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Prepaid expenses and other current assets                                                                  |   |          | 20,491  |          |   |         | 8,349   |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Deferred income taxes                                                                                      |   |          | 19,175  |          |   |         | 9,866   |  
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|TOTAL CURRENT ASSETS                                                                                                        |                                                                                                            |   | 451,867  |         |          |   | 475,257 |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Property and equipment  at cost, less accumulated depreciation and

amortization of $102,124 and $78,694                   |                                                                                                            |   | 80,752   |         |          |   | 71,669  |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Acquired technologies, goodwill and other intangible assets  at cost, less
accumulated amortization of $28,865 and $24,434 |                                                                                                            |   | 16,472   |         |          |   | 25,942  |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Other assets                                                                                                                |                                                                                                            |   | 8,008    |         |          |   | 7,022   |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Deferred income taxes                                                                                                       |                                                                                                            |   | 13,294   |         |          |   | 10,001  |        
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|TOTAL ASSETS                                                                                                                |                                                                                                            | $ | 570,393  |         |          | $ | 589,891 |        
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                        |                                                                                                            |   |          |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Current liabilities:                                                                                                        |                                                                                                            |   |          |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accounts payable and accrued expenses                                                                      |   | $        | 52,211  |          |   | $       | 49,933  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Accrued employee compensation and benefits                                                                 |   |          | 31,554  |          |   |         | 32,572  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Income taxes payable                                                                                       |   |          |        |          |   |         | 6,179   |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Deferred revenue                                                                                           |   |          | 100,234 |          |   |         | 88,828  |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Other liabilities                                                                                          |   |          | 13,727  |          |   |         |        |  
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|TOTAL CURRENT LIABILITIES                                                                                                   |                                                                                                            |   | 197,726  |         |          |   | 177,512 |        
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |        
|Other long-term liabilities                                                                                                 |                                                                                                            |   | 14,303   |         |          |   |        |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Long-term debt                                                                                                              |                                                                                                            |   | 91,045   |         |          |   | 102,518 |        
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|Stockholders equity:                                                                                                       |                                                                                                            |   |          |         |          |   |         |        
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Preferred stock  $.001 par value; 5,000 shares authorized;
none issued                                    |   |          |        |          |   |         |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Common stock  $.001 par value; 300,000 shares authorized;
33,715 and 32,616 shares issued and outstanding |   |          | 34      |          |   |         | 33      |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Additional paid-in capital                                                                                 |   |          | 212,952 |          |   |         | 197,376 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Less treasury stock, at cost: 1,355 and 0 common shares                                                    |   |          | (23,270 | )        |   |         |        |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Retained earnings                                                                                          |   |          | 88,599  |          |   |         | 119,736 |  
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                           
|                                                                                                                            | Currency translation adjustments                                                                           |   |          | (10,996 | )        |   |         | (7,284  | )
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|TOTAL STOCKHOLDERS EQUITY                                                                                                  |                                                                                                            |   | 267,319  |         |          |   | 309,861 |        
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |                                                                                                            | $ | 570,393  |         |          | $ | 589,891 |        
|                                                                                                                            |                                                                                                            |   |          |         |          |   |         |         |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



Hyperion Solutions Corporation
Consolidated Statements of Income
(in thousands, except per share data)

|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|---------------------------------------------------------------------------- | ------------------------ | - | ------------------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                                             |                          |   | Year Ended June 30,
|                                                                             |                          |   |                    
|                                                                             |                          |   | 2001                |         | 2000 |   | 1999   
|                                                                             |                          |   |                     |         |      |   |        
|REVENUES                                                                     |                          |   |                     |         |      |   |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Software licenses        |   | $                   | 227,994 |      |   | $       | 240,326 |  |   | $       | 205,991 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Maintenance and services |   |                     | 288,729 |      |   |         | 252,079 |  |   |         | 218,894 | 
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|TOTAL REVENUES                                                               |                          |   | 516,723             |         |      |   | 492,405 |         |  |   | 424,885 |        
|                                                                             |                          |  
|COSTS AND EXPENSES                                                           |                          |   |                     |         |      |   |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Cost of revenues:                                                            |                          |   |                     |         |      |   |         |         |  |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Software licenses        |   |                     | 16,334  |      |   |         | 8,782   |  |   |         | 7,799   | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Maintenance and services |   |                     | 149,834 |      |   |         | 139,665 |  |   |         | 115,265 | 
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Sales and marketing                                                          |                          |   | 208,286             |         |      |   | 189,164 |         |  |   | 164,913 |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Research and development                                                     |                          |   | 81,602              |         |      |   | 70,199  |         |  |   | 63,813  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|General and administrative                                                   |                          |   | 72,762              |         |      |   | 44,437  |         |  |   | 38,500  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Merger costs (credits)                                                       |                          |   |                    |         |      |   | (305    | )       |  |   | 19,473  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Restructuring and non-recurring charges                                      |                          |   | 42,785              |         |      |   | 2,066   |         |  |   |        |        
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|TOTAL COSTS AND EXPENSES                                                     |                          |   | 571,603             |         |      |   | 454,008 |         |  |   | 409,763 |        
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|OPERATING INCOME (LOSS)                                                      |                          |   | (54,880             | )       |      |   | 38,397  |         |  |   | 15,122  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                          |  
|Interest income                                                              |                          |   | 12,987              |         |      |   | 13,010  |         |  |   | 11,029  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Interest expense                                                             |                          |   | (5,502              | )       |      |   | (5,588  | )       |  |   | (5,378  | )      
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|INCOME (LOSS) BEFORE INCOME TAXES                                            |                          |   | (47,395             | )       |      |   | 45,819  |         |  |   | 20,773  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                          |  
|Provision for (benefit from) income taxes                                    |                          |   | (14,858             | )       |      |   | 17,000  |         |  |   | 12,800  |        
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|Income (loss) before extraordinary item                                      |                          |   | (32,537             | )       |      |   | 28,819  |         |  |   | 7,973   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                          |  
|Extraordinary
item  gain on redemption of debt,   net of income tax of $898 |                          |   | 1,464               |         |      |   |        |         |  |   |        |        
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 
|NET INCOME (LOSS)                                                            |                          | $ | (31,073             | )       |      | $ | 28,819  |         |  | $ | 7,973   |        
|                                                                             |                          |   |                     |         |      |   |         |         |  |   |         |         | 

See accompanying notes to consolidated financial statements.

24



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##### Table of Contents



Hyperion Solutions Corporation
Consolidated Statements of Income
(in thousands, except per share data)

|                                              |         |                                                                         |  |                     |       |      |  |        |      |  |  |        |      | 
|--------------------------------------------- | ------- | ----------------------------------------------------------------------- |  | ------------------- | ----- | ---- |  | ------ | ---- |  |  | ------ | ---- | 
|                                              |         |                                                                         |  | Year Ended June 30,
|                                              |         |                                                                         |  |                    
|                                              |         |                                                                         |  | 2001                |       | 2000 |  | 1999  
|                                              |         |                                                                         |  |                     |       |      |  |       
|EARNINGS (LOSS) PER SHARE                     |         |                                                                         |  |                     |       |      |  |        |      |  |  |       
|                                             
|                                             
|                                             
|                                             
|                                              | Basic   |                                                                         |  |                     |       |      |  |        |      |  |  |        |     
|                                             
|                                             
|                                             
|                                             
|                                              |         | Earnings
(loss) from continuing   operations before extraordinary item  |  | $                   | (0.99 | )    |  | $      | 0.91 |  |  | $      | 0.26 | 
|                                             
|                                             
|                                             
|                                             
|                                              |         | Extraordinary gain                                                      |  |                     | 0.04  |      |  |        |     |  |  |        |     | 
|                                              |         |                                                                         |  |                     |       |      |  |        |      |  |  |        |      | 
|                                              |         | Basic earnings (loss) per share                                         |  | $                   | (0.95 | )    |  | $      | 0.91 |  |  | $      | 0.26 | 
|                                              |         |                                                                         |  |                     |       |      |  |        |      |  |  |        |      | 
|                                              | Diluted |                                                                         |  |                     |       |      |  |        |      |  |  |        |     
|                                             
|                                             
|                                             
|                                             
|                                              |         | Earnings
(loss) from continuing    operations before extraordinary item |  | $                   | (0.99 | )    |  | $      | 0.87 |  |  | $      | 0.26 | 
|                                             
|                                             
|                                             
|                                             
|                                              |         | Extraordinary gain                                                      |  |                     | 0.04  |      |  |        |     |  |  |        |     | 
|                                              |         |                                                                         |  |                     |       |      |  |        |      |  |  |        |      | 
|                                              |         | Diluted earnings (loss) per share                                       |  | $                   | (0.95 | )    |  | $      | 0.87 |  |  | $      | 0.26 | 
|                                              |         |                                                                         |  |                     |       |      |  |        |      |  |  |        |      | 
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |         |                                                                         |  |                     |       |      |  |        |      |  |  |       
|                                             
|                                             
|                                             
|                                             
|                                              | Basic   |                                                                         |  | 32,592              |       |      |  | 31,665 |      |  |  | 30,196 |     
|                                             
|                                             
|                                             
|                                             
|                                              | Diluted |                                                                         |  | 32,592              |       |      |  | 33,107 |      |  |  | 30,855 |     

See accompanying notes to consolidated financial statements.

25



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##### Table of Contents



Hyperion Solutions Corporation
Consolidated Statements of Stockholders Equity & Comprehensive Income
(in thousands)

|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |         |         |  
|------------------------ | --------------------- | ------------------------------------------------- | -------------------------- |  | ------------ | - | -------------- |  | ---------- |  | ----- |  | ------- | - | -------- | - | ----------- | - | -------- |  | ----------- | - | ------- |  | ------- | - | ------- | - | ------ | - | ------- |  | ------- | ------- | -
|                         |                       |                                                   |                            |  | Common Stock |   | Treasury Stock |  | Additional |  |       |  |         |   | Currency |   |             |   |         
|                         |                       |                                                   |                            |  |              |   |                |  | Par        |  |       |  |         |   | Par      |   | Paid-in     |   | Retained |  | Translation |   |         |  |        
|                         |                       |                                                   |                            |  | Shares       |   | Value          |  | Shares     |  | Value |  | Capital |   | Earnings |   | Adjustments |   | Total   
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |         
|Balance at June 30, 1998 |                       |                                                   | 29,574                     |  |              | $ | 30             |  |            |  |      |  |         | $ |         |   |             | $ | 135,172  |  |             | $ | 80,058  |  |         | $ | (2,035  | ) |        | $ | 213,225 | 
|                        
|                        
|                        
|                        
|                         | Comprehensive income: |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |        
|                        
|                        
|                        
|                        
|                         |                       | Net income                                        |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  | 7,973   |   |         |   |        |   |         |  | 7,973   |        
|                        
|                        
|                        
|                        
|                         |                       | Currency translation effect                       |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   | (1,682 | ) |         |  | (1,682  | )      
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|                         |                       |                                                   | Total comprehensive income |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |         | 6,291   |  
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|                         |                       | Shares issued under stock plans                   |                            |  | 1,268        |   |                |  | 1          |  |       |  |         |   |          |   |             |   |          |  | 15,508      |   |         |  |         |   |         |   |        |   |         |  | 15,509  |        
|                        
|                        
|                        
|                        
|                         |                       | Income tax benefit from exercise
of stock options |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  | 2,865       |   |         |  |         |   |         |   |        |   |         |  | 2,865   |        
|                        
|                        
|                        
|                        
|                         |                       | Credit reflecting change in fiscal year           |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  | 2,886   |   |         |   |        |   |         |  | 2,886   |        
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|Balance at June 30, 1999 |                       |                                                   | 30,842                     |  |              |   | 31             |  |            |  |      |  |         |   |         |   |             |   | 153,545  |  |             |   | 90,917  |  |         |   | (3,717  | ) |        |   | 240,776 | 
|                        
|                        
|                        
|                        
|                         | Comprehensive income: |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |        
|                        
|                        
|                        
|                        
|                         |                       | Net income                                        |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  | 28,819  |   |         |   |        |   |         |  | 28,819  |        
|                        
|                        
|                        
|                        
|                         |                       | Currency translation effect                       |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   | (3,567 | ) |         |  | (3,567  | )      
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|                         |                       |                                                   | Total comprehensive income |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |         | 25,252  |  
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|                         |                       | Shares issued under stock plans                   |                            |  | 1,774        |   |                |  | 2          |  |       |  |         |   |          |   |             |   |          |  | 35,197      |   |         |  |         |   |         |   |        |   |         |  | 35,199  |        
|                        
|                        
|                        
|                        
|                         |                       | Income tax benefit from exercise
of stock options |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  | 8,634       |   |         |  |         |   |         |   |        |   |         |  | 8,634   |        
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|Balance at June 30, 2000 |                       |                                                   | 32,616                     |  |              |   | 33             |  |            |  |      |  |         |   |         |   |             |   | 197,376  |  |             |   | 119,736 |  |         |   | (7,284  | ) |        |   | 309,861 | 
|                        
|                        
|                        
|                        
|                         | Comprehensive loss:   |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |        
|                        
|                        
|                        
|                        
|                         |                       | Net loss                                          |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  | (31,073 | ) |         |   |        |   |         |  | (31,073 | )      
|                        
|                        
|                        
|                        
|                         |                       | Currency translation effect                       |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   | (3,712 | ) |         |  | (3,712  | )      
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|                         |                       |                                                   | Total comprehensive loss   |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         |  |         | (34,785 | )
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|                         |                       | Shares issued under stock plans                   |                            |  | 1,099        |   |                |  | 1          |  |       |  | (34     | ) |          |   | 494         |   |          |  | 14,101      |   |         |  | (64     | ) |         |   |        |   |         |  | 14,532  |        
|                        
|                        
|                        
|                        
|                         |                       | Income tax benefit from exercise
of stock options |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  | 1,475       |   |         |  |         |   |         |   |        |   |         |  | 1,475   |        
|                        
|                        
|                        
|                        
|                         |                       | Treasury shares repurchased                       |                            |  |              |   |                |  |            |  |       |  | 1,389   |   |          |   | (23,764     | ) |          |  |             |   |         |  |         |   |         |   |        |   |         |  | (23,764 | )      
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 
|Balance at June 30, 2001 |                       |                                                   | 33,715                     |  |              | $ | 34             |  |            |  | 1,355 |  |         | $ | (23,270  | ) |             | $ | 212,952  |  |             | $ | 88,599  |  |         | $ | (10,996 | ) |        | $ | 267,319 | 
|                         |                       |                                                   |                            |  |              |   |                |  |            |  |       |  |         |   |          |   |             |   |          |  |             |   |         |  |         |   |         |   |        |   |         | 

See accompanying notes to consolidated financial statements.

26



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##### Table of Contents



Hyperion Solutions Corporation
Consolidated Statements of Cash Flows
(in thousands)

|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |        |         |        | 
|---------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------------------------------------------ | ------------------------------------------------- | ------- | ------------------- | ----- | ------- | ------ | ------- | ----- | ------- | ------ | ------- | ------ | 
|                                                                                         |                                                         |                                            |                                                   |         | Year Ended June 30,
|                                                                                         |                                                         |                                            |                                                   |         |                    
|                                                                                         |                                                         |                                            |                                                   |         | 2001                |       | 2000    |        | 1999   
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |        
|OPERATING ACTIVITIES                                                                     |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Net income (loss)                                                                        |                                                         | $                                          | (31,073                                           | )       |                     | $     | 28,819  |        |         | $     | 7,973   |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Gain on redemption of debt                              |                                            |                                                   | (2,362  | )                   |       |         |       |         |       |         |       |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Depreciation and amortization                           |                                            |                                                   | 38,901  |                     |       |         | 34,482 |         |       |         | 33,963 |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Provision for accounts receivable allowance and returns |                                            |                                                   | 27,677  |                     |       |         | 8,316  |         |       |         | 8,382  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Deferred income taxes                                   |                                            |                                                   | (12,602 | )                   |       |         | (3,368 | )       |       |         | (4,192 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Other (see Note 11)                                     |                                            |                                                   | 10,902  |                     |       |         |        |         |       |         |        |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Credit reflecting change in fiscal year                 |                                            |                                                   |        |                     |       |         |       |         |       |         | 2,886  |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Changes in assets and liabilities:                      |                                            |                                                   |         |                     |       |         |        |         |       |         |        |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Accounts receivable                        |                                                   |         | (22,629             | )     |         |        | (59,454 | )     |         |        | (19,138 | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Prepaid expenses and other current assets  |                                                   |         | (10,389             | )     |         |        | (2,060  | )     |         |        | 1,486   |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Other assets                               |                                                   |         | 286                 |       |         |        | 546     |       |         |        | 1,082   |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Accounts payable and accrued expenses      |                                                   |         | 2,278               |       |         |        | (2,015  | )     |         |        | 6,875   |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Accrued employee compensation and benefits |                                                   |         | (1,015              | )     |         |        | 2,301   |       |         |        | (1,995  | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Income taxes payable                       |                                                   |         | (8,134              | )     |         |        | 12,468  |       |         |        | (10,891 | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Deferred revenue                           |                                                   |         | 11,403              |       |         |        | 7,739   |       |         |        | 16,729  |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Other liabilities (see Note 11)            |                                                   |         | 13,727              |       |         |        |        |       |         |        |        |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         | Other long-term liabilities (see Note 11)  |                                                   |         | 14,303              |       |         |        |        |       |         |        |        |       
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|Cash provided by operating activities                                                    |                                                         |                                            | 31,273                                            |         |                     |       | 27,774  |        |         |       | 43,160  |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                           
|
|INVESTING
ACTIVITIES                                                                     |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Proceeds from maturity of investments, net                                               |                                                         |                                            | 8,291                                             |         |                     |       | 5,590   |        |         |       | (2,862  | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Purchases of property and equipment, net                                                 |                                                         |                                            | (42,573                                           | )       |                     |       | (21,805 | )      |         |       | (24,376 | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Intangible and other assets                                                              |                                                         |                                            | (4,677                                            | )       |                     |       | (4,683  | )      |         |       | (1,879  | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Business acquisitions                                                                    |                                                         |                                            |                                                  |         |                     |       | (5,088  | )      |         |       | (15,395 | )     
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|Cash used in investing activities                                                        |                                                         |                                            | (38,959                                           | )       |                     |       | (25,986 | )      |         |       | (44,512 | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                           
|FINANCING
ACTIVITIES                                                                     |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Principal payments on notes payable                                                      |                                                         |                                            | (222                                              | )       |                     |       | (4,527  | )      |         |       | (827    | )     
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Redemption of debt                                                                       |                                                         |                                            | (8,652                                            | )       |                     |       |        |        |         |       |        |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Treasury stock transactions, net                                                         |                                                         |                                            | (23,270                                           | )       |                     |       |        |        |         |       |        |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Proceeds from exercise of stock options and employee stock purchase plan                 |                                                         |                                            | 14,038                                            |         |                     |       | 35,199  |        |         |       | 15,508  |       
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|Cash (used in) provided by financing activities                                          |                                                         |                                            | (18,106                                           | )       |                     |       | 30,672  |        |         |       | 14,681  |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                           
|Effect of exchange rate changes                                                          |                                                         |                                            | (3,712                                            | )       |                     |       | (3,567  | )      |         |       | (1,682  | )     
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                         |                                                         |                                            | (29,504                                           | )       |                     |       | 28,893  |        |         |       | 11,647  |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                           
|Cash and cash equivalents at beginning of year                                           |                                                         |                                            | 262,408                                           |         |                     |       | 233,515 |        |         |       | 221,868 |       
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                                 |                                                         | $                                          | 232,904                                           |         |                     | $     | 262,408 |        |         | $     | 233,515 |       
|                                                                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                         |                                                         |                                            |                                                   |         |                     |       |         |        |         |       |         |       
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Cash paid during the year for:                          |                                            |                                                   |         |                     |       |         |        |         |       |         |        |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                            | Income taxes                                      |         | $                   | 5,838 |         |        | $       | 8,500 |         |        | $       | 29,087 | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                            | Interest                                          |         |                     | 4,841 |         |        |         | 4,712 |         |        |         | 4,871  | 
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         | Non-cash operating and financing activity:              |                                            |                                                   |         |                     |       |         |        |         |       |         |        |        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                         |                                                         |                                            | Income tax benefit from exercise of stock options |         |                     | 1,475 |         |        |         | 8,634 |         |        |         | 2,865  | 

See accompanying notes to consolidated financial statements.

27



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##### Table of Contents



HYPERION SOLUTIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BUSINESS

Hyperion Solutions Corporation (Hyperion) develops, markets and supports
business intelligence software, which helps turn raw data into business
information. Hyperions products and services enable companies and their
employees to plan, manage and execute business strategies to measure
performance and drive profitability, and ultimately create value for their
shareholders.

Hyperions products analyze the raw data captured in operational systems, which
improves the return on investment that organizations have made in enterprise
resource planning (ERP), supply chain management (SCM), customer
relationship management (CRM), marketing automation, Web and e-commerce
systems and data warehouses.

Hyperion offers customers an open, scalable, flexible and integrated business
intelligence platform which consists of technology products and financial
applications. Technology products include: Hyperion Essbase on line analytical
processing (OLAP) server, Hyperion tools, incorporating domain-specific
business rules, data storage, integration, interoperability and visualization
capabilities. Financial applications include financial and business
performance management products that provide customers the opportunity to
strategize, model, plan and measure performance. Taken together, Hyperion and
its 400 partners offer a suite of business intelligence solutions that are
compelling in the industry and help customers measure performance and drive
profitability.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

During 1999, Hyperion (formerly Arbor Software Corporation) issued 18.2 million
shares of its common stock for all of the outstanding common stock of Hyperion
Software Corporation. The transaction was accounted for as a pooling of
interests and, accordingly, Hyperions consolidated financial statements have
been restated for all periods prior to the merger to include the results of
operations, financial position and cash flows of both companies.

The consolidated financial statements include the accounts of Hyperion and its
subsidiaries, all of which are wholly owned. All significant intercompany
accounts and transactions have been eliminated.

Certain prior period amounts in the consolidated financial statements and the
notes thereto have been reclassified to conform to the current year
presentation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Foreign Currency

The functional currency of Hyperions international subsidiaries is the local
currency. The financial statements of these subsidiaries are translated to
United States dollars using year-end rates of exchange for assets and
liabilities, and average rates of exchange for the year for revenues and
expenses. Translation gains (losses) are recorded and accumulated in other
comprehensive income as a component of stockholders equity. Net gains and
losses resulting from foreign exchange transactions are included in the
consolidated statements of operations and were not significant during the
periods presented.

Revenue Recognition

Hyperion derives revenues from licensing its software products and providing
related maintenance and support, product installation and implementation, and
training services. Hyperion records revenue from licensing of software
products to end-users when there is persuasive evidence of an arrangement, the
fee is fixed and determinable, collection is reasonably assured and delivery of
the product has occurred as prescribed by Statement of Position (SOP) No.
97-2, Software Revenue Recognition. When contracts contain multiple elements,
and for which vendor specific objective evidence (VSOE) of fair value exists
for the undelivered elements,

28



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Hyperion recognizes revenue for the delivered elements based upon the residual
method, in accordance with SOP No. 98-9, Modifications of SOP No. 97-2 with
Respect to Certain Transactions. Undelivered elements consist primarily of
maintenance and support and other services such as consulting and training.
VSOE of fair value for annual maintenance and support contracts is established
with the optional stated future renewal rates included in the contracts. VSOE
of fair value for the services element is based upon the standard hourly rates
Hyperion charges for services when such services are sold separately. Services
are generally not considered essential to the functionality of the software.
Hyperion recognizes revenue allocated to maintenance and support ratably over
the period of the maintenance and support contracts, respectively, which is
generally twelve months. For revenue related to consulting and training
services, Hyperion recognizes revenue as the related services are performed. In
instances where services are deemed essential to the software, both the
software license fee and consulting fees are recognized using the
percentage-of-completion method of contract accounting in accordance with SOP
No. 81, Accounting for Performance of Construction-Type and Certain
Product-Type Contracts and Accounting Research Bulletin (ARB) No. 45,
Long-Term Construction-Type Contracts.

Revenues from reseller arrangements are recognized on the sell-through
method, when the reseller reports to Hyperion the sale of Hyperions software
products to end-users. Hyperions agreements with its customers and resellers
do not contain product return rights.

Stock Based Compensation

Hyperion accounts for stock option grants in accordance with Accounting
Principles Board (ABP) Opinion No. 25, Accounting for Stock Issued to
Employees, and complies with the disclosure provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. Hyperion generally prices its stock options at fair market
value on the date of grant and, therefore, under APB Opinion No. 25, no
compensation expense is recognized for stock options granted.

In March 2000, the Financial Accounting Standards Board (FASB) issued
Interpretation (FIN) No. 44, Accounting for Certain Transactions Involving
Stock Compensation  an interpretation of APB Opinion No. 25. This
Interpretation clarifies the definition of employee for purposes of applying
APB Opinion No. 25, Accounting for Stock Issued to Employees, the criteria
for determining whether a plan qualifies as a noncompensatory plan, the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation was
effective July 1, 2000 and adoption of FIN No. 44 did not have a material
effect on Hyperions financial statements.

Cash and Cash Equivalents

Hyperion considers highly liquid investment instruments with remaining terms of
three months or less at the time of acquisition to be cash equivalents. Cash
equivalents are comprised primarily of investment-grade commercial paper, and
U.S. federal, state and political subdivision obligations.

Investments

Investments are comprised of U.S. government and debt securities. Investments
with remaining maturities exceeding three months but less than a year at the
time of purchase are classified as short-term investments. Investments with
maturities greater than a year are classified as long-term investments. All
debt securities that have readily determinable fair values have been classified
as available-for-sale in accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities. As a result, investments are
reported at fair value and unrealized holding gains and losses, net of
applicable taxes, are reported in other comprehensive income in stockholders
equity until realized. To date, unrealized gains and losses have not been
material for all periods presented. On a quarterly basis, management evaluates
individual securities to determine whether a decline in fair value is other
than temporary. If the decline in fair value is considered to be other than
temporary, the cost basis of the individual security is written down to fair
value as a new cost basis and the amount of the write-down is included in
operations. Interest income is recognized when earned. Realized gains and
losses for marketable securities are derived using the specific identification
method for determining the cost of the securities sold.

Fair Value of Financial Instruments

All current assets and current liabilities, because of their short-term nature,
are stated at cost, which approximates market value. The fair value of
Hyperions 4.5% convertible subordinated debt was approximately $72.6 million
at June 30, 2001, based on quoted market price. The carrying amount of
Hyperions mortgage loan approximates market value due to the market value
interest rate which this loan bears.

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##### Table of Contents



Long-Lived Assets

Hyperion accounts for long-lived assets under SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
which requires Hyperion to review for impairment of long-lived assets, whenever
events or changes in circumstances indicate that the carrying amount of an
asset might not be recoverable. When such an event occurs, Hyperion estimates
the future cash flows expected to result from the use of the asset and its
eventual disposition. If the undiscounted expected future cash flows is less
than the carrying amount of the asset, an impairment loss is recognized. An
impairment charge of $4.1 million was recorded during the quarter ended June
30, 2001.

Software Development Costs

Hyperion begins capitalizing software product development costs, principally
wages and contractor fees, only after establishing commercial and technical
feasibility. Annual amortization of these costs represents the greater of the
amount computed using (i) the ratio that current gross revenues for the
products bear to the total current and anticipated future gross revenues for
the products, or (ii) the straight-line method over the remaining estimated
economic life of the products; generally such deferred costs are amortized over
three years. Amortization commences when the product is available for general
release to customers.

Income Taxes

Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year
and deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in Hyperions financial statements or tax
returns. The measurement of current and deferred tax liabilities and assets are
based on provisions of the enacted tax law; the effects of future changes in
tax laws or rates are not anticipated. The measurement of deferred tax assets
is reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.

Concentration of Credit Risk

Financial instruments, which potentially subject Hyperion to a concentration of
credit risk, principally comprise cash and cash equivalents, short-term
investments and accounts receivable. Hyperion maintains a minimum average
short-term investment portfolio credit quality of AA and invests in instruments
with an investment credit rating of AA and better. Hyperion places its
investments for safekeeping with high-credit-quality financial institutions,
and by policy, limits the amount of credit exposure from any one institution or
issuer.

For all periods presented, Hyperion had no customers that accounted for 10
percent of total revenues. At June 30, 2001, there were 8 customers that
accounted for approximately 10% percent of total accounts receivable. At June
30, 2000, these same customers accounted for approximately 4% percent of total
accounts receivable.

Earnings Per Share

Earnings per share (EPS) is computed in accordance with SFAS No. 128,
Earnings Per Share. Basic EPS is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS is computed using the
weighted average number of shares of common stock and potentially dilutive
securities outstanding during the period. Potentially dilutive securities
consist of convertible preferred stock (using the if-converted method) and
stock options (using the treasury stock method) and shares issuable upon
conversion of the convertible subordinated notes (using the if-converted
method). Potentially dilutive securities are excluded from the computation if
the effect is antidilutive.

The following table sets forth the computation of basic and diluted EPS (in
thousands, except per share data)

|                                                                                       |  |   |         |   |                     |   |        |  |      |   |       |  |  |  | 
|-------------------------------------------------------------------------------------- |  | - | ------- | - | ------------------- | - | ------ |  | ---- | - | ----- |  |  |  | 
|                                                                                       |  |   |         |   | Year ended June 30,
|                                                                                       |  |   |         |   |                    
|                                                                                       |  |   |         |   | 2001                |   | 2000   |  | 1999
|                                                                                       |  |   |         |   |                     |   |        |  |     
|Numerator  income (loss) before extraordinary item                                    |  | $ | (32,537 | ) |                     | $ | 28,819 |  |      | $ | 7,973 | 
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|Numerator  extraordinary item  gain on redemption
of debt, net of income tax of $898 |  |   | 1,464   |   |                     |   |       |  |      |   |      | 
|                                                                                       |  |   |         |   |                     |   |        |  |      |   |       | 
|Numerator-net income (loss)                                                            |  | $ | (31,073 | ) |                     | $ | 28,819 |  |      | $ | 7,973 | 
|                                                                                       |  |   |         |   |                     |   |        |  |      |   |       | 

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|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |      |  |     | 
|-------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------ | ------------------- | ----- | ------------------- | - | ------ | ---- | ---- | ----- | ------ | ---- |  | --- | 
|                                                                                       |                                            |                                |                     |       | Year ended June 30,
|                                                                                       |                                            |                                |                     |       |                    
|                                                                                       |                                            |                                |                     |       | 2001                |   | 2000   |      | 1999
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |     
|Denominator for basic EPS  weighted-average shares                                    |                                            |                                | 32,592              |       |                     |   | 31,665 |      |      |       | 30,196 |     
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       |                                            | Effect of dilutive securities: |                     |       |                     |   |        |      |      |       |        |      |  |    
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       |                                            |                                | Stock option rights |       |                     |  |        |      |      | 1,442 |        |      |  | 659 | 
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|Denominator for diluted EPS  adjusted
weighted-average shares and assumed conversions |                                            |                                | 32,592              |       |                     |   | 33,107 |      |      |       | 30,855 |     
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|Basic                                                                                  |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Earnings (loss) from continuing operations |                                | $                   | (0.99 | )                   |   | $      | 0.91 |      |       | $      | 0.26 | 
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Extraordinary gain                         |                                |                     | 0.04  |                     |   |        |     |      |       |        |     | 
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Basic earnings (loss) per share            |                                | $                   | (0.95 | )                   |   | $      | 0.91 |      |       | $      | 0.26 | 
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|Diluted                                                                                |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Earnings (loss) from continuing operations |                                | $                   | (0.99 | )                   |   | $      | 0.87 |      |       | $      | 0.26 | 
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                       | Extraordinary gain                         |                                |                     | 0.04  |                     |   |        |     |      |       |        |     | 
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |     
|                                                                                       | Diluted earnings (loss) per share          |                                | $                   | (0.95 | )                   |   | $      | 0.87 |      |       | $      | 0.26 | 
|                                                                                       |                                            |                                |                     |       |                     |   |        |      |      |       |        |     

For the fiscal year ended June 30, 2001, all stock option rights totaling 8.8
million were excluded from the diluted EPS calculation due to their
antidilutive effect. For the fiscal years ended June 30, 2000 and 1999,
certain stock option rights for 1.7 million and 3.8 million common shares were
excluded from the diluted EPS calculation, respectively, because their effect
would be antidilutive. Shares of common stock issuable upon conversion of the
convertible subordinated notes due 2005 have been excluded from the diluted EPS
calculation for all the periods presented because of their antidilutive effect.

Comprehensive Income

Other comprehensive income is comprised of accumulated currency translation
adjustments and is reflected as a separate component of stockholders equity.

Derivative Instruments and Hedging Activities

Effective July 1, 2000, Hyperion adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS 133 establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in the derivatives fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivatives gains
and losses to offset related results on the hedged item in the income statement
to the extent effective, and requires that Hyperion must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The adoption of SFAS No. 133 did not have a material effect on
Hyperions financial statements.

Recent Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 141, Business Combinations which
addresses the financial accounting and reporting for business combinations and
supersedes APB Opinion No. 16, Business Combinations, and SFAS No. 38,
Accounting for Preacquisition Contingencies of Purchased Enterprises. SFAS
No. 141 requires that all business combinations be accounted for by a single
method, the purchase method, that modifies the criteria for recognizing
intangible assets, and expands disclosure requirements. The provisions of
SFAS No. 141 apply to all business combinations initiated after June 30, 2001.
We do not expect that the adoption of SFAS No. 141 will have a material effect
on our results of operations or statements of financial position.

In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets which addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. SFAS No. 142 addresses how intangible assets that are
acquired individually or with a group of other assets should be accounted for
in financial statements upon their acquisition and after they have been
initially recognized in the financial statements. SFAS No. 142 requires that
goodwill and intangible assets that have indefinite useful lives not be
amortized but rather tested at least annually for impairment, and intangible
assets that have finite useful lives be amortized over their useful lives.
SFAS No. 142 provides specific guidance for testing goodwill and intangible
assets that will not be amortized for impairment. In addition, SFAS No 142
expands the disclosure requirements about goodwill and other intangible assets in the years subsequent
to their acquisition. We have elected to early adopt SFAS No. 142 effective
July 1, 2001.

31



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2. INVESTMENTS

The following table sets forth the investment portfolio at June 30:

|                                       |  |                |        |      |  |   |        | 
|-------------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                                       |  | 2001           |        | 2000
|                                       |  |                |        |     
|                                       |  | (in thousands)
|State and municipal bonds              |  | $              | 1,000  |      |  | $ | 14,766 | 
|                                      
|                                      
|                                      
|                                      
|U.S. government and agency obligations |  |                | 8,452  |      |  |   | 4,999  | 
|                                      
|                                      
|                                      
|                                      
|Corporate notes                        |  |                | 9,995  |      |  |   | 10,994 | 
|Foreign debt securities                |  |                | 5,013  |      |  |   | 1,992  | 
|                                       |  |                |        |      |  |   |        | 
|                                      
|                                      
|                                      
|                                      
|                                       |  | $              | 24,460 |      |  | $ | 32,751 | 
|                                       |  |                |        |      |  |   |        | 

Included in foreign debt securities at June 30, 2001, is approximately $2.0
million which has a contractual maturity between one and two years and is
included in other assets on the consolidated balance sheets. Gross realized
gains and losses from the sale of such securities were not material for the
years ended June 30, 2001, 2000 and 1999.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30:

|                                                |  |                |          |         |  |        |         |   |  |               |    | 
|----------------------------------------------- |  | -------------- | -------- | ------- |  | ------ | ------- | - |  | ------------- | -- | 
|                                                |  |                |          |         |  |        |         |   |  | Depreciation/
|                                                |  |                |          |         |  |        |         |   |  | Amortization 
|                                                |  | 2001           |          | 2000    |  | Period
|                                                |  |                |          |         |  |       
|                                                |  | (in thousands) |          | (years)
|Land                                            |  | $              | 3,800    |         |  | $      | 3,800   |   |  |               |    | 
|                                               
|                                               
|                                               
|                                               
|Office and research facilities                  |  |                | 31,422   |         |  |        | 31,479  |   |  |               | 39 | 
|                                               
|                                               
|                                               
|                                               
|Building improvements                           |  |                | 4,334    |         |  |        | 3,882   |   |  | 5 to 39      
|                                               
|                                               
|                                               
|                                               
|Furniture, equipment and software               |  |                | 122,774  |         |  |        | 100,581 |   |  | 2 to 7       
|                                               
|                                               
|                                               
|                                               
|Leasehold improvements                          |  |                | 16,718   |         |  |        | 10,621  |   |  | lease term   
|                                               
|                                               
|                                               
|                                               
|Assets not yet placed in service                |  |                | 3,828    |         |  |        |        |   |  |               |    | 
|                                                |  |                |          |         |  |        |         |   |  |               |    | 
|                                                |  |                | 182,876  |         |  |        | 150,363 |   |  |               |    | 
|                                               
|                                               
|                                               
|                                               
|Less: accumulated depreciation
and amortization |  |                | (102,124 | )       |  |        | (78,694 | ) |  |               |    | 
|                                                |  |                |          |         |  |        |         |   |  |               |    | 
|                                                |  | $              | 80,752   |         |  | $      | 71,669  |   |  |               |    | 
|                                                |  |                |          |         |  |        |         |   |  |               |    | 

Depreciation is computed principally using the straight-line method over the
estimated useful lives of the applicable assets. Leasehold improvements are
amortized over the lesser of the remaining life of the lease or the useful life
of the improvements. Depreciation and amortization of these assets totaled
$28.3 million, $25.6 million and $25.4 million for 2001, 2000 and 1999,
respectively. Additionally, a $5.3 million impairment charge to property and
equipment was recognized in fiscal 2001.

4. ACQUIRED TECHNOLOGIES, GOODWILL AND OTHER INTANGIBLE ASSETS

Components of intangible assets, which relate primarily to business
acquisitions, are as follows at June 30:

|                                        |  |                |         |         |  |        |         |   |  |              |      | 
|--------------------------------------- |  | -------------- | ------- | ------- |  | ------ | ------- | - |  | ------------ | ---- | 
|                                        |  |                |         |         |  |        |         |   |  | Amortization
|                                        |  | 2001           |         | 2000    |  | Period
|                                        |  |                |         |         |  |       
|                                        |  | (in thousands) |         | (years)
|Acquired technologies                   |  | $              | 9,515   |         |  | $      | 9,733   |   |  |              | 3    | 
|                                       
|                                       
|                                       
|                                       
|Goodwill                                |  |                | 12,833  |         |  |        | 11,714  |   |  |              | 420 | 
|                                       
|                                       
|                                       
|                                       
|Product distribution and service rights |  |                | 546     |         |  |        | 8,623   |   |  |              | 7    | 
|                                       
|                                       
|                                       
|                                       
|Product development costs               |  |                | 17,596  |         |  |        | 15,436  |   |  |              | 3    | 
|                                       
|                                       
|                                       
|                                       
|Copyrights, trademarks and other        |  |                | 4,847   |         |  |        | 4,870   |   |  |              | 3    | 
|                                        |  |                |         |         |  |        |         |   |  |              |      | 
|                                        |  |                | 45,337  |         |  |        | 50,376  |   |  |              |      | 
|                                       
|                                       
|                                       
|                                       
|Less: accumulated amortization          |  |                | (28,865 | )       |  |        | (24,434 | ) |  |              |      | 
|                                        |  |                |         |         |  |        |         |   |  |              |      | 
|                                        |  | $              | 16,472  |         |  | $      | 25,942  |   |  |              |      | 
|                                        |  |                |         |         |  |        |         |   |  |              |      | 

During fiscal 2001, 2000 and 1999, Hyperion incurred research and development
costs of $83.8 million, $72.8 million and $65.6 million, of which $2.2 million,
$2.6 million and $1.8 million, respectively, of software development costs were
capitalized.

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Amortization of acquired technology, goodwill and other intangible assets
totaled $10.1 million, $8.9 million and $8.5 million,
of which $2.1 million, $2.2 million and $4.8 million related to
product development costs for 2001, 2000 and 1999,
respectively. Additionally, a $4.1 million impairment charge to reduce certain
intangible assets was recognized in fiscal 2001.

5. INCOME TAXES

The provision for income taxes consists of the following charges (credits):

|          |                 |   |                |         |      |   |        |        |   |   |        |        |  
|--------- | --------------- | - | -------------- | ------- | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|          |                 |   | 2001           |         | 2000 |   | 1999  
|          |                 |   |                |         |      |   |       
|          |                 |   | (in thousands)
|Current:  |                 |   |                |         |      |   |        |        |   |   |        |       
|         
|         
|         
|         
|          | U.S.            |   | $              | (4,628  | )    |   | $      | 16,960 |   |   | $      | 10,970 |  
|         
|         
|         
|         
|          | State           |   |                | (441    | )    |   |        | 2,527  |   |   |        | 3,237  |  
|         
|         
|         
|         
|          | Other countries |   |                | 2,813   |      |   |        | 1,481  |   |   |        | 2,785  |  
|          |                 |   |                |         |      |   |        |        |   |   |        |        |  
|          |                 |   | (2,256         | )       |      |   | 20,968 |        |   |   | 16,992 |       
|         
|         
|         
|         
|Deferred: |                 |   |                |         |      |   |        |        |   |   |        |       
|         
|         
|         
|         
|          | U.S.            |   |                | (13,845 | )    |   |        | (1,522 | ) |   |        | (3,282 | )
|         
|         
|         
|         
|          | State           |   |                | (603    | )    |   |        | (447   | ) |   |        | (821   | )
|         
|         
|         
|         
|          | Other countries |   |                | 1,846   |      |   |        | (1,999 | ) |   |        | (89    | )
|          |                 |   |                |         |      |   |        |        |   |   |        |        |  
|          |                 |   | (12,602        | )       |      |   | (3,968 | )      |   |   | (4,192 | )     
|          |                 |   |                |         |      |   |        |        |   |   |        |        |  
|          |                 | $ | (14,858        | )       |      | $ | 17,000 |        |   | $ | 12,800 |       
|          |                 |   |                |         |      |   |        |        |   |   |        |        |  

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their tax bases. Significant components of deferred tax assets
and liabilities at June 30 are as follows:

|                                 |  |                |        |      |  |   |        |  
|-------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                 |  | 2001           |        | 2000
|                                 |  |                |        |     
|                                 |  | (in thousands)
|Deferred income tax assets:      |  |                |        |      |  |   |        |  
|                                
|                                
|                                
|                                
|Net operating loss carryforwards |  | $              | 6,195  |      |  | $ | 5,590  |  
|                                
|                                
|                                
|                                
|Accounts receivable              |  |                | 5,152  |      |  |   | 6,554  |  
|                                
|                                
|                                
|                                
|Intangible assets                |  |                | 3,813  |      |  |   | 2,341  |  
|                                
|                                
|                                
|                                
|Property and equipment           |  |                | 9,690  |      |  |   | 6,995  |  
|                                
|                                
|                                
|                                
|Accrued expenses                 |  |                | 14,023 |      |  |   | 3,773  |  
|                                
|                                
|                                
|                                
|Deferred revenue                 |  |                |       |      |  |   | 164    |  
|                                 |  |                |        |      |  |   |        |  
|Other                            |  |                | 1,747  |      |  |   | 146    |  
|                                 |  |                |        |      |  |   |        |  
|                                 |  |                | 40,620 |      |  |   | 25,563 |  
|                                
|                                
|                                
|                                
|Less: valuation allowance        |  |                | (6,075 | )    |  |   | (3,472 | )
|                                 |  |                |        |      |  |   |        |  
|                                 |  | $              | 34,545 |      |  | $ | 22,091 |  
|                                 |  |                |        |      |  |   |        |  
|Deferred income tax liabilities: |  |                |        |      |  |   |        |  
|                                
|                                
|                                
|                                
|Product development costs        |  | $              | 1,626  |      |  | $ | 1,599  |  
|                                
|                                
|                                
|                                
|Deferred compensation            |  |                | 450    |      |  |   | 625    |  
|                                 |  |                |        |      |  |   |        |  
|                                 |  |                | 2,076  |      |  |   | 2,224  |  
|                                 |  |                |        |      |  |   |        |  
|Net deferred income tax asset    |  | $              | 32,469 |      |  | $ | 19,867 |  
|                                 |  |                |        |      |  |   |        |  

33



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The effective income tax rate varied from the statutory U.S. federal tax rate
as follows:

|                                            |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                            |  | 2001 |      | 2000 |  | 1999
|                                            |  |      |      |      |  |     
|Statutory U.S. tax rate                     |  |      | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0 | %
|                                           
|                                           
|                                           
|                                           
|State income taxes, net of U.S. tax benefit |  |      | 5.0  | %    |  |      | 3.0  | % |  |  | 8.0  | %
|                                           
|                                           
|                                           
|                                           
|Tax exempt interest                         |  |      | 3.7  | %    |  |      | -4.8 | % |  |  | -6.2 | %
|                                           
|                                           
|                                           
|                                           
|Goodwill                                    |  |      | -0.8 | %    |  |      | 1.7  | % |  |  | 1.9  | %
|                                           
|                                           
|                                           
|                                           
|Non-U.S. operations, including export sales |  |      | -4.4 | %    |  |      | -1.1 | % |  |  | -2.3 | %
|                                           
|                                           
|                                           
|                                           
|Change in valuation allowance               |  |      | -5.5 | %    |  |      | 0.3  | % |  |  | -0.6 | %
|                                           
|                                           
|                                           
|                                           
|Acquired in-process technology              |  |      |     |      |  |      | 1.8  | % |  |  |     |  
|                                           
|                                           
|                                           
|                                           
|Nondeductible merger costs                  |  |      |     |      |  |      |     |   |  |  | 23.8 | %
|                                           
|                                           
|                                           
|                                           
|Other  net                                 |  |      | -1.7 | %    |  |      | 1.2  | % |  |  | 2.0  | %
|                                            |  |      |      |      |  |      |      |   |  |  |      |  
|Effective income tax rate                   |  |      | 31.3 | %    |  |      | 37.1 | % |  |  | 61.6 | %
|                                            |  |      |      |      |  |      |      |   |  |  |      |  

Hyperion has non-U.S. net operating loss (NOL) carryforwards of $15.2 million
of which $5.7 million is carried forward indefinitely and the remaining $9.5
million expires between 2003 and 2011.

6. LONG-TERM DEBT

Long-term debt consists of the following at June 30:

|                                    |  |                |        |      |  |   |         |  
|----------------------------------- |  | -------------- | ------ | ---- |  | - | ------- | -
|                                    |  | 2001           |        | 2000
|                                    |  |                |        |     
|                                    |  | (in thousands)
|4.5% convertible subordinated notes |  | $              | 88,750 |      |  | $ | 100,000 |  
|                                   
|                                   
|                                   
|                                   
|Mortgage loan                       |  |                | 2,524  |      |  |   | 2,734   |  
|                                    |  |                |        |      |  |   |         |  
|                                    |  |                | 91,274 |      |  |   | 102,734 |  
|                                   
|                                   
|                                   
|                                   
|Less: current portion               |  |                | (229   | )    |  |   | (216    | )
|                                    |  |                |        |      |  |   |         |  
|                                    |  | $              | 91,045 |      |  | $ | 102,518 |  
|                                    |  |                |        |      |  |   |         |  

In March 1998, Hyperion issued $100.0 million of 4.5% convertible subordinated
notes (the Notes), due 2005. The Notes are subordinated to all existing and
future senior debt and are convertible into shares of Hyperions common stock
at a conversion price of $56.36 per share. The Notes are redeemable at the
option of Hyperion, in whole or in part, at any time on or after March 20,
2001, at 104.5% of the principal amount initially, and thereafter at prices
declining to 100% at maturity, in each case together with accrued interest.
Each holder of these Notes has the right, subject to certain conditions and
restrictions, to require Hyperion to offer to repurchase all outstanding Notes,
in whole or in part, owned by such holder, at specified repurchase prices
together with accrued interest upon the occurrence of certain events. Hyperion
incurred $3.3 million of costs in connection with the issuance of the Notes
which have been deferred and are included in other assets. These finance costs
are being recognized as interest expense over the term of the Notes using the
straight-line method, which approximates the effective interest method.
Interest on the Notes began accruing March 16, 1998, and is payable
semi-annually on March 15 and September 15. The fair value of the notes was
approximately $72.6 million at June 30, 2001, based on quoted market price.

During fiscal 2001, Hyperion repurchased $11.3 million of the Notes at a total
cost of $8.7 million, resulting in an extraordinary gain of approximately $1.5
million, after income taxes, or approximately $0.04 per share.

Hyperion obtained a mortgage loan (the Loan) of $9.5 million from the
Connecticut Development Authority (the CDA) to purchase our Connecticut
office building. The Loan is repayable in monthly installments of principal and
interest with the last payment due February 2010. As of January 1, 2000,
Hyperion employed fewer employees in its Stamford, Connecticut office as
required under the terms of the Loan. As a result, Hyperion prepaid $4.1
million of the outstanding principal and incurred additional interest of $0.2
million. In addition, the interest rate on the remaining outstanding principal
increased by approximately 1.4%. At June 30, 2001, the Loan bears interest at
6.0% per annum.

34



---



##### Table of Contents



Future maturities of the Loan are as follows (in thousands).

|           |  |   |       | 
|---------- |  | - | ----- | 
|2002       |  | $ | 229   | 
|          
|          
|          
|          
|2003       |  |   | 243   | 
|          
|          
|          
|          
|2004       |  |   | 258   | 
|          
|          
|          
|          
|2005       |  |   | 274   | 
|          
|          
|          
|          
|2006       |  |   | 291   | 
|          
|          
|          
|          
|Thereafter |  |   | 1,229 | 
|           |  |   |       | 
|           |  | $ | 2,524 | 
|           |  |   |       | 

7. COMMITMENTS AND CONTINGENCIES

Hyperion leases office and research facilities and certain computer and other
equipment under various operating lease agreements expiring at various dates
through 2016. In addition to base rent, Hyperion is responsible for certain
taxes, utilities and
maintenance costs. In addition, several leases include rentals based upon
changes in the Consumer Price Index or the fair market rental value of the
property and options for renewal or purchase. Hyperion subleases certain of
its facilities to third party tenants. The subleases expire at various dates
from 2003 to 2016.

Future minimum lease payments under all operating leases with noncancellable
terms in excess of one year and future sublease income are as follows (in
thousands):

|            |  |          |        |          |  |   |        | 
|----------- |  | -------- | ------ | -------- |  | - | ------ | 
|            |  | Future   |        | Future  
|            |  | Lease    |        | Sublease
|Fiscal Year |  | Payments |        | Income  
|            |  |          |        |         
|2002        |  | $        | 17,886 |          |  | $ | 959    | 
|           
|           
|           
|           
|2003        |  |          | 12,989 |          |  |   | 946    | 
|           
|           
|           
|           
|2004        |  |          | 10,250 |          |  |   | 743    | 
|           
|           
|           
|           
|2005        |  |          | 8,912  |          |  |   | 743    | 
|           
|           
|           
|           
|2006        |  |          | 6,228  |          |  |   | 743    | 
|           
|           
|           
|           
|Thereafter  |  |          | 26,380 |          |  |   | 7,240  | 
|            |  |          |        |          |  |   |        | 
|            |  | $        | 82,645 |          |  | $ | 11,374 | 
|            |  |          |        |          |  |   |        | 

Rental expense for the fiscal years ended June 30, 2001, 2000 and 1999 under
all lease agreements was $16.9 million, $13.1 million and $11.9 million,
respectively. Sublease income was $0.2 million, $0.2 million and $0.1 million
for the fiscal years ended June 30, 2001, 2000 and 1999, respectively.

From time to time, in the normal course of business, various claims are made
against Hyperion. At this time, in the opinion of management, there are no
pending claims the outcome of which is expected to result in a material adverse
effect on the financial position of Hyperion.

8. COMMON STOCK

During fiscal 2001, Hyperion repurchased a total of 1,389,000 shares of common
stock and reissued 34,000 in connection with stock options exercises. The
remaining shares totaling 1,355,000 are classified as treasury stock at June
30, 2001.

During fiscal 2000, Hyperion granted 100,000 restricted shares of common stock
to an officer of Hyperion. The market value of the shares awarded of $1.9
million was recorded as unearned compensation  restricted stock. This amount
is not reflected as a separate component of stockholders equity, but rather
has been netted within additional paid-in capital. Unearned compensation is
being amortized to expense over the four-year vesting period and amounted to
$0.5 million and $0.3 million in fiscal 2001 and 2000, respectively. In
connection with the issuance of the restricted stock, Hyperion provided a loan
for $1.0 million. The loan matures in October and is secured by a pledge of
such restricted stock. Interest accrues at 6.02% per annum and is due at
maturity.

35



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##### Table of Contents



9. STOCK OPTION, EMPLOYEE SAVINGS AND EMPLOYEE STOCK PURCHASE PLANS

Stock Option Plans

As of June 30, 2001, Hyperion had an aggregate
of 11.8 million common shares
authorized for issuance under its equity plans (Equity Plans). The Equity Plans
provide for the issuance of common shares pursuant to stock option exercises,
and other equity based awards. There were 2.5 million shares available for
grant under the Equity Plans as of June 30, 2001. Under the Equity Plans, stock
options are issued to employees and to non-employee directors.

Stock options are granted under the Equity Plans with an exercise price equal
to the fair market value of the common stock on the date of grant and generally
vest over a period of four years. Options granted under the Equity Plans have a
maximum term of 10 years from the date of grant. Options provide for
accelerated vesting upon certain events, including an employees Involuntary
Termination (as defined in the plan) within eighteen months following a change
in control of Hyperion.

The following table presents a summary of Hyperions stock option activity for
the years ended June 30 (shares in thousands):

|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |          |   |       |       |  |  |          |        |   |   |       |       | 
|-------------------------------- | ----------------------- |  | ------ | ------ | ----- | - | -------- | ----- | ----- |  | ------ | ------ | -------- | - | ----- | ----- |  |  | -------- | ------ | - | - | ----- | ----- | 
|                                 |                         |  | 2001   |        | 2000  |   | 1999    
|                                 |                         |  |        |        |       |   |         
|                                 |                         |  |        |        |       |   | Weighted |       |       |  |        |        | Weighted |   |       |       |  |  | Weighted
|                                 |                         |  |        |        |       |   | Average  |       |       |  |        |        | Average  |   |       |       |  |  | Average 
|                                 |                         |  |        |        |       |   | Exercise |       |       |  |        |        | Exercise |   |       |       |  |  | Exercise
|                                 |                         |  | Shares |        | Price |   | Shares   |       | Price |  | Shares |        | Price   
|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |         
|Outstanding at beginning of year |                         |  | 7,492  |        |       | $ | 25.29    |       |       |  | 5,355  |        |          | $ | 22.69 |       |  |  | 4,614    |        |   | $ | 22.33 |      
|                                
|                                
|                                
|                                
|                                 | Granted at market price |  |        | 3,159  |       |   |          | 18.67 |       |  |        | 5,123  |          |   |       | 26.98 |  |  |          | 3,200  |   |   |       | 22.29 | 
|                                
|                                
|                                
|                                
|                                 | Exercised               |  |        | (357   | )     |   |          | 13.79 |       |  |        | (1,251 | )        |   |       | 21.97 |  |  |          | (893   | ) |   |       | 9.32  | 
|                                
|                                
|                                
|                                
|                                 | Forfeited               |  |        | (1,871 | )     |   |          | 26.55 |       |  |        | (1,735 | )        |   |       | 24.68 |  |  |          | (1,566 | ) |   |       | 28.42 | 
|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |          |   |       |       |  |  |          |        |   |   |       |      
|Outstanding at year-end          |                         |  | 8,423  |        |       | $ | 23.02    |       |       |  | 7,492  |        |          | $ | 25.29 |       |  |  | 5,355    |        |   | $ | 22.69 |      
|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |          |   |       |       |  |  |          |        |   |   |       |      
|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |          |   |       |       |  |  |          |        |   |   |       |      
|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |          |   |       |       |  |  |          |        |   |   |       |      
|Options exercisable at year-end  |                         |  | 3,005  |        |       | $ | 24.16    |       |       |  | 1,665  |        |          | $ | 21.46 |       |  |  | 1,785    |        |   | $ | 21.69 |      
|                                 |                         |  |        |        |       |   |          |       |       |  |        |        |          |   |       |       |  |  |          |        |   |   |       |      

The following table summarizes information about stock options outstanding at
June 30, 2001 (shares in thousands):

|                |  |                     |       |                     |  |                  |      |             |  |                |       |  |  |          |       |  |  |   |       | 
|--------------- |  | ------------------- | ----- | ------------------- |  | ---------------- | ---- | ----------- |  | -------------- | ----- |  |  | -------- | ----- |  |  | - | ----- | 
|                |  | Options Outstanding |       | Options Exercisable
|                |  |                     |       |                    
|                |  |                     |       |                     |  | Weighted Average |      | Weighted    |  |                |       |  |  | Weighted
|Range of        |  | Number              |       | Remaining Years of  |  | Average          |      | Number      |  | Average       
|Exercise Prices |  | Outstanding         |       | Contractual Life    |  | Exercise Price   |      | Exercisable |  | Exercise Price
|                |  |                     |       |                     |  |                  |      |             |  |               
|$  0.50 - 14.94 |  |                     | 996   |                     |  |                  | 7.29 |             |  | $              | 12.63 |  |  |          | 557   |  |  | $ | 12.19 | 
|               
|               
|               
|               
|15.00 - 15.97   |  |                     | 1,585 |                     |  |                  | 9.44 |             |  |                | 15.09 |  |  |          | 59    |  |  |   | 15.31 | 
|               
|               
|               
|               
|16.00 - 19.94   |  |                     | 1,755 |                     |  |                  | 8.24 |             |  |                | 18.88 |  |  |          | 732   |  |  |   | 19.10 | 
|               
|               
|               
|               
|20.00 - 25.88   |  |                     | 1,518 |                     |  |                  | 8.58 |             |  |                | 22.02 |  |  |          | 522   |  |  |   | 21.69 | 
|               
|               
|               
|               
|26.00 - 35.96   |  |                     | 1,528 |                     |  |                  | 7.93 |             |  |                | 29.59 |  |  |          | 669   |  |  |   | 29.22 | 
|               
|               
|               
|               
|$36.00 - 57.63  |  |                     | 1,041 |                     |  |                  | 8.18 |             |  | $              | 43.86 |  |  |          | 466   |  |  | $ | 43.07 | 
|                |  |                     |       |                     |  |                  |      |             |  |                |       |  |  |          |       |  |  |   |       | 
|                |  |                     | 8,423 |                     |  |                  |      |             |  |                |       |  |  |          | 3,005 |  |  |   |       | 
|                |  |                     |       |                     |  |                  |      |             |  |                |       |  |  |          |       |  |  |   |       | 

Pro Forma Disclosure

The weighted average estimated grant date fair value, as defined by SFAS No.
123, for options granted under Hyperions stock option plans in fiscal 2001,
2000 and 1999 was $13.21, $11.26 and $9.13 per share, respectively. The
weighted average estimated grant date fair value, as defined by SFAS No. 123,
for purchase awards issued under Hyperions employee stock purchase plan in
fiscal 2001, 2000 and 1999 was $4.71, $7.80 and $10.69 per share, respectively.
The estimated grant date fair value was calculated using the Black-Scholes
model.

36



---



##### Table of Contents



The following weighted average assumptions are included in the estimated grant
date fair value calculations for stock option and purchase awards:

|                     |                                 |  |                     |      |      |  |      |      |   |  |  |      |  
|-------------------- | ------------------------------- |  | ------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                     |                                 |  | YEAR ENDED JUNE 30,
|                     |                                 |  |                    
|                     |                                 |  | 2001                |      | 2000 |  | 1999
|                     |                                 |  |                     |      |      |  |     
|Stock option plans:  |                                 |  |                     |      |      |  |      |      |   |  |  |     
|                    
|                    
|                    
|                    
|                     | Expected dividend yield         |  |                     | 0    | %    |  |      | 0    | % |  |  | 0    | %
|                    
|                    
|                    
|                    
|                     | Expected stock price volatility |  |                     | 84   | %    |  |      | 40   | % |  |  | 40   | %
|                    
|                    
|                    
|                    
|                     | Risk free interest rate         |  |                     | 4.97 | %    |  |      | 6.24 | % |  |  | 5.83 | %
|                    
|                    
|                    
|                    
|                     | Expected life (years)           |  |                     | 5.5  |      |  |      | 4.3  |   |  |  | 4.4  |  
|                    
|                    
|                    
|                    
|                     |                                 |  |                     |      |      |  |      |      |   |  |  |     
|                    
|                    
|                    
|                    
|Stock purchase plan: |                                 |  |                     |      |      |  |      |      |   |  |  |     
|                    
|                    
|                    
|                    
|                     | Expected dividend yield         |  |                     | 0    | %    |  |      | 0    | % |  |  | 0    | %
|                    
|                    
|                    
|                    
|                     | Expected stock price volatility |  |                     | 84   | %    |  |      | 40   | % |  |  | 40   | %
|                    
|                    
|                    
|                    
|                     | Risk free interest rate         |  |                     | 3.63 | %    |  |      | 6.22 | % |  |  | 5.14 | %
|                    
|                    
|                    
|                    
|                     | Expected life (years)           |  |                     | 0.5  |      |  |      | 0.5  |   |  |  | 0.5  |  

Had Hyperion recorded compensation based on the estimated grant date fair
value, as defined by SFAS No. 123, for awards granted under its stock option
plans and stock purchase plan, Hyperions net income (loss) and earnings (loss)
per share would have been reduced to the pro forma amounts below for the fiscal
years ended June 30, 2001, 2000 and 1999 (in thousands, except per share
amounts):

|                                       |         |   |                     |       |      |   |        |      |  |   |        |       |  
|-------------------------------------- | ------- | - | ------------------- | ----- | ---- | - | ------ | ---- |  | - | ------ | ----- | -
|                                       |         |   | YEAR ENDED JUNE 30,
|                                       |         |   |                    
|                                       |         |   | 2001                |       | 2000 |   | 1999  
|                                       |         |   |                     |       |      |   |       
|Net income (loss) as reported          |         | $ | (31,073             | )     |      | $ | 28,819 |      |  | $ | 7,973  |      
|                                      
|                                      
|                                      
|                                      
|Pro forma net income (loss)            |         | $ | (55,731             | )     |      | $ | 18,220 |      |  | $ | (3,141 | )    
|                                      
|                                      
|                                      
|                                      
|Earnings (loss) per share as reported: |         |   |                     |       |      |   |        |      |  |   |        |      
|                                      
|                                      
|                                      
|                                      
|                                       | Basic   |   | $                   | (0.95 | )    |   | $      | 0.91 |  |   | $      | 0.26  |  
|                                      
|                                      
|                                      
|                                      
|                                       | Diluted |   | $                   | (0.95 | )    |   | $      | 0.87 |  |   | $      | 0.26  |  
|                                      
|                                      
|                                      
|                                      
|Pro forma earnings (loss) per share:   |         |   |                     |       |      |   |        |      |  |   |        |      
|                                      
|                                      
|                                      
|                                      
|                                       | Basic   |   | $                   | (1.71 | )    |   | $      | 0.58 |  |   | $      | (0.10 | )
|                                      
|                                      
|                                      
|                                      
|                                       | Diluted |   | $                   | (1.71 | )    |   | $      | 0.55 |  |   | $      | (0.10 | )

Because the determination of the fair value of all options granted includes an
expected volatility factor in addition to the other factors described in the
table above and because additional option grants are expected to be made each
year, the above pro forma disclosures are not representative of the pro forma
effects of option grants on reported results for future years.

Employee Savings Plans

Hyperion maintains an employee savings plan that qualifies as a cash or
deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating U.S. employees may defer up to 15% of their
pre-tax compensation, but not more than $10,500 per calendar year. Hyperion
contributes to the plan, annually, up to a maximum of $2,000 per participant.
Similar savings plans are maintained with respect to certain non-U.S.
employees. In fiscal 2001, 2000 and 1999, Hyperion contributed $5.4 million,
$3.6 million and $2.8 million, respectively, to the savings plans.

Employee Stock Purchase Plan

Hyperion sponsors an employee stock purchase plan
(ESPP), which is
qualified under Section 423 of the Internal Revenue Code. Under the ESPP,
substantially all employees may purchase Hyperion common stock through payroll
deductions at a price equal to 85 percent of the lower of the fair market value
at the beginning or end of each six-month offering period. Stock purchases
under the ESPP are limited to 10 percent of an employees eligible
compensation, up to 1,000 shares in a six-month period and a fair market value
of $25,000 in any plan year. Shares issued under the ESPP were 775,000 for
fiscal 2001, 360,000 for fiscal 2000 and 74,000 for fiscal 1999. At June 30,
2001, 376,000 shares were reserved for future issuance under the ESPP.

37



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##### Table of Contents



10. STOCKHOLDER RIGHTS PLAN

In June 1998, Hyperion adopted a stockholder rights plan (the Rights Plan) in
which preferred stock purchase rights were distributed as a rights dividend at
the rate of one right for each share of common stock held as of the close of
business on July 3, 1998. The Rights Plan is designed to deter coercive or
unfair takeover tactics and to prevent an acquirer from gaining control of
Hyperion without offering a fair price to all of Hyperions stockholders. The
plan is intended to protect the interests of stockholders in the event Hyperion
is confronted in the future with coercive or unfair takeover tactics.

Each right will entitle holders of Hyperions common stock to buy one
one-thousandth of a share of Series A Junior Participating Preferred Stock of
Hyperion at an exercise price of $250 per one one-thousandth of a preferred
share. Generally, the rights will be exercisable only if a person or group
acquires more than 15% of the common stock, or announces a tender or exchange
offer which would result in its ownership of 15% or more of the common stock,
or a person owning 10% or more of the common stock is determined by the board
to be an Adverse Person, as defined in the Rights Plan. Under the Rights Plan,
the ownership, tender offer and exchange offer thresholds of 15% increase to
25% for certain grandfathered stockholders and approximately 20.5% for one
stockholder that held approximately 19.5% of Hyperions issued and outstanding
stock on July 3, 1998.

If any person or group becomes the beneficial owner of 15% or more of the
common stock (a Flip-In Event), each right not owned by such person or
related parties will entitle its holder to purchase, at the then current
exercise price of the right, common stock of Hyperion having a value of twice
the rights exercise price (or, in certain circumstances, a combination of
cash, property, common stock or other securities or a reduction in the exercise
price having an aggregate value equal to the value of the common stock
otherwise purchasable). After the occurrence of a Flip-In Event and before any
person or affiliated group becomes the owner of 50% or more of the then
outstanding common stock, Hyperion may also exchange one share of common stock
for each right outstanding. In addition, if Hyperion is involved in a merger or
other business combination transaction with another person in which its common
stock is changed or converted, or sells or transfers more than 50% of its
assets or earning power to another person, each right that has not previously
been exercised will entitle its holder to purchase, at the then current
exercise price of the right, shares of common stock of such other person having
a value of twice the rights exercise price.

Hyperion can redeem the rights at $.01 per right prior to the date the
ownership thresholds are passed. The rights will expire on July 3, 2008, unless
earlier redeemed or exchanged.

11. RESTRUCTURING AND NON-RECURRING CHARGES

In June 2001, Hyperion announced a corporate restructuring plan designed to
bring costs more in line with revenues and strengthen the financial performance
of the business. The restructuring plan included a company-wide initiative to
align personnel with Hyperions new strategy, which resulted in a reduction of
the workforce by approximately 300 or 12% of the worldwide headcount. Employee
groups impacted by the restructuring include personnel involved in corporate
services, product business units, sales and customer support. In addition,
Hyperion plans to consolidate certain facilities and exit other facilities.

A summary of the restructuring and non-recurring charges are as follows (in
thousands):

|                                              |                                            |   |         |         |  
|--------------------------------------------- | ------------------------------------------ | - | ------- | ------- | -
|Restructuring:                                |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Severance and benefits                     |   | $       | 8,674   |  
|                                             
|                                             
|                                             
|                                             
|                                              | Accrued lease costs                        |   |         | 17,227  |  
|                                             
|                                             
|                                             
|                                             
|                                              | Asset impairments                          |   |         | 6,157   |  
|                                             
|                                             
|                                             
|                                             
|                                              | Other                                      |   |         | 958     |  
|                                              |                                            |   |         |         |  
|Total Restructuring Charges                   |                                            |   | 33,016  |        
|                                             
|                                             
|                                             
|                                             
|                                              |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|Non-Recurring:                                |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Asset write-downs to net realizable values |   |         | 4,851   |  
|                                             
|                                             
|                                             
|                                             
|                                              | Other charges                              |   |         | 4,918   |  
|                                              |                                            |   |         |         |  
|Total Non-Recurring Charges                   |                                            |   | 9,769   |        
|                                             
|                                             
|                                             
|                                             
|                                              |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|Total restructuring and non-recurring charges |                                            |   | 42,785  |        
|                                              |                                            |   |         |         |  
|Less Reductions to Reserve:                   |                                            |   |         |        
|                                             
|                                             
|                                             
|                                             
|                                              | Cash paid                                  |   |         | (3,137  | )
|                                             
|                                             
|                                             
|                                             
|                                              | Non-cash                                   |   |         | (11,618 | )
|                                              |                                            |   |         |         |  
|Total Reductions to Reserve                   |                                            |   | (14,755 | )      
|                                              |                                            |   |         |         |  
|Reserve balance at June 30, 2001              |                                            | $ | 28,030  |        
|                                              |                                            |   |         |         |  

38



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As of June 30, 2001, Hyperion communicated to all impacted employees regarding
employee separation benefits and the timing of separation. As of June 30, 2001,
all 300 positions have been separated or were currently in the separation
process, resulting in payments of $3.1 million. Remaining cash expenditures
associated with employee separations are estimated to be approximately $5.6
million. Employee separations are expected to be substantially complete by
September 30, 2001. All restructuring activities associated with the
consolidation of facilities are anticipated to be complete by June 30, 2002.
All restructuring activities related to the disposal of long-term assets were
completed as of June 30, 2001.

The $42.8 million of restructuring and non-recurring charges is included in
operating expense for the fiscal year ended June 30, 2001. Approximately $11.6
million did not require an outflow of cash and the remaining $31.2 million will
require the use of cash (primarily payments due under long-term lease
obligations), approximately $3.1 million of which had been disbursed at June
30, 2001. The accrued balance of $28.0 million, related primarily to future
lease obligations and employee separation payments, is included in Other
liabilities and Other long-term liabilities in the accompanying consolidated
balance sheets. Hyperion expects to substantially complete its restructuring
activities related to the restructuring plan described above during fiscal
2002, however payments due under long-term lease obligations will continue to
be made over the remaining lives of the leases. No events or circumstances
occurred subsequent to the announcement of the restructuring plan requiring
significant changes to managements original estimates. If we are unable to
maintain a cost structure that is in appropriate balance with revenue going
forward, whether due to failure to increase revenue adequately or failure to
keep costs down, we could find it necessary to further adjust our cost
structure through the execution of additional restructuring plans.

In March 2000, Hyperion recorded a non-recurring charge to operations of
approximately $2.1 million, $1.3 million after taxes, associated with
restructuring our European operations and costs associated with outsourcing our
North American-based accounting department. This charge is comprised primarily
of severance costs. All of the cash associated with this item had been
expended at June 30, 2001.

12. SEGMENT AND GEOGRAPHICAL INFORMATION

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information established standards for reporting information about operating
segments in Hyperions financial statements. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker, or
decision making group, in deciding how to allocate resources and in assessing
performance. Hyperion has identified one industry segment: the development and
marketing of enterprise analytic application software and related services.
This segment operates in four geographic regions: North America, Europe, Asia
Pacific and Latin America. Hyperions products are marketed internationally
through Hyperions direct sales force, independent distributors and application
resellers.

Enterprise-wide information is provided in accordance with SFAS No. 131.
Geographic sales information is primarily based on the ordering location of the
customer. Long-lived asset information is based on the physical location of
the assets.

The significant accounting policies of the reportable segments are the same as
those summarized above in Note 1.

The following table is a breakdown of financial information by geographic area
(in thousands).(1)

|                                |  |         |          |        |  |         |         |         |  |       |        |  |  |   |       |  |  |   |         |  
|------------------------------- |  | ------- | -------- | ------ |  | ------- | ------- | ------- |  | ----- | ------ |  |  | - | ----- |  |  | - | ------- | -
|                                |  | North   |          |        |  |         |         | Asia    |  | Latin |        |  |  |  
|                                |  | America |          | Europe |  | Pacific |         | America |  | Total
|                                |  |         |          |        |  |         |         |         |  |      
|Fiscal Year Ended
June 30, 2001 |  |         |          |        |  |         |         |         |  |       |        |  |  |   |       |  |  |   |         |  
|                               
|                               
|                               
|                               
|Total revenues                  |  | $       | 347,251  |        |  | $       | 133,623 |         |  | $     | 30,288 |  |  | $ | 5,561 |  |  | $ | 516,723 |  
|                               
|                               
|                               
|                               
|Operating income (loss)         |  |         | (109,359 | )      |  |         | 37,640  |         |  |       | 12,711 |  |  |   | 4,128 |  |  |   | (54,880 | )
|                               
|                               
|                               
|                               
|Long-lived assets               |  |         | 71,175   |        |  |         | 8,268   |         |  |       | 1,167  |  |  |   | 142   |  |  |   | 80,752  |  
|                               
|                               
|                               
|                               
|Fiscal Year Ended
June 30, 2000 |  |         |          |        |  |         |         |         |  |       |        |  |  |   |       |  |  |   |         |  
|                               
|                               
|                               
|                               
|Total revenues                  |  | $       | 332,212  |        |  | $       | 130,927 |         |  | $     | 26,391 |  |  | $ | 2,875 |  |  | $ | 492,405 |  
|                               
|                               
|                               
|                               
|Operating income (loss)         |  |         | (12,069  | )      |  |         | 36,754  |         |  |       | 11,746 |  |  |   | 1,966 |  |  |   | 38,397  |  
|                               
|                               
|                               
|                               
|Long-lived assets               |  |         | 63,444   |        |  |         | 7,014   |         |  |       | 1,211  |  |  |   |      |  |  |   | 71,669  |  
|                               
|                               
|                               
|                               
|Fiscal Year Ended
June 30, 1999 |  |         |          |        |  |         |         |         |  |       |        |  |  |   |       |  |  |   |         |  
|                               
|                               
|                               
|                               
|Total revenues                  |  | $       | 276,370  |        |  | $       | 126,032 |         |  | $     | 20,163 |  |  | $ | 2,320 |  |  | $ | 424,885 |  
|                               
|                               
|                               
|                               
|Operating income (loss)         |  |         | (29,251  | )      |  |         | 34,550  |         |  |       | 8,264  |  |  |   | 1,559 |  |  |   | 15,122  |  
|                               
|                               
|                               
|                               
|Long-lived assets               |  |         | 64,904   |        |  |         | 9,707   |         |  |       | 845    |  |  |   |      |  |  |   | 75,456  |  



---

|(1) |  | Certain segment data related to prior periods has been reclassified to
conform to the current year presentation.
|--- |  | ----------------------------------------------------------------------------------------------------------------

39



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The following table presents external revenues for groups of similar products
and services: (in thousands)

|                                       |                                |   |                     |         |      |   |         |         |  |   |         |         | 
|-------------------------------------- | ------------------------------ | - | ------------------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                       |                                |   | YEAR ENDED JUNE 30,
|                                       |                                |   |                    
|                                       |                                |   | 2001                |         | 2000 |   | 1999   
|                                       |                                |   |                     |         |      |   |        
|Software Licenses                      |                                |   |                     |         |      |   |         |         |  |   |         |        
|                                      
|                                      
|                                      
|                                      
|                                       | Technology Products            |   | $                   | 124,744 |      |   | $       | 121,512 |  |   | $       | 97,494  | 
|                                      
|                                      
|                                      
|                                      
|                                       | Financial Application Products |   |                     | 103,250 |      |   |         | 118,814 |  |   |         | 108,497 | 
|                                       |                                |   |                     |         |      |   |         |         |  |   |         |         | 
|Total
Software License Revenue         |                                |   | 227,994             |         |      |   | 240,326 |         |  |   | 205,991 |        
|                                      
|Maintenance and Services               |                                |   |                     |         |      |   |         |         |  |   |         |        
|                                      
|                                      
|                                      
|                                      
|                                       | Maintenance                    |   |                     | 165,839 |      |   |         | 154,452 |  |   |         | 125,167 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Consulting and training        |   |                     | 122,890 |      |   |         | 97,627  |  |   |         | 93,727  | 
|                                       |                                |   |                     |         |      |   |         |         |  |   |         |         | 
|Total Maintenance and Services Revenue |                                |   | 288,729             |         |      |   | 252,079 |         |  |   | 218,894 |        
|                                       |                                |   |                     |         |      |   |         |         |  |   |         |         | 
|Total Revenues                         |                                | $ | 516,723             |         |      | $ | 492,405 |         |  | $ | 424,885 |        
|                                       |                                |   |                     |         |      |   |         |         |  |   |         |         | 

13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a tabulation of the unaudited quarterly results of operations
for the two fiscal years ended June 30, 2001 (in thousands, except per share
data):

|                                  |  |          |         |         |  |          |         |         |  |   |         |   |  |   |         |  
|--------------------------------- |  | -------- | ------- | ------- |  | -------- | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|FISCAL 2001                       |  | SEPT. 30 |         | DEC. 31 |  | MARCH 31 |         | JUNE 30
|                                  |  |          |         |         |  |          |         |        
|Total revenues                    |  | $        | 115,054 |         |  | $        | 134,458 |         |  | $ | 130,227 |   |  | $ | 136,984 |  
|                                 
|                                 
|                                 
|                                 
|Gross profit                      |  |          | 75,567  |         |  |          | 94,395  |         |  |   | 85,941  |   |  |   | 94,652  |  
|                                 
|                                 
|                                 
|                                 
|Net income (loss)                 |  |          | (4,093  | )       |  |          | 2,270   |         |  |   | (1,321  | ) |  |   | (27,929 | )
|                                 
|                                 
|                                 
|                                 
|Diluted earnings (loss) per share |  |          | (0.12   | )       |  |          | 0.07    |         |  |   | (0.04   | ) |  |   | (0.87   | )

|                           |  |          |         |         |  |          |         |         |  |   |         |  |  |   |         | 
|-------------------------- |  | -------- | ------- | ------- |  | -------- | ------- | ------- |  | - | ------- |  |  | - | ------- | 
|FISCAL 2000                |  | SEPT. 30 |         | DEC. 31 |  | MARCH 31 |         | JUNE 30
|                           |  |          |         |         |  |          |         |        
|Total revenues             |  | $        | 107,250 |         |  | $        | 115,793 |         |  | $ | 125,798 |  |  | $ | 143,564 | 
|                          
|                          
|                          
|                          
|Gross profit               |  |          | 76,389  |         |  |          | 81,529  |         |  |   | 89,266  |  |  |   | 96,774  | 
|                          
|                          
|                          
|                          
|Net income (loss)          |  |          | 6,025   |         |  |          | 7,073   |         |  |   | 6,613   |  |  |   | 9,108   | 
|                          
|                          
|                          
|                          
|Diluted earnings per share |  |          | 0.19    |         |  |          | 0.22    |         |  |   | 0.19    |  |  |   | 0.27    | 

40



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##### Table of Contents






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

None.

PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item 10 with respect to executive officers is
set forth in Part I of this Form 10-K. The information required by this Item
10 with respect to directors is incorporated by this reference to the section
entitled Election of Directors in the Companys definitive Proxy Statement
for its 2001 Annual Meeting of Stockholders.




ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to
the sections entitled Director Compensation and Executive Compensation and
Related Information, in Hyperions Proxy Statement for its 2001 Annual Meeting
of Stockholders.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated herein by reference to
the section entitled Stock Ownership of Certain Beneficial Owners and
Management, in Hyperions Proxy Statement for its 2001 Annual Meeting of
Stockholders.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated herein by reference to
the section entitled Certain Relationships and Related Transactions, in
Hyperions Proxy Statement for its 2001 Annual Meeting of Shareholders.

PART IV




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



|(a) |  | The following documents are filed as part of this report:
|--- |  | ---------------------------------------------------------



| | (1) |  | The consolidated financial statements of Hyperion Solutions
Corporation are included in Item 8:                                                                                      
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Consolidated Balance Sheets as of June 30, 2001 and 2000                                                                                                                             
|
| |     |  | Consolidated Statements of Income for the years ended June 30, 2001, 2000
and 1999                                                                                                   
|
| |     |  | Consolidated Statements of Stockholders Equity and Comprehensive Income
for the years ended June 30, 2001, 2000 and 1999                                                            
|
| |     |  | Consolidated Statements of Cash Flows for the years ended June 30, 2001,
2000 and 1999                                                                                               
|
| |     |  | Notes to consolidated financial statements                                                                                                                                           
|
| | (2) |  | Financial statement schedule, which is included at the end of this
report:                                                                                                           
|
| |     |  | Schedule II  Valuation and Qualifying Accounts                                                                                                                                      
|
| |     |  | All other schedules have been omitted since they are not required, not
applicable or the information has been included in the consolidated
financial statements or the notes thereto.

41



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##### Table of Contents





| | (3) |  | Exhibits:
| | --- |  | ---------

|            |  |             |  |                                                                                                                                                                                   
|----------- |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description
|            |  |            
|2.1(a)      |  | -           |  | Agreement and Plan of Merger dated May 25, 1998, by and among Registrant, Merger Sub and Hyperion                                                                                 
|           
|           
|           
|           
|2.2(k)      |  | -           |  | Share Purchase Agreement, dated April 14, 1999, by and among the Registrant, HSC Acquisition
Co., and the shareholders of Sapling Corporation                                     
|           
|           
|           
|           
|3.1(h)      |  | -           |  | Registrants Restated Certificate of Incorporation                                                                                                                                
|           
|           
|           
|           
|3.2(g)      |  | -           |  | Registrants Amended and Restated Bylaws                                                                                                                                          
|           
|           
|           
|           
|4.1(b)      |  | -           |  | Specimen Certificate of the Registrants Common Stock                                                                                                                             
|           
|           
|           
|           
|4.2(d)      |  | -           |  | Indenture dated March 15, 1998, by and between Registrant and State Street Bank and Trust
Company of California, N.A.                                                             
|           
|           
|           
|           
|4.3(d)      |  | -           |  | Registration Rights Agreement dated March 15, 1998, by and between the Registrant and Morgan
Stanley & Co. Incorporated and BancAmerica Robertson Stephens                        
|           
|           
|           
|           
|10.2(b)     |  | -           |  | 1992 Stock Option Plan                                                                                                                                                            
|           
|           
|           
|           
|10.3(m)     |  | -           |  | 1995 Stock Option/Stock Issuance Plan                                                                                                                                             
|           
|           
|           
|           
|10.4(c)     |  | -           |  | Employee Stock Purchase Plan                                                                                                                                                      
|           
|           
|           
|           
|10.5(b)     |  | -           |  | Form of Indemnification Agreement                                                                                                                                                 
|           
|           
|           
|           
|10.6(c)     |  | -           |  | Real Property Lease between the Registrant and SBC&D & Company dated as of July 16, 1996                                                                                          
|           
|           
|           
|           
|10.7(e)     |  | -           |  | Hyperion Software Corporation 1991 Stock Plan                                                                                                                                     
|           
|           
|           
|           
|10.8(e)     |  | -           |  | Hyperion Software Corporation 1991 Non-Employee Director Stock Option Plan                                                                                                        
|           
|           
|           
|           
|10.9(f)     |  | -           |  | Loan Agreement with the Connecticut Development Authority, dated January 20, 1995,
regarding financing of an office facility (including related Promissory Note and Mortgage Deed)
|           
|           
|           
|           
|10.10(i)    |  | -           |  | Employment Agreement with Stephen V. Imbler, dated February 23, 1999                                                                                                              
|           
|           
|           
|           
|10.15(j)    |  | -           |  | Employment Agreement with Jeffrey R. Rodek, dated October 11, 1999                                                                                                                
|           
|           
|           
|           
|10.16(j)    |  | -           |  | Restricted Stock Award Agreement with Jeffrey R. Rodek, dated October 11, 1999                                                                                                    
|           
|           
|           
|           
|10.17(j)    |  | -           |  | Secured Promissory Note with Jeffrey R. Rodek, dated October 11, 1999                                                                                                             
|           
|           
|           
|           
|10.18(j)    |  | -           |  | Employment Offer Letter with Michael L. Sternad, dated October 11, 1999                                                                                                           
|           
|           
|           
|           
|10.19(l)    |  | -           |  | Hyperion Solutions Corporation 1999 Stock Option Plan                                                                                                                             
|           
|           
|           
|           
|10.20(l)    |  | -           |  | Security and
Pledge Agreement with Jeffrey R. Rodek, dated October 11, 1999                                                                                                       
|           
|           
|           
|           
|10.21       |  | -           |  | Employment
Agreement with David W. Odell, dated December 6, 2000                                                                                                                  
|           
|           
|           
|           
|10.22       |  | -           |  | Employment
Agreement with W. Russell Wayman, dated January 22, 2001                                                                                                               
|           
|           
|           
|           
|10.23       |  | -           |  | Employment
Agreement with Dyke Hensen, dated April 6, 2001                                                                                                                        
|           
|           
|           
|           
|21.1        |  | -           |  | List of subsidiaries of the Registrant (filed herewith)                                                                                                                           
|           
|           
|           
|           
|23.1        |  | -           |  | Consent of PricewaterhouseCoopers LLP, independent accountants (filed herewith)                                                                                                   



| | (a) |  | Previously filed as an Exhibit to the Registrants Current Report on
Form 8-K, dated May 25, 1998                                                                
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Incorporated by reference to such exhibit as filed in the
Registrants Registration Statement on Form S-1, filed November 6, 1995
(file no. 33-97098), as amended
|
| | (c) |  | Previously filed as an Exhibit to the Registrants Annual Report on
Form 10-K, filed June 28, 1997                                                               
|
| | (d) |  | Previously filed as an Exhibit to the Registrants Current Report on
Form 8-K, filed March 5, 1998                                                               
|
| |     |  | Incorporated by reference to the exhibits to a Hyperion Software
Corporation Registration Statement or Current Report (file no. 0-19538):                        



| |                                     
| | ------------------------------------
| | (e) Form S-1 file no. 33-42855      
|
| | (f) Form 10-Q filed in February 1995



| | (g) |  | Incorporated by reference to such exhibit as filed in the
Registrants Registration Statement on Form S-4 (file no. 333-57197), as
amended, filed on June 18, 1998
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (h) |  | Incorporated by reference to such exhibit as filed in the
Registrants Current Report on Form 8-K, dated August 24, 1998 and filed
on October 13, 1998            
|
| | (i) |  | Incorporated by reference to the exhibits to the Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999                                  
|
| | (j) |  | Incorporated by reference to the exhibits to the Registrants
Quarterly Report on Form 10-Q for the quarter ended December 31, 1999                               
|
| | (k) |  | Incorporated by reference to the exhibits to the Registrants Annual
Report on Form 10-K dated September 28, 1999.                                                
|
| | (l) |  | Incorporated by reference to
the exhibits to the Registrant's Annual Report on Form 10-K dated
September 28, 2000.                                                
|
| | (m) |  | Incorporated by reference to
the exhibits to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended December 31, 2000.                              



|(b) |  | Reports on Form 8-K:                                                                            
|--- |  | ------------------------------------------------------------------------------------------------
|   
|    |  | Hyperion did not file any reports on Form 8-K during the three-month period
ended June 30, 2001.

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

|                         |                                             |                                             
|------------------------ | ------------------------------------------- | --------------------------------------------
|Date: September 14, 2001 | Hyperion Solutions Corporation
(Registrant)
|                        
|                        
|                        
|                        
|                         |                                             |                                             
|                        
|                        
|                        
|                        
|                         | By:                                         | /s/ David W. Odell                          
|                         |                                             |                                             
|                         |                                             | David W. Odell
Chief Financial Officer      
|                        
|                        
|                        
|                        
|                         |                                             |                                             
|                        
|                        
|                        
|                        
|                         | By:                                         | /s/ Nolene P. Fabre                         
|                         |                                             |                                             
|                         |                                             | Nolene P. Fabre
Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

|                                         |  |                                      |  |                   
|---------------------------------------- |  | ------------------------------------ |  | ------------------
|SIGNATURE                                |  | TITLE                                |  | DATE              
|                                         |  |                                      |  |                   
|/s/ Jeffrey R. RodekJeffrey R. Rodek     |  | Chairman and Chief Executive Officer |  | September 14, 2001
|                                        
|/s/ Gary G. GreenfieldGary G. Greenfield |  | Director                             |  | September 14, 2001
|                                        
|/s/ Kenneth A. GoldmanKenneth A. Goldman |  | Director                             |  | September 14, 2001
|                                        
|/s/ Aldo PaponeAldo Papone               |  | Director                             |  | September 14, 2001
|                                        
|/s/ Henry R. AutryHenry R. Autry         |  | Director                             |  | September 14, 2001

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##### Table of Contents






ITEM 14(a)(2) AND ITEM 14(d). FINANCIAL STATEMENT SCHEDULE

HYPERION SOLUTIONS CORPORATION

SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

|                                 |                                                        |           |            |          |            |             |           |          |             |           |         |        |  |  |  |        |      |  |   |        | 
|-------------------------------- | ------------------------------------------------------ | --------- | ---------- | -------- | ---------- | ----------- | --------- | -------- | ----------- | --------- | ------- | ------ |  |  |  | ------ | ---- |  | - | ------ | 
|                                 |                                                        |           |            |          |            |             | Additions |          |             |           |         |        |  |  | 
|                                 |                                                        |           |            |          |            |             |           |          |             |           |         |        |  |  | 
|                                 |                                                        |           |            |          |            |             |           |          |             |           | Charged |        |  |  |  |        |      |  |  
|                                 |                                                        |           | Balance at |          | Charged to |             | to Other  |          | Deductions  |           | Balance
|                                 |                                                        |           | Beginning  |          | Costs and  |             | Accounts  |          | (Additions) |           | at End 
|Description                      |                                                        | of Period |            | Expenses |            | Describe(a) |           | Describe |             | of Period
|                                 |                                                        |           |            |          |            |             |           |          |             |          
|For the year ended June 30, 1999 |                                                        |           |            |          |            |             |           |          |             |           |         |        |  |  |  |        |      |  |   |       
|                                
|                                
|                                
|                                
|                                 | Allowance for doubtful accounts,
returns and discounts |           | $          | 8,892    |            |             |           | 1,582    |             |           |         | 6,800  |  |  |  | 5,474  | (b)  |  | $ | 11,800 | 
|                                
|                                
|                                
|                                
|                                 | Valuation allowance for deferred tax assets            |           | $          | 2,159    |            |             |           | 121      |             |           |         |        |  |  |  | (1,734 | )(c) |  | $ | 4,014  | 
|                                
|                                
|                                
|                                
|For the year ended June 30, 2000 |                                                        |           |            |          |            |             |           |          |             |           |         |        |  |  |  |        |      |  |   |       
|                                
|                                
|                                
|                                
|                                 | Allowance for doubtful accounts,
returns and discounts |           | $          | 11,800   |            |             |           | 1,460    |             |           |         | 6,856  |  |  |  | 3,866  | (b)  |  | $ | 16,250 | 
|                                
|                                
|                                
|                                
|                                 | Valuation allowance for deferred tax assets            |           | $          | 4,014    |            |             |           | 124      |             |           |         |        |  |  |  | 666    | (c)  |  | $ | 3,472  | 
|                                
|                                
|                                
|                                
|For the year ended June 30, 2001 |                                                        |           |            |          |            |             |           |          |             |           |         |        |  |  |  |        |      |  |   |       
|                                
|                                
|                                
|                                
|                                 | Allowance for doubtful accounts,
returns and discounts |           | $          | 16,250   |            |             |           | 5,950    |             |           |         | 21,727 |  |  |  | 31,451 | (b)  |  | $ | 12,476 | 
|                                
|                                
|                                
|                                
|                                 | Valuation allowance for deferred tax assets            |           | $          | 3,472    |            |             |           | 2,603    |             |           |         |        |  |  |  |        |      |  | $ | 6,075  | 
|                                
|                                
|                                
|                                
|                                 | Restructuring components                               |           | $          |         |            |             |           | 31,167   |             |           |         |        |  |  |  | 3,137  | (d)  |  | $ | 28,030 | 



|(a) |  | Charged to revenues                                 
|--- |  | ----------------------------------------------------
|   
|   
|   
|   
|(b) |  | Write-offs, returns and discounts, net of recoveries
|   
|   
|   
|   
|(c) |  | Recognition and adjustments                         
|   
|   
|   
|   
|(d) |  | Cash payments                                       

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##### Table of Contents






EXHIBIT INDEX

|            |  |             |  |                                                                                                                                                                                   
|----------- |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description
|            |  |            
|2.1(a)      |  | -           |  | Agreement and Plan of Merger dated May 25, 1998, by and among Registrant, Merger Sub and Hyperion                                                                                 
|           
|           
|           
|           
|2.2(k)      |  | -           |  | Share Purchase Agreement, dated April 14, 1999, by and among the Registrant, HSC Acquisition
Co., and the shareholders of Sapling Corporation                                     
|           
|           
|           
|           
|3.1(h)      |  | -           |  | Registrants Restated Certificate of Incorporation                                                                                                                                
|           
|           
|           
|           
|3.2(g)      |  | -           |  | Registrants Amended and Restated Bylaws                                                                                                                                          
|           
|           
|           
|           
|4.1(b)      |  | -           |  | Specimen Certificate of the Registrants Common Stock                                                                                                                             
|           
|           
|           
|           
|4.2(d)      |  | -           |  | Indenture dated March 15, 1998, by and between Registrant and State Street Bank and Trust
Company of California, N.A.                                                             
|           
|           
|           
|           
|4.3(d)      |  | -           |  | Registration Rights Agreement dated March 15, 1998, by and between the Registrant and Morgan
Stanley & Co. Incorporated and BancAmerica Robertson Stephens                        
|           
|           
|           
|           
|10.2(b)     |  | -           |  | 1992 Stock Option Plan                                                                                                                                                            
|           
|           
|           
|           
|10.3(m)     |  | -           |  | 1995 Stock Option/Stock Issuance Plan                                                                                                                                             
|           
|           
|           
|           
|10.4(c)     |  | -           |  | Employee Stock Purchase Plan                                                                                                                                                      
|           
|           
|           
|           
|10.5(b)     |  | -           |  | Form of Indemnification Agreement                                                                                                                                                 
|           
|           
|           
|           
|10.6(c)     |  | -           |  | Real Property Lease between the Registrant and SBC&D & Company dated as of July 16, 1996                                                                                          
|           
|           
|           
|           
|10.7(e)     |  | -           |  | Hyperion Software Corporation 1991 Stock Plan                                                                                                                                     
|           
|           
|           
|           
|10.8(e)     |  | -           |  | Hyperion Software Corporation 1991 Non-Employee Director Stock Option Plan                                                                                                        
|           
|           
|           
|           
|10.9(f)     |  | -           |  | Loan Agreement with the Connecticut Development Authority, dated January 20, 1995,
regarding financing of an office facility (including related Promissory Note and Mortgage Deed)
|           
|           
|           
|           
|10.10(i)    |  | -           |  | Employment Agreement with Stephen V. Imbler, dated February 23, 1999                                                                                                              
|           
|           
|           
|           
|10.15(j)    |  | -           |  | Employment Agreement with Jeffrey R. Rodek, dated October 11, 1999                                                                                                                
|           
|           
|           
|           
|10.16(j)    |  | -           |  | Restricted Stock Award Agreement with Jeffrey R. Rodek, dated October 11, 1999                                                                                                    
|           
|           
|           
|           
|10.17(j)    |  | -           |  | Secured Promissory Note with Jeffrey R. Rodek, dated October 11, 1999                                                                                                             
|           
|           
|           
|           
|10.18(j)    |  | -           |  | Employment Offer Letter with Michael L. Sternad, dated October 11, 1999                                                                                                           
|           
|           
|           
|           
|10.19(l)    |  | -           |  | Hyperion Solutions Corporation 1999 Stock Option Plan                                                                                                                             
|           
|           
|           
|           
|10.20(l)    |  | -           |  | Security and Pledge Agreement with Jeffrey R. Rodek, dated October 11, 1999                                                                                                       
|           
|           
|           
|           
|10.21       |  | -           |  | Employment
Agreement with David W. Odell, dated December 6, 2000                                                                                                                  
|           
|           
|           
|           
|10.22       |  | -           |  | Employment Agreement with W. Russell Wayman, dated January 22, 2001                                                                                                               
|           
|           
|           
|           
|10.23       |  | -           |  | Employment
Agreement with Dyke Hensen, dated April 6, 2001                                                                                                                        
|           
|           
|           
|           
|21.1        |  | -           |  | List of subsidiaries of the Registrant (filed herewith)                                                                                                                           
|           
|           
|           
|           
|23.1        |  | -           |  | Consent of PricewaterhouseCoopers LLP, independent accountants (filed herewith)                                                                                                   

45