Use these links to rapidly review the documentTABLE OF CONTENTS PART II

As filed with the Securities and Exchange Commission on October 1, 2004



UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 20-F

|o                                       | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|--------------------------------------- | ----------------------------------------------------------------------------------------------
|OR                                     
|ý                                       | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For the fiscal year ended June 30, 2004
|OR                                     
|o                                       | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934      

Commission file no. 000-30838

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INFOVISTA S.A.(Exact name of Registrant as specified in its charter)

|Not Applicable(Translation of Registrant's
name into English) |  | 6, rue de la Terre de Feu
91940 Les Ulis
France
(33-1) 64-86-79-00(Address of principal
executive offices) |  | Republic of France(Jurisdiction of incorporation
or organization)
|------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------

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

Securities
registered or to be registered pursuant to Section 12(g) of the Act:

Title of Class:

American
Depositary Shares, each representing one Ordinary Share, nominal value (euro) 0.54 per share

Ordinary
Shares, nominal value (euro) 0.54 per share*

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

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Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report:

Ordinary shares

18,950,920


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.

ý  Yes    o  No

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

o  Item
17    ý  Item 18



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TABLE OF CONTENTS



|        |  |                                                       |  |                                                                
|------- |  | ----------------------------------------------------- |  | ---------------------------------------------------------------
|PART I 
|ITEM 1. |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|ITEM 2. |  | OFFER STATISTICS AND EXPECTED TIMETABLE              
|ITEM 3. |  | KEY INFORMATION                                      
|        |  | 3.1                                                   |  | Selected Financial Data                                        
|        |  | 3.2                                                   |  | Exchange Rate Information                                      
|        |  | 3.3                                                   |  | Risk Factors                                                   
|ITEM 4. |  | INFORMATION ON THE COMPANY                           
|        |  | 4.1                                                   |  | General Information                                            
|        |  | 4.2                                                   |  | General information concerning the Share Capital of the Company
|        |  | 4.3                                                   |  | Business Overview                                              
|        |  | 4.4                                                   |  | Industry Background                                            
|        |  | 4.5                                                   |  | The InfoVista Solution                                         
|        |  | 4.6                                                   |  | Strategy                                                       
|        |  | 4.7                                                   |  | Products                                                       
|        |  | 4.8                                                   |  | Products in Development                                        
|        |  | 4.9                                                   |  | Services                                                       
|        |  | 4.10                                                  |  | Geographical Breakdown of Revenues and Operating Results       
|        |  | 4.11                                                  |  | End-Users                                                      
|        |  | 4.12                                                  |  | Sales and Marketing                                            
|        |  | 4.13                                                  |  | Strategic Relationships                                        
|        |  | 4.14                                                  |  | Competition                                                    
|        |  | 4.15                                                  |  | Intellectual Property                                          
|        |  | 4.16                                                  |  | Insurance                                                      
|        |  | 4.17                                                  |  | Communications                                                 
|        |  | 4.18                                                  |  | Personnel                                                      
|        |  | 4.19                                                  |  | Research and Development                                       
|        |  | 4.20                                                  |  | Facilities                                                     
|        |  | 4.21                                                  |  | Legal Proceedings                                              
|        |  | 4.22                                                  |  | Seasonality                                                    
|        |  | 4.23                                                  |  | Raw Materials                                                  
|        |  | 4.24                                                  |  | Material Effect of Government Regulations                      
|        |  | 4.25                                                  |  | Industrial and Environmental Risks                             
|ITEM 5. |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS         
|        |  | 5.1                                                   |  | Overview                                                       
|        |  | 5.2                                                   |  | Recent Developments                                            
|        |  | 5.3                                                   |  | Revenues                                                       
|        |  | 5.4                                                   |  | Cost of Revenues                                               
|        |  | 5.5                                                   |  | Operating Expenses                                             
|        |  | 5.6                                                   |  | Period-to-Period Variability                                   
|        |  | 5.7                                                   |  | Results of Operations                                          
|        |  | 5.8                                                   |  | Liquidity and Capital Resources                                
|        |  | 5.9                                                   |  | Critical Accounting Policies                                   
|        |  |                                                       |  |                                                                

1

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|         |  | 5.10                                              |  | Transition to International Financial Reporting Standards (IFRS)      
|-------- |  | ------------------------------------------------- |  | ----------------------------------------------------------------------
|         |  | 5.11                                              |  | Forward Looking Statements                                            
|         |  | 5.12                                              |  | Off-balance Sheet Commitments                                         
|ITEM 6.  |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES       
|         |  | 6.1                                               |  | Board of Directors                                                    
|         |  | 6.2                                               |  | Executive Officers                                                    
|         |  | 6.3                                               |  | Corporate Governance                                                  
|         |  | 6.4                                               |  | (reserved)                                                            
|         |  | 6.5                                               |  | Compensation of Directors and Executive Officers (Mandataires Sociaux)
|         |  | 6.6                                               |  | Options and Warrants to Subscribe/Purchase our Securities             
|         |  | 6.7                                               |  | Employees                                                             
|         |  | 6.8                                               |  | Share ownership                                                       
|ITEM 7.  |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|         |  | 7.1                                               |  | Major Shareholders as of September 10, 2004                           
|         |  | 7.2                                               |  | Significant Changes to Shareholdings Over the Last Three Fiscal Years 
|         |  | 7.3                                               |  | Related Party Transactions                                            
|ITEM 8.  |  | FINANCIAL INFORMATION                            
|         |  | 8.1                                               |  | Consolidated Statements and Other Financial Information               
|         |  | 8.2                                               |  | Legal Proceedings                                                     
|         |  | 8.3                                               |  | Dividend Policy                                                       
|         |  | 8.4                                               |  | Significant Changes                                                   
|ITEM 9.  |  | THE OFFER AND LISTING                            
|         |  | 9.1                                               |  | Markets                                                               
|         |  | 9.2                                               |  | Price History of the Stock                                            
|         |  | 9.3                                               |  | General                                                               
|         |  | 9.4                                               |  | The Nouveau Marché                                                    
|ITEM 10. |  | ADDITIONAL INFORMATION                           
|         |  | 10.1                                              |  | Memorandum and Articles of Association                                
|         |  | 10.2                                              |  | Shareholders' Meetings and Voting Rights                              
|         |  | 10.3                                              |  | Financial Statements and Other Communications with Shareholders       
|         |  | 10.4                                              |  | Dividends                                                             
|         |  | 10.5                                              |  | Changes in Share Capital                                              
|         |  | 10.6                                              |  | Preemptive Subscription Rights                                        
|         |  | 10.7                                              |  | Form, Holding and Transfer of Shares                                  
|         |  | 10.8                                              |  | Liquidation Rights                                                    
|         |  | 10.9                                              |  | Requirements for Holdings Exceeding Certain Percentages               
|         |  | 10.10                                             |  | Purchase of Our Own Shares                                            
|         |  | 10.11                                             |  | Trading in Our Own Shares                                             
|         |  | 10.12                                             |  | Ownership of Shares by Non-French Persons                             
|         |  | 10.13                                             |  | Material Contracts                                                    
|         |  | 10.14                                             |  | Exchange Controls                                                     
|         |  | 10.15                                             |  | Other                                                                 
|         |  | 10.16                                             |  | French Taxation                                                       
|         |  | 10.17                                             |  | Taxation of U.S. Investors                                            
|         |  |                                                   |  |                                                                       

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|          |  | 10.18                                                      |  | U.S. Information Reporting and Backup Withholding       
|--------- |  | ---------------------------------------------------------- |  | --------------------------------------------------------
|          |  | 10.19                                                      |  | Where You Can Find More Information                     
|ITEM 11.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|          |  | 11.1                                                       |  | General                                                 
|          |  | 11.2                                                       |  | Currencies                                              
|          |  | 11.3                                                       |  | Interest Rates                                          
|          |  | 11.4                                                       |  | Shares                                                  
|          |  | 11.5                                                       |  | Liquidity Situation                                     
|          |  | 11.6                                                       |  | Financial Instruments                                   
|ITEM 12.  |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES    
|PART II  
|ITEM 13.  |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES           
|ITEM 14.  |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS  
|          |  | 14.1                                                       |  | Material Modifications to the Rights of Security Holders
|PART III 
|ITEM 15.  |  | CONTROLS AND PROCEDURES                                   
|ITEM 16.  |  | RESERVED                                                  
|ITEM 16A. |  | AUDIT COMMITTEE FINANCIAL EXPERT                          
|ITEM 16B. |  | CODE OF ETHICS                                            
|ITEM 16C. |  | PRINCIPAL ACCOUNTANT FEES AND SERVICES                    
|ITEM 16D. |  | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|ITEM 17.  |  | FINANCIAL STATEMENTS                                      
|ITEM 18.  |  | FINANCIAL STATEMENTS                                      
|          |  | INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS            
|ITEM 19.  |  | EXHIBITS                                                  

3

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PART I

ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

ITEM 3.    KEY INFORMATION

3.1    SELECTED FINANCIAL DATA

You should read the following selected consolidated financial data together with the section entitled "Operating and Financial Review and Prospects" and our
consolidated financial statements.

The
table below sets forth selected consolidated financial data as of and for each of the five years ended June 30, 2004, 2003, 2002, 2001 and 2000. The data as of and for the
years ended June 30, 2004, 2003, 2002, 2001 and 2000 are derived from our consolidated financial statements, which have been audited by our independent accountants, PricewaterhouseCoopers. The
audited consolidated financial statements for the years ended June 30, 2004, 2003 and 2002 appear elsewhere in this report.

All
financial data set forth in the following tables are derived from financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). For your
convenience, we have also presented United States of America ("U.S.") dollar amounts, calculated at the rate of U.S. $1.00 = €0.8142 (€1.00 = U.S.
$1.2282), which was the noon buying rate on September 10, 2004.

4

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|                                                                                                             |                                                                                                                                    | Year ended June 30 |           
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ----------
|
|
|
|Consolidated Statement of Income and Comprehensive Income Data:                                              |                                                                                                                                    |                    |           
|Revenues                                                                                                     |                                                                                                                                    |                    |           
|                                                                                                             | License revenues                                                                                                                   |                    | 19,745    
|                                                                                                             | Service revenues                                                                                                                   |                    | 15,489    
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             |                                                                                                                                    | Total revenues     |           
|Cost of revenues(exclusive of non-cash compensation expense of $0, €0, €5, €83, €146, and €215 respectively) |                                                                                                                                    |                    |           
|                                                                                                             | Cost of licenses                                                                                                                   |                    | 836       
|                                                                                                             | Cost of services                                                                                                                   |                    | 7,028     
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             | Total cost of revenues                                                                                                             |                    | 7,864     
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             |                                                                                                                                    | Gross profit       |           
|Operating expenses:                                                                                          |                                                                                                                                    |                    |           
|                                                                                                             | Selling and marketing expenses (exclusive of non-cash compensation expense of $54, €44, €24, €129, €309, and €361 respectively)    |                    | 18,180    
|                                                                                                             | Research and development expenses (exclusive of non-cash compensation expense of $0, €0, €6, €51, €155, and €231 respectively)     |                    | 7,469     
|                                                                                                             | General and administrative expenses (exclusive of non-cash compensation expense of $0, €0, €3, €54, €1,619, and €600 respectively) |                    | 5,338     
|                                                                                                             | Stock compensation expense                                                                                                         |                    | 54        
|                                                                                                             | Restructuring costs and consulting fee                                                                                             |                    | 3,064     
|                                                                                                             | Write-off of goodwill                                                                                                              |                    |          
|                                                                                                             | Amortization of goodwill and purchased intangibles assets                                                                          |                    | 467       
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             | Total operating expenses                                                                                                           |                    | 34,571    
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             |                                                                                                                                    | Operating loss     |           
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             | Other income                                                                                                                       |                    | (106      
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             | Loss before income taxes and minority interest                                                                                     |                    | (7,308    
|                                                                                                             | Income tax (expense) benefit                                                                                                       |                    | (312      
|                                                                                                             | Minority interest                                                                                                                  |                    |          
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             |                                                                                                                                    | Net loss           |           
|                                                                                                             | Other comprehensive (loss) gain, net of tax:                                                                                       |                    |           
|                                                                                                             | Foreign currency translation adjustments                                                                                           |                    | (120      
|                                                                                                             | Unrealized losses on available for sales securities                                                                                |                    | 66        
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             |                                                                                                                                    | Comprehensive loss |           
|                                                                                                             |                                                                                                                                    |                    |           
|                                                                                                             | Basic and diluted loss per share                                                                                                   |                    | (0.43     
|                                                                                                             | Basic and diluted weighted average shares outstanding                                                                              |                    | 17,778,929
|Other Financial Data:                                                                                        |                                                                                                                                    |                    |           
|                                                                                                             | Purchase of fixed assets                                                                                                           |                    | (598      
|                                                                                                             | Net cash used by operating activities                                                                                              |                    | (7,944    
|                                                                                                             | Depreciation and amortization                                                                                                      |                    | 2,031     

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|                                                          |  | As of June 30,
|--------------------------------------------------------- |  | --------------
|
|
|
|Consolidated Balance Sheet Data:                          |  |               
|Cash and cash equivalents                                 |  | 32,881        
|Working capital (current assets less current liabilities) |  | 38,020        
|Fixed assets, net                                         |  | 3,008         
|Total assets                                              |  | 60,001        
|Total current liabilities                                 |  | 15,335        
|Total non-current liabilities                             |  | 139           
|Shareholders' equity                                      |  | 44,527        
|Capital stock(1)                                          |  | 116,931       

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3.2    EXCHANGE RATE INFORMATION

In this report, all references to the "euro" or "€" are to the lawful currency of the French Republic and certain other member states of the
European Union ("E.U.") participating in the European Monetary Union. Beginning January 1, 2002, the participating member states have issued new euro-denominated bills and coins for
use in cash transactions. On February 17, 2002, France withdrew the bills and coins denominated in local currency from circulation, and these bills and coins are no longer legal currency for
any transaction. All references to the "U.S. dollar" or "$" are to the lawful currency of the U.S. and all references to the "French franc" are to the former lawful currency of the French Republic.

For
your convenience, this report contains translations of certain euro amounts into U.S. dollars. Unless otherwise indicated, dollar amounts have been translated from euros at the rate
of $1.00 = €0.8142, the noon buying rate in euros on September 10, 2004. The noon buying rate is the exchange rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank. This does not mean that we actually converted these amounts into U.S. dollars at that rate and you should not assume that they
could have been converted at that or any other rate.

On
March 10, 2000, we changed our share capital to euro. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar price of our American
Depository Shares, ("ADSs") on the Nasdaq National Market ("Nasdaq").

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In
order that you may ascertain how the trends in our financial results might have appeared had they been expressed in U.S. dollars, the following table shows the euro/U.S. dollar
exchange rate based on the noon buying rate expressed in euros per $1.00.

Period
end rate

Average rate(1)

High

Loweuro/U.S. dollarSeptember 2004 (through September 10, 2004)

1.22

1.21

1.22

1.20August 2004

1.21

1.22

1.24

1.20July 2004

1.22

1.23

1.24

1.20Year ended June 30,euro/U.S. dollar2004

1.22

1.19

1.29

1.082003

1.14

1.05

1.19

0.962002

1.00

1.12

1.19

1.002001

1.18

1.12

1.21

1.052000

1.05

1.01

1.12

0.92


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3.3    RISK FACTORS

You should carefully consider the following factors and the other information in this report before deciding to invest in our shares.

3.3.1    Risks Related to our Business

Our limited operating history makes it difficult for investors to predict how our business and our future operating results will develop

We began our current activities in 1995. From that time, we have been developing the technology that forms the basis of our products. We began generating sales
from early versions of our base product, the InfoVista Engine (now InfoVista Production/Workshop), in May 1997.

Accordingly,
we have a limited operating history as a developer and provider of service level management ("SLM") products upon which an evaluation of our business and prospects can be
based. We face many of the risks and uncertainties encountered by emerging companies in rapidly evolving markets, particularly companies in the competitive software industry. In addition, because of
our limited operating history, we have limited experience and insight into trends that may emerge and affect our business.

We have incurred losses, we may continue to incur losses and we cannot guarantee that we will achieve profitability

Since we began our current activities in 1995, we have experienced operating losses in each quarter. We had net losses of €6.2 million,
€11.5 million, and €11.9 million for the years ended June 30, 2004, 2003 and 2002, respectively. As of June 30, 2004, cumulative losses
amounted to €52.3 million.

Our
current business plan targets profitability in fiscal year 2006, although we may experience one or more profitable quarters during fiscal year 2005. We cannot guarantee that we shall
attain this target of profitability and if we do achieve it, we may not be able to sustain or increase profitability in the future. In particular, our ability to attain this target would be harmed if
the current economic downturn deepens or in certain acquisition scenarios, as discussed in the risk factor "Our inability to acquire and integrate other businesses, products or
technologies could seriously harm our competitive position". We expect our operating expenses to moderately increase; therefore, to achieve and maintain profitability, we shall
have to increase

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revenues.
We cannot assure you that our revenues will increase in the future. If we do not increase revenues, we could experience increased losses and our operating results could be seriously harmed.
We are also subject to legal limitations on our use of net operating loss carry forwards for tax purposes.

We expect that our quarterly operating results will fluctuate and this could cause our stock price to fluctuate or decline

Our quarterly operating results have varied significantly in the past and will likely vary significantly in the future. As a result, we believe that
period-to-period comparisons of our operating results are not meaningful and should not be relied upon as indicators of our future performance.

If
our quarterly revenues and operating results fail to meet or exceed the expectations of securities analysts and investors, the market price of our common stock could fall
substantially. Operating results vary depending on a number of factors, many of which are outside our control, including:



Our
business has experienced and may continue to experience significant seasonality. Sales of our products and services in Europe and certain other parts of the world are typically
adversely affected in
the quarter ending September 30, as many clients reduce their business activities during the summer months. In addition, the typical timing of budget and investment spending at our clients for
the quarter ending March 31 has historically experienced an adverse seasonal effect. We believe that these trends are likely to continue to result in significant seasonal fluctuations in our
quarterly results.

As
we tend to focus on larger business accounts, the average size of individual client orders is significant compared to our revenues. As a result, a delay in receiving an order, even
from a single account, could have a significant negative impact on our quarterly operating results. Finally, because of the structure of our sales incentives and our clients' budgeting procedures, we
typically realize a significant portion of software license revenues in the last month of a quarter, frequently in the last weeks or even days of the quarter. Software license revenues in any quarter
are difficult to forecast because they are substantially dependent on orders booked and shipped in that quarter. A delay in an anticipated sale past the end of a particular quarter could therefore
negatively impact our operating results for that quarter.

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Because we rely on the InfoVista product line and related services for the majority of our revenues today, our failure to commercialize them
successfully or to offer other products could weaken our competitive position and adversely affect our results of operations

We currently derive the majority of our revenues from licensing fees and services related to our InfoVista product family, which includes the VistaFoundation,
four pre-packaged solutions and related optional add-on products. As we acquire companies or businesses, we shall have additional products in our range. We expect that revenues
from our product line and related services will continue to account for a substantial part of our revenues for the foreseeable future.

Any
factor adversely affecting sales or pricing levels of these products could have a material adverse effect on our business, results of operations and financial condition. In addition,
we cannot assure you that market acceptance of our products will increase or even remain at current levels. Factors that may affect the market acceptance of our products include the availability and
price of competing products and technologies and the success of our sales efforts and those of our marketing partners. Our future performance will also depend in part on the successful development,
introduction and market acceptance of new and enhanced products. We cannot assure you that any such new or enhanced products will be successfully developed, introduced and marketed, and failure to do
so would have a material adverse effect on our business, results of operations and financial condition. Furthermore, in order to be successful in this emerging market, we must be able to differentiate
ourselves from our competitors through our products and service offerings and brand name recognition. We may not be successful in differentiating ourselves or achieving widespread market acceptance of
our software and services. In addition, organizations that have already invested substantial resources in other methods of managing their computer hardware and software systems may be reluctant or
slow to adopt a new approach that may replace, limit or compete with their existing management systems. Broad market acceptance of these products is, therefore, critical to our future success.

Our markets are highly competitive and we may not be able to compete effectively

Our software is designed for use in the rapidly evolving and highly competitive Service Level Management ("SLM") market, where competition is intense. Our failure
to maintain and enhance our competitive position could seriously harm our ability to license our products and sell our services and, therefore, our operating results. Our primary source of competition
comes from suppliers of comparable products. For sources of actual or potential competition please see "Item 4.14. Competition".

Moreover,
we anticipate that our competitors will introduce additional competitive products, particularly if demand for network management software products increases, which may reduce
future market acceptance of our products. In addition, new competitors could enter the SLM market and offer alternative products, which may impact the market acceptance of our products. This could
result in price reductions, reduced gross margins and loss of market share. Some of our competitors have longer operating histories and significantly greater financial, technical and marketing
resources than we have. Many of these companies also have more extensive client bases and broader client relationships than we have, including relationships with many of our current and potential
clients. Moreover, some of these companies have more established customer support and professional services organizations than we have. We cannot assure you that we will be able to compete effectively
against our current and future competitors.

Our failure to attract new clients and gain new opportunities within different divisions of existing clients could cause our revenues to decline

We need to attract new clients and gain new opportunities within new divisions of existing clients or our revenues could decline. We intend to continue to develop
our market share with our core telecommunications and service provider clients and to use the expertise that we have developed with these clients to

9

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develop
additional market share with other Information Technology ("IT")-intensive organizations. In addition, we need to leverage our existing client base to seek opportunities within new divisions
of large telecommunication and service provider clients.

Our
ability to attract new clients depends on a variety of factors, including the reliability, security, flexibility, scalability, price and cost-effectiveness of our
software and services as well as our ability to market our software and services effectively. In the enterprise market, competition is even more intense. Our ability to attract new enterprise clients
shall largely depend on our ability to release cost effective solutions that contain "plug and play" features along with solutions that address performance management reporting on the application
level.

Our failure to obtain additional large clients or significant opportunities within existing large clients could cause our revenues to decline

For the years ended June 30, 2004, 2003 and 2002, our five largest clients accounted for approximately 26.8%, 22.9% and 26.3%, respectively, of our total
revenues and our ten largest clients accounted for approximately 40.5%, 34.8% and 38.1%, respectively, of our total revenues. We anticipate that revenues
from large contracts with a small number of clients will continue to be an important part of our operating results in any given period.

We
expect that the composition of that small group of clients will continue to change over time so that the achievement of our long-term revenue goals will require us to
obtain additional large clients or additional significant opportunities within existing large clients on an ongoing basis. Our failure to enter into a sufficient number of large contracts during a
particular period could harm our operating results.

Because our revenues depend on service providers, including telecommunications companies, adverse trends in these clients' markets could have a material
adverse effect on our results of operations

For the year ended June 30, 2004, we generated approximately 66.0% of our total revenue from end-users in the service provider industry, which
includes telecommunications companies, Internet Service Providers ("ISPs"), Application Service Providers ("ASPs") Management Service Providers ("MSP") and other outsourcers of IT services. A
significant portion of our revenues is expected to continue to be attributable to sales of products to service provider clients. Our future performance depends significantly upon the service provider
market. In particular, if the willingness of the service provider sector to use our solutions for internal purposes or to incorporate our solutions into their product or service offerings decreased,
our business would be harmed.

Accordingly,
if the economic downturn continues to affect this market into the foreseeable future, it could have harmful effects on our business, operating results and financial
condition. It could also affect our ability to collect payments due from clients. The actual or potential insolvency of any of our service provider clients could cause us to recognize provisions for
doubtful accounts or defer additional revenues on new sales. Any of these events could have a material adverse effect on our business, operating results and financial condition.

Our software requires the use of third-party software and our business could be seriously harmed if we fail to obtain or embed it effectively in our
software

We license third-party software and embed it into our products. In particular, we license software from eXcelon Corporation (formerly, Object Design, Inc.)
that is integrated with internally developed software and used in our products to perform key functions. On August 23, 2000, we entered into a contract with eXcelon Corporation to renew our
license, which will expire December 31, 2007. Although we have negotiated licenses on commercially reasonable terms for third-party software, we cannot guarantee that such third-party software
licenses will continue to be available to us on commercially reasonable terms, if at all.

10

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If
we are unable to maintain the third-party software licenses, we could face delays or reductions in our product shipments until equivalent software is developed internally or is
identified, licensed from third parties and integrated with our software. Any such delays or reductions would have a material adverse effect on our business, operating results and financial condition.
In addition, the inability of these third parties to enhance their products in a timely and cost-effective manner in response to changing client needs, industry standards or technological
developments could adversely affect our business. Any of these events could result in shipment delays or reductions in the sale of our software and could require us to redesign our products.
Furthermore, we might be forced to limit the features available in our current or future software products. Either alternative could seriously harm our business, operating results and financial
conditions.

The inability of our products to operate with the products used by our present and potential clients could harm our revenues

Our products are designed to operate on a variety of hardware and software platforms employed by our clients in their networks. We must continually modify and
enhance our products to keep pace with changes in hardware and software platforms and database technology.

As
a result, uncertainties related to the timing and nature of new product announcements, introductions or modifications by hardware and software vendors could materially adversely
impact our business, operating results or financial condition. The inability of our products to operate with the hardware and software platforms used by our present and potential clients could harm
our revenue, business, operating results or financial condition.

Defects in our products could harm our reputation and expose us to potential liability

Software products such as ours often contain errors or defects when first introduced or when new versions or enhancements are released. If errors or defects are
discovered in our current or future products, we may not be able to correct them in a timely manner, or at all. We believe that we maintain adequate worldwide product liability insurance. However, any
insurance would only offset financial consequences borne by third parties and not the cost of correcting significant errors or defects. We may therefore need to expend significant capital resources in
order to eliminate or work around errors and defects.

Errors
and defects in our products may result in the loss of, or a delay in, market acceptance of our products, the diversion of development resources, damage to our reputation and
increased service and warranty costs. Many of our clients use our products to monitor and manage business-critical applications. Because of this, errors, defects or other performance problems in our
software could result in significant financial or other damage to our clients. As a result, our clients could pursue claims against us. A product liability claim brought against us, even if not
successful, would be likely to be time consuming and costly to defend and could adversely affect our marketing efforts.

Our failure to adapt to rapid changes in technology or to develop and introduce new products or enhancements to existing products could seriously reduce
the demand for our products

The market in which we compete is characterized by rapid changes in customer needs, technology and competing products. Existing products become obsolete and
unmarketable when products using new technologies are introduced and new industry standards emerge. For example, our products are designed mainly to use the industry-standard Simple Network Management
Protocol ("SNMP") and to interact with and report on industry-standard operating systems. New technologies could change the way products like ours are sold or delivered. As a result, the life cycles
of our products may be very short.

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Our
products are complex and technical, and new products and product enhancements may require long development periods. We may not be able to develop new products or enhance or modify
our existing products or may experience delays in new product releases in the future.

We
will need to develop and introduce new products and make enhancements to our existing products. We consider that it is essential that we manage to develop new technologies, or to
develop and deploy
new product releases or enhanced products on a timely basis, in order to maintain our level of revenues as well as our market perception.

Our products have a long and variable sales cycle making it difficult to determine if and when a sale will occur

Our products have a long and variable sales cycle, which is typically between four and nine months in duration. The reasons for the long sales cycle include the
following:



As
a result of the long and unpredictable sales cycle, we face difficulty in completing sales, which can cause us to incur costs and mobilize resources with no resulting revenue, and
which, in addition, can cause our quarterly operating results to vary widely.

Our failure to adequately protect our intellectual property could harm our competitive market position

Our success depends upon our proprietary technology. We rely on a combination of patent, trademark, copyright and trade secret law and contractual restrictions to
protect the proprietary aspects of our technology. These legal protections afford only limited protection. Our failure to protect our technology adequately may lead to the development of similar
technology by third parties and reduce our software license revenues. We have three French patents issued. One of these patents is for a performance measurement and service quality monitoring system
and process for an information system. The second is for a modeling process for an information system, in particular with a view to monitoring the
quality-of-service and a measurement and modeling system implementing this process. These two French patents expire on January 29, 2017. Both of the patents have
received extensions in the U.S., with two U.S. patents issued which expire on January 29, 2018, and we also have extensions pending in Europe. The third patent is for an indirect addressing
method and system for locating a target element in a communication network. This French patent expires on December 7, 2021, and we also have extensions pending in Europe and in the U.S. We have
registered the trademark "InfoVista" in a number of countries, including Europe (as a Community Trademark) and the U.S., and have trademark applications pending in a number of other jurisdictions.

Litigation
may be necessary to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Any litigation could result in
substantial costs to us and the diversion of resources and could seriously harm our operating results. We may not prevail in any such litigation and our intellectual property rights may be found
invalid or unenforceable. If we do not receive a particular patent, our competitors will not be restricted from developing and operating independently technology that is similar to any of our
unpatented technology. If we do not receive a trademark registration, we can still use that trademark, but our rights may be weaker than if it were registered. In addition, we have acquired some of
the technology underlying our software internationally, and we sell our

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software
internationally, and the laws of many countries do not protect our proprietary rights to the same extent as the laws of the U.S. and Europe.

Claims that our products infringe the proprietary rights of others could harm our sales and increase our costs

Other companies or individuals, including our competitors, may have or obtain patents or other proprietary rights that could prevent, limit or interfere with our
ability to make, use or sell our software. Furthermore, companies in the software market are increasingly bringing suits alleging infringement of their proprietary rights by others, particularly
patent rights. As a result, we may be held by a court to have infringed on the proprietary rights of others. We have received, and may in the future receive, communications alleging possible
infringement by us of patents and other intellectual property rights of others.

We
could incur substantial costs to defend any litigation brought against us, regardless of its merits, and our failure to prevail in intellectual property litigation could force us to
do one or more of the following:



Our inability to maintain and establish new relationships with strategic partners and other indirect sales relationships could cause our revenues to
decline

Our sales strategy requires that we establish and develop long-term relationships through indirect sales channels. Our indirect sales channels include
systems integrators who offer IT integration and project management services to their customers and provide our products as a part of a broader solution; original equipment manufacturers ("OEMs"), who
incorporate our products into their own products; and technology consultants who are typically providing wide ranging consulting services to their clients and refer those clients either directly to us
or to one of our systems integrators for the supply of products and/or services. We have also developed strategic joint product development and marketing relationships which include developing
compatible products, cross training personnel and implementing joint marketing. We intend to continue to develop new relationships with indirect resellers and strategic marketing partners. Our success
will depend in large part on our ability to develop and maintain these additional relationships and on the performance and success of these third parties. We may not be able to further develop and
fully benefit from our existing relationships. In addition, we have established these relationships recently, and we cannot predict the extent to which our indirect channels will be successful in
marketing our products or the degree to which we will be able to develop compatible products or successful joint market programs.

If
we are unable to establish and/or maintain these new relationships, our future sales volume may decline. Our current agreements with our strategic marketing partners and indirect
channels do not prevent them from selling products of other companies, including products that may compete with our products. These strategic marketing partners and indirect channels could give higher
priority to another company's software or to their own products than they give to ours. In addition, we generally sell our products to our indirect channels at a higher discount than direct sales. As
a result, an increase in sales through indirect channels would reduce our net revenues.

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Our inability to hire and retain research and development engineers, sales persons and qualified service personnel would limit our revenue growth

We believe that research and development is at the core of our business. We need engineers to develop the programs that address our customers' needs. Our
engineers must not only develop new products, but also upgrade existing products and solve any problems that may arise with our software. There is intense competition for qualified personnel in the
software industry and there are relatively few people with the highly specialized technical training and experience that we require. Our inability to hire engineers may delay the development, launch
and update of our products. These types of delays could harm our reputation and revenues.

To
date, we rely upon our sales force for a significant portion of our revenues. Competition for qualified sales personnel is intense, and we may not be able to hire as many qualified
individuals as we may require in the future. In addition, we may not be successful in managing an expanded sales force or in increasing its productivity. Because sales personnel need to be experienced
in our market, it may require extensive training and it may take six months or longer to achieve full productivity. It is important that we retain experienced sales people in order to maintain the
quality of service and volume of sales. These factors may have an adverse effect on our ability to manage and optimize our sales force in order to increase sales.

We
believe that growth in our product license revenues depends in part on our ability to provide clients with the required professional services and to educate third-party resellers on
how to provide similar services. However, competition for such personnel is also very intense, and if we are unable to attract, train or retain high caliber staff that our business needs, our
reputation, customer satisfaction and revenues could be harmed.

Our inability to hire and retain key personnel would slow our growth

Our business is dependent on our ability to hire, retain and motivate highly qualified senior management and other key personnel. Our performance is substantially
dependent on the performance of key technical and senior management personnel. We do not maintain key life insurance policies on any of our employees. Qualified individuals are in high demand and we
may not be able to attract the personnel we need. The loss of the services of any member of our senior management or our inability to attract qualified additional personnel could harm our business.

We will be increasingly susceptible to risks associated with our international operations, which could harm our operating results

Our international expansion will subject us to a variety of risks, including:



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Any
of these factors could harm our operating results. In addition, it is possible that the relevant tax authorities may review our prior and future intra-group arrangements, which may
adversely impact the tax treatment of our income for those periods. In the future, our international revenues may be increasingly denominated in local currencies. Because we do not have a hedging
program, we are vulnerable to adverse fluctuations in foreign currency, which may reduce revenues from outside the euro zone.

Our business may be harmed by incidents and consequences of acts of domestic and international terrorism, war and revolutions

Certain incidents and acts of terrorism, war and revolutions could have a material adverse effect on our business, operating results and financial condition. For
example, the unstable political environment that preceded the war between the U.S. and Iraq in February 2003 had a negative impact on us. Capital investment decisions of certain clients were
frozen temporarily during that period.

Any
future similar events or domestic or international conflict, terrorism, war or revolution may have further adverse consequences for our business.

Our inability to acquire and integrate other businesses, products or technologies could seriously harm our competitive position

In order to remain competitive, we may acquire additional businesses, products or technologies. We are pursuing and will continue to pursue potential acquisition
projects in upcoming months. Regarding such acquisition candidates, we may not be successful in negotiating the terms of an acquisition, financing an acquisition or effectively integrating an acquired
business, product or technology into our existing business and operations. Further, completing a potential acquisition and integrating an acquired business will divert a significant portion of
management's time and resources.

If
we consummate any significant acquisitions using stock or other securities as consideration, shareholder equity in us could be significantly diluted. If we make any significant
acquisitions using cash consideration, we may be required to use a substantial portion of our available cash. In addition, we may be required to amortize and/or write-off significant
amounts of goodwill and other intangible assets in connection with future acquisitions, which could seriously harm our financial results. If we acquire a loss-making company, the
acquisition may increase our losses and will affect our profitability targets and our operating results. If we perform due-diligence procedures for potential acquisitions that are not
consummated, the external advisors costs incurred will increase our general and administrative expenses and affect our profitability target and operating results.

In the future, we may not be able to secure financing necessary to operate our business as planned

We believe our current cash balances and cash provided by future operations should be sufficient to meet our anticipated cash needs for working capital and
capital expenditure requirements for at least the next 18 months, excluding any exceptional costs such as acquisitions. Our business and operations may consume resources faster than we
anticipate. In the future, we may need to raise additional funds for these purposes. Additional financing may not be available on favorable terms, if at all.

If
adequate funds are not available on acceptable terms, we may be unable to fund our operating activities or take advantage of acquisition or other opportunities, which could seriously
harm our business and operating results. If we issue debt, the debt holders would have rights senior to shareholders to make claims on our assets and the terms of any debt could restrict our
operations, including our ability to pay

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dividends
on our common stock. Furthermore, if we issue additional equity securities, shareholders may experience dilution.

We are incurring compensation and other costs relating to our stock option plans and warrants, which adversely affects our margins and our results of
operations and may increase our tax liability

We have granted stock options to our employees on various occasions. Under U.S. GAAP, some of these grants, issues or sales are treated as additional employee
compensation, which we reflect as stock compensation in our financial statements. We recognized approximately €0.4 million in stock compensation expense for years ended
June 30, 2004, 2003 and 2002. We do not expect significant costs associated with these plans for the fiscal year 2005. During the past year, the U.S. GAAP accounting regulatory bodies have
discussed proposed modifications to the current accounting rules on stock compensation. Any such modifications could adversely affect our results of operations and financial condition.

In
addition, French fiscal law allows for a favorable tax regime for stock options provided that, among other considerations, the shares resulting from the exercise of stock options, by
employees who were resident in France at the date of grant, are not sold for a period of either four or five years (depending upon the deemed date of grant) from the date of grant of the stock
options. If any of our employees who were French residents at the date of grant of the stock options, exercises the stock options and sells the resulting shares before the end of the relevant four or
five year holding period, we could be required to pay French social charges on those amounts. If the resulting shares are sold or transferred prior to the expiration of the applicable holding period,
a less favorable tax regime applies to the employee. For this reason, we do not consider the premature sale of such shares very probable and accordingly we have not made a provision in our financial
statements for this potential risk. In the event that such employees exercised their stock options and sold the resulting shares prior to the expiration of the four or five year holding period, we
would have to pay social charges in an amount equivalent to approximately 45% of the difference between the market price at the date of the exercise and the exercise price.

During
the year ended June 30, 2002, we carried out a stock option cancellation and re-grant scheme in such a way that it did not generate stock compensation charges.
We do not currently anticipate effecting a new stock option cancellation and re-grant scheme in such a way that it would generate significant stock compensation charges to our future
operating results, however, we cannot exclude that possibility in the future, nor can we exclude the possibility that the accounting rules may be changed retroactively such that we may be obliged to
record stock compensation arising from a stock option re-pricing. If the exercise price of the re-granted stock options under a stock option re-pricing scheme is
lower than the exercise price of the cancelled stock options, it is more likely that the stock option holders will exercise their stock options and thus dilute shareholders' equity in us.

3.3.2    Risks Related to our Industry

If the SLM market or the Performance Management segment in particular, declines or fails to grow, demand for our products will be reduced

We derive all of our revenues from the sale of products and services designed to allow our clients to monitor, analyze and report on the performance, availability
and quality-of-service of IT infrastructure, including networks, servers and applications. Our products are a part of the software market segment known as SLM. The market for
SLM and performance reporting solutions is relatively immature; rapidly evolving and will likely consist of an increasing number of competitors.

If
that market fails to develop, or develops more slowly than expected, our business and operating results could be seriously harmed.

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Because we are subject to general economic and market conditions, any economic downturn could have a material adverse effect on our business, results of
operations and financial condition

Segments of the software, technology and telecommunications industry have experienced significant economic downturns in the past, characterized by decreased
product demand, price erosion, work slowdowns and layoffs. We have targeted certain markets including telecommunications carriers, ISPs, outsourcers and integrators. The current economic downturn has
affected the technology sector and the telecommunications market in particular, which has led to a decrease of or delay in such companies' overall investments in IT infrastructure on both hardware and
software.

General
economic and market conditions may affect the timing of the receipt of orders from major clients and capital spending of our clients. As a result, our business, operating results
and financial conditions may be adversely affected.

3.3.3    Other Risks

The price of our shares and ADSs is highly volatile and could decline significantly

The price of our shares and ADSs has been highly volatile since our listing on theNouveau Marchéof Euronext Paris and Nasdaq on July 7, 2000. For example, between our initial public offering and the date of this report, the price of our shares on theNouveau
Marchéhas fluctuated between €1.15 on July 11, 2002 and €57.00 on October 24, 2000. On September 10, 2004,
the price of our shares on theNouveau Marchéwas €3.75. See "Item 9. The Offer and Listing Price History of the Stock"
for historical pricing data on our shares and ADSs. The stock market has, from time to time, experienced significant price and volume fluctuations that have affected the market prices of securities,
particularly securities of technology and computer software companies. As a result, shareholders may experience a material decline in the market price of our shares, regardless of our operating
performance. Price declines in our shares could result from a variety of factors, including many outside our control. These factors include:



In
the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has often been brought against that company. In
the future, we may become involved in this type of litigation, which is often expensive and diverts management's attention and resources.

In
order to stabilize our share price and in accordance with French regulations, we have recently implemented a series of successive share buy-back programs, the most recent
of which was approved at the December 15, 2003 general shareholders' meeting. See "Item 10.10. Purchase of Our Own Shares"

The price of our ADSs and the U.S. dollar value of any dividends will be affected by fluctuations in the U.S. dollar/euro exchange rate

Our ADSs trade in U.S. dollars. Fluctuations in the exchange rate between the euro and the U.S. dollar are likely to affect the market price of the ADSs. For
example, because our financial statements are

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reported
in euro, a decline in the value of the euro against the U.S. dollar would reduce our earnings and our financial position as reported in U.S. dollars. This could adversely affect the price at
which the ADSs trade on the U.S. Securities markets. Any dividend we might pay in the future would most likely be denominated in euros. A decline in the value of the euro against the U.S. dollar would
reduce the U.S. dollar equivalent of any such dividend.

The effects of fluctuations in international currency exchange rates could have a material adverse impact on the results of our operations and the
financial condition of our customers, our subsidiaries and us

A portion of our assets, earnings and cash flows are denominated in currencies other than the euro, principally the U.S. dollar, the Singapore dollar and the
British pound. Fluctuations in the relative value of these currencies to one another could have a material adverse effect on our results of operations and financial condition. To date, we have not
engaged in currency hedging as we do not believe such activity would be beneficial. Appreciation of the euro against the U.S. dollar could reduce our competitiveness against our competitors whose
expenses are principally denominated in U.S. dollars.

The effects of fluctuations in interest rates could have a material adverse impact on the results of our operations and the financial condition of our
customers, our subsidiaries and us

We
are exposed to interest rate risk on our deposits, which represent a significant part of our assets. To date, we have not engaged in interest rate hedging as we do not believe such
activity would be beneficial.

Certain shareholders may not be able to exercise preemptive rights for shares underlying their ADSs

Under French law, shareholders have preemptive rights ("droits préférentiels de
souscription") to subscribe for cash for issuances of new shares or other securities giving rights, directly or indirectly, to acquire additional shares on a pro rata basis.
Shareholders may waive their preemptive rights specifically in respect of any offering, either individually or collectively, at an extraordinary general shareholders' meeting. Preemptive rights, if
not previously waived, are transferable during the subscription period relating to a particular offering of shares and may be quoted on theNouveau
Marché. U.S. holders of ADSs may not be able to exercise preemptive rights for the shares underlying their ADSs unless a registration statement under the U.S.
Securities Act of 1933, as amended, is effective with respect to such rights or an exemption from the registration requirements there under is available. We intend to evaluate at the time of any
rights offering the costs and potential liabilities associated with any such registration statement, as well as the indirect benefits of enabling the exercise by the holders of ADSs of the preemptive
rights associated with the shares underlying their ADSs, and any other factors we consider appropriate at the time, and then to make a decision as to whether to file such a registration statement. We
cannot guarantee that any registration statement would be filed, or, if filed, that it would be declared effective. If preemptive rights cannot be exercised by an ADS holder, The Bank of New York, as
the depositary, will, if possible, sell such holder's preemptive rights and distribute the net proceeds of the sale to the holder. If the depositary determines, in its discretion, that such rights
cannot be sold, the depositary may allow such rights to lapse. In either case, ADS holders' interest in us will be diluted and, if the depositary allows rights to lapse, holders of ADSs will not
realize any value from the granting of preemptive rights.

Holders of ADSs may be subject to additional risks related to holding ADSs rather than shares

Because holders of ADSs do not hold their shares directly, they are subject to the following additional risks:



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The value of the shares that we hold may fluctuate

As of June 30, 2004, we held shares in Network Physics and also treasury stock that had a historical cost of €1.0 million and
€5.3 million, respectively. The investment in Network Physics is valued at the lower of historical cost or net realizable value, which is based on our assessment of future value
of Network Physics. The treasury stock is recorded at historical cost. The value of those shares is subject to fluctuation, which could adversely affect our operating results and financial conditions.
To date, we have not engaged in any hedging of these shares.

Passive Foreign Investment Company Status under the U.S. Internal Revenue Code

We believe we were classified as a passive foreign investment company (a "PFIC") for the year ended June 30, 2004. If you are a U.S. shareholder of our
shares or ADSs, the PFIC rules generally subject you to potential adverse U.S. tax consequences, including:



There
is no assurance that we will not continue to be a PFIC in future years. U.S. shareholders should refer to Item 10 the section below "Taxation of U.S. InvestorsPassive
Foreign Investment Company Status" and are urged to consult their own tax advisors regarding the application of the PFIC rules to their ownership of shares or ADSs.

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ITEM 4.    INFORMATION ON THE COMPANY

4.1    GENERAL INFORMATION

4.1.1    Name and registered office

InfoVista
S.A.
6, rue de la Terre de Feu
91940 Les Ulis
France
Telephone: + 33 (1) 64 86 79 00

4.1.2    Legal form and applicable law

InfoVista S.A., the parent company, is a Frenchsociété anonymewith a Conseil
d'administration. We are subject to the provisions of Book II of the FrenchCode de commerceand
the Act no 67-236 of March 23, 1967 which relates to trading companies.

4.1.3    Date of incorporation and expiry

InfoVista S.A. was incorporated on October 14, 1985 in the form of a Frenchsociété à
responsabilité limitéeunder the nameMéthodes Futures pour l'Informatique M.F.I.,and was registered on December 3, 1985 for a duration of 99 years. We were transformed into asociété
anonymeon December 1, 1992. We changed our name to InfoVista S.A. on April 5, 1996.

4.1.4    Corporate Purpose

Our corporate purpose, in France as well as internationally, is the following:



Our
corporate purpose is also found in Article 2 of ourstatuts(by-laws).

4.1.5    Registry of Commerce and Companies

InfoVista S.A. is registered with the Register of Commerce & Companies of Evry (France) under number 334 088 275. Our APE code is 722 C, being the activity
of development of software.

4.1.6    Consultation of legal documents

InfoVista S.A.'sstatuts, minutes of shareholders meetings and other publicly available documents can be consulted
at our registered office.

4.1.7    Fiscal year

Our fiscal year runs from July 1 to June 30.

4.1.8    Mergers & consolidations

Since June 30, 2001, there have been no material reclassifications, mergers or consolidations of us or any of our subsidiaries, any material changes in the
mode of conducting the business; material changes in the types of products produced or services rendered, or name changes. Since our creation, the only

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acquisition
of a business activity has been the acquisition of TISS, achieved on December 2, 2000. This entity has been fully merged with InfoVista GmbH with effect from January 1, 2002.
There have been no bankruptcy, receivership or similar proceedings with respect to our subsidiaries or us.

Since
June 30, 2000, our principal investment or capital expenditures have consisted of the €6.0 million purchase of a marketable security, KLEBER 2006 in
January 2002, €3.2 million acquisition of TISS in December 2000, €1.8 million purchase of licensed technology in connection with an
agreement entered into with eXcelon Corporation in August 2000, €1.0 million purchase of Network Physics shares during the year ended June 30, 2003, as well as
expenditures relating to office and computer equipment. There are no additional major capital expenditures and divestitures currently in progress. All capital expenditures and investments have been
financed with stockholders' equity.

There
has been no indication of any public takeover offer by any third party in respect of our shares, or by us in respect to other companies' shares, which have occurred during the last
and current fiscal years.

4.2    GENERAL INFORMATION CONCERNING THE SHARE CAPITAL OF THE COMPANY

4.2.1    Subsidiaries and unconsolidated investments as of September 10, 2004

CHART

InfoVista
S.A. is the primary office for our operations where the majority of research and development activities are performed. Our senior executives are located at InfoVista SA's
primary office in Les Ulis France or InfoVista Corp, our U.S. subsidiary, whose primary office is in Herndon, Virginia, USA. All of our subsidiaries are financed by InfoVista S.A, the parent company.
In accordance with proper accounting practice, Network Physics is not consolidated in our financial results and position. We address the local markets for sale and support of our software and
services. Worldwide marketing activities are primarily managed from our U.S. subsidiary with some local presence in other various entities. Executive officers of InfoVista S.A. are also officers of
certain subsidiaries. The costs related to services rendered amongst InfoVista S.A. and each subsidiary are allocated based upon their respective annual revenues.

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InfoVista S.A. owns the majority of our intellectual property rights and trademarks and renders maintenance services on behalf of its subsidiaries. Royalties and services invoiced to
subsidiaries for the sale of software licenses and maintenance services amounted to €13.5 million and €11.6 million for the years ended June 30, 2004 and 2003
respectively.

4.2.2    Share capital as of September 10, 2004

Number of ordinary shares issued: 19,007,170, all of which are fully paid up.

Nominal
value of each ordinary share: €0.54

Issued
Share Capital: €10,263,871.80

4.3    BUSINESS OVERVIEW

Our company was founded in 1995, when Alain Tingaud, our current Chairman of the board, along with other private investors, acquired a software service company.
Since then, our company has been transformed into a software developer of technologically advanced SLM performance reporting solutions. This technology forms the basis of our products and has been
developed by a research and development team that remains based in France. In May 1997, we began generating sales primarily in Europe from earlier versions of our products. As a result, we
commenced related service activities: consulting, training and customer support services.

In
1997, we commenced commercial activities in the U.S. with the opening of our first subsidiary, InfoVista Corp, which is the headquarters for our Americas region, one of our three
major regions. Subsequently, in 1999, we expanded our commercial activities in Germany and the U.K. In 2000, we expanded further into the Asia-Pacific region with the opening of InfoVista
(Asia-Pacific) Pte Ltd in Singapore. In December 2000, we acquired TISS Intra GmbH in Germany to expand our commercial activities in Central and Eastern Europe and acquired
the rights to
certain functionalities of their portal technology. In 2001, TISS Intra GmbH was merged with InfoVista GmbH. Lastly, we completed our commercial activities expansion in 2001 with the opening of
InfoVista BNL and InfoVista IBE in Europe.

We
consider ourselves to be a leading global provider of Business Technology Intelligence ("BTI") software solutions. We empower global 2000 companies to optimize their IT infrastructure
for delivery of best-in-class business services at the lowest cost. Our approach to BTI incorporates context-sensitive, pre-packaged solutions designed to generate
breakthrough improvements in service quality and IT efficiency. Our software collects and analyzes performance indicators from thousands of IT assets in real time, then transforms these technology
metrics into business-relevant, insightful and actionable information. Integrated views of actionable information spanning traditional silos are presented through unified, dynamic dashboards. This
information enables decision makers at every level to continuously align IT services with business priorities. Our fully personalized and interactive portal provides visibility into
real-time and historical information essential to optimize the end-to-end service experience of the user and the underlying technology assets. We generate revenues
in the form of licensing fees on our products and in the form of service fees from our professional services, customer support and training.

Our
solutions target the network performance management and service management segments for both service providers and enterprise customers. In addition, our solutions address our
customers' needs ranging from real-time network and system performance analysis to network troubleshooting, capacity planning, customer-facing performance reporting and SLM. Our technology
approach is based on partnering with customers and strategic partners to drive industry-leading innovations in our software.

About
80% of the world's largest service providers as ranked by Fortune® in December 2002 have selected our software to maximize the value of their business technology
assets. In December 2002, we were ranked number one in the Deloitte & Touche Technology Fast 50 2002 Program in France, which lists

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French
technological companies with the highest growth of revenue between 1998 and 2001. In December 2002, we also received a special award from Euronext for the period.

Our
clients use our solutions for performance and service management across several different functional roles and multiple technology areas.

The
functional capability areas addressed by our solutions include:



The
technology areas addressed by our solutions include Internet Protocol Virtual Private Network ("IP VPN"), IP Telephony, Core networks including Multiple Protocol Layer Services
("MPLS"), Asynchronous Transfer Mode ("ATM"), Frame Relay, Local Area Network ("LAN") and Wide Area Network ("WAN") technologies, systems including servers infrastructure and applications and
middleware. Some customer examples of our successes in these technology areas are as follows:



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Our
telecommunications and MSP clients include AAPT (part of Telecom New Zealand Group), Bell South International, Brazil Telecom, British Telecom, Cable & Wireless, Chung Hwa
Telecom, Cingular Wireless, ComTel, Deutsche Telekom, France Télécom, infonet, LambdaNet, Nippon Telegraph and Telephone, SingTel, Telefonica, Telewest and
Wanadoo. Enterprise clients include ABN Amro, AXA, Banques Populaires, BNP Paribas, BASF, Deloitte & Touche, Wachovia Bank, Graybar, Hoffmann-La-Roche, Motorola, Pfizer,
Royal Bank of Scotland and Shell.

We
sell our products and solutions through a complementary direct/indirect model that includes a direct sales force, indirect sales channels and key strategic alliances. We have more
than 35 solution partners in over 30 countries already participating in our programs. Channel partners include:



Our
partners help us achieve greater distribution coverage and expand business opportunities in their respective region of operations. They tend to reduce our sales cycle due to their
existing customer relationships and their authoritative ability to recommend and persuade customers to consider our solutions. Last but not least they play a critical role in delivering critical
services to our joint customers including solution design and implementation.

Conversely,
our partners benefit from our programs that aim to empower them with our solutions to win new business opportunities and deliver services. Some of the benefits delivered
under our partner programs include:



We
are continually seeking ways to upgrade and enrich our programs. During fiscal year 2004, we delineated a new alliance strategy to pursue global system integrators, specialty and
regional players, hardware vendors and independent software vendors with an international team of dedicated business development individuals. We strengthened our relationships with Accenture
Communication and High Tech ("C&HT") division and International Network Services Inc. ("INS") in the U.S., signed a worldwide

24

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referral
agreement with Nortel Networks and worked very closely with Juniper Networks on a number of opportunities which have culminated with the signature of the multi-million dollar contract with
the Defense Information Systems Agency ("DISA").

In
addition to the above alliance partners, we continue to work with other technology vendors to jointly develop and co-market performance management and SLM solutions.
Representative technology partners include Cisco, Ericsson, Motorola, Packeteer, Atrica, Ipanema, Smarts and Micromuse.

4.4    INDUSTRY BACKGROUND

We market our solutions to both service providers and enterprises Below is a description of the current environment for purchasing network performance and service
management solutions in each market.

Service Provider Market

The continued convergence around IP-based networks, enabling the delivery of multiple services over a shared bandwidth is setting new challenges for
performance reporting and service management. This convergence is driving the need for increased network productivity, management of differentiated levels of QoS, increased competitive fervor and the
search for newer revenue streams among service providers.



The
broad market trends and rapid pace of change make it imperative that different types of management systems including network performance and service management, fault and event
management, policy management, security, provisioning, billing and mediation provide sufficient capabilities for integration to help service providers attain their business objectives.

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Enterprise Market

Enterprise businesses today continue to focus on the bottom line when evaluating IT infrastructure options. While according to industry analysts, discernible
improvements in external economic conditions and technology replacement needs are expected to fuel moderate single digit growth in IT infrastructure investments in 2004 and 2005, corporate decisions
continue to be driven by business impact and Return on Investment ("ROI") goals.

The
need for improved ROI is a key driver in the increasing rounds of consolidation of IT infrastructure assets to reduce both ongoing operational costs and future capital investments.
This includes consolidations of physical assets like data center locations and associated systems and network infrastructure, as well as finding ways to increase utilization of existing investments.
Consequently, IT groups need better and more business relevant justification to support new purchases of software and computer equipment.

The
performance of internal IT groups is also being increasingly benchmarked on both cost and service delivery against best practices of external service providers and outsourcers. While
IT's role as a strategic asset continues to rise in situations where it is the medium of service delivery for external customers (e.g. in online financial services), in other situations, IT continues
to be a business enabler rather than a business driver. Hence, mainstream enterprises are increasingly becoming comfortable to consider outsourcing both traditional IT services as well as the business
processes they support, to external providers.

However,
regardless of the ownership of service delivery, whether internal or external, better identification and linkage of IT infrastructure to supporting business services is of
critical importance. Enterprises are realizing that top down service management driven by business needs is the only way to improve productivity, lower costs and increase the business relevancy of IT
operations.

Network
and server performance reporting and service management systems have to adjust to this new perspective of IT management and make it easier for both business and technical
stakeholders to take business prioritized decisions and maintain ongoing visibility of the business to IT linkages.

The InfoVista Value Proposition

Our software is designed to meet the emerging network and server performance reporting and service management requirements of organizations worldwide. We
recognize that the value of an organization's IT infrastructure is more than the sum of its underlying assets; it is a function of the services delivered by that IT infrastructure. The focus on
service quality is driving infrastructure managers to measure
performance along a service value chain. This paradigm requires rich, real-time visibility across IT infrastructure management functions, as well as deep visibility into each
layernetwork, system, and application. In today's internetworked world, real-time visibility into IT infrastructure performance for both internal and external customers is a
strategic necessity.

Many
global businesses have already made significant investments in technology and online infrastructure in recent years. Further purchases that help to optimize their IT assets must
therefore demonstrate a significant ROI in terms of impact on revenue, business processes, transactions and associated cost reductions.

Our
solutions for network and server performance and service management reporting create substantial returns on the purchase investment of our solutions. Customers will generally realize
immediate savings on IT infrastructure care, maintenance and growth.

Fundamental
savings are found in the mainstream of network and server performance management ROI. These include the clear benefits of managing network, system and application uptime by
troubleshooting problems before help desk calls are made and by reducing the time to correct problems.

26

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Down
time, and the effort required to correct, equates to costs. This affects all of our clients to varying degrees.

Effective
management of service levels using our solutions enables both cost savings and new revenue opportunities. The verification and visibility of network service level performance
can ensure best use of IT services purchased or can ensure the best delivery of IT services depending upon whether our customer is a consumer or provider of IT services. While improved network service
assurance can prevent lost revenue caused by failure to meet network service level commitments, business consumers are willing to pay for higher levels of network performance visibility of critical
outsourced IT services.

Finally,
we help system and network architects to visualize the growth of their IT infrastructure in line with business demands. With a clear understanding of the current and future
capacity of their systems, degraded network performance due to overloaded components will be managed more effectively. Moreover, appropriate new equipment and system upgrades can be enforced using
information from our solutions, preventing unnecessary expenditures on new equipment and software.

In
summary, we enable service providers and large enterprises that view their global IT infrastructures as strategic assets to:



4.5    THE INFOVISTA SOLUTION

Our software enables service providers and consumers of IT to manage and optimize their technology-dependent service offerings through web portal-based
performance management solutions. They are built on a proven software architecture that collects and analyzes network and server performance information from thousands of IT assets in real time. We
transform these technology metrics into business-relevant, insightful and actionable information across traditional silos through dynamic dashboards.

Our
software is based on a multi-tier architecture that is uniquely capable of supporting the most challenging network performance management requirements. It collects data
from large and complex business technology infrastructures; performs real time analytics; consolidates business and
technology service metrics; automates discovery, inventory and configuration management; and presents business-relevant IT service performance information.

This
architecture supports a range of powerful solutions that provide service level views of the performance of connections and components throughout the entire networked infrastructure,
enabling IT managers to detect, isolate and resolve network service level problems. Our products can also be easily integrated with other management systems to leverage existing tools and processes,
in order to resolve network service level issues. The flexibility, scalability and openness of our products provide an efficient environment to give any IT decision maker the necessary visibility to
leverage IT infrastructure to competitive advantage.

27

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Our
solutions are optimized for the increasing challenges of managing IT infrastructure performance in a dynamic, service-centric business environment. Our solutions offer the following
technical differentiators:



28

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4.6    STRATEGY

We aim to become the leading provider of BTI solutions. Key elements of our strategy include:



29

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4.7    PRODUCTS

Our products form a family of network and server performance management software solutions that address specific performance management disciplines and
support the efficient management of network, application and system technologies. Our solutions address capacity planning, problem resolution, performance troubleshooting and SLM for networks and
servers.

Our
products collect data from the IT infrastructure and generate reports on the performance and service achievements across all IT system elements. Our products can operate on a
stand-alone basis or interoperate with other business and technology management systems, allowing users to determine whether IT performance meets business needs or the standards of an existing SLA or
generally meets users' expectations.

VistaCapacity Planneris a capacity planning solution. VistaCapacity Planner enables organizations to customize IT infrastructure
resources, prioritize capacity adjustments and analyze the impact of new business initiatives and growth scenarios. This solution supports proactive network capacity analysis based on advanced
trending of historical performance utilization metrics. VistaCapacity Planner incorporates pre-defined analytics and industry standard process flow that helps streamline network capacity
planning activities.

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VistaService Manageris a SLM solution. VistaService Manager is designed to monitor end-to-end availability,
reliability and integrity across the application infrastructure, as well as track achievement against network and server service level objectives. VistaService Manager is uniquely capable of managing
critical, multi-tier business services and mapping them to supporting IT infrastructure layers for effective root cause analysis and immediate business impact assessment.

VistaOperations Centeris a problem resolution solution. VistaOperations Center delivers preemptive notification of potential network
performance issues, prioritizes problem resolution by business impact, and offers a robust troubleshooting platform (VistaTroubleshooter) to investigate, diagnose and rapidly resolve network
performance problems. VistaOperations Center incorporates pre-defined analytics and industry standard process flow that helps streamline IT service operations' activities.

VistaTroubleshooteris a stand-alone, web-based network performance troubleshooting solution designed specifically to enable
customers to quickly start high resolution, high polling rate and real-time reports. It has an intuitive interface that requires no knowledge of how our software works. VistaTroubleshooter
is a self-managed, no training required, troubleshooting tool. VistaTroubleshooter includes integrations with Smarts InCharge, HP OpenView, Micromuse Netcool, Aprisma Spectrum, and Network
Physics.

In
accordance with our market driven solution strategy, we are currently building market-specific solutions designed expressly for supporting the efficient management of key initiatives
for both enterprises and service providers. These solutions contain some or all of the capabilities found within our VistaCapacity Planner, VistaOperations Center and VistaService Manager solutions to
support performance management initiatives related to IP VPNs, IP Telephony, servers and networks. The first solution released to market isVistaInsight for
Servers, a fully packaged server management and consolidation offering.

Our
solutions are based on a tightly integrated set of existing and new components engineered by our research and development organization. At the core of these components is the
InfoVista Server, a server-based application that acts both as a data gathering and analysis engine and a central point for managing real-time users' report requests. Multiple InfoVista
Servers are organized around VistaMart, our centralized global data repository and configuration management system. In addition to InfoVista Server, other components include VistaViews, our series of
ready-to-use reports that are available within solutions, in bundles or individually, and our web portal products, VistaPortal Standard Edition and VistaPortal, which allow
aggregated and real-time reports to be viewed using a web-browser.

The InfoVista Serverperforms both production and development roles for the gathering, analysis and storage of network performance
information.



The
key features of InfoVista Server are:



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VistaViewsare an advanced set of coherent, pre-configured, out of the box reports for gathering, analyzing, consolidating and
displaying the behavior of networks, systems and applications throughout an organization's IT environment. VistaViews target vendor-agnostic technologies and services, as well as popular
vendor-specific device and IT management technologies. VistaView releases include corresponding VistaPortal report templates for globally aggregated analysis, dashboard views and globally consolidated
reporting. Certain VistaViews are embedded in the InfoVista Server (Standard VistaViews) and others are sold as a part of solution packaging, or separately as a part of client
up-selling. Using InfoVista Workshop, a customer can tailor the VistaView reports with simple drag and drop, Windows-based editing tools. Likewise, VistaPortal enables
Web-based report customization using the VistaPortal report designer.

We
currently have 96 VistaViews within 9 categories: Standard VistaViews, Solution VistaViews, VistaViews for Network Infrastructure, VistaViews for Server Infrastructure, VistaViews for
Wan Switches, VistaViews for Application Servers, VistaViews for Application End-to-End Performance, VistaViews for IP Networking Services, and VistaViews for Network Security.

As
new technologies emerge, new VistaViews and report templates are released, enabling a comprehensive view into any IT infrastructure. In addition, existing VistaViews can be customized
and new VistaViews created to meet both simple and highly sophisticated requirements.

In
addition to developing our own VistaViews, we have developed and will continue to develop VistaViews with several partners including OEMs. Going forward, we intend to promote a
community of independent developers for the creation of new VistaViews.

VistaMartis a global data mart repository and centralized provisioning engine that commands and controls multiple InfoVista Servers and
consolidates InfoVista Server data, forming a scalable, manageable distributed system. It is especially adapted for customers who need to gather information from geographically dispersed sites in an
automated, reliable and efficient way. VistaMart provides the data for centralized reports of networks, systems and applications across a customer's IT infrastructure. VistaMart can also integrate
with a variety of third-party tools such as decision support or data mining tools that exploit VistaMart's data, and inventory, configuration management and provisioning systems that enable automated
report generation. Additionally, it can process and merge data from sources other than the InfoVista Server, such as call center management software, which can be used to create a single report that
reveals relationships between IT device, service and business performance.

VistaPortalgives visibility into the global infrastructure, enabling customers to design and display reports containing data residing
within the VistaMart database. VistaPortal is a portal-based interactive window to the IT infrastructure. Its secured Extensible Markup Language ("XML")-based architecture contains
fully configurable components of SLM oriented applications. It allows users to simultaneously view Key Performance Indicators (KPIs), real-time notifications and strategic business
information. From these global overview reports, customers can drill down to related real-time and historical reports from within VistaMart, the InfoVista Server and VistaTroubleshooter.
In addition, VistaPortal's standards-based architecture and openness allows seamless integration with user's existing applications and can be easily embedded into other web portals.



32

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VistaDiscoveryensures an accurate, up to date InfoVista Performance Management solution by discovering networks, systems and IP services
within large IT infrastructures. VistaDiscovery features the ability to support complex network relationships with an advance discovery engine and automatically configures our solution according to
scheduled processes. By easily integrating with inventory systems, device libraries and other network management systems, our solution dynamically maintains complex IT resource relationships with
business functions, groups of users, locations and other business properties. By doing so, VistaDiscovery automatically maintains modeling of technologies, services and business systems within
ever-changing IT infrastructures so that a business-driven IT environment can be managed at a low level of effort.

VistaProvisionerautomates the integration of our reporting solutions in our customers' environments. VistaProvisioner enables service
providers and large enterprises to leverage existing network and customer topology information and achieve accurate, proactive performance and availability management reporting solutions within
ever-changing, complex environments. VistaProvisioner is an innovative change management solution that brings scalable provisioning to our powerful reporting environment.

VistaCockpitis a powerful management console that simplifies the administration and supervision of the InfoVista Performance Management
environment. It enables users to monitor, configure, troubleshoot and optimize InfoVista implementations of all sizes. VistaCockpit provides comprehensive views of installed software versions, product
configuration settings and supporting hardware platform information. This information, in conjunction with monitoring and debugging tools, enables the
InfoVista administrator to rapidly detect and correct improper configuration settings, hardware limitations and software problems that can lead to InfoVista performance limitations.

VistaBridgeenables organizations to import data into our rich reporting environment. Using VistaBridge, data can be easily moved from
virtually any source into our software where it can be displayed visually, in the form of graphs, charts, or tables, along with network service level metrics. This creates unified views for an
understanding of the relationship between IT performance and business operations.

VistaBridge
provides the ability to import data from business applications, element management systems, or any device, into either the InfoVista Server or VistaMart. VistaBridge can
import data from non-standard IT devices, legacy devices or devices that cannot be polled via SNMP. Legacy data can also be imported to get the perspective of past performance history.

VistaLinksare a suite of pre-built integrations with leading vendors in the major categories of the Network Management System
("NMS") and OSS marketsservice activation; fault management; event correlation, inventory management; and billing and mediation. VistaLinks leverage our open, documented and supported API
to create substantial customer value. VistaLinks provide our customers with the benefits of best-of-breed, off-the-shelf software without the typical
costs and risks of complex software integration.



33

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Vista Plug-insare intelligent agents that reside on local and remote servers and workstations. They gather traffic statistics
and performance information on IT service levels not readily available using traditional SNMP. Performance data is gathered by polling the Vista Plug-in agents, instead of IT devices.



VistaAPIis a software development kit that allows third party software vendors, systems integrators and technology consultants to
integrate our software with other OSS software or in-house IT management applications. VistaAPI allows developers to build custom applications on multiple platforms including Sun Solaris
and Microsoft Windows using industry-standard programming languages including C, Java and Perl. VistaAPI comes with annual technical support for developers, a full set of documentation as well as code
samples that demonstrate the VistaAPI features. Several of our products have already been developed using this software development kit, including VistaTroubleshooter, VistaBridge and
VistaProvisioner.

4.8    PRODUCTS IN DEVELOPMENT

We continue to enhance our VistaPortal product with new modules that create a more dynamic user experience and speed navigation between notification reports and
critical analysis available within the portal. New modules will also expand the type of analysis that more advanced users would expect to accomplish.

We
are extending the capabilities of our VistaMart product to simplify and centralize the management of our large-scale implementations. This product will enable the person or group
responsible for the implementation of our solutions to better manage the entire InfoVista environment from one interface. For large implementations, this will speed deployment time significantly. At
the same time, it will further simplify the support of our solutions and will reduce the overall cost of ownership. VistaMart will also be

34

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enhanced
to provide improved global aggregation, grouping and analysis capabilities, as well as new mechanisms to better import data discretely, continuously and from flow-based
applications.

We
continue to add new content to our reporting solutions. As technology evolves, we are constantly evolving our solutions to the requirements of our customers. We are building new,
fully packaged solutions that deliver immediate value to our customers. The solutions will provide actionable insight into the performance of IT services for stakeholders within multiple
organizational silos. The solutions will provide top-down visibility from business group to IT service to supporting IT resources and will enable our customers to efficiently deliver IT
services at the lowest possible risk.

Finally
we continue to work on integrating our software with other standard products in the market.

4.9    SERVICES

We provide services related to our software products, including consulting, education, support and services. We generally invoice for our services separately from
our licensing fees. We believe that a high level of professional service and client support is critical to the successful marketing and sale of our software and solutions. As of June 30, 2004,
we had 43 employees in our customer services group of
which 17, 23, and 3 were part of Consulting, Solution Support, and Training & Certification, respectively. We plan to remain moderately flat in the number of our service teams in line with our
business objectives of profitability, while continuing to reinforce the education of clients, partners, resellers and other third parties on how to provide similar services.

The
following is a list of the services we offer:



35

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We
continue to identify Solution Support Partners to whom we aim to train to a high standard and use them to enable us to deliver the entire range of services worldwide. We require that
all our partners have dedicated personnel who fully understand our products and employ a minimum number of engineers that have been trained and certified by us. We require that they follow documented
internal procedures including clear communication channels so that they will have the necessary support to assist our end users. We performed several audits of these partners during the last year to
ensure a continuous high level of quality support.

4.10    GEOGRAPHICAL BREAKDOWN OF REVENUES AND OPERATING RESULTS

The following chart shows revenues invoiced from Europe, the Americas and Asia-Pacific broken down between license and service revenues for the
periods indicated.

Year ended June 30,2004

2003

2002(In thousands)Europe

€
13,818

€
12,584

€
17,084Of whichLicense revenues


6,886


5,229


10,797Services revenues


6,932


7,355


6,287Americas


12,063


9,603


10,087Of whichLicense revenues


7,288


5,655


6,087Services revenues


4,775


3,948


4,000Asia-Pacific


2,806


3,335


2,232Of whichLicense revenues


1,902


2,362


1,410Services revenues


904


973


822Total

€
28,687

€
25,522

€
29,403


The
following chart shows revenues invoiced from Europe, the Americas and Asia-Pacific broken down by country.

Year ended June 30,2004

2003

2002(In thousands)Europe

€
12,584

€
17,084

€
13,818Of whichFrance


3,666


3,645


6,028Germany


3,035


2,631


3,886United Kingdom


4,021


3,827


4,928Belgium


740


822


1,266Spain


2,356


1,659


976Americas


12,063


9,603


10,087Asia-Pacific


2,806


3,335


2,232Total

€
28,687

€
25,522

€
29,403


36

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The following chart shows operating results in Europe, the Americas and Asia-Pacific broken down by country:

Year ended June 30,2004

2003

2002(In thousands)Europe

€
(5,506
)
€
(12,094
)
€
(10,674
)Of whichFrance


(11,431
)

(15,416
)

(15,251
)Germany


501


153


405United Kingdom


2,768


1,709


2,833Belgium


772


475


754Spain


1,884


985


585Americas


(1,558
)

(760
)

(1,979
)Asia-Pacific


1,200


523


(735
)Total

€
(5,864
)
€
(12,331
)
€
(13,388
)


4.11    END-USERS

We have a diverse set of end-users in a variety of business sectors, including telecommunications, internet services, financial services, IT services,
outsourcing and consulting. To date, we target end-users particularly in the telecommunications and service provider industry, along with large enterprise organizations such as financial
service institutions. However, a significant portion of our revenues is, and is expected to continue to be, attributable to sales of products to telecommunications carriers and service providers. For
the years ended June 30, 2004, 2003 and 2002, our five largest end-users accounted for approximately 26.8%, 22.9% and 26.2%, respectively, of our total revenues and our ten largest
end-users accounted for approximately 40.5%, 34.8% and 37.8%, respectively, of our total revenues. We anticipate that our operating results for any given period will continue to depend to
a significant extent upon revenues from large contracts with a small number of end users. We expect that the composition of that small group of end-users will continue to change over time
so that the achievement of our long-term revenue goals will require us to obtain additional large end-users on an ongoing basis.

The
table below shows the revenues composition from our three largest end-users for the periods indicated.

|Year ended June 30, | 
|------------------- | 
|
|DISA                | 
|Telefonica          | 
|Client "B"(2)       | 

---

For the years ended June 30, 2004 and 2003, we had Days Sales Outstanding ("DSO") of 107 and 75 days, respectively. We calculate DSO
by dividing net accounts receivable at the end of a period by annual revenues, which is then multiplied by the number of days in the given year. See "Item 5.8 Liquidity and Capital Resources" for
further discussion on DSO.

As
of June 30, 2004, we had 286 active end-users (active end-user is defined by us as a group that has purchased and still uses one of our software
solutions) in countries including France, the U.S., the United

37

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Kingdom,
Germany, Spain, Singapore and Japan. The table below shows a representative list of companies that use our products.

|Telecommunications
Companies and ISPs                                                                                                                                                                                                                                                                                              |  | Financial Institutions                                                                                               |  | Outsourcers and
Consulting Firms                                                                                              |  | Other Enterprises                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|AAPT
BellSouth
Bouygues Telecom
British Telecom
Cable & Wireless
Cingular Wireless
Chung Hwa Telecom
Czech Telecom
EasyNet
France Télécom
Globe Telecom
infonet
Interoute
H3G
MCI
Nextel Communications
Nippon Telegraph and Telephone
SingTel
T-COM (T-Data, Deutsche Telekom)
Telecom Asia
Telefonica
VeriSign
Videotron
Verizon |  | AXA
Banque de France
Banque Populaire
BNP Paribas
Crédit Agricole-Indosuez
Royal Bank of Scotland
Wachovia
Wellpoint |  | Callahan
Cap Gemini Telecom
Hitachi Information Systems
Info AG/Satisfactory
Siemens Business Services
Spherion
T/Systems ITS |  | AGIS
Acasia
BASF
British Airways
Chevron
Hoffmann-La Roche
Norfolk Southern
Royal Canadian Mounted Police
Shell
Thales

4.12    SALES AND MARKETING

As of June 30, 2004, we had a total of 68 sales and marketing employees (61 in sales and 7 in marketing) of whom 18 were located in France, 31 in the U.S.,
11 in Europe (outside France) and 8 in the Asia-Pacific..

Sales

We use a two-tiered sales strategy consisting of both a direct sales force and indirect sales channels.



For
a discussion of the categories of our indirect sales channels, see "Item 4.3. Business Overview".

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Marketing

Our worldwide marketing functions include strategic, product and field marketing, along with analyst and media relations. As of June 30, 2004, we had
marketing personnel stationed in France and the U.S.

4.13    STRATEGIC RELATIONSHIPS

We have developed strategic relationships with a number of market leaders in system integration, consulting, hardware networking and software to increase our
market reach and visibility, open new business opportunities, develop complementary offerings and reduce our sales cycle. Our relationships also aim to develop compatible and integrated products,
better enable new service offerings from our partners such as server consolidation or IP Telephony service assurance, increase our expertise on the newest technology products and techniques,
cross-train and implement joint sales and marketing campaigns. Highlights of our recent successes include the following partnerships:

We
entered a strategic relationship with Accenture CH&T division in 2003 to better serve the needs of Global 500 companies and Tier-1 service providers. Our products were
selected as the preferred performance and service level management solution as part of Accenture's Communications Solution ("ACS") offering. ACS is a set of pre-integrated assets that help
streamline a service provider's ability to plan, create, and operate traditional and next-generation network and services. The major benefits ACS solutions bring to customers include: a
plug-and-play architecture based on a robust, common integration framework; flexibly defined process and organization models; and real world solutions developed from proven
client experience. As a result of our active cooperation, we have achieved significant success in fiscal year 2004.

INS
is a leading IT infrastructure consulting services, software, and business solutions' company that helps organizations build, secure, and manage their business-critical networks. INS
and we have established a worldwide alliance to provide end-to-end consulting solutions, which address market needs in IT strategy and planning, IT infrastructure and network
and systems management.

We
are members of both the Cisco Ecosystem Partner Program and Architecture for Voice, Video and Integrated Data ("AVVID") initiative providing Cisco on-going product
development, sales and marketing efforts for both service provider and enterprise markets. We continue to support Cisco's executive briefing center and other Cisco lab environments for demonstrations
and presentations of our network performance management and SLM solutions to our joint customers.

We
have strengthened our premium partner status with Juniper Networks, this success being largely driven by continued cooperation in large service provider and governmental networking
sectors. Fiscal year 2004 witnessed sustained efforts of collaboration in market development and product integration with the expansion of the Juniper product family. As a result of our concerted
efforts of collaboration, we secured several contracts across the world in fiscal year 2004, including a multi-million dollar agreement with the DISA.

In
early 2004, we announced with Nortel Networks an agreement to integrate our network performance management solution with Nortel's new Multi-Service Edge router (MSE) offering. We have
been retained as an integral part of Nortel Networks OSS Software Partner Program, which gives us access to technical, marketing and sales support to promote our solutions alongside Nortel's ongoing
MSE promotional efforts. We support MSE platforms by monitoring vendor-specific and industry-standard metrics and providing pre-packaged management support for MPLS, VoIP and IP VPN.

Motorola
has been our worldwide OEM for the past 3 fiscal years and has been using our software to monitor traffic and provide performance reports to public safety agencies that use
Motorola 2-way radios around the world.

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We
have an equity investment in Network Physics whose network appliance, among other things, allows end users to associate abnormal performance with specific business functions, thereby,
providing a critical link between IT performance and business impact.

4.14    COMPETITION

The network performance and service management market is highly fragmented with a number of point solutions. The depth of data, expertise and service management
reporting also varies widely. As a result it is typical to find multiple network service management and performance reporting solutions, installed in the same customer environment addressing different
technology segments. Our software has been traditionally used in the network systems management environment that caters to both service providers and enterprises.

However,
recent trends in consolidation of performance and service management reporting by service providers and enterprise demand to provide integrated cross-silo views are
driving market vendors to broaden their technology footprint. In fact, service management of technology infrastructure is no longer enough, but it increasingly needs to be correlated with higher-level
business and service views that can easily relate the impact of IT problems to the overall business (enterprises) or on services delivered to end customers (service providers). This type of customer
demand is the prime mover behind the evolution and growth of the Business Service Management (BSM) market. Our software is well positioned to take advantage of this market evolution, especially with
the new technological improvements in our recently launched VistaFoundation 2.0 platform as well as increased maturity in our system and application offerings. We term our market approach in meeting
the needs of this broader segmentBTI.

It
is important to note that a host of erstwhile network performance and service management vendors have announced their products for meeting BSM market needs. Hence the market
fragmentation continues, but it makes it more difficult for point solutions to make an effective case because they are unable to capture all the moving parts within the IT infrastructure that impact
the business. Nonetheless, vendors of all sizes, whether from network, system or application backgrounds are propagating the BSM message and contributing to increased confusion in the marketplace.

Overall,
the network performance and service management market is characterized by rapid technology change, evolving industry standards and increasingly complex customer requirements.
Our existing and potential clients typically have preset budgets for their IT operations, management and planning functions for which we must compete. We expect competition will continue to be
intense.

Our
primary source of direct competition comes from suppliers of comparable products, including Concord Communications eHealth suite, Hewlett Packard OpenView Performance Insight
(formerly Trinagy's Trend), Lucent Technologies Navis iOperations Software, VitalSuite, NetIQ, Quallaby Corporation and several smaller software vendors. Other sources of actual or potential
competition include:



40

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Some
of our competitors have longer operating histories and significantly greater financial, technical and marketing resources than we do. In addition, other companies may enter the
performance and service management market.

4.15    INTELLECTUAL PROPERTY

Our success and ability to compete are dependent on our ability to develop, maintain and protect the proprietary aspects of our technology. We rely on a
combination of patent, trademark, copyright and trade secret law and contractual restrictions to protect the proprietary aspects of our technology. Our patent and trademark applications might not
result in the issuance of any valid patents or trademarks.

Patents.We presently have three French patents issued. One of these patents is for a performance measurement and service
quality monitoring system and process for an information system. The second is for a modeling process for an information system, in particular with a view to monitoring the QoS and a measurement and
modeling system implementing this process. Both of these patents expire on January 29, 2017. Both of the patents have received extensions in the U.S. and in Europe, with two U.S. and two
European patents issued which expire on January 29, 2018. The third French patent is for an indirect addressing method and system for locating a target element in a communication network. This
French patent expires on December 7, 2021, and we also have extensions pending in Europe and in the U.S.

Trademarks.We have registered the trademark "InfoVista" in a number of countries, including in Europe (as a Community
Trademark) and the U.S. We also have a trademark registration for "VistaMart" in France. In addition, we have filed trademark applications in a number of countries, including the U.S. and the EU for
the product names "VistaView", "VistaMart," "VistaPortal," "VistaFinder", "VistaService", "VistaFoundation", "VistaNotifier", "VistaLink", "VistaBridge", "Vista Plug-in", "VistaNext",
"VistaProvisioner", "VistaDiscovery", "VistaOperations Center", "VistaCockpit", "VistaTroubleshooter", "VistaCapacity Planner", "VistaService Manager", and for "InfoVista" accompanied by its logo and
the phrase "Seeing IT." We have applications pending for protection for some of these trademarks in other jurisdictions. We plan to apply for trademark registrations for other product names containing
the word "Vista" in the near future.

We
seek to protect our source code for our software, documentation and other written materials under trade secret and copyright laws. For example, we license our products to
end-users under shrink-wrap license agreements. We seek to avoid disclosure of our intellectual property by restricting access to our source code and by requiring employees and
consultants with access to our proprietary information to execute confidentiality agreements with us. Our employees generally sign contracts with us agreeing not to compete for a certain period
following their departure from our company subject to certain limitations. We have deposited our source codes with theAgence pour la Protection des
Programmes, one of the main French organizations offering software escrow services.

Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. In
addition, the laws of many countries do not protect our proprietary rights to the same extent as the laws of the U.S. and France. Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets and to determine the validity and scope of the proprietary rights of others. Litigation could result in substantial costs and diversion of resources. In
addition, we may not prevail in any such litigation, and our intellectual property rights may be found invalid or unenforceable. Any of the foregoing could have a material adverse effect on our
business and operating results.

We
use a variety of third party software in our products that we license for this purpose. This software will range from a specific application or codes developed by a software provider
in conjunction with our

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development
team to software which is made freely available via the Internet. In some cases, the software forms a key role in our products; in other cases we can use alternative software without
significantly impacting our performance or timetable. In the case of key software, we seek to protect our ability to use the software by negotiating appropriate licenses and escrow protection.
However, we cannot guarantee that the third-party software licenses will continue to be available to us on commercially reasonable terms, if at all.

Our
success and ability to compete also depend upon our ability to operate without infringing upon the proprietary rights of others. In the event of any successful claim of infringement
against us, however, and our failure or inability to license that technology on acceptable terms, our business and operating results could be significantly harmed.

4.16    INSURANCE

We have maintained an appropriate level of insurance coverage with conditions that are in line with our industry standards. We have put into effect a worldwide
insurance program that provides coverage for significant risks and activities.

We
maintain insurance against potential civil and product liability claims. We also maintain insurance policies against the following risks: directors and officers' liability, civil
liability including general liability. This insurance covers all countries where we have a legal presence. We have not obtained any insurance for net losses in any of the countries in which we have
operations.

We
have obtained directors and officers insurance for our benefit and the benefit of our directors and officers for coverage of USD $7 million in directors and officers insurance.
To date, we have not obtained any key employee life insurance in which we would benefit.

In
fiscal year 2004, our Group policy on civil liability insurance offered coverage of €2 million. Adapting to our expected level of business activity, we chose to
increase this coverage amount to €5 million for fiscal year 2005.

For
the years ended June 30, 2004 and 2003, total amount paid for insurance coverage were €237,125 and €268,184, respectively.

We
maintain a comprehensive portfolio of insurance policies covering our principal risks, including damage to physical property, legal liability for third party damage, product liability
and professional errors and omissions liability as well as directors and officers liability. We regularly review the level of coverage in force with the risks that we may encounter. We believe that
the level and geographical scope of our coverage is appropriate for the risks encountered, and is in line with the practices in the insurance market.

4.17    COMMUNICATIONS

We communicate with our investors and the public by means of our website at www.infovista.com and participation at trade shows and trade events. We also conduct
regular press statements and meetings with the press and analysts and embark on road shows from time to time.

4.18    PERSONNELSee "Item 6. Directors, Senior Management and Employees"

4.19    RESEARCH AND DEVELOPMENT

Our research and development team is responsible for the design, development and release of our software. As of June 30, 2004 and 2003, our research and
development organization consisted of 56 and 47 employees, respectively. We subcontract engineers for highly specialized and discrete projects. Our research and development team focuses on developing
our more complex and strategically important

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projects.
Our total research and development expenses were € 6.1 million, € 7.0 million and
€ 7.2 million for the years ended June 30, 2004, 2003 and 2002, respectively.

4.20    FACILITIES

Our headquarters, located in Les Ulis, outside Paris, France, occupy approximately 3,500 square meters of office space under a lease, which expires on
June 30, 2009, with an option to terminate the contract every three years. We also lease regional offices located in the U.S. in Herndon (Virginia), New York (New York), and Dallas (Texas), as
well as in Europe, in London (United Kingdom), Madrid (Spain), Munich (Germany) and in Singapore for our operational center in the Asia-Pacific region with offices in Sydney (Australia)
and Tokyo (Japan). We believe that our existing facilities are adequate for our current needs and that suitable additional or alternative space should be available in the future on commercially
reasonable terms as needed.

4.21    LEGAL PROCEEDINGS

As is the case with many companies in the software industry, we have received, and may in the future receive, communications alleging possible infringement of
patents and other intellectual property rights of others. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs with respect to the defense thereof,
which could have a material adverse effect on our operating results or financial condition. In addition, if we were to lose an infringement claim against us in the future, we might have to pay
substantial damages or stop making, using or selling the technology that was determined to infringe another party's rights or products that incorporate it.

We
are currently involved in ordinary routine litigation or arbitration incidental to our business; however, we do not believe that we are party to any pending litigation or arbitration,
which has had or could have a material, adverse effect on our financial condition, activity or results. As a result, we have recorded no significant provision for litigation as of September 10,
2004.

As
of June 30, 2004, we provided for € 143 thousand for accrued litigations with former employees. This provision was calculated based on a
case by case basis considering the amounts former employees claimed along with the written advice from legal counsel on the exposure from such claims.

4.22    SEASONALITY

The following table shows the quarterly consolidated revenues over the last three fiscal years:

Year ended June 30,2004

2003

2002(In thousands)Quarter ended September 30


5,858


6,507


6,588Quarter ended December 31


6,898


6,595


7,782Quarter ended March 31


7,886


6,080


7,878Quarter ended June 30


8,045


6,340


7,155Total

€
28,687

€
25,522

€
29,403


Our
business has experienced and may continue to experience significant seasonality as described in "Item 3. Key InformationRisk Factors" and "Item 5. Operating and
Financial Review and Prospects."

4.23    RAW MATERIALS

Our business is not dependent upon any raw materials.

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4.24    MATERIAL EFFECT OF GOVERNMENT REGULATIONS

During the fiscal year 2004, there were no changes to governmental regulations in any jurisdiction in which we do business, which had a material adverse effect on
our operations or financial condition.

4.25    INDUSTRIAL AND ENVIRONMENTAL RISKS

Given our business activities, we are not particularly exposed to industrial and environmental risks. We do not store flammable or dangerous material or products
at any of our facilities, nor are we subject to any specific constraints with respect to any potential environmental risks.

We
are not aware of any industrial or environmental risk known or suspected to be associated with the development, manufacture, transport or use of our products and services. We are not
aware of any industrial or environmental risks, which affect or may affect the utilization of any of our facilities.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the discussion below in conjunction with our consolidated financial statements included elsewhere in this report, which have been prepared in
accordance with U.S. GAAP.

During
the year ended June 30, 2003, we adopted Staff Announcement Topic D-103, "Income Statement Characterization of Reimbursement Received for
"Out-of-Pocket" Expenses Incurred", which states that reimbursements received for "Out-of-Pocket" expenses should be reported as revenues and costs. As
a result, the figures below have been restated for the years ended June 30, 2002 in order to reflect the application of this new rule.

5.1    OVERVIEW

We are a leading global provider of BTI software solutions. Our solutions empower our customers to optimize their IT infrastructure for delivery of
best-in-class business services at the lowest cost. Our approach to BTI incorporates context-sensitive, pre-packaged solutions that generate breakthrough
improvements in service quality and IT efficiency. Our software collects and analyzes performance indicators from thousands of IT assets in real time, then transforms these technology metrics into
business-relevant, insightful and actionable information. Integrated views of actionable, information spanning traditional silos is presented through unified, dynamic dashboards. This information
enables decision makers at every level to continuously align IT services with business priorities. Our fully personalized and interactive portal provides visibility into real-time and
historical information essential to optimize the end-to-end service experience of the user and the underlying technology assets. We generate revenues in the form of licensing
fees on our software products and in the form of service fees from our professional services, customer support and training.

5.2    RECENT DEVELOPMENTS

5.2.1    Realignment of executive management team

On July 27, 2004, we announced a realignment of our executive management team. As part of this process, and based upon our Chairman and Chief Executive
Officer's ("CEO") proposal, the board of directors has decided on July 21, 2004 to separate the functions of the Chairman of the board and CEO. Alain Tingaud, our founder, will assume the role
of Chairman of the board and Gad Tobaly the role of CEO.

5.2.2    Stock option grants

On August 17, 2004, the board of directors granted to officers and employees of the Company options to subscribe for shares and to purchase shares, for up
to 616,300 shares.

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Stock
options giving the right to subscribe for 460,100 shares were granted under the 2000 and 2001 Plans. Each option will give the right to subscribe for new shares at the price of
€3.42 per share.

Stock
options giving the right to purchase 156,200 shares of treasury stock out of the 480,000 authorized by the shareholders' meeting of December 15, 2003 were granted under the
2004 Plan. The terms and conditions of the 2004 Plan are similar to those of the 2003 Plan. Each option will give the right to purchase existing shares at the price of €3.92 per share.

5.2.3    Strategic alliance with Micromuse

In September 2004, we announced along with Micromuse the commencement of a strategic alliance that enables enterprise and service provider customers of
both companies to deploy software solutions for fault, performance, and business service management of both software companies with minimal integration effort. Micromuse shall offer our entire line of
service aware performance management solutions as the Netcool ® /Vista product family. The Netcool ® /VistaInsight Solutions, currently available as part of the Netcool/Vista
product line, extend the Netcool suite's capabilities through performance management and reporting for systems and applications, IP Telephony, IP-VPN, and core networks. The Netcool/Vista
product family offers realtime analytics and historical trending of KPIs for customer-centric service level management across the business technology infrastructure. Also we shall offer Micromuse's
entire line of agent software for systems and applications management. Micromuse's Netcool/System Service Monitors  and Netcool/Application Service Monitors 
enhance our product offering by generating realtime health intelligence on critical business applications and providing rich, detailed data on system and application performance. The agents
proactively monitor performance thresholds enabling proactive problem resolution and alerting IT operations staff before outages affect users, customers, and revenue.

5.3    REVENUES

We generate revenues from our software licensing fees and related services provided by our professional services activities, including maintenance, consulting and
training. For the years ended June 30, 2004, 2003, and 2002, revenues from licenses represented 56.0%, 51.9%, and 62.2% of total revenues, respectively.

As
of June 30, 2004 and 2003, we had 286 and 281 active end-users of our products, respectively. We target end-users particularly in the telecommunications
and service provider industry, along with large enterprise organizations such as financial service institutions. Revenues from service provider end-users, which include telecommunications
and service provider companies, such as ISPs, MSPs and outsourcers of IT services, accounted for 66.0%, 66.6%, and 69.5% of our total revenues for the years ended June 30, 2004, 2003, and 2002,
respectively. We expect that revenues from service provider industry end-users shall continue to constitute a significant portion of our future revenues.

We
generate revenues not only through our direct sales force but also from indirect sales through channel resellers, who in turn sell our products and services to their customers. In
addition, referral partners, who we compensate for their assistance in the sales cycle of a particular customer order, influence a portion of our direct revenues. For the year ended June 30,
2004, 51.8%, 39.3%, 5.1%, and 3.8% of our revenues were recognized from direct sales, resellers, OEMs, and direct sales from partner referrals, respectively. For the year ended June 30, 2003,
56.6%, 32.2%, 5.3%, and 5.9% of our revenues were recognized from direct sales, resellers, OEMs, and direct sales from partner referrals, respectively. For the year ended June 30, 2002, 65.1%,
29.4%, 3.2%, and 2.3% of our revenues were recognized from direct sales, resellers, OEMs, and direct sales from partner referrals, respectively. We expect revenues from the different above-mentioned
channels to continue to moderately shift toward reseller and partner referral revenues in the near and mid-term.

Our
main sales regions are Europe, Americas, and the Asia-Pacific. For the year ended June 30, 2004, approximately 48.1%, 42.1%, and 9.8% of our revenues were
recognized from sales invoiced from Europe,

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Americas
and Asia-Pacific, respectively. For the year ended June 30, 2003, approximately 49.3%, 37.6% and 13.1% of our revenues were recognized from sales invoiced from Europe,
Americas, and Asia-Pacific, respectively. For the year ended June 30, 2002, approximately 58.1%, 34.3%, and 7.6% of our revenues were recognized from sales invoiced from Europe,
Americas and Asia-Pacific, respectively. We expect revenues from the Americas to continue to increase in percentage of total revenues.

5.4    COST OF REVENUES

Our cost of revenues is comprised of cost of license revenues and cost of service revenues. Cost of license revenues consists primarily of license fees paid to
third-party software vendors whose software is embedded in our products and, to a lesser extent, the costs of software packaging, production of documentation and shipping. As we continue to analyze
new third-party software products to embed into our products and license revenues evolve, we anticipate that our cost of license revenues will increase for the near term.

Cost
of service revenues consists primarily of personnel-related costs (salaries and facilities) incurred in providing services. The gross profit on service revenues is significantly
lower than on license revenues and accordingly, if a higher percentage of our revenues are generated from sales of licenses, we would expect our overall gross profit as a percentage of revenues to
increase. This expectation is based on our strategy to increasingly use partners to deliver services directly to our clients, which we believe will result in a decrease in our service revenues as a
percentage of total revenues. As service revenues evolve, we expect to adapt our customer support and professional service personnel to our maintenance, consulting and training activities.
Consequently, we anticipate that our cost of service revenues will fairly increase for the near term.

Our
cost of revenues is shown exclusive of stock compensation. The following discussion of cost of revenues and the subsequent presentation of the results of our operations, which
analyzes this expense classification and its relationship to revenues, also excludes stock compensation expense. This presentation conforms to the presentation of our consolidated statement of
operations included elsewhere in this report. Because of the magnitude and irregular timing of charges relating to stock compensation expense, we believe such presentation will help you compare
operating results over the periods presented.

5.5    OPERATING EXPENSES

Sales and marketing expenses consist primarily of salaries, commissions to sales personnel and agents, travel, tradeshow participation, advertising, public
relations, and other promotional expenses. We expect that our sales and marketing expenses will slightly decrease as a percentage of revenues for the near term. Research and development expenses
consist primarily of personnel costs associated with software product development and outsourced research and development. We expect that our research and development expenses will slightly decrease
as a percentage of revenues for the near term. We have not capitalized any software development costs as the time between technological feasibility and product release is very short, and development
costs incurred during that time are immaterial. General and administrative expenses consist primarily of salaries for financial, administrative and executive management personnel and related travel
expenses, as well as legal and accounting expenses. We expect that
these expenses will stay relatively flat as a percentage of revenues in the short and long-term.

We
have granted stock options and issued stock warrants to our employees, board members and officers on various occasions. Under U.S. GAAP, certain of these awards and sales are viewed
as additional employee compensation, which we reflect as stock compensation in our financial statements. We recognized approximately €0.4 million in share plan costs from
July 1, 2001 through June 30, 2004. See Note 13 to the consolidated financial statements for further information on stock compensation expense. Cost of services, sales and
marketing expenses, research and development expenses and general and administrative expenses are all shown exclusive of this stock compensation expense.

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5.6    PERIOD-TO-PERIOD VARIABILITY

Our business has experienced and may continue to experience significant seasonality. Sales of our products and services in Europe and certain other parts of the
world are typically adversely affected in the quarter ending September 30, as many clients reduce their business activities during the summer months. In addition, the typical timing of budget
and investment spending at our clients for the quarter ending March 31 has historically experienced an adverse seasonal effect. We believe that these trends are likely to continue to result in
significant seasonal fluctuations in our quarterly results.

5.7    RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage of total revenues represented by each item in our consolidated statements of operations.

|                                               |                                          | Year ended June 30, |      
|---------------------------------------------- | ---------------------------------------- | ------------------- | -----
|
|
|Revenues                                       |                                          |                     |      
|                                               | License revenues                         |                     | 56.0 
|                                               | Service revenues                         |                     | 44.0 
|                                               |                                          |                     |      
|Total revenues                                 |                                          | 100.0               |      
|Cost of revenues                               |                                          |                     |      
|                                               | Cost of licenses                         |                     | (2.4 
|                                               | Cost of services                         |                     | (19.9
|                                               |                                          |                     |      
|Total cost of revenues                         |                                          | (22.3               | )    
|                                               |                                          |                     |      
|Gross profit                                   |                                          | 77.7                |      
|Operating expenses                             |                                          |                     |      
|                                               | Sales and marketing expenses             |                     | (51.6
|                                               | Research and development expenses        |                     | (21.2
|                                               | General and administrative expenses      |                     | (15.1
|                                               | Stock compensation expense               |                     | (0.2 
|                                               | Restructuring costs and consulting fee   |                     | (8.7 
|                                               | Impairment charge for goodwill           |                     |     
|                                               | Amortization of goodwill and intangibles |                     | (1.3 
|                                               |                                          |                     |      
|Total operating expenses                       |                                          | (98.1               | )    
|                                               |                                          |                     |      
|Operating loss                                 |                                          | (20.4               | )    
|                                               | Other income (expense)                   |                     | (0.3 
|                                               |                                          |                     |      
|Loss before income taxes and minority interest |                                          | (20.7               | )    
|                                               | Income tax expense                       |                     | (0.9 
|                                               | Minority interest                        |                     |     
|                                               |                                          |                     |      
|Net loss                                       |                                          | (21.6               | )    
|                                               |                                          |                     |      

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The
following table sets forth, for the periods indicated, our gross margins presented for licenses and services.

Year ended June 30,2004

2003

2002All amounts in percentagesLicense gross margin(License gross profit as % of license revenues)

95.8

93.1

94.8Service gross margin(Service gross profit as % of service revenues)

54.6

49.4

44.6


Years Ended June 30, 2004, 2003 and 2002

Total Revenues

Total revenues were €28.7 million, €25.5 million, and €29.4 million for the years ended
June 30, 2004, 2003 and 2002, respectively, representing an increase of 12.4% from fiscal year 2003 to fiscal year 2004 and a decrease of 13.3% from fiscal year 2002 to fiscal year 2003.

On
a constant exchange rate basis between fiscal year 2003 and 2004, total revenues for the year ended June 30, 2004 would have been €30.6 million. Total
revenues for Europe increased 9.8% from fiscal year 2003 to 2004 with no exchange rate impact. The improvement of sales productivity that resulted from the reorganization of our European-based sales
team along with the slight recovery of the service provider space led to the restoration of revenue growth in Europe. Total revenues for the Americas increased 25.6% from fiscal year 2003 to 2004,
however on a constant exchange rate basis, total Americas' revenues increased 42.4%. Although the U.S. dollar continued to
devalue against the euro, we have experienced positive results in the Americas region that resulted from significant opportunities that came from newly developed strategic partner relationships, along
with the slight recovery of the service provider space. Total revenues for Asia-Pacific decreased by 15.9% from fiscal year 2003 to 2004, while on a constant exchange rate basis, total
Asia-Pacific revenues decreased by 6.5%. Despite the turnover of two of the three sales persons in the region during fiscal year 2004, the Asia Pacific region was still able to produce
stable, but decreasing revenue results.

On
a constant exchange rate basis between fiscal year 2002 and 2003, total revenues for the year ended June 30, 2003 would have been €27.6 million. Total
revenues for Europe decreased 26.3% from fiscal year 2002 to 2003 with no exchange rate impact. We were disappointed with the sales performance and put corrective actions in place during fiscal year
2004 to restore revenue growth. Total revenues for the Americas decreased 4.8% from fiscal year 2002 to 2003, while on a constant exchange rate basis, total Americas revenues increased 12.5%. Despite
the negative exchange rate impact, we have experienced some positive benefits from the reorganization that we implemented during the first half of fiscal year 2003, along with positive penetration in
the Americas' enterprise market. Total revenues for Asia-Pacific increased by 49.4% from fiscal year 2002 to 2003, while on a constant exchange rate basis, total Asia-Pacific
revenues increased by 71.6%. We have experienced significant revenue growth from the reorganization that we implemented during the end of fiscal year 2002, along with positive penetration in the
Asia-Pacific service provider market, particularly in terms of developing sound relationships with indirect channels and an intense focus on service providers.

License Revenues

License revenues were €16.1 million, €13.2 million, and €18.3 million for the years ended
June 30, 2004, 2003, and 2002, respectively.

The
21.3% increase in license revenues from fiscal year 2003 to fiscal year 2004 was primarily due to the improved sales productivity in both the Americas and European regions, the
development of new

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strategic
partner relationships primarily in Americas, along with our ability to capitalize on sales opportunities in two relatively new sub-sectors of the service provider market: IP VPN
and IP Telephony. License arrangements obtained through strategic partners have helped to reduce the sales lifecycle through heightened customer management, creating greater efficiencies and improved
execution. On a constant exchange rate basis between fiscal year 2003 and 2004, license revenues for the year ended June 30, 2004 would have been €17.2 million.

The
27.9% decrease in license revenues from fiscal year 2002 to fiscal year 2003 was primarily due to the unsuccessful implementation of our solutions-oriented sales model in Europe and
the decline of the U.S. dollar against the euro, which were netted against a strong increase in license revenues in Asia-Pacific. On a constant exchange rate basis between fiscal year 2002
and 2003, license revenues for the year ended June 30, 2003 would have been €14.5 million.

Service Revenues

Service revenues, including maintenance, training, and consulting services, were €12.6 million, €12.3 million, and
€11.1 million for the years ended June 30, 2004, 2003, and 2002, respectively.

The
2.7% increase from fiscal year 2003 to fiscal year 2004 was primarily due to the increase of maintenance revenues of 10.7% that resulted from both the increased install base and
strong maintenance renewal rates, netted by a decrease in both consulting and training revenues of 15.5%. The decrease in consulting revenues resulted primarily from a shift in consulting projects to
the Americas region, whose revenues experienced a negative impact from the devaluation of the U.S. dollar against the euro, while training revenues dropped as a result of our decrease of resources for
our training program. On a constant exchange rate basis between fiscal year 2003 and 2004, service revenues for the year ended June 30, 2004 would have been
€13.4 million.

The
10.8% increase from fiscal year 2002 to fiscal year 2003 was primarily due to the increase of maintenance revenues by 27.6% that resulted from both the increased install base and
strong maintenance renewal rates, netted by a decrease in both consulting and training revenues by 13.9% that resulted from the decrease in license revenues. On a constant exchange rate basis between
fiscal year 2002 and 2003, service revenues for the year ended June 30, 2003 would have been €13.1 million.

Cost of Revenues

Cost of revenues were €6.4 million, €7.1 million, and €7.1 million for the years ended
June 30, 2004, 2003, and 2002, respectively. Cost of revenues decreased between fiscal year 2003 and 2004, which can be attributed to lower average customer service headcount and third party
subcontract costs for €0.5 million and less third party product license fees of €0.2 million. Cost of revenues has been relatively flat between fiscal
year 2002 and 2003, which is primarily due to our continued push to improve service margins.

Cost
of license revenues, as a percentage of license revenues, was 4.2%, 6.9% and 5.2% for the years ended June 30, 2004, 2003, and 2002, respectively. The percentage decrease in
fiscal year 2004 compared with fiscal year 2003 was primarily due to lower variable royalty expenses that decreased from a favorable product mix. The percentage increase in fiscal year 2003 compared
with fiscal year 2002 was primarily due to the decrease of license revenues coupled with certain royalty arrangements that are fixed in nature.

Cost
of service revenues, as a percentage of service revenues, was 45.4%, 50.6%, and 55.4% for the years ended June 30, 2004, 2003, and 2002, respectively. The percentage
decreases were due to an increase in maintenance service revenues, which carry less cost of revenues than consulting and training revenues.

Sales and Marketing Expenses

Sales and marketing expenses were €14.8 million, €16.5 million, and €16.6 million for the
years ended June 30, 2004, 2003, and, 2002, respectively. The percentage decrease of 10.4% from fiscal year 2003 to

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fiscal
year 2004 can be attributed to decreased headcount, along with a favorable foreign currency translation effect of €0.9 million. Sales and marketing was relatively flat
between fiscal year 2002 and 2003, since we had maintained our annual spending on sales force and marketing/sales support teams along with discretionary marketing during this time. Headcount in
selling and marketing as of June 30, 2004, 2003, and 2002 was 68, 76, and 84 employees, respectively.

Research and Development Expenses

Research and development expenses were €6.1 million, €7.0 million, and €7.2 million for the
years ended June 30, 2004, 2003, and 2002, respectively. The percentage decrease of 13.6% from fiscal year 2003 to fiscal year 2004 was primarily due to a reduction of technology acquisitions
from €1.0 million to €0.0 million in fiscal year 2004. The percentage decrease of 2.8% from fiscal year 2002 to fiscal year 2003 was primarily due to a
reduction of research and development personnel, netted by the increase in technology acquisitions of €0.8 million. Headcount in research and development as of June 30,
2004, 2003, and 2002 was 56, 47, and 63 employees, respectively.

General and Administrative Expenses

General and administrative expenses were €4.3 million, €5.2 million, and €7.0 million for the
years ended June 30, 2004, 2003, and 2002, respectively. The percentage decreases of 15.9% from fiscal year 2003 to fiscal year 2004 and 25.7% from fiscal year 2002 to fiscal year 2003 were due
to the reduced headcount in administrative positions along with the continued reduction of legal and accounting fees. Headcount in general and administration as of June 30, 2004, 2003, and 2002
was 23, 23 and 35 employees, respectively.

Restructuring Charges

During each year ended June 30, 2004, 2003, and 2002, we effected a reduction in workforce and adopted an office rationalization plan to
re-focus our commercial activities and optimize office space in the U.S. and Germany. As a result of the restructuring plans, we accounted for restructuring charges of
€2.5 million, €1.6 million and €1.7 million for the years ended June 30, 2004, 2003 and 2002, respectively. We do not expect
to incur any additional significant restructuring charges in the near or mid-term.

Consulting Fee

During the year ended June 30, 2002, we appointed a leading management consultancy firm, to help assess our global strategy and positioning. U.S. and
European teams were selected and worked with our executives and employees to develop a three-year strategic plan that includes execution and implementation. During the year ended
June 30, 2002, €0.8 million of consulting fees were incurred of which €0.1 million were included as part of the restructuring charges. We did not
incur any significant consulting fees during the year ended June 30, 2004 and 2003. We do not expect to incur any additional significant consulting fees in the near or mid-term.

Impairment Charge for Goodwill

During the year ended June 30, 2002, we reclassified the carrying value of the workforce as of July 1, 2001 into goodwill in accordance with a new
accounting rule on goodwill in U.S. GAAP. In June 2002, we performed the annual impairment test of goodwill that resulted from our acquisition of TISS Intra GmbH and wrote-off its
entire carrying value of €1.8 million. As a result of economic conditions in Central Eastern Europe, our future cash flows forecast for this reporting unit were lowered, which
led to an impairment charge for the entire carrying value of the goodwill. We did not incur goodwill impairment charges during the year ended June 30, 2004 and 2003. We do not expect to incur
any additional goodwill impairment charges in the near or mid-term.

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Stock Compensation Expense

Stock compensation expense totaled €44 thousand, €38 thousand, and €0.3 million for the years
ended June 30, 2004, 2003, and 2002, respectively. During the year ended June 30, 2004, we incurred stock compensation from the re-measurement of certain stock options whose
terms were modified by our board of directors. During the year ended June 30, 2003 and 2002, we incurred stock compensation charges primarily from the amortization of deferred stock
compensation from pre-IPO stock options and warrants. Since September 2000, stock options and warrants have generally been issued at a price equal to the fair market value at the
date of grant. Since all deferred compensation relating to stock options granted before September 2000 has been fully amortized, we do not expect any significant stock compensation expenses in
the near term or mid-term, under the current U.S. GAAP accounting rules.

Other Income (expense)

Other income (expense) was (€0.1 million), €0.8 million, and €1.5 million for the years ended
June 30, 2004, 2003, and 2002, respectively. The decrease from fiscal year 2003 to fiscal year 2004 was primarily due to the lower income earned from a lower cash and cash equivalents coupled
with the increased loss on disposals and impairment of fixed assets of €0.5 million, which resulted primarily from the office rationalization program in fiscal year 2004. The
46.7% decrease from fiscal year 2002 to fiscal year 2003 was primarily due to the lower income earned from a lower cash and cash equivalents balance.

Income Tax Expense

We had income tax expense of approximately €0.3 million, €36 thousand and €12 thousand for
the years ended June 30, 2004, 2003, and 2002, respectively. These amounts primarily represented withholding taxes on customer cash receipts, along with the fixed annual minimum income tax
payable in various European countries. In addition, during the year ended June 30, 2004, we provided for €0.1 million to cover our estimated potential exposure to pay
income taxes as a result of an on-going tax audit as of June 2004. We do not expect significant income tax expenses in the near term or mid-term.

Impact of Changes in Exchange Rates

We operate on a multinational basis and a significant portion of our business is conducted in currencies other than the euro, our financial reporting currency. A
significant portion of our revenues and expenses are denominated in U.S. dollars and other non-euro currencies. Fluctuations in the value of the currencies in which we conduct our business
relative to the euro have caused and will continue to cause euro-translated amounts to vary from one period to another. Also, currency rate movements on non-euro denominated
assets and liabilities, including intercompany accounts, can result in the reporting of transaction gains or losses in our consolidated statement of operations. Foreign currency transaction gains or
losses that are related to intercompany investments that are considered long-term in nature are recorded in cumulative translation adjustment as a separate component of stockholders'
equity. Our net exchange loss for the years ended June 30, 2004, 2003, and 2002 was €0.1 million, €0.2 million, and
€0.7 million, respectively. These amounts represent both realized and unrealized gains or losses from foreign currency transactions or balance sheet items. Our foreign currency
net investments are not hedged by currency borrowings and other hedging instruments. Due to the constantly changing currency exposures and the volatility of currency exchange rates, we cannot predict
the effect of exchange rate fluctuations on future consolidated operating results.

Impact of Inflation

We believe that inflation has not had a material effect on our consolidated results of operations during each of the three years ended June 30, 2004.

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5.8    LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2004 and 2003, we had cash and cash equivalents amounting to €26.8 million and €37.9 million.
As of June 30, 2004, cash and cash equivalents were held in euros, U.S. dollars, British pound and Singapore dollars for an amount equivalent to €22.8 million,
€3.6 million, €0.3 million and €0.1 million respectively. As of June 30, 2003, cash and cash equivalents were held in euros,
U.S. dollars and British pounds for an amount equivalent to €34.3 million, €2.9 million and €0.5 million respectively. We have
financed our operations primarily through the sale of equity securities. On July 7, 2000, we completed an IPO of 6,000,000 common shares at the issue price of €12.80 per share.
The net proceeds to us of the IPO were €68.7 million, after deduction of expenses of €8.2 million. During the years ended June 2004, 2003 and 2002,
proceeds from the exercise of stock options and warrants for the subscription of shares were €0.3 million, €23 thousand, and
€0.3 million, respectively. As of June 30, 2004, we have no indebtedness.

As
of June 30, 2004 and 2003, we had working capital, defined as current assets less current liabilities, of €31.0 million and
€39.7 million, respectively. Cash, cash equivalents, and marketable securities were €32.7 million and €43.8 million as of
June 30, 2003 and 2002, respectively. Because we do not yet generate a positive cash position from our operations, the main indicator of our liquidity is our net cash provided by financing
activities, which includes funds from our capital increases. These have led to a significant positive cash position as of June 30, 2004 and 2003.

For
the years ended June 30, 2004 and 2003, we had Days Sales Outstanding ("DSO") of 107 and 75 days, respectively. We calculate DSO by dividing net accounts receivable at
the end of a period by annual revenues, which is then multiplied by the number of days in the given year. This rise in our DSO primarily resulted from exceptionally strong cash collection during the
last months of fiscal year 2003, along with an increase of billings in fiscal year 2004. We expect that we will return to and maintain our normal DSO level at around 90 days during fiscal year
2005.

Net
cash used by operating activities was €6.5 million, €7.5 million, and €5.3 million for the years ended
June 30, 2004, 2003, and 2002, respectively. The decrease in cash used by operating activities from fiscal year 2003 to 2004 can be attributed to a significantly lower net loss, netted by the
lower cash receipts on revenues in fiscal year 2004. During the year ended June 30, 2004, €2.5 million of cash was spent on restructuring charges. The increase in cash
used by operating activities from fiscal year 2002 to 2003 was primarily due to a higher net loss in fiscal year 2003, excluding non-cash items such as the write-off of
goodwill and stock compensation expenses. During the year ended June 30, 2003, €3.7 million of cash was spent on exceptional operating activities, which includes
technical acquisitions, payment on restructuring charges and consulting fees.

Net
cash used by investing activities was €0.6 million, €1.6 million, and €7.6 million for the years ended
June 30, 2004, 2003, and 2002, respectively. For the year ended June 30, 2004, investing activities primarily consisted of the €0.1 million purchase of shares in
Network Physics and the acquisition of computer and office equipment. For the year ended June 30, 2003, investing activities primarily consisted of the €0.9 million
purchase of shares in Network Physics and the acquisition of computer and networking equipment. For the year ended June 30, 2002, investing activities primarily consisted of the
€6.0 million purchase of a marketable security, KLEBER 2006, and the acquisition of computer and networking equipment and leasehold improvements for new office space.

Net
cash (used) generated by financing activities was (€4.0 million), (€3.0 million), and €28 thousand for the years
ended June 30, 2004, 2003 and 2002, respectively. Net cash used by financing activities for the year ended June 30, 2004 primarily consisted of €4.3 million for
purchase of treasury stock net of proceeds from issuance of stock options and warrants. Net cash used by financing activities for the year ended June 30, 2003 primarily consisted of the
€2.7 million purchase of treasury stock net of proceeds from issuance of treasury stock and the €0.3 million final repayment of the ANVAR cash advance.
Net cash generated by financing activities for the year ended June 30, 2002 primarily consisted of the €259 thousand

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partial
repayment of the ANVAR cash advance and the €287 thousand proceeds from exercise of stock options and from subscription and exercise of warrants.

As
of June 30, 2004, we had available net operating loss carry forwards of approximately €46.5 million. Of these net operating loss carry forwards,
€23.3 million will expire between the years ended June 30, 2013 and 2024 and €23.2 million have no expiration date. They are subject to review and
possible adjustment by the appropriate tax authorities.

We
believe that our current cash balances and the cash flows generated by operations, if any, will be sufficient to meet our anticipated cash needs for working capital and capital
expenditures for the next 18 months. Information regarding operating leases is available in Note 11 to our consolidated financial statements. Thereafter, if cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or convertible debt securities or obtain credit facilities. The decision to sell additional
equity or debt securities could be made at any time and would likely result in additional dilution to our stockholders. A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies. From time to time, in the ordinary course of business, we evaluate potential acquisitions of such businesses, products
or technologies. Information regarding technological acquisitions is available in Note 15 to our consolidated financial statements.

5.9    CRITICAL ACCOUNTING POLICIES

We consider the accounting policies described below as critical in preparing our consolidated financial statements. These policies include significant estimates
made by management using information available at the time the estimations are made. A more detailed description of the significant accounting policies used by us in preparing our financial statements
is included in Note 1 to the consolidated financial statements.

Revenue recognition

Our revenue recognition policy is significant because revenue is a key component of our results of operations.

Revenues
from sales of our licenses to our end-user clients are recognized generally when we receive a purchase order and/or other written contractual documentation
(depending on the requirement of the client), we deliver the software (assuming no significant obligations on our part remain), collection of the resulting receivable is probable and the amount of
fees is fixed or determinable. We provide for allowances for estimated future returns from our clients upon shipment. We recognize reseller license revenues on the same basis as for direct sales to
end-user clients, except for an additional procedure in which we receive either a copy of the purchase order between the reseller and end-user or a written certification from
the reseller that confirms that the licenses have been sold through a named end-user. We recognize license revenues from our OEMs either after receipt of a quarterly report of their
sales made in a given period or upon receipt of a purchase order.

Our
customers purchase maintenance services for an initial period (typically 12 months) as part of the purchase of the license. Generally, the subsequent year maintenance services
are automatically renewable for subsequent 12-month periods, unless either party cancels. Payments for maintenance fees (on initial or renewal orders) are generally made in advance and are
non-refundable. We defer revenues for maintenance services and recognize them ratably over the term of the maintenance sold. Revenues from purchase orders received for consulting, training
and other support services are generally recognized as the services are performed. The revenue recognition policies for services are the same regardless of the sales channel used. Service revenues are
not shared between our resellers and us. End-users either enter into a service contract directly with us or with a reseller. We account for the reimbursement of
"out-of-pocket" expenses as service revenues, as these costs are incurred.

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Since licenses are almost always sold with maintenance services, we recognize the amount of license revenue in a license and maintenance package based on the residual value method. The
fee allocated to maintenance services is based upon the fee charged to renew these maintenance services. Significant discounts offered on other services are generally allocated to the delivered
license portion of the fee. License revenues and service revenues that have been prepaid or invoiced but that have not yet been recognized as revenues under our policy are reflected as deferred
revenues.

Trade receivables

Trade receivables are carried at anticipated net realizable value. Doubtful accounts are provided for on the basis of anticipated collection losses. The estimated
losses are determined from historical collection experience and a review of outstanding accounts receivable.

Foreign currency translation

Generally, our functional currency and our subsidiaries is the applicable local currencies in accordance with Statement of Financial Accounting Standards
("SFAS") 52, "Foreign Currency Translation", while our reporting currency is the euro.

All
our assets and liabilities and our subsidiaries with functional currencies other than euro are translated into euro equivalents at exchange rates as follows: (1) asset and
liability accounts at the rate of exchange in effect on the balance sheet date, (2) revenues and expenses at the average rate of exchange for the year, and (3) shareholder's equity
accounts at historical exchange rates. Generally, transaction gains or losses are reflected in net income (loss). Transaction gains or losses that are related to intercompany investments that are
considered long-term in nature are recorded in cumulative translation adjustment as a separate component of shareholder's equity.

5.10    TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")

The implementation of International Financial Reporting Standards ("IFRS") is mandatory for each fiscal year starting on or after January 1, 2005, for all
publicly traded companies governed by the law of a Member State of the European Union. We currently report our results in French and U.S. GAAP to the French and American financial markets,
respectively. The implementation of IFRS will replace our French GAAP consolidated financial reporting in fiscal year 2006. In regards with our reporting to the American market, we currently intend to
continue to report in U.S. GAAP, but may elect to apply IFRS and provide a reconciliation between U.S. GAAP and IFRS.

Internal organization

During fiscal year 2004, we launched a project in order to prepare for the transition to IFRS. The objectives of this project are (i) to ensure the proper
and timely implementation of IFRS, (ii) to decide on accounting options, (iii) to report to our Audit Committee & executive management team and (iv) train our finance and
accounting staff on IFRS accounting policies ("IFRS project"). Since we have a fairly centralized finance and accounting team, our Vice-President of Finance, under the direct supervision
of our Chief Financial Officer, manages the IFRS project.

The
initial phase of the IFRS project (the so-called "diagnosis phase") started in fiscal year 2004 in order to identify the possible differences between IFRS and our
accounting standards currently applied. We organized training sessions for certain members of our finance and accounting teams and have hired a third party consultant to assist us. In addition, we
have had some informal discussions with our independent auditors on the impact of IFRS.

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Impact of the standards

A certain number of standards have not yet been finalized or have been only recently finalized, while others have not been yet approved by the European
Commission, including (i) IFRS 3 regarding business combinations and the related modifications to International Accounting Standard ("IAS") 36 (impairment of assets) and IAS 38 (intangible
assets), (ii) IFRS 5 relating to the disposal of
non-current assets and presentation of discontinued operations and (iii) revisions to IAS 39 (macro-hedging).

IFRS
1, which sets forth the procedures that an entity must follow when it adopts IFRS for the first time, provides for a certain number of options, which we are currently studying.

Otherwise,
based on the IFRS voted by the International Accounting Standards Board ("IASB") and the proposals under examination, differences may impact our current French GAAP accounting
policies, which include primarily:



Due
to the measures that we have implemented, an opening balance sheet as of July 1, 2004, adjusted in conformity with IFRS, should be prepared and available at the same time as
the publication of the financial statements for fiscal year 2005, which will be published in French standards for the last time. Following such date, interim financial statements in fiscal year 2006
will be prepared in conformity with
IFRS. Comparative information for prior periods, as adjusted to reflect the accounting standards used in fiscal year 2005, will also be made available.

5.11    FORWARD LOOKING STATEMENTS

This report includes forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events.
These forward-looking statements are subject to risks, uncertainties, and assumptions about us, including, among other things:



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Except
as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

Forward Looking Discussion of Available Trend Information

The statements below are part of a forward-looking discussion on available trend information based on our current knowledge and beliefs. Actual results may differ
significantly from those indicated below for the reasons set forth above under the captions "Forward Looking Statements" and "Risk Factors":

On
July 27, 2004, we announced that our results for the fourth quarter and fiscal year 2004 demonstrated our success in meeting and exceeding our targets, delivering on all of our
our 3-years strategic plan goals and positioning ourselves for accelerated growth in the coming years. We look to fiscal year 2005 with confidence, driving forward a company characterized
by superior positioning, execution and vision. We expect to continue to yield success from our business partnership strategy in fiscal year 2005, resulting in significant new sources of revenue and
generating further strategic partnerships through increased market visibility. In order to build upon our success and expand our leadership in the market, we will be making additional investments in
our research and development and sales and marketing teams during the first quarter of fiscal year 2005, enabling ourselves to further strengthen our competitive advantages.

In
addition, we announced on July 27, 2004, that based on our strong results for the last three consecutive quarters of fiscal year 2004, a proven strategy and stronger corporate
structure, we have a positive and confident outlook for the fiscal year 2005. We expect momentum to continue into the first quarter of fiscal year 2005 and, with a number of deals already booked in
July 2004, we believe that we will achieve revenues for the first quarter of fiscal year 2005 of between €7.2 and €7.6 million, representing a
year-on-year increase of approximately 25%. We do not expect to record positive EBITDA in the first quarter of fiscal year 2005. Starting in the second quarter and for the
fiscal year 2005, we expect to achieve a positive EBITDA performance. In conclusion, fiscal year 2004 can be seen as the year of our successful turnaround and the outlook for fiscal 2005 is very
promising.

On
September 20, 2004, we conducted a SFAF meeting, during which we communicated on our opinion of our estimated addressable market. For the year 2003, we estimated that the total
addressable market for IP Network Performance was at €850 million. For the year 2005, we anticipated a growth of more than 40% of our addressable market in the amount of
approximately €1.2 billion. This includes the Server Management sector for €110 million, the IP Telephony sector for €120 million,
the IP VPN sector for €120 million and the remaining IP Network Performance sector.

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5.12    OFF-BALANCE SHEET COMMITMENTs

The following table represents our contractual obligations as of June 30, 2004:

|                                  |  |   |       | Payments due by period
|--------------------------------- |  | - | ----- | ----------------------
|
|
|Long-term debt obligations        |  | € |      |                       
|Capital finance lease obligations |  |   |      |                       
|Operating lease obligations       |  |   | 4,541 |                       
|Purchase obligations              |  |   | 486   |                       
|Other long-term liabilities       |  |   | 113   |                       
|                                  |  |   |       |                       
|                                  |  | € | 5,140 |                       
|                                  |  |   |       |                       

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

In accordance with French law governing asociété anonyme, our affairs are managed
by our board of directors, which determines our strategy and oversees its implementation, along with our Chairman (Président du Conseil
d'administration). Ourstatutsgrant the Chief Executive Officer full executive authority to manage our affairs, subject to
prior authorization of the board of directors or the general shareholders' meeting for certain decisions designated by law. French company law number 2001-420 dated May 15, 2001,
published on May 16, 2001 (the "Law of May 15, 2001"), gives the board of directors the right to elect one person to assume the position of Chairman and Chief Executive Officer or to
split these functions between two different persons (the Chairman of the board and another natural person bearing the title of Chief Executive Officer or "Directeur
Général"). Ourstatutswere modified at our general shareholders' meeting on December 13,
2001, to provide for such a choice. (See "Item 10.2.2 General Shareholders' Meeting"). The board of directors has decided to split these two functions on July 21, 2004, which are currently
performed respectively by Mr. Alain Tingaud and Mr. Gad Tobaly.

6.1    BOARD OF DIRECTORS

Currently, the board of directors consists of six members of which five are considered independent (i.e. with no relation of whatever nature with us or our
management, which may influence their judgment. This is in accordance with the definition as proposed by the FrenchRapport Boutondated
September 23, 2002, which provides for recommendations on corporate governance). Ourstatutscurrently provide that our board of directors shall
consist of between three and eighteen members elected by a general shareholders' meeting. Each director must own at least one of our shares. Ourstatutsprovide that each director is elected for a term of one year, which may be renewed. Our board of directors has met nine times during the course of fiscal year 2004. Our directors' attendance rate to
the nine board meetings held during the course of fiscal year 2004 was 92%. None of our shareholders has the exclusive right to appoint a director to the board of directors. There is no arrangement or
understanding with major shareholders, clients, suppliers or others, pursuant to which any person referred to below was selected as a director or member of the senior management team. None of our
directors were appointed by employees and there are no advisors within the board of directors.

The
board of directors intends to adopt internal regulations which would, among other things, provide for measures aimed at evaluating the board of directors' performance.

The
board of directors cannot increase the number of members of the board. Only the shareholders, acting pursuant to a simple majority, can do so. Under French law, a director may be an
individual or a legal entity, but the Chairman and/or the Chief Executive Officer must be individual(s). The board of directors elects the Chairman and/or Chief Executive Officer. Directors are
elected by the shareholders

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and
serve until the expiry of their respective terms, or until their resignation, death or removal, with or without cause by the shareholders. Under certain conditions, the board of directors may fill
vacancies on the board of directors, pending the next general shareholders' meeting, however, the board of directors has the power to appoint and remove the Chairman of the board at any time.

In
consideration of their services on the board, directors are entitled to receivejetons de présence(directors' fees. The
total annual amount ofjetons de présenceis fixed by the general shareholders' meeting, but the board determines their allocation among
the directors. In addition, remuneration may be granted to directors on a case-by-case basis for special assignments. A director may not vote for his or her own remuneration.
If he or she does vote, the decision is void. The board may also authorize the reimbursement of travel and accommodation expenses as well as other expenses incurred by directors in the corporate
interest. In April 2001, the compensation committee and the board of directors discussed and adopted rules determining the directors' fees allocation. These rules are updated from time to time.
They currently provide for a fixed and a variable remuneration to
be allocated to directors according to their regular attendance to board meetings and active participation in one or several committees.

The
Chairman and/or Chief Executive Officer are entitled to receive remuneration in addition to thejetons de présencegranted by the general shareholders' meeting. The board of directors determines this additional remuneration and in this case, the Chairman and/or Chief Executive Officer can vote on a resolution
concerning his or her remuneration.

Under
French law, the board of directors presents the year-end accounts to the shareholders and convenes general shareholders' meetings. In addition, the board of directors
reviews and monitors our economic, financial and technical strategies.

French
law and ourstatutspermit the board of directors to appoint up to five persons to whom the board of directors may delegate general
or specific powers ("Directeurs Généraux Délégués").The Chief Executive
Officer proposes theDirecteurs Généraux Déléguésand the board of directors
determines their specific management powers and responsibilities. Under French law and ourstatuts, aDirecteur
Général Délégué, like the Chief Executive Officer, has broad powers to represent and bind us in
dealing with third parties. TheDirecteur Général Déléguémay be removed by
the board of directors at any time upon the proposal of the Chief Executive Officer. TheDirecteur Général
Déléguémay be held individually responsible for his/her actions if they are deemed contrary to our interests. Philippe Ozanian was
appointedDirecteur Général Déléguéby the board of directors on
September 26, 2001.

Meetings
of the board of directors, which are held as often as required in the corporate interest, are normally convened by the Chairman. According to our statuts, directors who take part in a meeting of the
board by means of a videoconference are deemed to be present, for calculating the quorum and the
majority. According to French company law and ourstatuts,if the board of directors has not met for more than two months, at least
one-third of the members of the board of directors may request that the Chairman convene the board of directors regarding matters listed on the agenda for the meeting. According to our statuts, a quorum
consists of one-half of the members of the board of directors (with a minimum of two members) and decisions are taken by a
vote of the majority of the members present, deemed to be present or represented by other members of the board of directors. A director may give a proxy to another director but a director cannot
represent more than one other member at any particular meeting. Members of the board of directors represented by another member at meetings do not count for purposes of determining the existence of a
quorum. A director may not vote for an arrangement or contract in which he or she is materially interested. If he or she does vote, the decision is void.

Under
French law and ourstatuts, our board of directors must give prior authorization for any security, pledge or guarantee by us. This
authorization is generally granted for a period of one year. If the security, pledge or guarantee has not been previously authorized by the board of directors, this security, pledge or guarantee shall
have no effect to us.

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The French Commercial Code (Code de Commerce) strictly forbids loans by a company to its directors. No company may provide overdrafts for
directors or guarantee any director's obligations. This prohibition also applies to specified executive officers (Directeur Général and Directeurs
Généraux Délégués), permanent representatives of companies on the board of directors, spouses or
heirs of such persons and other intermediaries.

The
French Commercial Code requires directors,Directeur Général, one of its Directeurs Généraux Délégués, one
of our shareholders having a fraction of
the voting rights greater than 10%, or if a shareholder company, the company controlling it, that are considering either directly or indirectly, personally or through an intermediary, entering into an
agreement with the company, to inform the company's board of directors as well as its independent auditors before the transaction is consummated. French law also requires such an agreement to be
authorized by the board of directors and the director in question may not vote on the issue. French law further requires such an agreement to be submitted to an ordinary general shareholders' meeting
for approval once entered into, upon presentation of a special report from the independent's auditors. Any agreement entered into in violation of these requirements may be voided by the Commercial
Court at our request or any shareholder, if such agreement is contrary to the interests of the company. Moreover, French law also states that agreements which are entered into in the ordinary course
of business and with terms and conditions which are not out of the ordinary are not subject to the prior authorization of the board of directors. Nevertheless, such agreements must be disclosed by the
interested party to the Chairman of the board except when they are not significant for any parties because of their purpose or financial impact. The list and purpose of such agreements must be
communicated by the Chairman of the board and to the independent auditors.

Under
French law, directors are liable for violations of French legal or regulatory requirements applicable tosociétés
anonymes, violation of ourstatutsor mismanagement. A director may be held liable for such actions both individually and
jointly with the other directors.

Ourstatutsdetermine the retirement age of our directors. Our board of directors may not have more than a third of its members who exceed
the age of 75. If this limit is reached, the oldest director is deemed to have resigned during the next general shareholders' meeting following his or her 75th birthday. The mandates of
aDirecteur Généralor aDirecteur Général
Déléguémay not continue beyond the general shareholders' meeting following his or her 70th birthday.

The
table below sets forth, as of September 10, 2004, the name and year of birth of each of our directors, their current positions with our company, the dates of their initial
appointment as directors, the expiration dates of their current terms (which dates, with respect to the legal entities listed below, refer to

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the
appointment and term of such legal entity) and their current principal occupation or employment. There is no family relationship between any of the persons listed in the table below.

|Name (Year of birth)        |  | Date of
appointment |     | Term
expiry date(1) |  | Current title
with InfoVista |  | Main occupation outside
InfoVista |  | Other positions
or employment                                                                          
|--------------------------- |  | ------------------- | --- | ------------------- |  | ---------------------------- |  | --------------------------------- |  | -------------------------------------------------------------------------------------------------------
|Alain Tingaud (1954)        |  | 1995                |     | Dec. 2004           |  | Chairman and Director        |  |                                   |  |                                                                                                        
|                            |  |                     |     |                     |  |                              |  |                                   |  |                                                                                                        
|Jean-Paul Bernardini (1962) |  | 1998                | (2) | Dec. 2005           |  | Director                     |  |                                   |  |                                                                                                        
|Guy Dubois (1954)           |  | 2003                |     | Dec. 2004           |  | Director                     |  |                                  |  | Executive Vice-President International Operations at PeopleSoft International                          
|Herbert May (1949)          |  | 2000                |     | Dec. 2004           |  | Director                     |  |                                  |  | Management Consultant in Strategy, Marketing, Multimedia Telecommunications, and Information Technology
|Hubert Tardieu (1945)       |  | 1998                |     | Dec. 2004           |  | Director                     |  |                                  |  | Executive Vice-President of Global Systems Integration at Atos Origin                                  
|Peter Waal (1932)           |  | 2000                |     | Dec. 2004           |  | Director                     |  |                                  |  | Principal of Waal Associates (consulting)                                                              

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Directors Business Activities

Alain Tingaudhas served as Chairman since 1995 (this mandate was renewed by the board of directors on
December 15, 2003). He has also served as Chief Executive Officer from 1995 to July 21, 2004. Since 1998, he has substantially devoted all his professional time to our business. From
1991 to 1995, Mr. Tingaud was the Chairman and Chief Executive Officer of ARCHE Communications, which has been a subsidiary of Siemens since 1995. From 1995 to 1998, Mr. Tingaud held
various other positions within the Siemens group, including Chairman and Chief Executive Officer of Groupe Siemens Nixdorf France S.A. (1997-1998) and of Siemens Business Service France
S.A. (1996-1998). From 1987 to 1991, Mr. Tingaud held various positions at 3Com, including Vice-President of 3Com Southern Europe and Vice-President of
Strategy & Business Development. Mr. Tingaud created Alain Tingaud Innovations EURL and that company is a director of Mediapps, Château-on-line,
Maneos Ltd, RealViz S.A. and Ecensity Corp. Mr. Tingaud is also a director of InfoVista Corp, InfoVista UK, InfoVista
(Asia-Pacific) Pte Ltd and Chairman of the board of directors of InfoVista Enterprise Solutions. Mr. Tingaud holds a diploma in Technology from the University of Poitiers.

Mr. Tingaud
may be contacted at our head office, 6, rue de la Terre de Feu, 91940, Les Ulis, France.

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Jean-Paul Bernardinihas served within the Private Equity sector for the past 15 years. Until recently, he was a
partner at PAI, one of Europe's largest players in the sector. During his term at PAI, he successfully managed the investments within sectors as diversified as transportation, construction, computer
services, software, telecommunication, electronics and electric equipment.

Mr. Bernardini
can be contacted at 9, boulevard du Château, 92200 Neuilly sur Seine, France.

Herbert Mayis a management consultant and investor. He specializes in strategy, sales, multimedia, telecommunications, and information
technology. He is a director of In-Fusio, Versant, Gate5, Netlinx and o3sis.

Mr. May
may be contacted at Management Beratungs und Beteiligungs-GmbH, Johannisstr. 20, D-10117 Berlin, Germany.

Hubert Tardieuis Executive Vice-President Global Systems Integration at Atos Origin.

Mr. Tardieu
may be contacted at Atos Origin, Tour Horizon, 64 rue du 8 mai 1945, 92025 Nanterre Cedex, France.

Peter Waalis one of the senior partners of Waal Associates, a consulting firm specializing in telecommunications. He also currently
serves on the Technical Advisory Board of Teloptica Inc.

Mr. Waal
may be contacted at PO Box 796249, Dallas, TX 75379-6249, USA.

Guy Duboisis Executive Vice-President International Operations at PeopleSoft International.

Mr. Dubois
may be contacted at 8, rue Dupont des Loges, 75007 Paris, France.

6.2    EXECUTIVE OFFICERS

The table below shows, as of September 10, 2004, the name and year of birth of each of our executive officers (Executive Committee members) and their
responsibilities at our company.

|Name (Year of birth)    |  | Initially
appointed |  | Current position with InfoVista                                          
|----------------------- |  | ------------------- |  | -------------------------------------------------------------------------
|Gad Tobaly (1963)       |  | 2004                |  | Directeur GénéralChief Executive Officer                                 
|Philippe Ozanian (1963) |  | 2000                |  | Directeur Général DéléguéChief Financial Officer
Executive Vice-President
|Manuel Stopnicki (1963) |  | 1995                |  | Chief Technical Officer
Executive Vice-President                         

As
of September 10, 2004, no family relationships existed between any of the persons listed in this table. In addition, none of our company's material assets were employed by any
of our executive officers, directly or indirectly.

Executive Officers' Biographies

Gad Tobalywas appointedDirecteur
Généralby the board of directors on July 21, 2004. Prior to this appointment, Mr. Tobaly served as Chief Operations Officer. Prior
to joining InfoVista in January 2004, Mr. Tobaly was Senior Vice President & General Manager at Computer Associates from 1999 to 2003. Mr. Tobaly joined Computer Associates
in the U.S. upon the acquisition of Platinum Technology, Inc, of which he was Chief Executive Officer for France from 1996 to 1999. Mr. Tobaly earned mathematics and physics degrees from the
Paris Jussieu University and has a Masters degree in management information systems from Paris-Dauphine University.

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Philippe Ozanianwas appointedDirecteur Général
Déléguéby the board of directors on September 26, 2001 (this mandate was renewed by the board of directors on
December 15, 2003) and serves as Chief Financial Officer and Executive Vice-President. Prior to joining InfoVista S.A. in November 2000, Mr. Ozanian was director of
Human Resources and Communications at Johnson & Johnson France and Benelux from 1999 to 2000. Mr. Ozanian served as director of Strategy and Development at Siemens from 1996 to 1999, and
from 1987 to 1996, he was director of Human Resources at Olivetti France. Mr. Ozanian has a Masters in law, a Masters in Management and further postgraduate studies in law and management.
Mr. Ozanian is a director of InfoVista Corp., InfoVista (Asia-Pacific) Pte Ltd, InfoVista BNL, InfoVista GmbH, InfoVista UK Ltd and InfoVista Enterprise Solutions.

Manuel Stopnickihas served as Chief Technology Officer and Executive Vice-President since June 1995. Before 1995,
Mr. Stopnicki served in various positions at M.F.I. (1987-1995), the software service company that was the predecessor company to InfoVista S.A. Mr. Stopnicki is a graduate
ofEcole Supérieure d'Informatiquein Paris with a Masters in Engineering and Computer Science. Mr. Stopnicki is a director of
InfoVista Enterprise Solutions.

All
of our executive officers may be contacted at our head office, 6, rue de la Terre de Feu, 91940, Les Ulis, France.

6.3    CORPORATE GOVERNANCE

On January 11, 1999, we established three committees of the board of directors.

6.3.1    Audit Committee

The board of directors has an audit committee, which meets at least four times a year, comprised of Messrs. Bernardini and Waal, whom we consider to be
independent board directors. This committee is responsible for providing advice to the board of directors on financial and accounting matters, in particular with respect to our financial statements,
the audit of our investment program and the choice of accountants. The audit committee established by the board of directors is in compliance with generally accepted business practices in France. For
this reason, on September 7, 2000, we were granted a permanent exemption from Nasdaq's Independent Director and Audit Committee requirements.

During
the year ended June 30, 2004, the Audit committee met four times and its two members attended all meetings. Over the same period, the committee's main activities consisted
in advising and assisting the board of directors with the monitoring of:



In
addition to the Audit Committee's contact with management, our Audit Committee freely meets with our directors of finance and independent auditors, in and outside the presence of our mandataires sociauxand other senior managers.

The
audit committe includes a financial expert, Mr. Bernardini, as defined in Item 16A of Form 20-F. Mr. Bernardini is considered to be an independent
board director.

The
audit committee adopted a charter defining its role, responsibilities and rules of organization. This charter was approved by the committee and the board of directors on
July 21, 2004.

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6.3.2    Compensation Committee

The board of directors has a compensation committee, comprised of Messrs. Bernardini, Dubois and May, whom we consider to be independent board directors.
The compensation committee meets at least four times a year and is responsible for proposing salaries and incentives, including stock options and other profit sharing programs, of our officers and key
personnel to the board of directors.

During
the year ended June 30, 2004, the members of the compensation committee had nine meetings, with a 97% attendance rate. The mission of the compensation committee primarily
consists of examining, verifying and/or proposing mainly the following:



The
compensation committee adopted a charter defining its role, responsibilities and rules of organization. This charter was approved by the committee and the board of directors on
July 21, 2004.

6.3.3    Investment Committee

The board of directors has an investment committee, comprised of Messrs. Dubois, May, Tardieu and Waal, whom we consider to be independent board directors,
which is responsible for defining general investment priorities, including potential acquisitions, our goals for return on equity, and financial oversight procedures.

The
investment committee meets on an "as-needed" basis to review certain technology acquisition projects and the decisions to purchase shares in Network Physics and related
opportunities. During the year ended June 30, 2004, the investment committee did not conduct any meetings.

The
investment committee adopted a charter defining its role, responsibilities and rules of organization. This charter was approved by the committee and the board of directors on
July 21, 2004.

6.4    (RESERVED)

6.5    COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS ("MANDATAIRES SOCIAUX")

During the year ended June 30, 2004, the board of directors have not received any benefits in kind but have received fees relating to services rendered
during fiscal years 2004 and 2003, within the limits specified by the shareholders during the general shareholders' meeting held on December 13, 2001. At the general shareholders' meeting held
on December 13, 2001, the shareholders approvedjetons de presenceof €150,000 as the amount that may be allocated to the
directors for the year ended June 30, 2002 and for every fiscal year thereafter until a contrary decision of the shareholders is made, and granted the board of directors full authority to
allocate these fees between directors, in full or in part, in accordance with the terms to be established by the board of directors.

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During the year ended June 30, 2004, the fees paid to non-executive directors for services rendered during the year ended June 30, 2003 amounted to
€28,125. The fees paid to non-executive directors for services rendered during the year ended June 30, 2004 amounted to €75,000
(€60,000 paid during the year ended June 30, 2004 for services rendered during the first three quarters of that fiscal year and €15,000 paid during the fiscal
year 2005 for services rendered during the last quarter of the year ended June 30, 2004).

The
table below sets out the compensation and benefits paid to themandataires sociauxduring fiscal year 2004, and the directors' fees
paid during fiscal year 2004 for service rendered during fiscal year 2004 and fiscal year 2003.

|                     |  | Gross compensation
(including variable
component) |   | Other benefits |          | Fees paid for
services rendered
during
fiscal year 2004 |   | Fees paid for
services rendered
during
fiscal year 2003 |  | Total
payments
|-------------------- |  | ------------------------------------------------- | - | -------------- | -------- | ------------------------------------------------------- | - | ------------------------------------------------------- |  | --------------
|Alain Tingaud        |  | €261,690 (58,887                                  | ) | €              | 19,492   |                                                         | € |                                                        |  | €             
|Philippe Ozanian     |  | 197,584 (50,625                                   | ) |                | 38,655   |                                                         |   |                                                        |  |               
|Didier Lesteven      |  | 185,574 (42,333                                   | ) |                | 180,794  |                                                         |   |                                                        |  |               
|Jean-Paul Bernardini |  |                                                  |   |                |         |                                                         |   | 6,925                                                   |  |               
|Bruce Cohen          |  |                                                  |   |                |         |                                                         |   | 6,425                                                   |  |               
|Marco Landi          |  |                                                  |   |                |         |                                                         |   | 6,425                                                   |  |               
|Herbert May          |  |                                                  |   |                |         |                                                         |   | 12,308                                                  |  |               
|Guy Dubois           |  |                                                  |   |                |         |                                                         |   | 5,050                                                   |  |               
|Hubert Tardieu       |  |                                                  |   |                |         |                                                         |   | 11,308                                                  |  |               
|Peter Waal           |  |                                                  |   |                |         |                                                         |   | 11,558                                                  |  |               
|                     |  |                                                   |   |                |          |                                                         |   |                                                         |  |               
|Total                |  | €644,848 (151,845                                 | ) |                | €238,941 |                                                         |   | €60,000                                                 |  |               
|                     |  |                                                   |   |                |          |                                                         |   |                                                         |  |               

The aggregate amount of gross compensation that we paid to our executive officers as a group (5 persons in all during the year ended
June 30, 2004 and 4 persons in all as of June 30, 2004), for services in all capacities during the year ended June 30, 2004 was €1,195,988. Part of this amount was
in the form of performance-related bonuses paid to our executive officers, the calculation of which is based on revenues. The compensation of our executive officers and key personnel is proposed or
reviewed by the compensation committee of the board of directors. See "Item 6.3.2. Corporate GovernanceCompensation Committee" above.

There
are currently no director's service contracts between any of our directors and us that provide for benefits upon termination of employment.

However,
Mr. Tobaly is entitled to receive compensation equal to 12 months of his compensation, and fully accelerated vesting of his stock options, if we terminate his
employment other than for cause. Mr. Ozanian is also entitled to receive compensation equal to 12 months of his compensation if we terminate his employment other than for cause, or if he
resigns because of a change in his position or responsibilities.

64

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The
following table sets out the holdings of shares, stock options and warrants by directors and executive officers as of September 10, 2004.

Security type

Directors(1)

Executive
Officers(2)Options(3)

130,755
(4)
1,174,568
(5)Warrants(3)

224,998
(6)
1,000
(7)Shares

1,245,682

30,533Total

1,601,435

1,206,101


---

During year ended June 30, 2004, the board of directors granted a total of 251,761 stock options giving right to subscribe for the same
number of shares to threemandataires sociauxas follows:

|                 |  | Total number of stock options granted
during fiscal year 2004 |  |                                                          |  |  
|---------------- |  | ------------------------------------------------------------- |  | -------------------------------------------------------- |  | -
|
|
|Alain Tingaud    |  | 130,755                                                       |  | 130,755
(Board Aug. 19, 2003)                            |  | €
|Didier Lesteven  |  | 63,529                                                        |  | 63,529
(Board Aug. 19, 2003)                             |  |  
|Philippe Ozanian |  | 57,477                                                        |  | 27,477
(Board Aug. 19, 2003)
30,000
(Board Aug 19, 2003) |  | €

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The table below indicates the information, which relates to the ten employees who were granted the greatest number of stock options during year
ended June 30, 2004:

|                    |  | Total number of stock options granted
during fiscal year 2004 |  |                                                    |  |  
|------------------- |  | ------------------------------------------------------------- |  | -------------------------------------------------- |  | -
|
|
|Gad Tobaly          |  | 400,000                                                       |  | 400,000
(Board Feb. 16, 2004)                      |  | €
|Julien Dahan        |  | 88,353                                                        |  | 88,353
(Board Aug. 19, 2003)                       |  | €
|Rick Lanpher        |  | 60,000                                                        |  | 60,000
(Board Aug. 19, 2003)                       |  | €
|Jean-Luc Valente    |  | 60,000                                                        |  | 60,000
(Board Jun 2, 2004)                         |  | €
|Joe Bergera         |  | 58,543                                                        |  | 58,543
(Board Aug. 19, 2003 and February 16, 2004) |  | €
|Manuel Stopnicki    |  | 52,091                                                        |  | 52,091
(Board Aug. 19, 2003)                       |  | €
|Serge Adda          |  | 35,000                                                        |  | 35,000
(Board Aug. 19, 2003)                       |  | €
|Serge Genetet       |  | 30,682                                                        |  | 30,682
(Board Aug. 19, 2003)                       |  | €
|Jack Allen          |  | 30,000                                                        |  | 30,000
(Board Aug. 19, 2003)                       |  | €
|Jean-François Allot |  | 20,000                                                        |  | 20,000
(Board Aug. 19, 2003)                       |  | €
|Ranadeep Ray        |  | 20,000                                                        |  | 20,000
(Board Feb. 16, 2004)                       |  | €

The
table below indicates the information which relates to the employees, among the ten above listed, who exercised the greatest number of stock options during the year
ended June 30, 2004:

|             |  | Total number of shares exercised
during fiscal year 2004 |  |                             
|------------ |  | -------------------------------------------------------- |  | ----------------------------
|
|
|Rick Lanpher |  | 18,715                                                   |  | 18,715
(Board Feb. 10, 2003)
|Joe Bergera  |  | 17,500                                                   |  | 12,500
(Board May 13, 2002) 
|             |  |                                                          |  | 5,000
(Board Feb. 10, 2003) 

6.6    OPTIONS AND WARRANTS TO SUBSCRIBE / PURCHASE OUR SECURITIES

6.6.1 Options giving the right to subscribe for new shares

We currently have three stock option plans giving the right to subscribe for new shares. The following discussion has been adjusted to reflect the 1:2 reverse
stock split approved by our shareholders on May 25, 2000.

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Authorization information

French law requires that an extraordinary shareholders' meeting be convened for the shareholders to authorize the grant of stock options, with a
two-thirds majority vote. The authorization includes amongst other things the number of issuable shares and the conditions of exercise price determination. The shareholders may delegate
power to the board of directors to fix the terms and conditions of the plan and to grant the options. The authority is given for a limited period of time. Our shareholders have delegated to the board
of directors the authority to grant options, in all circumstances, giving the right to subscribe for our shares to employees and executive officers, for specified periods of time.

The
following table sets forth the key dates and figures relating to the authorization of our stock option plans currently in force and the number of issuable shares authorized.

|Name of Plan |  | Date of
shareholders
authorization |  | Date of expiry of
authorization   |  | Number of issuable
shares authorized(1)
|------------ |  | ---------------------------------- |  | --------------------------------- |  | ---------------------------------------
|1999 Plan    |  | April 9, 1999                      |  | April 9, 2004                     |  | 1,126,000                              
|2000 Plan    |  | December 9, 1999
May 11, 2000      |  | December 9, 2004
December 9, 2004 |  | 250,000
500,000                        
|2001 Plan(2) |  | December 18, 2000                  |  | December 18, 2005                 |  | 2,000,000                              

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Vesting information

Under each Plan, each year after the date of grant, the holder may exercise 25% of the total number of stock options held. Under all the other plans, the vesting
rules are generally that the holder may exercise 25% of the options after the first anniversary of the date of grant, 50% after the second anniversary of the date of grant, 75% after the thirtieth
month (21/2 years) of the date of grant and 100% after the third anniversary of the date of grant. Under all the plans, the board of directors has the right to vary these dates and
percentages either at the date of grant or at any time thereafter with the consent of the stock option holder.

However,
our board of directors decided to modify the above vesting rules of certain stock options granted on August 19, 2003, giving the right to subscribe for 330,830 shares.
These stock options shall vest by the earlier of 25% at the end of each quarter for which we will reach break even point ("adjusted net profit"), or under the terms of the 2000 Plan.

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Grant information

The following table sets out the key dates and figures relating to the grant of stock options as of September 10, 2004 (as adjusted for the reverse stock
split of May 25, 2000).

|Grant dates         |  | Period during which stock option-holder may exercise stock options |  | Exercise Price per stock option in €(1) |  | No. of issuable shares
|------------------- |  | ------------------------------------------------------------------ |  | --------------------------------------- |  | ----------------------
|1999 Plan           |  |                                                                    |  |                                         |  |                       
|April 9, 1999       |  | April 2000 - April 2007                                            |  | 1.77                                    |  | 387,162               
|July 9, 1999        |  | July 2000 - July 2007                                              |  | 1.77                                    |  | 63,750                
|October 28, 1999    |  | October 2000 - October 2007                                        |  | 3.05                                    |  | 65,626                
|January 28, 2000    |  | January 2001 - January 2008                                        |  | 4.88                                    |  | 43,250                
|March 31, 2000      |  | March 2001 - March 2008                                            |  | 12.20                                   |  | 5,500                 
|August 19, 2003     |  | August 19, 2004 - August 19, 2011                                  |  | 2.15                                    |  | 133,500               
|February 16, 2004   |  | February 2005 - February 2012                                      |  | 3.94                                    |  | 22,200                
|                    |  |                                                                    |  |                                         |  |                       
|Totals per plan     |  | 720,988                                                           
|                    |  |                                                                    |  |                                         |  |                       
|2000 Plan           |  |                                                                    |  |                                         |  |                       
|January 28, 2000    |  | January 2001 - January 2008                                        |  | 4.88                                    |  | 41,625                
|March 10, 2000      |  | March 2001 - March 2008                                            |  | 12.20                                   |  | 34,500                
|March 31, 2000      |  | March 2001 - March 2008                                            |  | 12.20                                   |  | 30,750                
|October 19, 2000(2) |  | October 2001 - October 2008                                        |  | 38.50                                   |  | 1,000                 
|February 10, 2003   |  | February 2004 - February 2011                                      |  | 1.52                                    |  | 100,000               
|August 19, 2003     |  | August 2004(7) - August 2011                                       |  | 2.15                                    |  | 302,358               
|August 17, 2004     |  | August 2005 - August 2012                                          |  | 3.42                                    |  | 218,000               
|                    |  |                                                                    |  |                                         |  |                       
|Totals per plan     |  | 728,233                                                           
|                    |  |                                                                    |  |                                         |  |                       
|2001 Plan           |  |                                                                    |  |                                         |  |                       
|January 24, 2001(3) |  | January 2002 - January 2011                                        |  | 31.00                                   |  | 16,500                
|April 23, 2001(4)   |  | April 2002 - April 2011                                            |  | 10.83                                   |  | 26,600                
|June 20, 2001(5)    |  | June 2002 - June 2011                                              |  | 8.14                                    |  | 39,650                
|September 26, 2001  |  | September 2002 - September 2011                                    |  | 2.44                                    |  | 8,600                 
|December 13, 2001   |  | December 2002 - December 2012                                      |  | 4.26                                    |  | 12,200                
|May 13, 2002(6)     |  | September 2001 - May 2012                                          |  | 2.80                                    |  | 609,560               
|August 8, 2002      |  | August 2003 - August 2012                                          |  | 1.84                                    |  | 300,000               
|February 10, 2003   |  | February 2004 - February 2013                                      |  | 1.52                                    |  | 121,000               
|February 16, 2004   |  | February 2005 - February 2014                                      |  | 3.94                                    |  | 430,000               
|June 2, 2004        |  | June 2005 - June 2014                                              |  | 3.76                                    |  | 81,200                
|August 17, 2004     |  | August 2005 - August 2014                                          |  | 3.42                                    |  | 243,100               
|                    |  |                                                                    |  |                                         |  |                       
|Totals per plan     |  | 1,888,410                                                         
|                    |  |                                                                    |  |                                         |  |                       

---

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Under French law, we cannot grant stock options to members of the board of directors (other than the Chairman and/or Chief Executive Officer or Directeurs
Généraux Délégués) who are not employees. All stock options
granted under the 1999 Plan and the 2000 Plan have a maximum term of eight years and all stock options granted under the 2001 Plan have a maximum term of ten years. If stock option holders that are
French residents and are subject to paying social charges in France do not transfer their shares for a specified holding period following the grant of the stock option, under certain conditions, they
benefit from a favorable tax treatment on the realized gain upon the subsequent sales of the shares issued upon the exercise of the stock options. In general, if a stock option holder dies during the
period of the options, such person's stock options may be exercised up to six months after his or her death to the extent vested at the time of his or her death. No stock option may be transferred by
the stock option holder other than by will or the laws of intestacy.

If
a stock option holder subject to social charges in France at the date of grant of stock options, sells or otherwise converts the shares in bearer form issued from an exercise of such
stock options prior to the expiration of the applicable holding period, the employer is required to pay French social contributions and certain salary-based taxes, which may represent, for us,
approximately 45% of the taxable salary, on the difference between the exercise price of a stock option and the fair market value of the underlying shares on the exercise date. The law is consistent
with French personal income tax law pursuant to which the difference between the stock option exercise price and the fair value of the shares at the exercise date is treated as salary income if the
shares are sold or otherwise disposed of within the said holding period.

This
rule applies to all our stock options, whatever the grant date. Because our existing stock option plans are not structured to enforce this holding period, if any of our stock option
holders exercise stock options and sell the resulting shares before the end of the relevant holding period, we could be required to pay French social charges to the French government on the resulting
taxable income to those employees. In the case of stock options granted before April 27, 2000, the holding period is five years from the date of grant. For stock options granted on or after
that date, the holding period is reduced to four years.

On
July 23, 2001, the board of directors resolved, under certain conditions, to make available to employees holding stock options with an exercise price higher than
€ 30.00 per share, an offer to surrender all or some of the stock options granted to them on or after September 1, 2000,
without limitation as to exercise price. In exchange, under certain conditions, such employees were granted new stock options giving the right to subscribe to the same number of shares as the
surrendered stock options by the board of directors, on May 13, 2002. The exercise price for the new stock options was fixed at € 2.80 in accordance with the rules
of the 2001 Plan and otherwise subject to the conditions set forth in the Schedule TO filed with the Securities and Exchange Commission ("SEC") on August 30, 2001, the commencement date of the
offer period. 1,021,945 stock options in total were eligible for cancellation of which 950,265 stock options were cancelled under the terms of the offer. On May 13, 2002, 884,365 stock options
were re-granted.

Stock
options generally expire thirty days after we receive or give notice of a stock option holder's termination of employment. In the past, the board of directors has modified this
expiration term for certain employees. As of September 10, 2004, stock options giving the right to subscribe to 309,250 shares were subject to such modifications.

6.6.2    Options giving the right to purchase existing shares

We currently have two stock option plans giving the right to purchase existing shares. Pursuant to the authorizations granted by the general shareholders' meeting
held on December 5, 2002 and by the general shareholders' meeting held on December 15, 2003 giving the right to purchase up to an aggregate of respectively 300,000 existing shares and
480,000 existing shares, our board of directors adopted a plan on August 19, 2003 ("2003 Plan"), and a second plan on August 17, 2004 ("2004 Plan").

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Authorization information

French law requires that an extraordinary shareholders' meeting be convened for the shareholders to authorize the grant of stock options, with a
two-thirds majority vote. The authorization includes amongst other things the number of issuable shares and the determination exercise price. The shareholders may delegate power to the
board of directors to fix the terms and conditions of the plan and to grant the stock options. The authority is given for a limited period of time. Our shareholders have delegated to the board of
directors, the authority to grant stock options, in all circumstances, giving the right to subscribe for our shares to employees and executive officers, for specified periods of time.

The
following table sets forth the key dates and figures relating to the authorization of our stock option plans as of September 10, 2004.

Name of Plan

Date of shareholders authorization

Date of expiry of authorization

Number of issuable shares authorized(1)2003 Plan

December 5, 2002

February 4, 2006

300,0002004 Plan

December 15, 2003

February 14, 2007

480,000


---

Vesting information

Under the 2003 and 2004 Plan, the vesting rules are generally that the holder may exercise 25% of the stock options after the first anniversary of the date of
grant, 50% after the second anniversary of the date of grant, 75% after the thirtieth month (21/2 years) of the date of grant and 100% after the third anniversary of the date of grant.
Under all the plans, the board of directors has the right to vary these dates and percentages either at the date of grant or at any time thereafter with the consent of the stock option holder.

Grant information

The following table sets out the key dates and figures relating to the grant of stock options as of September 10, 2004 (as adjusted for the reverse stock
split of May 25, 2000)

|Grant dates     |  | Period during which stock option-holder may exercise stock options |  | Exercise Price per stock option |      | No. of issuable shares
|--------------- |  | ------------------------------------------------------------------ |  | ------------------------------- | ---- | ----------------------
|2003 Plan       |  |                                                                    |  |                                 |      |                       
|August 19, 2003 |  | August 19, 2004 - August 19, 2013                                  |  | €                               | 2.15 |                       
|                |  |                                                                    |  |                                 |      |                       
|Total per plan  |  | 295,180                                                           
|                |  |                                                                    |  |                                 |      |                       
|2004 Plan       |  |                                                                    |  |                                 |      |                       
|August 17, 2004 |  | August 17, 2005 - August 17, 2014                                  |  | €                               | 3.92 |                       
|                |  |                                                                    |  |                                 |      |                       
|Total per plan  |  | 156,200                                                           
|                |  |                                                                    |  |                                 |      |                       

Under
French law, we cannot grant stock options to members of the board of directors (other than the Chairman and/or Chief Executive Officer orDirecteurs
Généraux Délégués) who are not employees. All stock options granted under the 2003 and 2004 Plan have
a maximum term of ten years. If stock option holders who have to pay social charges in France do not transfer their shares for a specified holding period following the grant of the stock option, under
certain conditions, they benefit from a favorable tax treatment on the realized gain upon the subsequent sales of the shares issued upon the exercise of the stock options. In general, if a stock
option holder dies during his or her employment, such person's stock options may be exercised up to six months after his or her death to the extent vested at the time of his or

70

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her
death. No stock option may be transferred by the stock option holder other than by will or the laws of intestacy.

If
a stock option holder who is subjected to social charges in France at the date of grant of stock options, sells or otherwise transfers the shares resulting from an exercise of such
stock options prior to the expiration of the applicable holding period, the employer is required to pay French social contributions and certain salary-based taxes, which may represent, for us,
approximately 45% of the taxable salary, on the difference between the exercise price of a stock option and the fair market value of the underlying shares on the exercise date. The law is consistent
with French personal income tax law pursuant to which the difference between the stock option exercise price and the fair value of the shares at the exercise date is treated as salary income if the
shares are sold or otherwise disposed of within the said holding period. This rule applies to all our stock options, whatever the grant date. Because our existing stock option plans are not structured
to enforce this holding period, if any of our stock option holders exercise stock options and sell the resulting shares before the end of the relevant holding period, we could be required to pay
French social charges to the French government on the resulting taxable income to those stock option holders. For stock options granted under the 2003 and 2004 Plans, the holding period is four years
from the date of grant.

6.6.3    Warrants

We have issued eight series of warrants, three of which remain outstanding. Most of the warrants were issued to current shareholders and/or executive officers
and/or directors. However, Mr. Gilles Assant holds 8,000 warrants, Mr. Robert Troy was granted 10,000 warrants and Mr. Ozanian, who has subsequently become an employee, was
granted 2,000 warrants, all of which may be exercised for shares in a two-to-one ratio; Mr. P. Balachandran holds 15,000 warrants and Mr. Frank Chen 10,000
warrants (one warrant giving the right to subscribe for one share).

The
key dates and figures relating to the warrants as of September 10, 2004 are set out in the following table.

|Name of series |  | Date of shareholders' authorization |  | Period during
which holder
may exercise warrants |  | Maximum no. of shares authorized by the shareholders |  | Maximum no. of issuable shares |     | Subscription price in |      | Exercise price per warrant in €(1) |   | No. of warrants granted to executive officers |     | No. of executive officers concerned
|-------------- |  | ----------------------------------- |  | ------------------------------------------------ |  | ---------------------------------------------------- |  | ------------------------------ | --- | --------------------- | ---- | ---------------------------------- | - | --------------------------------------------- | --- | -----------------------------------
|Series C       |  | December 9, 1999                    |  | December 9, 1999 to December 9, 2004             |  | 50,000                                               |  | 28,750                         | (2) | €                     | 0.02 |                                    | € | 4.88                                          |     | 1,000                              
|Series E       |  | December, 13 2001                   |  | February 7, 2002 to February 6, 2007             |  | 195,624                                              |  | 115,624                        |     | €                     | 0.04 |                                    | € | 4.31                                          |     | 0                                  
|Series F(3)    |  | December 5, 2002                    |  | February 10, 2003 to February 9, 2008            |  | 190,624                                              |  | 140,624                        |     | €                     | 0.02 | (3)                                | € | 1.52                                          | (3) | 25,000                             
|               |  |                                     |  |                                                  |  |                                                      |  |                                |     |                       |      |                                    |   |                                               |     |                                    
|               |  | Total per series                    |  | 436,248                                          |  | 284,998                                              |  |                                |     |                       |      |                                    |   | 26,000                                        |     |                                    
|               |  |                                     |  |                                                  |  |                                                      |  |                                |     |                       |      |                                    |   |                                               |     |                                    

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6.7    EMPLOYEES

6.7.1    Employee distribution

As of June 30, 2004, we employed 190 persons, excluding independent workers, trainees and temporary workers.

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As of June 30,2004

2003

2002General and administrative

23

23

35Sales and marketing

68

76

84Research and development

56

47

63Customer service

43

43

45Total Employees

190

189

227




As of June 30,2004

2003

2002Employees

5

10

19Engineers/Managers

181

175

204Executive officers

4

4

4Total Employees

190

189

227




As of June 30,2004

2003

2002Europe

128

124

151Americas

49

51

57Asia-Pacific

13

14

19Total Employees

190

189

227


Generally,
employees are hired for an unlimited period of time. Other employment contracts are used to replace employees who are temporarily absent.

As
of June 30, 2004, the average age of our employees was 36 years old. For the year ended June 30, 2004, our employee turnover rate, defined as the voluntarily and
involuntarily departures divided by the average number of employees, was 25%.

6.7.2    Reduction in workforce

During fiscal year 2004, we implemented a restructuring plan that evoked a reduction in the workforce of 16 employees. This reduction primarily resulted from the
reorganization to better align its operating expenses with revenues. In addition, we moved our New York office, relocated its Columbia office to Herndon and moved our Munich office.

During
fiscal year 2004, we increased our workforce by hiring persons for certain positions that are key to the our success, therefore, total employees remained relatively flat between
fiscal year 2003 and 2004.

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6.7.3    Remuneration

Remuneration policy

The Group believes that its compensation policy is equitable and linked to individual and collective performance, especially at a time when each employee has to
give his or her best efforts to contribute to the Group's objectives of profitability. Certain employees benefit from group life insurance contracts.

For
the years ended June 30, 2004 and 2003, Group personnel costs amounted to €19.1 million and €20.9, respectively, while the average
annual compensation was €72 and €71 thousand, respectively.

Profit sharing and Share purchase schemes

On March 6, 2000, we entered into a profit sharing agreement ("Plan d'Intéressement") with
our employees in France for a duration of three years. On July 1, 2002 a new three-year profit sharing agreement was implemented, which replaced the plan of March 6, 2000. On
June 1, 2001, we put in place an employee savings plan ("Plan d'Epargne d'Entreprise") for our employees in France as a complement to the above
profit sharing plan. AXA Gestion Intéressement manages the plan, which allows the French employees to invest either the funds derived from the aforementioned profit sharing agreement or
their individual contributions into a choice of three funds. One of the funds represents an investment in our shares.

For
the year ended June 30, 2004, the amount of payments made to employees under the profit sharing agreement was €0.7 million, of which
€0.3 million was invested in the employee savings plan. Mr. Stopnicki and Mr. Ozanian are executives that benefit from the profit sharing plan.

6.7.4    Social relations and collective agreements

Social relations

A work council exists in France, whose members are our employees that meet regularly in order to discuss issues related to our personnel and the economic
situation. Our social and professional relations are generally good with our employees.

Collective agreements

As of February 1, 2000, French employers became subject to a new law reducing the workweek to 35 hours for French-based employees. Accordingly, we
signed an agreement with the work council on March 8, 2000, which retroactively reduced the number of working hours for French-based employees from February 1, 2000.

In
addition, employment contracts with all of our employees in France are subject to the provisions of the collective agreement SYNTEC ("convention collective
nationale des bureaux d'études techniques, cabinets d'ingénieurs-conseils et sociétés de conseils"), the collective
bargaining agreement applicable to employees in our industry.

6.7.5    Health and safety conditions

We maintain good work and health conditions for our employees by providing them with pleasant and comfortable premises. In each country, we adapt our health
policy to local requirements. In France, members of the health and safety committee meet regularly, in order to discuss health and safety issues.

6.7.6    Training for personnel

During the years ended June 30, 2004 and 2003, we expensed €33 thousand and €0.1 million for the training and
development of its personnel, corresponding to 0.1% and 0.4% of its revenues, respectively.

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The
majority of the training was for the benefit of personnel in Europe for the departments of sales and marketing, research and development and customer service. The purpose of the aforementioned
training was to reinforce the professional competencies and to facilitate organizational changes. We consider that training and development represent an important element to our overall strategy. We
seek to develop three main competencies: professions, techniques and personal development.

6.8    SHARE OWNERSHIP

With respect to directors and senior management, information concerning their share ownership in our company is addressed in "Item 7. Major Shareholders and
Related Party Transactions".

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.1    MAJOR SHAREHOLDERS AS OF SEPTEMBER 10, 2004

We obtained the information, as set forth in the table below, as of September 10, 2004 with respect to each person known by us to beneficially own more
than 2% of our outstanding shares and all of our directors and executive officers as a group as of such date. The voting rights of our principal shareholders are identical to those of our other
shareholders.

|                                          |  | Number
of shares |  | % of share
capital |  | % of voting
rights
|----------------------------------------- |  | ---------------- |  | ------------------ |  | ------------------
|Shareholders                              |  |                  |  |                    |  |                   
|Odyssée Venture SAS(1)                    |  | 1,906,612        |  | 10.03              |  | 11.10             
|FMR Corp. / Fidelity International Ltd(1) |  | 1,848,813        |  | 9.73               |  | 10.77             
|CV Sofinnova Ventures                     |  | 602,066          |  | 3.20               |  | 3.34              
|Directors & Executive Officers            |  |                  |  |                    |  |                   
|Alain Tingaud(1)                          |  | 1,235,053        |  | 6.50               |  | 7.19              
|Jean-Paul Bernardini                      |  | 1                |  | 0.00               |  | 0.00              
|Herbert May                               |  | 1                |  | 0.00               |  | 0.00              
|Hubert Tardieu(1)                         |  | 1,250            |  | 0.01               |  | 0.01              
|Peter Waal                                |  | 9,376            |  | 0.05               |  | 0.05              
|Guy Dubois                                |  | 1                |  | 0.00               |  | 0.00              
|Philippe Ozanian                          |  | 533              |  | 0.00               |  | 0.00              
|Manuel Stopnicki                          |  | 30,000           |  | 0.16               |  | 0.17              
|Gad Tobaly                                |  | 0                |  | 0.00               |  | 0.00              
|InfoVista S.A.                            |  | 1,835,454        |  | 9.66               |  | 0.00              
|Others(2)                                 |  | 11,538 010       |  | 60.49              |  | 63.05             
|                                          |  |                  |  |                    |  |                   
|Total                                     |  | 19,007,170       |  | 100.00             |  | 100.00            
|                                          |  |                  |  |                    |  |                   

---

We are not aware of any lock-up or other holding obligations in force affecting our shares or ADSs held by our directors, executive
officers, or any shareholders.

To
our knowledge, as of September 10, 2004, (i) shares held in nominative form represented 11.75% of the share capital and (ii) shares held in bearer form
represented 88.25% of the share capital.

To
our knowledge, as of September 10, 2004, (i) the number of outstanding ADSs was 290,920 and (ii) the number of registered ADS holders was nine.

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To
our knowledge, we are not directly or indirectly owned or controlled by another corporation, any foreign government or any other national or legal person separately or jointly. There
is no arrangement known to us, the operation of which may at any subsequent date result in a change of control over us.

We
are not aware of any shareholders agreement, or of any other shareholders controlling directly or indirectly more than 2% of our shares or voting rights.

7.2    SIGNIFICANT CHANGES TO SHAREHOLDINGS OVER THE LAST THREE FISCAL YEARS

The table below shows the significant changes of which we are aware in the percentage of ownership of our shares by our major shareholders during the past three
years. The table shows the number of shares, percentage ownership of share capital and voting rights of our major shareholders on the date of our principal capital increases and/or sales of shares
during the period. We generally do not have any knowledge behind the reasons of the fluctuations in our stock price.

|                                                 |  | June 30, 2004 |  | June 30, 2003 |  | June 30, 2002 | 
|------------------------------------------------ |  | ------------- |  | ------------- |  | ------------- | 
|
|Société Centrale d'Investissements(2)            |  | 0             |  | 0             |  | 0             | 
|FMR Corp et Fidelity International Limited(1)(3) |  | 1,852,471     |  | 9.77          |  | 10.82         | 
|Odyssée Venture SAS(1)(4)                        |  | 1,895,625     |  | 10.0          |  | 11.07         | 
|Alain Tingaud (1)(5)                             |  | 1,235,053     |  | 6.51          |  | 7.21          | 
|Vertex Technology Fund Ltd(6)                    |  | 0             |  | 0             |  | 0             | 
|CV Sofinnova Ventures Partners III               |  | 602,066       |  | 3.17          |  | 3.51          | 
|Innovacom 1 & 2(7)                               |  | 0             |  | 0             |  | 0             | 
|InfoVista S.A                                    |  | 1,835,454     |  | 9.69          |  | 0             | 
|Others(7)                                        |  | 11,530,251    |  | 60.84         |  | 67.37         | 
|                                                 |  |               |  |               |  |               | 
|Total                                            |  | 18,950,920    |  | 100.00        |  | 100.00        | 
|                                                 |  |               |  |               |  |               | 

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7.3    RELATED PARTY TRANSACTIONS

Between June 30, 2004 and September 10, 2004, two related party transactions were concluded after being authorized by the Board of Directors:



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See
Note 16 of the consolidated financial statements for further information on related party transactions.

ITEM 8.    FINANCIAL INFORMATION

8.1    CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See "Item 18. Financial Statements", for a list of the financial statements filed with this document.

8.2    LEGAL PROCEEDINGS

We are involved in various routine legal proceedings incidental to the ordinary course of our business. We believe that the outcome of all pending legal
proceedings will not have a significant effect on our financial condition or operational results. For additional information see "Item 4. Information on the CompanyLegal Proceedings".
There is currently no litigation in which a director or an executive officer has interests which contradict ours.

8.3    DIVIDEND POLICY

We have not declared dividends for the past three fiscal years. We expect to use all available funds for the financing of our activities, as a result we do not
plan on declaring dividends in the near future. For additional information on our dividend policy see "Item 10. Additional informationDividends".

8.4    SIGNIFICANT CHANGES

We have set forth our financial condition as of June 30, 2004 in "Item 5. Operating and Financial Review and Prospects", "Item 11. Quantitative and
Qualitative Disclosures About Market Risks" and "Item 18. Financial Statements." We are not aware of any significant changes affecting our financial condition since June 30, 2004.

ITEM 9.    THE OFFER AND LISTING

In November 2003, a new entity was created, theAutorités des Marchés
Financiers(the "AMF"), resulting from the merger of theCommission des Opérations de Bourse(the "COB"), the Conseil des Marchés
Financiers(the "CMF") and theConseil de Discipline de la Gestion
Financière(the "CDGF"). The AMF, an independent governmental authority, is in charge of the protection of investors, investors' information and proper running
of the securities markets.

9.1    MARKETS

Our shares have been listed on theNouveau Marchéof Euronext Paris S.A. ("Euronext Paris") and our
ADSs have been listed on Nasdaq in the U.S. since July 7, 2000. We have been included in the Euronext Paris IT CAC since July, 2000, on the SBF 250 index since December 21, 2000, the
Euronext Paris IT CAC 50 since June 15, 2001. The SBF 250 is an index of shares of 250 companies selected by Euronext Paris as the most representative of the French equities listed on Euronext
Paris, from twelve economic sectors. The IT CAC index is an index of French technology companies, which included 159 listed securities as of September 10, 2004. The IT CAC 50 indexes the 50
largest and most liquid stocks from the IT CAC. We have been a member of the NextEconomy, since January 1, 2002.

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9.2    PRICE HISTORY OF THE STOCK

This table provides the high and low closing prices for our shares on theNouveau Marchéand our
ADSs on Nasdaq since July 1, 2002.

Volume of transactions and closing price evolution on theNouveau Marchéand on Nasdaq

|                               |  | Price of Shares in euros(1) |  | Price of ADSs in US
dollars(2)
|------------------------------ |  | --------------------------- |  | ------------------------------
|
|6 months to September 10, 2004 |  |                             |  |                               
|2004    September              |  | 3.85                        |  | 3.65                          
|2004    August                 |  | 4.18                        |  | 3.15                          
|2004    July                   |  | 4.00                        |  | 3.43                          
|2004    June                   |  | 4.10                        |  | 3.60                          
|2004    May                    |  | 4.20                        |  | 3.31                          
|2004    April                  |  | 4.22                        |  | 3.65                          
|
|June 30, 2004                  |  | 4.22                        |  | 3.31                          
|March 31, 2004                 |  | 4.69                        |  | 2.35                          
|December 31, 2003              |  | 2.57                        |  | 1.86                          
|September 30, 2003             |  | 2.63                        |  | 2.01                          
|
|June 30, 2003                  |  | 2.20                        |  | 1.21                          
|March 31, 2003                 |  | 1.90                        |  | 1.21                          
|December 31, 2002              |  | 2.31                        |  | 1.32                          
|September 30, 2002             |  | 2.05                        |  | 1.15                          
|
|July 1, 2003 to June 30, 2004  |  | 4.69                        |  | 1.86                          
|July 1, 2002 to June 30, 2003  |  | 2.31                        |  | 1.15                          
|July 1, 2001 to June 30, 2002  |  | 6.20                        |  | 1.62                          

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The following charts represent the price history of the stock on theNouveau Marchéand Nasdaq from July 7, 2000 to September 10, 2004.

Price history of the stock on the Nouveau Marché
(Source EURONEXT PARIS)

LOGO

Price history of the stock on the NASDAQ
(Source: NASDAQ)

LOGO

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9.3    GENERAL

On September 22, 2000, upon successful completion of an exchange offer, the ParisBourseSBF S.A., or the "SBF" the Amsterdam Stock Exchanges
and the Brussels Stock Exchanges merged to create Euronext, the first pan-European exchange. Through the exchange offer, all the shareholders of SBF, the Amsterdam Stock Exchanges and the
Brussels Stock Exchanges contributed their shares to Euronext N.V., a Dutch holding company. Following the creation of Euronext, the SBF changed its name to Euronext Paris. Securities quoted on
exchanges participating in Euronext cash markets are traded and cleared over common Euronext platforms. NSC is the common platform for trading and Clearing 21 for the clearing, LIFFE
CONNECT; the LIFFE trading platform is to be used for all Euronext futures and options trading. In addition, Euronext anticipates the implementation of a central clearinghouse platform
and of settlement and custody structures over a common system. However, these securities will remain listed on their local exchanges. As part of Euronext, Euronext Paris retains responsibility for the
admission of shares to Euronext Paris' trading markets as well as the regulation of those markets.

Euronext
N.V. is listed on thePremier Marchéof Euronext Paris since July 2001. In January 2002, Euronext
N.V acquired the London International Financial Futures and Options Exchange (LIFFE), London's derivatives market. The combination of LIFFE and Euronext N.V. will enable, among other things, the
volume of derivatives business conducted through LIFFE CONNECT trading platform to treble.

Since
February 6, 2002,Bolsa de Valores de Lisboa e Porto(BVLP) has become a wholly-owned subsidiary of Euronext N.V. and is
therefore renamed Euronext Lisbon.

Securities
approved for listing by Euronext Paris are traded in one of three markets. The securities of most large public companies are listed on thePremier
Marché, with theSecond Marchéavailable for small and medium-sized companies. Trading on the Nouveau Marchéwas introduced in March 1996 to allow companies seeking development capital to access the stock market. In
addition, securities of certain other companies are traded on a non-regulated over-the-counter market, theMarché Libre
OTC, which is also operated by Euronext Paris.

Euronext
Paris has announced that it currently expects that, beginning January 2005, thePremier Marché, Second
MarchéandNouveau Marchéwill be combined, and all securities listed on Euronext Paris will be
traded on a single market.

9.4    THE NOUVEAU MARCHÉ

TheNouveau Marchéis a regulated market managed and operated by Euronext Paris. The Nouveau
Marché, however, is neither a new section of an existing market, nor a stepping-stone to Euronext Paris'sSecond Marché.

TheNouveau Marchéis an electronic market which combines a central order book with market-making to ensure greater
liquidity. Member firms of theNouveau Marchémay act in one or more capacities: Listing Advisers/Market-Makers
(Introducteurs/Teneurs de Marché, or "ITMs") or broker-dealers
(Négociateurs-Courtiers).

Admission
to theNouveau Marchéis subject to certain capital adequacy and liquidity requirements determined by Euronext
Paris. In addition, companies applying for listing on theNouveau Marchéare required to publish comprehensive information regularly and
to keep the public informed of events likely to affect the market price of their securities. TheNouveau Marchémay also require certain
current shareholders to enter into lock-up arrangements at the time of offerings of securities.

Shares
listed on theNouveau Marchéare placed in one of two categories depending on the volume of transactions, continuorfixing.

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The
Shares of InfoVista are placed in the categorycontinuwhich includes the most actively traded shares on the Nouveau Marché. Such trading takes
place on each business day from 9:00 a.m. to 5:25 p.m., with a pre-opening
session from 7:15 a.m. to 9:00 a.m. and a pre-closing session from 5:25 to 5:30, during which, transactions are recorded but not executed and a closing auction at
5:30 p.m. From 5:30 p.m. to 5:40 p.m. (trading at last phase), transactions are executed at the closing price.

For
shares that are not traded continuously, retail orders on theNouveau Marchéare matched by the central system at two
daily fixings, at 10:30 a.m. and 4:00 p.m. Between such fixings, ITMs display bid/asked spreads for a minimum number of each of the securities for which they act as market-makers,
and trades with the ITM are executed from time to time throughout the day. Our shares trade continuously. Trading in the securities listed on theNouveau
Marchémay be suspended by Euronext Paris if quoted prices exceed certain price limits defined by the regulations of Euronext Paris. In particular, if the quoted
price of aContinusecurity varies by more than 10% from the previous day's closing price, trading may be suspended for 4 minutes. Once trading has
commenced, further suspensions for up to 4 minutes are also possible if the price varies again by more than 10% from the threshold at which the suspension was initiated. During the continuous trading
session, Euronext Paris may also suspend trading for a 4-minute period if the price varies by more than 5% from the last traded price. Euronext Paris may also suspend trading of a security
listed on theNouveau Marchéin certain other limited circumstances, including, for example, the occurrence of unusual trading activity
in such security. In addition, in exceptional cases, the AMF may also suspend trading.

Trades
of securities listed on theNouveau Marchéare settled on a cash basis on the third trading day following the trade.
However, market intermediaries are also permitted to offer investors a Deferred Settlement Service ("Service de Règlement
Différé") for a fee. TheService de Règlement Différéallows investors who elect this service to benefit from leverage and other special features of the monthly settlement market. The deferred settlement service is only available for trades in securities
which have both a total market capitalization of at least €1 billion and a daily average volume of trades of at least €1 million. Our shares are not
eligible for the deferred settlement service.

Prior
to any transfer of securities held in registered form on theNouveau Marché, such securities must be converted into
bearer form and accordingly inscribed in an account maintained by an accredited intermediary with Euroclear France, a settlement organization. Transactions in securities are initiated by the owner
giving instructions (through an agent, if appropriate) to the relevant accredited intermediary. Trades of securities listed on theNouveau
Marchéare cleared by Clearnet and settled through Clearing 21 and Euroclear France. A fee or commission is payable to the ITM or broker-dealer or other agent
involved in the transaction.

BNP
Paribas Equities France acts asTeneur de Marchéwith respect to the shares traded on the Nouveau Marché.

ITEM 10.    ADDITIONAL INFORMATION

10.1    MEMORANDUM AND ARTICLES OF ASSOCIATION

For our registration details as well as legal objects see "Item 4. Information on the Company".

For
a complete description of the board of directors' powers under French law and ourstatuts,see "Item 6. Directors, Senior Management,
and Employees-Board of Directors"

In
this section, we summarize material information concerning our share capital, together with material provisions of applicable French law and our statuts. This information does not purport to be complete
and is qualified in its entirety by reference to our statuts, and to the applicable provisions of French law. An unofficial English translation of ourstatutsis included as an exhibit to this report. You may obtain copies of ourstatutsin French from
theGreffeof the Registry of Commerce and Companies of Evry, France. Please refer to those full documents for additional details.

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10.2    SHAREHOLDERS' MEETINGS AND VOTING RIGHTS

10.2.1    General

In accordance with Book II of the French commercial code and Decree no. 67-236 of March 1967, there are two types of general
shareholders' meetings: ordinary and extraordinary.

Ordinary
general shareholders' meeting are required for matters such as:



Extraordinary
general shareholders' meeting are required for approval of matters such as amendments to ourstatuts, including any
amendment required in connection with extraordinary corporate actions. Extraordinary corporate actions include:



Special
shareholder meetings of a certain category of shares are required for any modification of the rights derived from such category of shares. The resolutions of the general
shareholders' meeting affecting these rights are effective only after approval by the relevant special meeting.

10.2.2    General Shareholders' Meetings

French company law requires our board of directors to convene an annual ordinary shareholders' meeting for approval of the annual accounts. This meeting must be
held within six months of the end of each fiscal year. This period may be extended by an order of the President of theTribunal de Commerce(Commercial
Court). The board of directors may also convene an ordinary or extraordinary meeting of shareholders upon proper notice at any time during the year. If the board of directors fails to convene a
general shareholders' meeting, our independent auditors may call the meeting. In a bankruptcy, our liquidator or court-appointed agent may also call a general shareholders' meeting in some instances.
Any of the following may request the court to appoint an agent:



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10.2.3    Notice of Shareholders' Meetings

We must announce general meetings at least thirty days in advance by means ofavis de reunion(a preliminary
notice) which is published in theBulletin des Annonces Légales Obligatoires, ("BALO"). The preliminary notice must have been previously
sent to the AMF. It must contain, among other things, the agenda, a draft of the resolutions to be submitted to the shareholders, a description of the procedures which holders of bearer shares must
follow to attend the meeting, the procedure for voting by mail and a notice stating that the shareholders have ten days from the date of publication to send their proposals for resolutions.

At
least fifteen days prior to the date set for the meeting on first call, and at least six days before any second call, we must send anavis de
convocation(final notice) containing, among other things, the final agenda, time and place of the meeting and other information. The final notice must be sent by mail to all
registered shareholders who have held shares for at least one month prior to the date of the preliminary notice and published in a newspaper authorized to publish legal announcements in the département(local administrative region) in which our company is registered as well as in the BALO, with prior notice having been given
to the AMF.

In
general, shareholders can only take action at general shareholders' meetings on matters listed on the agenda for the meeting. As an exception to this rule, shareholders may take
action with respect to the appointment, dismissal and/or replacement of directors. Additional resolutions to be submitted for approval by the shareholders at the meeting may be proposed to the board
of directors within ten days of the publication of the preliminary notice in the BALO by:



The
board of directors must submit these resolutions to a vote of the shareholders.

In
addition, during the two weeks preceding a meeting of shareholders, any shareholder may submit written questions to the board of directors relating to the agenda for the meeting. The
board of directors must respond to these questions.

10.2.4    Attendance and Voting at Shareholders' Meetings

Each share confers on the shareholder the right to one vote. Shareholders may attend ordinary general meetings and extraordinary general meetings and exercise
their voting rights subject to the conditions specified in the French company law and ourstatuts. There is no requirement that a shareholder have a
minimum number of shares in order to attend or to be represented at an ordinary or extraordinary general meeting.

In
order to participate in any general meeting, a holder of shares held in registered form must have its shares registered in its name in a shareholder account maintained by us or on our
behalf by an agent appointed by us at least five days prior to the date set for the meeting. A holder of bearer shares must obtain a certificate from the accredited intermediary with whom the holder
has deposited its shares. This certificate must indicate the number of bearer shares the holder owns and must state that these shares are not transferable until the time fixed for the meeting. The
holder must deposit this certificate at the place specified in the notice of the meeting at least five days before the meeting.

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Ourstatutsprovide that, if our board of directors so decides it, the shareholders may participate in the general shareholders' meetings
by videoconference or by other means of telecommunication permitting shareholders' identification in accordance with the applicable laws and regulations.

10.2.5    Proxies and Votes by mail

In general, all shareholders who have properly registered their shares or duly presented a certificate from their accredited financial intermediary may
participate in general meetings. Shareholders may participate and vote in general meetings either in person, by proxy or by videoconference or by any means of telecommunication, which allow them to be
identified.

Proxies
will be sent to any shareholder on request with, among other things, a draft of the resolutions to be passed at the relevant meeting. In order to be counted, such proxies must be
received at our registered office, or at any other address indicated on the notice convening the meeting, prior to the date of the meeting. A shareholder may grant proxies to his or her spouse or to
another shareholder or if the shareholder is not a French resident by an intermediary registered under the conditions set forth by French law. A shareholder that is a corporation may grant proxies to
a legal representative. Alternatively, the shareholder may send us a blank proxy dated and signed without nominating any representative. In this case, the chairman of the meeting will vote the blank
proxies in favor of all resolutions proposed by the board of directors and against all others.

With
respect to votes by mail, we must send shareholders a voting form. The completed form must be returned to us at least three days prior to the date of the general shareholders'
meeting.

10.2.6    Quorum

French company law requires that shareholders having at least 25% of the shares entitled to voting rights must be present to vote in person or vote by mail, by
proxy or by videoconference or by any means of telecommunications, which allows them to be identified to fulfill the quorum requirement for:



The
quorum requirement is 331/3% of the shares entitled to voting rights, on the same basis, for any other extraordinary general meeting.

If
a quorum is not present at a meeting, the meeting is postponed. When a postponed ordinary meeting is duly reconvened, a further failure to establish a quorum will not prevent business
being transacted. No quorum is required when the postponed extraordinary general meeting is resumed only to approve an increase in our share capital through incorporation of reserves, profits or share
premium. In the case of any other resumed extraordinary general meeting, shareholders having at least 25% of outstanding voting rights must be present in person or voting by mail, by proxy or by
videoconference or other means of telecommunication, which allows them to be identified for a quorum. If a quorum is not present, the reconvened meeting may be postponed for a maximum of two months.
No deliberation by the shareholders may take place without a quorum. However, only questions, which were on the agenda of the postponed meeting may be discussed and voted upon.

10.2.7    Majority

A simple majority of shareholders may pass a resolution concerning a capital increase by incorporation of reserves, profits or share premium at either an ordinary
general meeting or an extraordinary general meeting. At any other extraordinary general meeting, a two-thirds majority of the shareholder votes cast is required.

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A
unanimous shareholder vote is required to increase liabilities of shareholders.

Abstention
from voting by those present in person or by videoconference or any means of telecommunication which allows them to be identified or those represented by proxy or voting by
mail is counted as a vote against the resolution submitted to a shareholder vote.

In
general, each shareholder is entitled to one vote per share at any general meeting. Under the French company law, shares of a company held by entities controlled directly or
indirectly by that company are not entitled to voting rights and do not count for quorum or majority purposes.

10.3    FINANCIAL STATEMENTS AND OTHER COMMUNICATIONS WITH SHAREHOLDERS

In connection with any general shareholders' meeting, we must provide a set of documents including our annual report and a summary of the results of the five
previous fiscal years in French GAAP to any shareholder who so requests. The French company law also requires that a special report must be provided to the ordinary shareholders' meeting regarding
stock options authorized and/or granted by the company.

Pursuant
to a new French act of August 1, 2003 (loi de sécurité financière), the
Chairman of our board of directors will deliver a special report to the annual ordinary general shareholders' meeting regarding the status of the preparation and organization of the work of our board
of directors, the status of the internal control procedures implemented by us and on the restrictions if any, that our board of directors have placed on the powers granted to the Chief Executive
Officer. In general, this report describes the objectives of our internal controls, the organization of the participants in our internal controls and the internal control procedures that we currently
have in place.

10.4    DIVIDENDS

We may only distribute dividends out of our "distributable profits," plus any amounts held in our reserve which the shareholders decide to make available for
distribution, other than those reserves which are specifically required by French law or ourstatuts. "Distributable profits" consist of our
unconsolidated net profit in each fiscal year, as increased or reduced by any profit or loss carried forward from prior years, less any contributions to the reserve accounts pursuant to French company
law or ourstatuts.

10.4.1    Legal Reserve

The French company law provides that Frenchsociétés anonymessuch as our company
must allocate five percent of their unconsolidated statutory net profit for each year to their legal reserve fund before dividends may be paid with respect to that year. Funds must be allocated until
the amount in the legal reserve is equal to 10% of the aggregate nominal value of the issued and outstanding share capital. This restriction on the payment of dividends also applies to each of our
French subsidiaries on an unconsolidated basis. As of June 30, 2004, our legal reserve was €4,941.94. The legal reserve of any company subject to this requirement may only be
distributed to shareholders upon liquidation of the company.

10.4.2    Approval of Dividends

According to the French company law, the board of directors may propose a dividend for approval by the shareholders at the annual general shareholders' meeting.
If we have earned distributable profits since the end of the preceding fiscal year, as reflected in an interim income statement certified by our auditors, the board of directors may distribute interim
dividends to the extent of the distributable profits for the period covered by the interim income statement. The board of directors may declare such dividends, subject to French law, and may do so,
for interim dividends paid in cash, without obtaining shareholder approval. For interim dividends paid in shares, prior authorization by a general shareholders' meeting is required.

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10.4.3    Distribution of Dividends

If such a priority dividend is paid in full, dividends are distributed to shareholders pro rata according to their respective holdings of shares. Outstanding
dividends are payable to shareholders on the date of the general shareholders' meeting at which the distribution of dividends is approved. In the case of interim dividends, distributions are made to
shareholders on the date of the board of directors' meeting in which the distribution of interim dividends is approved. The actual dividend payment date is decided by the shareholders in an ordinary
general meeting. We have not distributed any dividends during the past three fiscal years.

In
addition, ourstatutsauthorize our shareholders, in an ordinary general shareholder's meeting, to authorize the grant to each
shareholder of an option to receive all or part of any dividends either in cash or in our shares.

10.4.4    Timing of Payment

According to the French company law, we must pay any dividends within nine months of the end of our fiscal year, unless otherwise authorized by court order.
Dividends on shares that are not claimed within five years of the date of declared payment revert to the French State.

10.5    CHANGES IN SHARE CAPITAL

10.5.1    Increases in Share Capital

As provided by French company law, our share capital may be increased only with the shareholders' approval at an extraordinary general meeting following a
recommendation of the board of directors. Increases in our share capital may be effected by:



Increases
in share capital by issuing additional securities may be effected by issuing such securities:



Decisions
to increase the share capital through the capitalization of reserves, profits and/or share premiums require the approval of an extraordinary general meeting, acting under the
quorum and majority requirements applicable to general shareholders' meetings. Increases effected by an increase in the nominal value of shares require unanimous approval of the shareholders, unless
effected by capitalization of reserves, profits or share premiums. All other capital increases require the approval of an extraordinary general shareholders' meeting. See "Item 10.2. Shareholders'
Meetings and Voting Rights."

The
shareholders may delegate the right to carry out any increase in share capital (other than for contribution in-kind) to the board of directors, provided that the increase
has been previously authorized

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by
the shareholders. The board of directors may further delegate this right to the Chairman and/or Chief Executive Officer.

Each
time the shareholders decide on a capital increase in cash or decide to delegate to the board of directors the right to carry out a capital increase in cash, they must decide on
whether or not to proceed with a capital increase reserved to employees of our company and its subsidiaries or on whether or not to delegate to the board of directors the right to carry out such
reserved capital increase.

On
December 15, 2003, the shareholders authorized our board of directors for a period of 26 months to:



In
addition, the shareholders authorized our board of directors to use the authorizations referred to above to increase the share capital in the context of a tender offer or exchange
offer. This authorization is granted until the general shareholders' meeting called to approve our financial statements for the year ended June 30, 2004.

Additionally,
at the December 15, 2003 general shareholders' meeting, the shareholders authorized the board of directors to increase the share capital up to an annual nominal
amount equal to €216,000 per share through the issuance of shares or any other securities giving rights to subscribe to our share capital for those employees participating in the
employee savings plan.

10.5.2    Decreases in Share Capital

According to French company law, any decrease in our share capital requires approval by the shareholders entitled to vote at an extraordinary general
shareholders' meeting. In the case of a capital reduction, other than a reduction to absorb losses or a reduction as part of a program to purchase our own shares, all shareholders must be offered the
possibility to participate in such a reduction. The share capital may be reduced either by decreasing the nominal value of the outstanding share capital or by reducing the number of outstanding
shares. The number of outstanding shares may be reduced either by an exchange of shares or by the repurchase and cancellation of shares. Holders of each class of shares must be treated equally unless
each affected shareholder agrees otherwise.

10.5.3    Share Capital Issued History

|Date     |  | Movement                 |  | Number of
Shares |  | Capital
Amount |           | Additional
Paid-in
Capital
Amount |    | Cumulative
Capital |  | Cumulative
Number of
Shares |            | Nominal
Value
|-------- |  | ------------------------ |  | ---------------- |  | -------------- | --------- | --------------------------------- | -- | ------------------ |  | --------------------------- | ---------- | -------------
|10/13/95 |  | Issuance of common stock |  | 19,000           |  | FF             | 900,000   |                                   | FF | 8,100              |  | FF                          | 1,900,000  |              
|10/13/95 |  | Issuance of common stock |  | 81,000           |  | FF             | 8,100,000 |                                   |    |                   |  | FF                          | 10,000,000 |              
|         |  |                          |  |                  |  |                |           |                                   |    |                    |  |                             |            |              

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|06/21/96                                  |  | Reduction of the nominal value by issues of shares at no value                |  | 2,000,000 new shares in exchange for 100,000 existing shares     |  |    |           |  |    |                           |  | FF | 10,000,000    |  | 2,000,000  |  | FF | 5   
|----------------------------------------- |  | ----------------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | -- | ---------- |  | -- | -------------------------- |  | -- | ------------- |  | ---------- |  | -- | ----
|05/16/97                                  |  | Reduction of the nominal value                                                |  | 10,000,000 new shares in exchange for 2,000,000 existing shares  |  |    |           |  |    |                           |  | FF | 10,000,000    |  | 10,000,000 |  | FF | 1   
|05/16/97                                  |  | Issuance of common stock                                                      |  | 3,769,415                                                        |  | FF | 3,769,415  |  | FF | 11,270,550.85              |  | FF | 13,769,415    |  | 13,769,415 |  | FF | 1   
|05/16/97                                  |  | Issuance of common stock (incorporating additional paid in capital of 0,80 F) |  |                                                                 |  | FF | 11,015,532 |  |    |                           |  | FF | 24,784,947    |  | 13,769,415 |  | FF | 1.80
|06/30/98                                  |  | Issuance of common stock                                                      |  | 5,809,720                                                        |  | FF | 10,457,496 |  | FF | 22,657,908                 |  | FF | 35,242,443    |  | 19,579,135 |  | FF | 1.80
|06/30/99                                  |  | Exercise of stock warrants (6/30/1998 Shareholders' Meeting)                  |  | 2,091,495                                                        |  | FF | 3,764,691  |  | FF | 8,365,980                  |  | FF | 39,007,134    |  | 21,670,630 |  | FF | 1.80
|12/23/99
(09/12/99
Shareholders'
meeting) |  | Issuance of common stock                                                      |  | 2,800,000                                                        |  | FF | 5,040,000  |  | FF | 39,760,000                 |  | FF | 4,047,134     |  | 24,470,630 |  | FF | 1.80
|03/10/2000                                |  | Conversion of capital into euros and capital reduction                        |  |                                                                 |  | FF | 707,595.19 |  |    |                           |  | €  | 6,607,070.10  |  | 24,470,630 |  | €  | 0.27
|03/31/2000                                |  | Exercise of 1999 D Stock warrants (12/9/1999 Shareholders' meeting)           |  | 1,200,000                                                        |  |    | 324,000    |  | FF | 17,040 000
(€2,603,021.10) |  | €  | 6,931,070.10  |  | 25,670,630 |  | €  | 0.27
|05/23/2000                                |  | Exercise of stock options (Plans 1996 and 1999)                               |  | 188,326                                                          |  |    | 50,848.02  |  | FF | 156,329.08
(€23,832.21)    |  | €  | 6,981,918.12  |  | 25,858,956 |  | €  | 0.27
|05/25/2000                                |  | Reverse stock split (2 for 1)                                                 |  | 12,929,478 new shares in exchange for 25,858,956 existing shares |  |    |           |  |    |                           |  | €  | 6,981,918.12  |  | 12,929,478 |  | €  | 0.54
|Initial Public Offering (07/07/2000)      |  | Issuance of common stock                                                      |  | 6,000,000                                                        |  | €  | 3,240,000  |  | €  | 73,560,000                 |  | €  | 10,221,918.12 |  | 18,929,478 |  | €  | 0.54
|10/12/2000                                |  | Exercise of 1999 B stock warrants (12/9/1999 Shareholders' meeting)           |  | 70,000                                                           |  | €  | 37,800     |  | €  | 303,685.79                 |  | €  | 10,259,718.12 |  | 18,999,478 |  | €  | 0.54
|12/18/2000                                |  | Exercise of stock options (Plan 1999)                                         |  | 72,186                                                           |  | €  | 38,980.44  |  | €  | 93,847.83                  |  | €  | 10,298,698.56 |  | 19,071,664 |  | €  | 0.54
|01/24/2001                                |  | Exercise of 1999 C stock warrants (12/9/1999 Shareholders' meeting)           |  | 18,750                                                           |  | €  | 10,125     |  | €  | 81,344.40                  |  | €  | 10,308,823.56 |  | 19,090,414 |  | €  | 0.54
|                                          |  |                                                                               |  |                                                                  |  |    |            |  |    |                            |  |    |               |  |            |  |    |     

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|01/24/2001 |  | Exercise of stock options (Plans 1996 and 1999)                                          |  | 18,437    |  | € | 9,955.98   |  | € | 18,582.45    |  | € | 10,318,779.54 |  | 19,108,851 |  | € | 0.54
|---------- |  | ---------------------------------------------------------------------------------------- |  | --------- |  | - | ---------- |  | - | ------------ |  | - | ------------- |  | ---------- |  | - | ----
|04/04/2001 |  | Exercise of 1999 A stock warrants (12/9/1999 Shareholders' meeting)                      |  | 30,000    |  | € | 16,200     |  | € | 130,151.05   |  | € | 10,334,979.54 |  | 19,138,851 |  | € | 0.54
|06/20/2001 |  | Exercise of 1998 O stock warrants (6/30/1998 Shareholders' meeting)                      |  | 287,289   |  | € | 155,136.06 |  | € | 195,239.35   |  | € | 10,490,115.60 |  | 19,426,140 |  | € | 0.54
|06/20/2001 |  | Exercise of 1999 A stock warrants (12/9/1999 Shareholders' meeting)                      |  | 120,000   |  | € | 64,800     |  | € | 520,604.23   |  | € | 10,554,915.60 |  | 19,546,140 |  | € | 0.54
|06/20/2001 |  | Exercise of stock options (Plans 1996 and 1999)                                          |  | 95,274    |  | € | 51,447.96  |  | € | 169,508.03   |  | € | 10,606,363.56 |  | 19,641,414 |  | € | 0.54
|10/17/2001 |  | Exercise of stock options (Plans 1996 and 1999)                                          |  | 16,562    |  | € | 8,943.48   |  | € | 11,252.91    |  | € | 10,615,307.04 |  | 19,657,976 |  | € | 0.54
|01/23/2002 |  | Exercise of 1998 O stock warrants (6/30/1998 Shareholders' meeting)                      |  | 197,710   |  | € | 106,763.40 |  | € | 134,362.16   |  | € | 10,722,070.44 |  | 19,855,686 |  | € | 0.54
|06/04/2002 |  | Exercise of stock options (Plans 1996 and 1999)                                          |  | 10,874    |  | € | 5,871.96   |  | € | 13,797.52    |  | € | 10,727,942.40 |  | 19,866,560 |  | € | 0.54
|09/11/2002 |  | Exercise of stock options (Plan 1996)                                                    |  | 16,250    |  | € | 8,775      |  | € | 19,825       |  | € | 10,736,717.40 |  | 19,882,810 |  | € | 0.54
|04/23/2003 |  | Cancellation of common stock held in treasury                                            |  | 1,080,173 |  | € | 583,293.42 |  | € | 1,154,914.76 |  | € | 10,153,423.98 |  | 18,802,637 |  | € | 0.54
|07/25/2003 |  | Exercise of stock options (Plan 1999)                                                    |  | 2,625     |  | € | 1,417.50   |  | € | 3,228.75     |  | € | 10,154,841.48 |  | 18,805,262 |  | € | 0.54
|01/26/2004 |  | Exercise of stock options (Plan 1999)                                                    |  | 23,125    |  | € | 12,487.50  |  | € | 28,443.75    |  | € | 10,167,328.98 |  | 18,828,387 |  | € | 0.54
|07/21/2004 |  | Exercise of stock options (Plans 1999 and 2001) and O 1998 and BSA F 2003 stock warrants |  | 163,533   |  | € | 88,307.82  |  | € | 245,844.59   |  | € | 10,255,636.80 |  | 18,991,920 |  | € | 0.54
|09/10/2004 |  | Exercise of stock options (Plans 1999 and 2001)1                                         |  | 15,250    |  | € | 8,235      |  | € | 18,880       |  | € | 10,263,871.80 |  | 19,007,170 |  | € | 0.54

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10.6    PREEMPTIVE SUBSCRIPTION RIGHTS

According to French company law, if we issue specific kinds of additional securities, current shareholders will have preemptive subscription rights to these
securities on apro ratabasis. These preemptive rights require us to give priority treatment to those shareholders. The rights entitle the individual
or entity that holds them to subscribe to an issue of any securities that may increase the share capital of our company by means of a cash payment or a settling of cash debts. Preemptive subscription
rights are transferable during the subscription period relating to a particular offering of shares. These rights may also be listed on Euronext Paris.

A
two-thirds majority of the shares entitled to vote at an extraordinary general shareholders' meeting may vote to waive preemptive subscription rights with respect to any
particular offering. French law requires that the board of directors and our independent auditors present reports that specifically address any proposal to waive preemptive subscription rights. In the
event of a waiver, the issue of securities must be completed within the period prescribed by law. The shareholders may also decide at an extraordinary general shareholders'meeting to give the existing
shareholders a non-transferable priority right to subscribe to the new securities, during a limited period of time. Shareholders also may notify us that they wish to waive their own
preemptive subscription rights with respect to any particular offering of shares if they so choose.

10.7    FORM, HOLDING AND TRANSFER OF SHARES

10.7.1    Form of Shares

Ourstatutsprovide that the shares may be held in registered or bearer form.

10.7.2    Holding of Shares

In accordance with French law concerning dematerialization of securities, shareholders' ownership rights are represented by book entries instead of share
certificates. We maintain a share account with Euroclear France for all shares in registered form, which is administered by BNP Paribas. In addition, we maintain separate accounts in the name of each
shareholder either directly or, at a shareholder's request, through the shareholder's accredited intermediary. Each shareholder account shows the name of the holder and the number of shares held and,
in the case of shares held through an accredited intermediary, the shareholder account shows that the shares are held through such intermediary. BNP Paribas, as a matter of course, issues
confirmations to each registered shareholder as to shares registered in the shareholder's account, but these confirmations are not documents of title.

Shares
held in bearer form are held on the shareholder's behalf in an account maintained by an accredited intermediary and are registered in an account, which the accredited intermediary
maintains with Euroclear France. That account is separate from our company's share account with Euroclear France. Each accredited intermediary maintains a record of shares held through it and will
issue certificates of registration for the shares that it holds. Shares held in bearer form may only be transferred through accredited intermediaries and Euroclear France. Our statutspermit us to
request that Euroclear France provide us at any time with the identity of the holders of our shares or other securities granting
immediate or future voting rights, held in bearer form, and with the number of shares or other securities so held.

French
company law states that shares held by any non-French resident may be held on the shareholder's behalf in a collective account or in several individual accounts by the
intermediary. The intermediary must declare his position as an intermediary holding shares on behalf of the beneficial owner. Consequently, the owner of the shares recorded in the collective account
or in several individual accounts by an intermediary will be represented in the general shareholders' meetings by this intermediary.

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10.7.3    Transfer of Shares

Ourstatutsdo not contain any restrictions relating to the transfer of shares.

Registered
shares must be converted into bearer form before being transferred on Euronext Paris, and accordingly, must be registered in an account maintained by an accredited
intermediary. A shareholder
may initiate a transfer by giving instructions to the relevant accredited intermediary. A fee or commission is payable to the broker involved in the transaction, regardless of whether the transaction
occurs within or outside France. No registration duty is normally payable in France, unless a transfer instrument has been executed in France.

10.8    LIQUIDATION RIGHTS

If we are liquidated, any assets remaining after payment of our debts, liquidation expenses and all of our remaining obligations will be distributed first to
repay in full the nominal value of our shares. Any surplus will be distributedpro rataamong shareholders in proportion to the nominal value of their
shareholdings.

10.9    REQUIREMENTS FOR HOLDINGS EXCEEDING CERTAIN PERCENTAGES

French company law provides that any individual or entity, acting alone or in concert with others, that becomes the owner, directly or indirectly, of more than
5%, 10%, 20%, 331/3%, 50% or 662/3% of the outstanding shares or voting rights of a listed company in France, such as our company, or that increases or decreases its
shareholding or voting rights above or below any of those thresholds, must notify the company within five trading days of the date it crosses the threshold of the number of shares and ADSs it holds
and their voting rights. The individual or entity must also notify the AMF within five trading days of the date it crosses the threshold.

French
law and the AMF regulations impose additional reporting requirements on persons who acquire more than 10% or 20% of the outstanding shares or voting rights of a listed company.
These persons must file a report with the companythe AMF within ten trading days of the date they cross the threshold. In the report, the acquirer must specify its intentions for the following
12-month period, including whether or not it intends to continue its purchases, to acquire control of the company in question or to seek nomination to the board of directors. The AMF makes
the notice public. The acquirer must also publish a press release stating its intentions in a financial newspaper of national circulation in France. The acquirer may amend its stated intentions,
provided that it does so on the basis of significant changes in its own situation or shareholders. Upon any change of intention, it must file a new report.

Under
AMF regulations, and subject to limited exemptions granted by the AMF, any person or persons acting in concert who comes to own in excess of 331/3% of the share
capital or voting rights of a French listed company must initiate a public tender offer for the balance of the share capital of such company.

In
addition, ourstatutsprovide that any person acting alone or in concert who becomes, directly or indirectly, the owner of more than
two percent of our share capital or voting rights must notify us within five trading days by registered mail, return receipt requested, of the number of shares it holds. The same notification
requirement applies to each subsequent increase, up to and including 50%, or decrease in ownership of two percent or whole multiples of two percent. If a person does not comply with this notification
requirement, one or more shareholders holding two percent or more of our share capital or voting rights may require a general shareholders' meeting to deprive the shares in excess of the relevant
threshold of voting rights for all general shareholders' meetings for two years following the date on which the owner complies with the notification requirements.

In
order to permit shareholders to give the required notice, we must publish in the BALO, not later than fifteen calendar days after the general shareholders' meeting, information with
respect to the total

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number
of voting rights outstanding as of the date of such meeting. In addition, if the number of outstanding voting rights changes by 5% or more between two general shareholders' meetings, we must
publish in the BALO, within fifteen calendar days of such change, the number of voting rights outstanding and provide the AMF with a written notice. The AMF publishes the total number of voting rights
so notified by all listed companies in a weeklyavis(notice), mentioning the date each such number was last updated. In order to facilitate compliance
with the notification requirements, a holder of ADSs may deliver any such notification to the depositary and the depositary shall, as soon as practicable, forward such notification to us and to the
AMF.

If
any person fails to comply with the legal notification requirement, the shares or voting rights in excess of the relevant threshold will be deprived of voting rights for all general
shareholders' meetings until the end of a two-year period following the date on which the owner thereof complies with the notification requirements. In addition, any shareholder who fails
to comply with these requirements may have all or part of its voting rights suspended for up to five years by the Commercial Court at the request of our Chairman, any shareholder or the AMF, and may
be subject to a €18,000 fine.

10.10    PURCHASE OF OUR OWN SHARES

Under French law, our company may not issue shares to itself. However, we may, either directly or through a financial intermediary acting on our behalf, purchase
our shares for one of three purposes:



We
may not cancel more than 10% of our outstanding share capital over any 24-month period. In addition, we may not repurchase under either of the second or third case cited
above, for an amount of shares that would result in our company holding, directly or through a person acting on our behalf, more than 10% of our outstanding share capital, or if we have different
classes of shares, 10% of the shares in each class.

We
must hold any shares we repurchase in registered form. These shares also must be fully paid up. Shares repurchased by us are deemed outstanding under French law but are not entitled
to dividends or voting rights, and we may not exercise the preemptive subscription rights attached to them.

The
shareholders, at an extraordinary general meeting, may decide not to take these shares into account in determining the preemptive subscription rights attached to the other shares.
However, if the shareholders decide to take them into account, we must either sell the rights attached to the shares we hold on the market before the end of the subscription period or distribute them
to the other shareholders on apro ratabasis.

Pursuant
to the authorization granted by the general shareholders' meeting held on December 15, 2003, our board of directors is authorized to repurchase up to 10% of our total
outstanding share capital at a maximum price per share of €6.48 and a minimum price per share of €1.51 per share. The total amount of purchase may not exceed
€15 million. This authorization will expire on the date of the general shareholders' meeting called to approve the accounts for the year ended June 30, 2004. The board
may use this authorization for the purpose of implementing stock purchase plans for the benefit of our employees or executives or those of our affiliates; providing consideration in the context of an
acquisition or an exchange of company shares (especially as part of external growth operations); delivering securities upon

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the
exercise of convertible or exchangeable securities; stabilizing the price of our shares; purchasing and selling shares depending on market conditions and in compliance with the relevant
regulations; and canceling shares, subject the adoption of a specific resolution by the extraordinary general meeting of shareholders. Anote
d'informationwas filed with the AMF on November 26, 2003 and the AMF has granted the visa number 03-1044. A new resolution will be submitted to this effect
to the next general shareholders' meeting called to approve our financial statements for the year ended June 30, 2004. We intend to file anote
d'informationwith the AMF about the new share repurchase program before the next general shareholders' meeting.

In
addition, at the December 15, 2003 general shareholders' meeting, the shareholders granted the board of directors the authorization to cancel some or all of the shares
purchased under the share repurchase program up to a limit of 10% of our share capital in any one 24-month period. This authorization will expire on the date of the general shareholders'
meeting called to approve the accounts for the fiscal year ending June 30, 2004.

Between
July 1, 2000 and September 10, 2004, under authorization that our board of directors received from the shareholders on December 18, 2000, December 13,
2001, December 5, 2002 and December 15, 2003, we repurchased 3,058,816 shares for a total of €7.7 million and sold 143,189 shares for a total of
€0.6 million and cancelled 1,080,173 shares for a total of €1.2 million. On September 10, 2004, we held 1,835,454 shares or 9.66% of our share
capital in treasury. We have not used any financial derivative instruments in relation to our share buy-back program.

10.11    TRADING IN OUR OWN SHARES

UnderRèglement no. 90-04of the COB, as amended, we may not trade in our
own shares for the purpose of manipulating the market. There are three requirements for trades by a company in its own shares to be considered valid. Specifically, in order to be valid:



If
a company's shares, such as our shares, are continuously quoted (cotation en continu), then a trade must meet the following further
requirements to be considered valid:



Prescriptions
regarding volume of purchases do not apply to purchase of securities on behalf of an issuer by aprestataire de services
d'investissement(an authorized investment firm) acting pursuant to a

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contrat de liquidité(liquidity agreement) in conformity with acharte de déontologie(code of
ethics) that has been approved by the COB. The first code of ethics was adopted by the "Association française des entreprises
d'investissement" (AFEI) and approved by the COB on February 13, 2001.

If
a company's shares are quoted at fixings, then a trade must meet one further requirement to be considered valid:



The
use of repurchased shares to finance an acquisition is deemed justified to the extent the acquisition is performed after a three-month abstention period and an independent expert has
been designated to verify the value of the shares, the value of the acquisition, and the fairness of the exchange ratio.

However,
there are two periods during which we are not permitted to trade in our own securities: the 15 day period before the date on which we make our consolidated or annual
accounts public, and the period beginning on the date at which we become aware of information that, if disclosed, would have a significant impact on the market price of our securities and ending on
the date this information is made public.

After
making an initial purchase of our own shares, we must file monthly reports with the AMF that contain specified information about subsequent transactions. The AMF makes this
information publicly available.

10.12    OWNERSHIP OF SHARES BY NON-FRENCH PERSONS

Under French law, there is no limitation on the right of non-residents or non-French shareholders to own or, where applicable, to vote
securities of a French company.

A
French law dated February 14, 1996 abolished the requirement that a person who is not a resident of the E.U. obtain anautorisation
préalable, (prior authorization), prior to acquiring a controlling interest in a French company. However, pursuant to the French Decree number
2003-196 of March 7, 2003, the acquirer / investor must file adéclaration administrative, (administrative
notice), with French authorities in connection with certain cases of foreign investments, direct investments and indirect foreign investments in any French company. Under existing administrative
rulings, ownership of more than 33.33% of a French company's share capital or voting rights is regarded as a direct investment subject to a "déclaration
administrative".

10.13    MATERIAL CONTRACTS

See "Item 4. Information on the CompanyIntellectual Property".

10.14    EXCHANGE CONTROLS

Under current French exchange control regulations, there are no limitations on the amount of payments that may be remitted by a French company to
non-residents. Laws and regulations concerning foreign exchange controls do require, however, that all payments or transfers of funds made by a French resident to a
non-resident be handled by an accredited intermediary. In France, all registered banks and substantially all credit establishments in France are accredited intermediaries.

10.15    OTHER

For other limitations affecting shareholders, please see "Item 10.7. Form, Holding and Transfer of Shares" and "Item 10.9. Requirements for Holdings Exceeding
Certain Percentages."

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10.16    FRENCH TAXATION

The following is a general summary of the material French tax consequences of owning and disposing of the shares of our company. This summary may only be relevant
to you if you are not a resident of France and you do not hold your shares in connection with a permanent establishment or a fixed base in France through which you carry on a business or perform
personal services.

This
discussion is intended only as a descriptive summary. It does not address all aspects of French tax laws that may be relevant to you in light of your particular circumstances. It is
based on the laws, conventions and treaties in force as of the date of this report, all of which are subject to change, possibly with retroactive effect, or different interpretations.

In
particular, holders of shares of our Company should be aware that the French Budget Law for 2004 (no 2003-1311, dated December 30, 2003) has abolished
theavoir fiscaland theprécomptewith respect to dividends to be paid to French
individual shareholders as of January 1, 2005. As to French non-individual shareholders, they will generally no longer be entitled to use theavoir
fiscalas of January 1, 2005. The Budget Law for 2004 nonetheless provides that French individual shareholders will be entitled, with respect to dividends paid as of
January 1, 2005, to a new tax credit equal to 50% of the dividend paid, capped at €230, or as the case may be, €115, depending on the marital status of the
individual.

Although
yet unclear, non-resident individual shareholders that are entitled to and that comply with the procedures for claiming benefits under an applicable tax treaty
should be entitled to the refund of theavoir fiscalwith respect to distributions paid until December 31, 2004 and, possibly to the new tax
credit with respect to dividends paid as of January 1, 2005. Also, non-resident shareholders that are not entitled to benefit from the transfer of theavoir
fiscalbut are otherwise entitled to benefit from a double tax treaty (i.e., corporate shareholders and
individuals, if they are not entitled to theavoir fiscalrefund), should be entitled to a refund of the précompte, if any, that our Company paid in
cash on distributions made in 2004.

In
addition the French Budget Law for 2004 has implemented a temporary equalization tax that will be levied at the rate of 25% (assessed on the net dividends before withholding tax) on
dividends paid in 2005 out of profits that have not been taxed at the ordinary corporate income tax rate or that have been earned and taxed more than five years before the distribution. However,
unlike theprécompte, such temporary equalization tax will not be refundable to non-resident shareholders.

You
are urged to consult your own tax advisor about the potential tax effects of owning or disposing of shares in your particular situation.

10.16.1    Taxation on Sale or Disposal of Shares

Generally, you will not be subject to any French income tax or capital gains tax when you sell or dispose of shares of our company if both of the following apply
to you:



If
a double tax treaty between France and your country of residence contains more favorable provisions, you may not be subject to any French income tax or capital gains tax when you sell
or dispose of any shares of our company, even if one or both of the above statements applies to you.

Subject
to specific conditions, foreign states, international organizations and a number of foreign public bodies are not considered French residents for these purposes.

If
you transfer listed shares using a written agreement, that agreement must generally be registered. You will be required to pay a registration duty of 1% of either the purchase price
or the market value of

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the
shares transferred, whichever is higher. The maximum duty is €3,049 per transfer. However, in some circumstances, if the agreement is executed outside France, you will not be
required to pay this duty.

10.16.2    Taxation of Dividends

In France, companies may only pay dividends out of income remaining after tax has been paid. When shareholders resident in France received dividends in 2003 from
French companies, they were generally entitled to a tax credit, known as theavoir fiscal.

The
amount of theavoir fiscalis generally equal to:



In
addition, if the distribution of dividends by us gave rise to theprécompte, (see "Item 10.16.3. The Précompte") shareholders entitled to theavoir fiscalat the rate of 10% generally were
entitled to an additional amount ofavoir fiscalequal to 80% of theprécomptepaid in
cash by the company.

As
discussed in more detail above, as a result of the reform enacted by the French Budget Law for 2004, French resident individual shareholders will still benefit from the avoir fiscalwith respect to
dividend distributions made during 2004 but will not be entitled to theavoir
fiscalwith respect to dividend distributions made from 2005 on. Instead, from 2005 on, French resident individuals will be entitled to the tax credit described in the
introduction above. French resident shareholders who are not
individuals will generally no longer be entitled to use theavoir fiscal(i.e., to offset the avoir fiscalagainst tax otherwise payable) as from January 1, 2005.

Under
French domestic law, French companies must generally deduct a 25% French withholding tax from dividends paid to non-residents, and shareholders who are not resident in
France are not eligible for theavoir fiscal. Under most tax treaties between France and other countries, the rate of this withholding tax may be
reduced in specific circumstances. Generally, a holder who is a non-French resident is subsequently entitled to a tax credit in his or her country of residence for the amount of tax
actually withheld. Under some tax treaties, the withholding tax is eliminated altogether.

The
following countries,Territoires d'Outre-Mer(French overseas territories) and jurisdictions have entered into income tax
treaties with France that provide for the arrangements summarized below:

|Australia
Austria
Belgium
Bolivia
Brazil
Burkina Faso
Canada
Estonia
Finland
Gabon
Germany(1)
Ghana
Iceland
India
Israel |  | Italy
Ivory Coast
Japan
Latvia
Lithuania
Luxembourg
Malaysia
Mali
Malta
Mauritius
Mexico
Namibia
Netherlands
New Zealand
Niger |  | Norway
Pakistan
Senegal
Singapore
South Korea
Spain
Sweden
Switzerland
Togo
Turkey
Ukraine
United Kingdom
U.S.
Venezuela |  | French Territoires
d'Outre-Mer and
others:Mayotte
New Caledonia
Saint-Pierre & Miquelon
|------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------

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Under these treaties, a shareholder who fulfills specific conditions may generally apply to the French tax authorities for the following:



Except
for the U.S., none of the countries or territories listed above has a treaty granting benefits to holders of ADSs, as opposed to shares. Accordingly, this discussion of treaty
benefits does not apply to ADS holders.

If
these arrangements provided for by any of the above-listed treaties apply to a shareholder, we will generally withhold tax from the dividend at the lower rate, provided that the
shareholder has established, before the date of payment of the dividend that he or she is entitled to the lower rate and has complied with the filing formalities. Otherwise, we must withhold tax at
the full rate of 25%, and the shareholder may subsequently claim the excess tax paid.

Some
of the countries and territories listed above impose additional conditions for corporate entities wishing to receive theavoir
fiscal. In other countries and territories, individual residents may receive theavoir fiscalbut corporate entities may not. In
any event, non-resident shareholders other than individuals will generally not be entitled to a refund of theavoir fiscalwith respect to
dividends paid from 2004 on.

10.16.3    The Précompte

A French company must pay a tax known as theprécompteto the French tax authorities if it
distributes, before January 1, 2005, dividends which carry anavoir fiscalout of:



The
amount of theprécompteis 50% of the net dividends before withholding tax.

As
regards dividends paid in 2003, a shareholder that is not a French resident for French tax purposes may generally obtain a refund of all or part of the précomptewe actually paid in cash, net of
applicable withholding tax, in two cases:



Although
the French tax authorities have not yet issued guidelines to confirm this point, the provisions of a treaty, insofar as they provide for the transfer of the avoir fiscalor, as the case may be, a refund
of theprécompte(see paragraph on the précomptebelow), should continue to apply to distributions paid until December 31, 2004, but
will no longer apply from
January 1, 2005. Although still unclear, non-resident individual shareholders that benefit from a tax treaty which provides for the transfer of theavoir
fiscalshould be entitled to the newly implemented credit described above from 2005 on.

Furthermore,
it should be noted that as a consequence of the suppression of theprécomptefor dividends which will be paid
as of January 1, 2005, the French Budget Law for 2004 implements a temporary equalization tax that will be levied at the rate of 25% (assessed on the net dividends before

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withholding
tax) on dividends paid in 2005 out of profits that have not been taxed at the ordinary corporate income tax rate or that have been earned and taxed more than five years before the
distribution. However, unlike theprécompte, such temporary equalization tax will not be refundable to non-resident
shareholders.

10.16.4    Estate and Gift Tax

France imposes estate and gift tax where an individual or entity acquires shares of a French company from a non-resident of France by way of
inheritance or gift. France has entered into estate and gift tax treaties with a number of countries. Under these treaties, residents of those countries may be exempt from this tax or obtain a tax
credit, assuming specific conditions are met. You
should consult your own tax advisor about whether French estate and gift tax will apply to you and whether you may claim an exemption or tax credit.

10.16.5    Wealth Tax

You will not be subject to theimpôt de solidarité sur la fortune(French wealth
tax) if both of the following apply to you:



If
a double tax treaty between France and your country contains more favorable provisions, you may not be subject to French wealth tax even if one or both of the above statements applies
to you.

10.17    TAXATION OF U.S. INVESTORS

The following is a general summary of certain material U.S. federal income tax and French tax consequences to U.S. Holders of owning and disposing of our shares
or ADSs. You will be a "U.S. Holder" if you are the beneficial owner of shares or ADSs and all of the following six points apply to you:



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When referring to the U.S.-France income tax treaty, we refer to the income tax treaty currently in force between the U.S. and France, the "Convention between the Government of the
United States of America and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital," signed on
August 31, 1994.

For
purposes of the U.S.-France income tax treaty and U.S. federal income tax, deposits or withdrawals of shares by you for ADSs will not be subject to U.S. federal income tax.

Special
rules may apply to U.S. expatriates, insurance companies, tax-exempt organizations, banks and other financial institutions, regulated investment companies, real
estate investment trusts, persons subject to the alternative minimum tax, securities broker-dealers, traders in securities that elect to use the mark to market method of accounting, persons holding
their shares or ADSs as part of a hedging, straddle or conversion transaction, persons who acquired their shares or ADSs pursuant to the exercise of employee stock options or similar derivative
securities or otherwise as compensation, among others. Those special rules, except certain rules applicable to certain tax-exempt investors, are not discussed in this report.

If
a partnership holds shares or ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If you are a partner in
a partnership that holds shares or ADSs, you are urged to consult your own tax advisor regarding the specific tax consequences of owning and disposing of the shares or ADSs.

This
discussion is based on the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), existing, proposed, and temporary U.S. Treasury regulations thereunder, judicial
decisions, administrative pronouncements, French law and regulations and the U.S.-France income tax treaty, all as currently in effect as of the date hereof, and all of which are subject to change or
changes in interpretation possibly with retroactive effect. In addition, this summary is based, in part, upon representations made by the depositary to us and assumes that the Deposit Agreement, and
all other related agreements, will be performed in accordance with its terms.

U.S. Holders of our shares or ADSs should be aware that we believe that we have been classified as a passive foreign investment company ("PFIC") for the years
ended June 30, 2002, 2003 and 2004. Our PFIC status will result in U.S. federal income tax consequences for holders of our shares and ADSs that are different from those ordinarily applicable.
U.S. Holders are urged to review the section below entitled "Passive Foreign Investment Company Status" and to consult their own tax advisors regarding the consequences of owning and disposing of our
shares or ADSs as well as the applicable filing
requirements and the advisability of making an election in light of our PFIC status. In addition, holders are urged to consult their own advisors concerning the U.S. federal, state and local tax
consequences in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

10.17.1    Taxation of Dividends

Withholding Tax and Avoir Fiscal

In France, companies may only pay dividends out of income remaining after tax has been paid. When shareholders resident in France received dividends from French
companies in 2003, they generally were entitled to theavoir fiscal.

The
amount of theavoir fiscalattached to dividends paid in 2003 is equal to:



In
addition, if the distribution of dividends by us gave rise to theprécompte, shareholders entitled to the avoir fiscalat the rate of 10% were
generally entitled to an additional amount ofavoir fiscalequal to
80% of theprécomptepaid in cash by the company.

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As
indicated below, theprécompteis a tax which is paid by French companies when they distribute, until
December 31, 2004, dividends out of certain profits and such dividends carry anavoir fiscal(see paragraph below relating to the précompte).

As
discussed in more detail under "French Taxation" above, the French Budget Law for 2004 included a reform of the French tax treatment of distributions made by French companies to
residents of France which directly affects non-residents of France.

French
companies must normally deduct a 25% French withholding tax from dividends paid to non-residents and, under French domestic law, shareholders who are not resident in
France are not eligible for theavoir fiscal.

Under
the U.S.-France income tax treaty, this withholding tax is reduced to 15% if your ownership of the shares or ADSs is not effectively connected with a permanent establishment or a
fixed base that you have in France and certain other requirements are satisfied.

As
regards dividends paid by our company in 2003, additional provisions apply if you are considered an eligible U.S. Holder of shares or ADSs. You are eligible if your ownership of the
shares or ADSs is not effectively connected with a permanent establishment or a fixed base that you have in France and any one of the following four points applies to you:



Individual
holders of our shares or ADSs that are residents of the United States as defined pursuant to the provisions of the U.S.-France tax treaty and whose ownership in our shares is
not connected with a permanent establishment in France, if they are still entitled to the transfer of theavoir fiscalwith respect to dividends paid
until December 31, 2004, should remain "eligible" U.S. holders with respect to distributions to be made by us in 2004. As regards distributions of dividends to be made from January 1,
2005 on, and subject to confirmation by administrative guidelines from the French tax authorities, individual U.S. holders should be entitled to the transfer of the new tax credit implemented by the
French Budget law for 2004.

If
you are an eligible U.S. Holder, we withhold tax from your dividend at the reduced rate of 15%, provided that you previously establish that you are a resident of the U.S. under the
U.S.-France income tax treaty in accordance with the following procedures:



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If
you are not an eligible U.S. Holder, or if you do not complete Form RF I A EU-No. 5052 or the five-point certificate before the dividend payment date,
we must deduct French withholding tax at the rate of 25%, but you may claim a refund from the French tax authorities of the excess withholding tax.

So
long as the avoir fiscal is still in effect, and subject to certain conditions, an eligible U.S. Holder, may also be claim the payment from the French Treasury of the avoir fiscal(net of applicable
withholding tax), by completing Form RF I A EU-No. 5052 and sending it to the French tax authorities
before December 31 of the second year following the year during which the dividend is paid. This payment will generally not be made until after the close of the calendar year in which the
dividend was paid.

Please
note that the procedures described above apply so long as theavoir fiscalremains in effect. Although the French tax authorities
have not yet issued any guidance regarding the procedures for claiming the benefit of the reduced rate of French withholding tax following the suppression of theavoir
fiscaland, if applicable, the transfer of the newly implemented tax credit, any such benefits will be subject to the accomplishment of formalities yet to be published.

Specific
rules apply to the following:



Entities
in these two categories are eligible for the reduced withholding tax rate of 15% on dividends, subject to the same withholding tax filing requirements as eligible U.S. Holders,
except that they may have to supply additional documentation evidencing their entitlement to these benefits. As regards dividends paid to in 2003, these entities were not entitled to the full avoir fiscal. However, they were entitled to claim a partialavoir fiscalequal to 30/85 of the grossavoir fiscal, less withholding tax on such amount, provided that they owned, directly or indirectly, less than 10% of our company's capital and they
satisfied the filing requirements specified in Internal Revenue Service regulations.

Please
note that entities in these two categories being treated like any other corporate shareholders as regards the suppression of theavoir
fiscal, they will no longer be entitled to use theavoir fiscalas of January 1, 2005 and will thus lose the benefit of
the transfer of anyavoir fiscalwith respect to dividends received as of January 1, 2004.

Any avoir fiscalor partialavoir fiscaland any French withholding tax refund are
generally expected to be paid within 12 months after the holder of shares or ADSs files Form RF I A EU-No. 5052. However, they will not be paid before January 15
following the end of the calendar year in which the dividend is paid.

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The
Form RF I A EU-No. 5052 or the certificate, so long as they are applicable, together with its respective instructions, will be provided by the depositary to all
U.S. Holders of ADSs registered with the depositary and are also available from the United States Internal Revenue Service. The depositary will arrange for the filing with the French tax authorities
of all Forms or Certificates completed by U.S. Holders of ADSs that are returned to the depositary in sufficient time.

Subject
to the discussion in "Passive Foreign Investment Company Status" below, for U.S. federal income tax purposes, the gross amount of any distribution and any related tax credit,
including any French tax withheld therefrom, will be included in your gross income as ordinary income when any such payment is received by you (or by the depositary, if you hold ADSs), to the extent
they are paid or deemed paid out of our current or accumulated earnings and profits as calculated for U.S. federal income tax purposes. Distributions in excess of our current and accumulated earnings
and profits will be treated first as a tax-free return of capital to the extent of your tax basis in the shares or ADSs, and to the extent in excess of such tax basis, will be treated as a
gain from a sale or exchange of the shares or ADSs. Dividends paid by our company will not give rise to the dividends received deduction generally allowed to U.S. corporations with respect to
dividends received from other U.S.
corporations. Such dividends generally will constitute foreign source "passive" income for foreign tax credit purposes (or, for some holders, foreign source "financial services" income).

Further,
the amount of any dividend paid in euros, including any French tax withheld, will, for U.S. federal income tax purposes, be included in gross income in an amount equal to the
U.S. dollar value of the euro calculated by reference to the exchange rate in effect on the date the dividend is received by you, in the case of shares, or by the depositary, in the case of ADSs,
regardless of whether the payment is in fact converted into U.S. dollars. If you do not convert any such foreign currency that is distributed to you into U.S. dollars on the date you receive it, you
will have a basis in that foreign currency equal to its U.S. dollar value on the date of receipt. Any gain or loss resulting from currency exchange fluctuations during the period from the date the
dividend is includible in your gross income to the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss. You may also be required to recognize
foreign currency gain or loss if you receive a refund under the U.S.-France income tax treaty of tax withheld in excess of the treaty rate. This foreign currency gain or loss generally will be U.S.
source ordinary income or loss.

French
withholding tax imposed on the dividends you receive and on any tax credit at 15% under the U.S.-France income tax treaty is treated as payment of a foreign income tax. You may
claim this amount as a credit against your U.S. federal income tax liability, subject to detailed conditions and limitations, or you may alternatively choose to claim a deduction, provided a deduction
is claimed for all of the foreign taxes you pay in a particular year. A deduction does not reduce U.S. federal income tax on a dollar-for-dollar basis like a tax credit. The
deduction, however, is not subject to the limitations applicable to foreign tax credits.

The
U.S. Treasury has expressed concerns that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits for U.S. Holders of
ADSs. Accordingly, the creditability of French withholding tax on dividends could be affected by future actions that may be taken by the U.S. Treasury.

The Précompte

As currently applicable, a French company must pay an equalization tax known as theprécompteto
the French tax authorities if it distributes, until December 31, 2004, dividends, which carry anavoir fiscalout of:



The
amount of theprécompteis 50% of the net dividends before withholding tax.

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As
regards dividends distributed to you until December 31, 2004, if you are not entitled to the fullavoir fiscal, you should
generally obtain a refund from the French tax authorities of anyprécomptepaid by us with respect to any such dividends

Under
the U.S.-France income tax treaty, the amount of theprécompterefunded to U.S. residents is reduced by the 15%
withholding tax applicable to dividends and by the partialavoir fiscal, if any. Under the treaty, you are entitled to a refund of any précomptewhich we actually pay in cash, but not to anyprécomptewhich we
pay by off-setting French and/or foreign tax credits. To apply for a refund of theprécompte, so long as you may apply for
it, you should file French Treasury Form RF I B EU-No. 5053 before the end of the second year following the year in which the dividend was paid. The form and its instructions are
available from the United States Internal Revenue Service or from the FrenchCentre des Impôts des
Non-Résidents,whose address is 9, rue d'Uzès, 75094 Paris Cedex 2, France.

As
mentioned above, the French tax authorities have not yet issued any guidelines to confirm whether non-resident shareholders will be entitled to the refund of the précompte, if any, that we will
pay on distributions made in 2004.

Subject
to the discussion in "Passive Foreign Investment Company Status" below, for U.S. federal income tax purposes, the gross amount of the précompte,including any French withholding tax, will be
included in your gross income as ordinary income in the year you receive it. It
will generally constitute foreign source "passive" income for foreign tax credit purposes (or, for some holders, foreign source "financial services" income). The amount of any précomptepaid in
euros, including any French withholding taxes, will be equal to the U.S. dollar value of the euro on the date the précompteis included in income which, for a U.S. holder of ADSs, will be the
date of receipt by the depositary, regardless of whether
the payment is in fact converted into U.S. dollars. Any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend is includible in your gross income to
the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss.

As
a consequence of the suppression of theprécomptefor dividends which will be paid as of January 1, 2005, the
French Budget Law for 2004 implements a temporary equalization tax payable by the company at the rate of 25% (assessed on the net dividends before withholding tax) on dividends paid in 2005 out of
profits that have not been taxed at the ordinary corporate income tax rate or that have been earned and taxed more than five years before the distribution. However, unlike the précompte, such
temporary equalization tax will not be refundable to non-resident shareholders.

10.17.2    Taxation of Capital Gains

If you are a resident of the United States for purposes of the U.S.-France income tax treaty, you will not be subject to French tax on any capital gain if you
sell or exchange your shares or ADSs, unless you have a permanent establishment or fixed base in France and the shares or ADSs you sold or exchanged were part of the business property of that
permanent establishment or fixed base. Special rules apply to individuals who are residents of more than one country.

Please
see the discussion below under "Passive Foreign Investment Company Status" for a discussion of the consequences of a sale of our shares or ADSs for U.S. federal income tax
purposes if you have owned our shares or ADSs during any year in which we were a PFIC (as defined below), including fiscal years ending June 30, 2002, 2003 and 2004.

In
the event that we cease to be a PFIC and you have made an appropriate election described below, you will generally recognize capital gain or loss if you sell, exchange or dispose of
your shares or ADSs in an amount equal to the U.S. dollar value of the difference between the amount realized for the share or ADS and your adjusted basis in the share or ADS. Such gain or loss
generally will be U.S. source gain or loss and will be treated as long-term capital gain or loss if your holding period in the shares or ADSs exceeds one year. The deductibility of capital
losses is subject to significant limitations. If you are an individual, any capital gain or loss generally will be subject to U.S. federal income tax at preferential rates if you meet specified
minimum holding periods.

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10.17.3    Passive Foreign Investment Company Status

We believe, based on the review of our June 2004 year-end financial statements, and based upon the advice of Shearman & Sterling,
our tax counsel, as to the legal requirements relating to PFIC status, that we will be classified as a PFIC for U.S. federal income tax purposes for the year ended June 30, 2004. We also were
classified as a PFIC for the years ended June 30, 2002 and 2003. A non-U.S. corporation is classified as a PFIC for any taxable year, if at least 75% of its gross income consists of
passive income (such as dividends, interest, rents, royalties (other than royalties derived from the licensing of computer software that the licensor developed, created or produced), or gains on the
disposition of certain minority interests) or at least 50% of the average value of its assets (determined on the basis of a quarterly average) consist of assets that produce, or are held for the
production of, passive income.

Our
determination that we are a PFIC is based on a current valuation of our passive assets, such as cash, and our non-passive assets (including goodwill, which is derived
from the market value of our shares and therefore is subject to change). The determination of whether we are or will continue to be a PFIC must be made annually as at the close date of each taxable
year and is a function of all the facts and circumstances. Accordingly, it is possible that we may continue to be classified as a PFIC in future taxable years.

If
you are a U.S. Holder of our shares or ADSs, the PFIC rules may subject you to the following potential adverse U.S. tax consequences:



Certain
elections are available to U.S. Holders of shares or ADSs that may serve to alleviate some of the adverse tax consequences of PFIC status.

Mark to Market Election

Under an alternative tax regime, you can avoid the interest charge by making a mark-to-market election with respect to your shares or
ADSs, provided that the shares or ADSs are "marketable". Shares or ADSs will be marketable if they are regularly traded on certain U.S. stock exchanges (including Nasdaq), or on certain
non-U.S. stock exchanges (including the Nouveau Marché of the Euronext Paris). For these purposes, the shares will be considered regularly traded during any calendar year
during which they are traded, other than in negligible quantities, on at least 15 days during each calendar quarter. (Any trades that have as their principal purposes meeting this requirement
will be disregarded).

If
you choose to make a mark-to-market election, you must include in ordinary income for each taxable year for which the election is in effect and we are a PFIC
an amount equal to the excess, if any, of the fair market value of your shares or ADSs as of the close of the relevant taxable year over your adjusted

103

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tax
basis in the shares or ADSs as of the close of the prior year. In addition, you may claim an ordinary loss deduction of the excess, if any, of your adjusted tax basis in the shares or ADSs over
the fair market value of the shares or ADSs at the close of the taxable year, but only to the extent of any prior net mark-to-market gains. Your adjusted tax basis will be
increased by the amounts recognized under the mark-to-market election and decreased by the deductions allowed under the election. In the event of an actual sale or other
disposition of the shares or ADSs during a year in which we are a PFIC, any gains will be treated as ordinary income and any losses will be treated as an ordinary loss to the extent of any prior net
mark-to-market gains. A mark-to-market election applies to the taxable year in which the election is made and to each subsequent year for which we are a
PFIC and therefore in general is irrevocable. (Exceptions are provided if either the shares or ADSs cease to be marketable or the IRS consents to revocation of the election.) If you do not make a
mark-to-market election for the first year in which you own your shares or ADSs and we are a PFIC, the interest charge will apply to any
market-to-market gain recognized in the year that the election is first made. Should our company cease to be classified as a PFIC in a future year, U.S. Holders may benefit
from capital gain treatment on the disposition of our shares or ADSs in a year that we no longer are a PFIC. U.S. Holders should consult their own tax advisors regarding the potential consequences to
them of the mark-to-market election.

Deemed Sale Election

If you decide not to make a market-to-market election, you nevertheless may elect to make a "deemed sale election" pursuant to which you
will be treated as having sold your shares or ADSs on the last day of the last taxable year in which we quality as a PFIC. Any gain on the deemed sale will be considered to have been earned pro rata
over your holding period in the shares or ADSs and must be included in ordinary income. The tax on the gain is based on the value of the tax deferral and will include an interest charge as described
above in the case of the general PFIC rules. After making a deemed sale election, you must increase your adjusted tax basis in the shares or ADSs by the amount of gain recognized. You cannot recognize
any loss realized on the deemed sale, and your basis would not be affected in such case.

To
make this election, you must not have previously made a mark-to-market election at any time. You must file an amended income tax return for your taxable year
that includes our last taxable year in which we qualified as a PFIC and you must do so within three years of the due date, as extended, for your return for that taxable year. You must attach to the
amended return either IRS Form 8621 or a statement containing the information required therein.

We
will continue to monitor our PFIC status annually, and will notify you should we cease to be classified as a PFIC.

YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR REGARDING ANNUAL FILING REQUIREMENTS AS WELL AS ANY DECISION TO MAKE (OR REFRAIN FROM MAKING) ANY ELECTION THAT MAY
BE AVAILABLE TO YOU. BECAUSE ANY SUCH DECISION WILL DEPEND UPON YOUR OWN PARTICULAR TAX SITUATION AND MAY HAVE SIGNIFICANT AND CONTINUING U.S. TAX CONSEQUENCES, WE ARE UNABLE TO GIVE ADVICE IN THIS
REGARD. FOR ADDITIONAL INFORMATION, PLEASE CONSULT THE INSTRUCTIONS TO IRS FORM 8621 "Return by a Shareholder of a Passive Foreign Investment Company or Qualified Election
Fund."

10.17.4    Recent U.S. Tax Law Changes Applicable to Individuals

Under 2003 U.S. tax legislation, some U.S. Holders (including individuals) may be eligible for reduced rates of U.S. federal income tax (currently a maximum of
15%) in respect of "qualified dividend income" received in taxable years beginning after December 31, 2002 and beginning before January 1, 2009. For this purpose, qualified dividend
income generally includes dividends paid by non-U.S. corporations if, among other things, the corporation is not a passive foreign investment company for the corporation's taxable year in
which the dividend was paid, or the preceding year, certain minimum holding periods are met by the

104

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holder
and either (i) the shares (or ADSs) with respect to which the dividend has been paid are readily tradable on an established securities market in the United States, or (ii) the
non-U.S. corporation is eligible for the benefits of a comprehensive U.S. income tax treaty (such as the U.S.-France income tax treaty) which provides for the exchange of information. We
currently anticipate that if we were to pay any dividends in the year ended June 30, 2005 with respect to its shares and ADSs they would not constitute qualified dividend income for U.S.
federal income tax purposes and that U.S. Holders would not be entitled to the reduced rates of tax because of our passive foreign investment company status (see "Passive Foreign Investment Company
Status" above). You are urged to consult your own tax advisor regarding the impact of the provisions of the 2003 tax legislation on your particular situation.

10.17.5    French Estate and Gift Taxes

Under the Convention Between the United States of America and the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Estates, Inheritance and Gifts, signed November 24, 1978, if you transfer your shares or ADSs by gift, or if they are transferred by reason of your death, that transfer will
only be subject to French gift or inheritance tax if one of the following applies:



10.17.6    French Wealth Tax

French wealth tax does not generally apply to shares or ADSs if the holder is a resident of the U.S. for purposes of the U.S.-France income tax treaty.

10.18    U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING

Dividend payments made to you and proceeds paid from the sale, exchange or disposal of your shares or ADSs may be subject to information reporting to the Internal
Revenue Service and possible U.S. federal backup withholding at a current rate of 28%. Certain exempt recipients (such as corporations) are not subject to these information reporting requirements.
Backup withholding will not apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other required certification, or who is otherwise
exempt from backup withholding. U.S. persons who are required to establish their exempt status generally must provide Internal Revenue Service Form W-9 (Request for Taxpayer
Identification Number and Certification). Non-U.S. Holders generally are not subject to U.S. information reporting or backup withholding. However, such holders may be required to provide
certification of non-U.S. status in connection with payments received in the U.S. or through U.S.-related financial intermediaries.

Backup
withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability. You may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.

10.19    WHERE YOU CAN FIND MORE INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and file reports and other information with
the SEC. This annual report on Form 20-F is being filed pursuant to the Exchange Act. This report summarizes the content of contracts and other documents that we refer you to. Since
this report may not contain all of the information that is important to you, you should review the full text of these documents.

105

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Since
we are a foreign private issuer, we and our shareholders are exempt from some of the Exchange Act reporting requirements. The reporting requirements that do not apply to us or our
shareholders include the proxy solicitation rules and Section 16 short-swing profit reporting for our officers and directors and for holders of more than 10% of our shares. In addition, we are
not required to file annual, quarterly or current reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
However, we will file with the SEC, as long as we are required to do so, within 180 days after the end of each fiscal year, an annual report on Form 20-F containing financial
statements audited by an independent accounting firm. We also intend to file semi-annual reports on Form 6-K. Documents submitted to or filed with the SEC are available
on the SEC's website at www.sec.gov. You may read and copy any document we file with the SEC at its public reference rooms at 450 Fifth Street, N.W., Washington D.C. 20549, and at its regional offices
at 233 Broadway, New York, NY 10279 New York, New York 10048, and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60662. Please call the SEC at
1-800-SEC-0330 for more information on the public reference rooms and their copy charges.

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

11.1    GENERAL

Our activities expose us to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and
interest rates. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance. To date, we have
not used derivative financial instruments such as foreign exchange contracts and interest-rate swaps to hedge certain exposures. Our finance department under the direction of management
and the board of directors carries out financial risk management. Our finance department manages the identification, evaluation and hedging of financial risks in close co-operation with
management.

11.2    CURRENCIES

As our assets, earnings and cash flows are influenced by our foreign operations in the U.S., the United Kingdom and the Asia-Pacific, we are exposed
to foreign currency risk. To date, we have not engaged in currency hedging, as we do not believe such activity would provide long-term benefits. We periodically reassess this policy.

Most
of our sales are denominated in euro and the euro is the most important currency influencing our costs. Our cash is primarily denominated in euro and U.S. dollars. We hold modest
amounts of cash in British pounds against outflows for short-term operational reasons.

We
estimate that a ten-percent adverse change between the euro and the U.S. dollar exchange rate would impact reported financial results for the year ended June 30,
2004 by approximately €643,000. We estimate that a ten-percent adverse change between the euro and the British pound foreign exchange rate would impact reported financial
results for the year ended June 30, 2004 by approximately €24,000.

11.3    INTEREST RATES

As of June 30, 2004, we are only exposed to interest rate risk on our cash and cash equivalents, since we have no long-term indebtedness. To
date, we have not engaged in any interest rate hedging. Our investment policy is to maximize interest income with an investment that carries minimal risk (such as money market investments).

106

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The
following chart presents the term of assets ("+") and liabilities ("-") subject to variable interest rates as of June 30, 2004:

0 to 1 year

1 to 5 years

More than
5 years(in thousands)Financial assets

€
22,352

€


€
Financial liabilities








Balance before hedging


22,352





Hedging








Balance after hedging

€
22,352

€


€



We
estimate that a one percent adverse change in the interest rate would impact reported financial results by €0.2 million over a twelve month period. This amount
can be compared to our interest income that amounted to €0.6 million for the year ended June 30, 2004.

11.4    SHARES

As of June 30, 2004, we held shares in Network Physics and also treasury stock that had a historical cost of €1.0 million and
€5.3 million, respectively. The investment in Network Physics is valued at the lower of historical cost or net realizable value, which is based on our assessment of future value
of Network Physics. The treasury stock is recorded at historical cost. The value of those shares is subject to fluctuation, which could adversely affect our operating results and financial conditions.
To date, we have not engaged in any hedging of these shares.

11.5    LIQUIDITY SITUATION

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of
committed credit facilities. Due to the dynamic nature of the underlying businesses, our finance department aims at maintaining flexibility in funding by investing in highly liquid cash and cash
equivalents. Since our assets do not exceed the maturity of our debts, we do not consider ourselves to have high liquidity risk.

11.6    FINANCIAL INSTRUMENTS

The carrying amount and fair value of cash and cash equivalents, and deposits and other assets are set forth below. Since these assets have a
short-term maturity, their fair value is not significantly different from their carrying amount.

As of June 30, 2004Carrying Amount

Fair Value(In thousands €)Cash and cash equivalents

€
26,772

€
26,772Deposits and other assets


701


434


The
interest rate used to calculate the fair values of the above financial instruments was 4.49%.

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

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PART II

ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

To our knowledge, there has been no material default in the payment of principal or interest or any other material default not cured within thirty days relating
to our indebtedness.

To
our knowledge, no payment of dividends is in arrears.

ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

14.1    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

To our knowledge, no one (i) has modified materially the instruments defining the rights of holders of our shares or (ii) has modified materially or
qualified the rights evidenced by our shares by issuing or modifying any other class of securities.

PART III

ITEM 15.    CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer, after participating with the management of InfoVista in evaluating the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of the end of the period covered by this Annual Report on
Form 20-F, have concluded that as of such date, our disclosure controls and procedures were effective to ensure that material information relating to InfoVista, including our
consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this Annual Report is being prepared.

No
change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15)d-15(f) of the Exchange Act) occurring during the period
covered by this Annual Report on Form 20-F has been identified that has materially affected or is reasonably likely to materially affect our internal control over financial
reporting.

ITEM 16.    [RESERVED]

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

The audit committee includes a financial expert, Mr. Jean-Paul Bernardini, as defined in Item 16A of Form 20-F.
Mr. Bernardini is considered an independent board director, with "independent" as defined under Nasdaq Marketplace Rule 4200(a)(15) and Rule 10A-3(b)(1) of the
Securities and Exchange Act of 1934.

ITEM 16B.    CODE OF ETHICS

We have not yet adopted a "code of ethics" as defined in Item 16B of Form 20-F. During year ended June 30, 2004, we have focused
on developing and implementing our process book, which contains general, finance and accounting procedures. We shall continue to develop additional processes and a code of ethics during fiscal year
2005.

108

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ITEM 16C.    PRINCIPAL INDEPENDENT AUDITOR FEES AND SERVICES

Principal independent auditor fees recorded in our accounts for the year ended June 30, 2004 were as follows:

|                         |           | PricewaterhouseCoopers and other member firms |     | S&W Associés
|------------------------ | --------- | --------------------------------------------- | --- | ------------
|
|
|Audit fees(1)            |           | 206                                           |     |             
|Audit-related fees(2)    |           | 18                                            |     |             
|                         |           |                                               |     |             
|                         | Sub-total |                                               | 224 |             
|                         |           |                                               |     |             
|Legal, tax and social(3) |           | 39                                            |     |             
|Services' fees           |           |                                              |     |             
|All other fees(4)        |           | 11                                            |     |             
|                         |           |                                               |     |             
|                         | Sub-total |                                               | 50  |             
|                         |           |                                               |     |             
|Total                    |           | 274                                           |     | 100.0       
|                         |           |                                               |     |             

---

Our Audit Committee is responsible, amongst other matters, for the oversight of our statutory auditors. To the extent permitted by the mandatory
provisions of French law, the Audit Committee pre-approves any auditing services, within the meaning of the U.S. Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated
thereunder (the "SOX Act"), in particular those services set out above. The Audit Committee also pre-approves non-audit services permitted under French law and the SOX Act
proposed for the statutory auditors.

During
fiscal year 2004, no Audit-related fees, Legal, tax and social fees, Services' fees or other non-audit fees provided to us by our statutory auditors were approved by
the Audit Committee, pursuant to thede minimisexception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable

109

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ITEM 17.    FINANCIAL STATEMENTS

ITEM 18.    FINANCIAL STATEMENTS

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                
|------------------------------------------------------------------------------------------------
|Consolidated Financial Statements                                                               
|Report of independent accountant                                                                
|Consolidated Statements of Operations for the years ended June 30, 2004, 2003 and 2002          
|Consolidated Balance Sheets as of June 30, 2004 and 2003                                        
|Consolidated Statements of Stockholders' Equity for the years ended June 30, 2004, 2003 and 2002
|Consolidated Statements of Cash Flows for the years ended June 30, 2004, 2003 and 2002          
|Notes to the Consolidated Financial Statements                                                  

110

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ITEM 19.    EXHIBITS

|1    |  | Statuts, or by-laws, of InfoVista (unofficial English translation up to date as of July 21, 2004)                                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | License to Commercialize "ObjectStore," "ObjectStore Performance Expert" and "ObjectStore Runtime," between eXcelon Corporation and InfoVista dated August 23, 2000** (incorporated by reference to exhibit 4.1 to Form 20-F, Commission File
Number 000-30838).
|4.2  |  | 1999 Stock Option Plan (unofficial English translation) (incorporated by reference to exhibit 10.6 to Form F-1, Commission File Number 333-12160)                                                                                                               
|4.3  |  | 2000 Stock Option Plan, as amended (unofficial English translation) (incorporated by reference to exhibit 10.7 to Form F-1, Commission File Number 333-12160)                                                                                                   
|4.4  |  | 2001 Stock Option Plan, as amended (unofficial English translation) (incorporated by reference to exhibit 4.3 to Form S-8, Commission File Number 333-81300)                                                                                                    
|4.5  |  | 2003 Stock Option Plan (unofficial English translation) (incorporated by reference to exhibit 4.6 to Form 20-F, Commission File Number 000-30838)                                                                                                               
|4.6  |  | 2004 Stock Option Plan (unofficial English translation)                                                                                                                                                                                                         
|4.7  |  | Employment Agreement dated January 26, 2004 between InfoVista S.A. and Gad Tobaly                                                                                                                                                                               
|8    |  | Subsidiaries of the Registrant (see "Information on the CompanyGeneral Information Concerning the Share capital of the CompanySubsidiaries and Investments").                                                                                                 
|10.1 |  | Consent of independent auditors                                                                                                                                                                                                                                 
|12.1 |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                         
|12.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                         
|13.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                         

111

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of InfoVista S.A.

In
our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and comprehensive income, of cash flows and of changes in stockholders'
equity present fairly, in all material respects, the financial position of InfoVista and its subsidiaries at June 30, 2004 and June 30, 2003, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
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 our opinion.

Paris,
France

July 27,
2004, except for note 20 as to which the date is September 27, 2004

PricewaterhouseCoopers
Audit

/s/JEAN FRANCOIS CHATELJean-François Châtel
Partner

F-1

---





INFOVISTA        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except for share and per share data)

|                                                      |                                                                                                                         | Year ended June 30, |           
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ------------------- | ----------
|
|Revenues                                              |                                                                                                                         |                     |           
|                                                      | License revenues                                                                                                        |                     | €         
|                                                      | Service revenues                                                                                                        |                     |           
|                                                      |                                                                                                                         |                     |           
|Total revenues (Note 14)                              |                                                                                                                         |                     | 28,687    
|Cost of revenues                                      |                                                                                                                         |                     |           
|                                                      | Cost of licenses                                                                                                        |                     |           
|                                                      | Cost of services (exclusive of non-cash compensation expense of €0, €5 and €83, respectively)                           |                     |           
|                                                      |                                                                                                                         |                     |           
|Total cost of revenues                                |                                                                                                                         |                     | 6,403     
|                                                      |                                                                                                                         |                     |           
|Gross profit                                          |                                                                                                                         |                     | 22,284    
|Operating expenses                                    |                                                                                                                         |                     |           
|                                                      | Sales and marketing expenses (exclusive of non-cash compensation expense of €44, €24 and €129, respectively)            |                     |           
|                                                      | Research and development expenses (exclusive of non-cash compensation expense of €0, €6 and €51, respectively)(Note 15) |                     |           
|                                                      | General and administrative expenses (exclusive of non-cash compensation expense of €0, €3 and €54, respectively)        |                     |           
|                                                      | Stock compensation expense                                                                                              |                     |           
|                                                      | Restructuring costs and consulting fee(Note 17)                                                                         |                     |           
|                                                      | Impairment charge for goodwill(Note 7)                                                                                  |                     |           
|                                                      | Amortization of intangibles(Note 7)                                                                                     |                     |           
|                                                      |                                                                                                                         |                     |           
|Total operating expenses                              |                                                                                                                         |                     | 28,148    
|                                                      |                                                                                                                         |                     |           
|Operating loss                                        |                                                                                                                         |                     | (5,864    
|Other income (expense):                               |                                                                                                                         |                     |           
|                                                      | Interest income                                                                                                         |                     |           
|                                                      | Net foreign currency transaction losses                                                                                 |                     |           
|                                                      | Other                                                                                                                   |                     |           
|                                                      |                                                                                                                         |                     |           
|Loss before income taxes and minority interest        |                                                                                                                         |                     | (5,950    
|                                                      | Income tax expense(Note 9)                                                                                              |                     |           
|                                                      | Minority interest                                                                                                       |                     |           
|                                                      |                                                                                                                         |                     |           
|Net loss                                              |                                                                                                                         | €                   | (6,204    
|                                                      |                                                                                                                         |                     |           
|Basic and diluted loss per share                      |                                                                                                                         | €                   | (0.35     
|                                                      |                                                                                                                         |                     |           
|Basic and diluted weighted average shares outstanding |                                                                                                                         |                     | 17,778,929

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

F-2

---



INFOVISTA

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share and per share data)

|                                                                                                                                                               |                               | As of June 30 |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | ------------- | -------
|
|ASSETS                                                                                                                                                         |                               |               |        
|Cash and cash equivalents(Note 2)                                                                                                                              |                               | €             | 26,772 
|Marketable securities(Note 3)                                                                                                                                  |                               |               | 5,904  
|Trade receivables, net of allowance of €387 and €460(Note 18)                                                                                                  |                               |               | 8,367  
|Prepaid expenses and other current assets(Note 4)                                                                                                              |                               |               | 2,399  
|                                                                                                                                                               |                               |               |        
|                                                                                                                                                               | Total current assets          |               |        
|Fixed assets, net(Note 5 & 14)                                                                                                                                 |                               |               | 2,449  
|Licensed technology and advances, net                                                                                                                          |                               |               | 850    
|Investment in affiliate(Note 6)                                                                                                                                |                               |               | 1,027  
|Deposits and other assets(Note 8)                                                                                                                              |                               |               | 1,085  
|                                                                                                                                                               |                               |               |        
|                                                                                                                                                               | Total non-current assets      |               |        
|                                                                                                                                                               |                               |               |        
|Total assets                                                                                                                                                   |                               | €             | 48,853 
|                                                                                                                                                               |                               |               |        
|LIABILITIES & STOCKHOLDERS' EQUITY                                                                                                                             |                               |               |        
|Trade payables                                                                                                                                                 |                               | €             | 2,614  
|Accrued salaries and commissions                                                                                                                               |                               |               | 1,680  
|Accrued social security and other payroll taxes                                                                                                                |                               |               | 818    
|Deferred revenue                                                                                                                                               |                               |               | 5,453  
|Accrued VAT                                                                                                                                                    |                               |               | 1,384  
|Other current liabilities                                                                                                                                      |                               |               | 537    
|                                                                                                                                                               |                               |               |        
|                                                                                                                                                               | Total current liabilities     |               |        
|Other long term liabilities                                                                                                                                    |                               |               | 113    
|                                                                                                                                                               |                               |               |        
|                                                                                                                                                               | Total non-current liabilities |               |        
|Commitments and contingencies(Note 11)                                                                                                                         |                               |               |        
|Stockholders' equity                                                                                                                                           |                               |               |        
|Common stock, par value of €0.54 per share (18,950,920 and 18,802,637 shares authorized and issued, and 17,115,466 and 18,038,003 shares outstanding)(Note 13) |                               |               | 10,233 
|Capital in excess of par value of stock                                                                                                                        |                               |               | 84,982 
|Accumulated deficit                                                                                                                                            |                               |               | (52,313
|Unrealized losses on available for sale securities                                                                                                             |                               |               | (96    
|Cumulative translation adjustment                                                                                                                              |                               |               | (1,236 
|Less common stock in treasury (1,835,454 and 764,634 shares), at cost                                                                                          |                               |               | (5,316 
|                                                                                                                                                               |                               |               |        
|Total stockholders' equity                                                                                                                                     |                               |               | 36,254 
|                                                                                                                                                               |                               |               |        
|Total liabilities and stockholders' equity                                                                                                                     |                               | €             | 48,853 
|                                                                                                                                                               |                               |               |        

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

F-3

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INFOVISTA
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except for share and per share data)

|                                                       |  | Numbers of
ordinary
shares |   | Numbers of
treasury
shares |   | Common
stock |        | Treasury
stock |   | Capital in
excess of par
value of stock |   | Accumulated
other
comprehensive
loss |        | Deferred
compensation |   | Total   |  
|------------------------------------------------------ |  | -------------------------- | - | -------------------------- | - | ------------ | ------ | -------------- | - | --------------------------------------- | - | ------------------------------------ | ------ | --------------------- | - | ------- | -
|Balance, June 30, 2001                                 |  | 19,641,414                 |   | 6,753                      |   | €            | 10,606 |                | € | (72                                     | ) | €                                    | 85,717 |                       | € | (23,283 | )
|Exercise of stock warrants                             |  | 197,710                    |   |                           |   |              | 107    |                |   |                                        |   |                                      | 135    |                       |   |        |  
|Exercise of stock options                              |  | 27,436                     |   |                           |   |              | 15     |                |   |                                        |   |                                      | 25     |                       |   |        |  
|Subscription and exercise of stock warrants            |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      | 6      |                       |   |        |  
|Reversal of deferred compensation on forfeited options |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      | (107   | )                     |   |        |  
|Stock compensation expense                             |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      | 63     |                       |   |        |  
|Components of comprehensive income:                    |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Net loss                                               |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (11,904 | )
|Currency translation adjustment                        |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (165    | )
|Unrealized loss on available for sale securities       |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (487    | )
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Comprehensive income                                   |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Balance, June 30, 2002                                 |  | 19,866,560                 |   | 6,753                      |   |              | 10,728 |                |   | (72                                     | ) |                                      | 85,839 |                       |   | (35,839 | )
|Exercise of stock options                              |  | 16,250                     |   |                           |   |              | 9      |                |   |                                        |   |                                      | 10     |                       |   |        |  
|Subscription and exercise of stock warrants            |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      | 3      |                       |   |        |  
|Stock compensation expense                             |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   |        |  
|Purchase of treasury stock                             |  |                           |   | 1,938,054                  |   |              |       |                |   | (2,912                                  | ) |                                      |       |                       |   |        |  
|Common stock issued from treasury                      |  |                           |   | (100,000                   | ) |              |       |                |   | 193                                     |   |                                      | 17     |                       |   |        |  
|Cancellation of treasury stock                         |  | (1,080,173                 | ) | (1,080,173                 | ) |              | (584   | )              |   | 1,737                                   |   |                                      | (1,153 | )                     |   |        |  
|Components of comprehensive income:                    |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Net loss                                               |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (11,525 | )
|Currency translation adjustment                        |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (370    | )
|Unrealized gain on available for sale securities       |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | 337     |  
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Comprehensive income                                   |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Balance, June 30, 2003                                 |  | 18,802,637                 |   | 764,634                    |   |              | 10,153 |                |   | (1,054                                  | ) |                                      | 84,716 |                       |   | (47,397 | )
|Exercise of stock options                              |  | 124 950                    |   |                           |   |              | 67     |                |   |                                        |   |                                      | 182    |                       |   |        |  
|Subscription and exercise of stock warrants            |  | 23 333                     |   |                           |   |              | 13     |                |   |                                        |   |                                      | 17     |                       |   |        |  
|Stock compensation expense                             |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      | 44     |                       |   |        |  
|Purchase of treasury stock                             |  |                           |   | 1,100,820                  |   |              |       |                |   | (4,310                                  | ) |                                      |       |                       |   |        |  
|Common stock issued from treasury                      |  |                           |   | (30,000                    | ) |              |       |                |   | 48                                      |   |                                      | 23     |                       |   |        |  
|Components of comprehensive income:                    |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Net loss                                               |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (6,204  | )
|Currency translation adjustment                        |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | (98     | )
|Unrealized gain on available for sale securities       |  |                           |   |                           |   |              |       |                |   |                                        |   |                                      |       |                       |   | 54      |  
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Comprehensive income                                   |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  
|Balance, June 30, 2004                                 |  | 18,950,920                 |   | 1,835,454                  |   | €            | 10,233 |                | € | (5,316                                  | ) | €                                    | 84,982 |                       | € | (53,645 | )
|                                                       |  |                            |   |                            |   |              |        |                |   |                                         |   |                                      |        |                       |   |         |  

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

F-4

---





INFOVISTA

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, except for share and per share data)

|                                                                            |                                                                            | Year ended June 30 |        
|--------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------ | -------
|
|Cash flows from operating activities:                                       |                                                                            |                    |        
|Net loss                                                                    |                                                                            | €                  | (6,204 
|Adjustments to reconcile net loss to net cash used by operating activities: |                                                                            |                    |        
|                                                                            | Depreciation                                                               |                    |        
|                                                                            | Loss on disposal and impairment of fixed assets                            |                    |        
|                                                                            | Amortization of intangibles                                                |                    |        
|                                                                            | Impairment charge for goodwill                                             |                    |        
|                                                                            | Amortization of licensed technologies and royalties advances               |                    |        
|                                                                            | Stock compensation expense                                                 |                    |        
|                                                                            | Provision for bad debt                                                     |                    |        
|Changes in operating assets and liabilities:                                |                                                                            |                    |        
|                                                                            | Trade receivables                                                          |                    |        
|                                                                            | Prepaid expenses and other current assets                                  |                    |        
|                                                                            | Deposits and other assets                                                  |                    |        
|                                                                            | Trade payables                                                             |                    |        
|                                                                            | Accrued expenses                                                           |                    |        
|                                                                            | Deferred revenues                                                          |                    |        
|                                                                            | Other current liabilities                                                  |                    |        
|                                                                            | Other long term liabilities                                                |                    |        
|                                                                            |                                                                            |                    |        
|Net cash used by operating activities                                       |                                                                            |                    | (6,468 
|Cash flows from investing activities:                                       |                                                                            |                    |        
|                                                                            | Purchase of fixed assets                                                   |                    |        
|                                                                            | Purchase of investments in an affiliate                                    |                    |        
|                                                                            | Purchase of marketable securities                                          |                    |        
|                                                                            |                                                                            |                    |        
|Net cash used by investing activities                                       |                                                                            |                    | (577   
|Cash flows from financing activities:                                       |                                                                            |                    |        
|                                                                            | Payments of debt                                                           |                    |        
|                                                                            | Proceeds from exercise of stock options                                    |                    |        
|                                                                            | Proceeds from subscription and exercise of stock warrants                  |                    |        
|                                                                            | Purchase of treasury stock                                                 |                    |        
|                                                                            | Proceeds from issuance of treasury stock                                   |                    |        
|                                                                            |                                                                            |                    |        
|Net cash (used) provided by financing activities                            |                                                                            |                    | (3,960 
|                                                                            |                                                                            |                    |        
|Net change in cash                                                          |                                                                            |                    | (11,005
|                                                                            | Effects of exchange rate changes                                           |                    |        
|                                                                            |                                                                            |                    |        
|Decrease in cash and cash equivalents                                       |                                                                            | €                  | (11,128
|Cash and cash equivalents at beginning of period                            |                                                                            | €                  | 37,900 
|                                                                            |                                                                            |                    |        
|Cash and cash equivalents at end of period                                  |                                                                            | €                  | 26,772 
|                                                                            |                                                                            |                    |        
|Supplemental disclosure of non-cash transactions:                           |                                                                            |                    |        
|                                                                            | Reversal of deferred compensation on cancellation of related stock options |                    | €      
|                                                                            |                                                                            |                    |        

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

F-5

---





INFOVISTA        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        (In thousands, except for share and per share data)

1.     SIGNIFICANT ACCOUNTING POLICIES



InfoVista S.A. and its subsidiaries (the "Group") design and develop software, which monitors, analyses, and reports on the performance and quality of service of
information technology ("IT") infrastructure, including networks, servers and applications. In addition, the Group provides service support for the installation, implementation, training and
maintenance of its products. The Group products are part of the software market segment known as Service Level Management ("SLM"). The Group markets its products to telecommunication companies,
Internet Service Providers ("ISPs") and large enterprises. The Group maintains its headquarters in Les Ulis (outside Paris), France with subsidiaries located in Europe, Americas and Asia.



The consolidated financial statements of the Group have been prepared in conformity with accounting principles generally accepted in the United States of America.
Certain prior year amounts have been reclassified to conform to the current year presentation.

The
accompanying consolidated financial statements include the accounts of InfoVista S.A. and its subsidiaries. All significant intercompany balances and transactions have been
eliminated. During the year ended June 30, 2003, InfoVista Enterprise Solution ("IES") was created in October 2002 and the Group purchased a significant portion of minority shares in
July 2002 for InfoVista (Asia-Pacific) Pte Ltd. During the year ended June 30, 2002, InfoVista GmbH and TISS Intra GmbH were merged together as of January 1,
2002. During the year ended June 30, 2001, InfoVista BNL was created in December 2000, and InfoVista IBE in June 2001, while TISS Intra GmbH was acquired by InfoVista S.A. on
December 2, 2000.

Consolidated
companies are the following as of June 30, 2004:

|Company                          |  | Country of
incorporation |  | % of
ownership |  | Commencement of
inclusion in
consolidated
financial
statements
|-------------------------------- |  | ------------------------ |  | -------------- |  | --------------------------------------------------------------
|InfoVista S.A. (parent)          |  | France                   |  |               |  |                                                              
|InfoVista Corp.                  |  | USA                      |  | 100.00         |  | 1997                                                          
|InfoVista UK Ltd                 |  | Great Britain            |  | 100.00         |  | 1999                                                          
|InfoVista GmbH                   |  | Germany                  |  | 100.00         |  | 1999                                                          
|InfoVista (Asia-Pacific) Pte Ltd |  | Singapore                |  | 98.04          |  | 2000                                                          
|InfoVista BNL NV                 |  | Belgium                  |  | 100.00         |  | 2001                                                          
|InfoVista IBE SA                 |  | Spain                    |  | 100.00         |  | 2001                                                          
|InfoVista IES SAS                |  | France                   |  | 100.00         |  | 2002                                                          



Generally, the functional currency of InfoVista S.A. and its subsidiaries is the applicable local currencies in accordance with Statement of Financial Accounting
Standards ("SFAS") 52, "Foreign Currency Translation", while the Group's reporting currency is the euro.

All
assets and liabilities of the InfoVista S.A. and its subsidiaries with functional currencies other than euro are translated into euro equivalents at exchange rate as follows:
(1) asset and liability accounts at the

F-6

---



rate
of exchange in effect on the balance sheet date, (2) revenues and expenses at the average rate of exchange for the year, and (3) shareholder's equity accounts at historical exchange
rates. Generally, transaction gains or losses are reflected in net income (loss). Transaction gains or losses that are related to intercompany investments that are considered long-term in
nature are recorded in cumulative translation adjustment as a separate component of shareholder's equity.



The Group records goodwill when the cost of net identifiable assets that it acquires in a purchase business combination exceeds their fair value. Goodwill and
intangible assets are tested annually and whenever events or circumstances occur indicating these assets may be impaired. The purpose of these tests is to identify any facts or circumstances, either
internal or external, which indicate that the carrying value of the asset cannot be recovered. The Group compares future undiscounted cash flows that are generated by the asset to its carrying value
in order to initially test whether an impairment charge should be recognized. If the future undiscounted cash flows are lesser than the carrying value, the Group then performs a subsequent calculation
to measure the amount of the impairment loss based on the excess of the carrying value over the fair value of the impaired assets. If quoted market prices for the assets are not available, the fair
value is calculated using the present value of estimated expected future cash flows. The cash flow calculation is based on management's best estimates, using appropriate assumptions and projections at
that time.



Licensed technology and royalty advances, which pertain to payments by the Group for the license of technology used in the Group's products, are stated at cost
less accumulated amortization. Costs of licensed technology and royalty advances are amortized using the greater of (1) the straight-line method over their estimated economic lives
or (2) current period revenue to anticipated total revenues during the license period.



Fixed assets are recorded at their historical cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the
respective assets, which are as follows:

Furniture and fixtures

10 yearsComputers and hardware

5 yearsLeasehold improvements

10 yearsPurchased software

3 years


Leasehold
improvements are depreciated over the lesser of its useful life or the remaining period of the existing leases. Repairs and maintenance expenditures are expensed as incurred.
When assets are retired or otherwise disposed of, the assets and related allowances for depreciation are eliminated from the accounts and any resulting gain or loss is recognized in other
income/expense.

The
Group has adopted SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which requires impairment losses to be recorded for
long-lived assets used in operations, such as property, equipment and improvements, and intangible assets, when indicators of impairment are present

F-7

---



and
the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets.



Trade receivables are carried at anticipated net realizable value. Doubtful accounts are provided for on the basis of anticipated collection losses. The estimated
losses are determined from historical collection experience and a review of outstanding accounts receivable.



The Group considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The Group has classified its marketable
securities as available-for-sale and recorded them at fair value with the unrealized gains and losses reported as a separate component of stockholders' equity.



The Group accounts for income taxes in accordance with SFAS 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are computed based on
the difference between the financial statement and income tax bases of assets and liabilities using currently enacted applicable tax rates. SFAS 109 requires that the net deferred tax asset be
reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized.



Revenues from sales of licenses to end-user clients are recognized generally when the Group receives a purchase order and/or other written contractual
documentation (depending on the requirement of the end-user client), the Group delivers the software (assuming no significant obligations exist), collection of the resulting receivable is
probable and the amount of fees is fixed or determinable. The Group recognizes reseller license revenues on the same basis as for direct sales to end-user clients, except for an additional
procedure in which the Group receives either a copy of the purchase order between the reseller and end-user or a written certification from the reseller that confirms that the licenses
have been sold through a named end-user. The Group recognizes license revenues from Original Equipment Manufacturers ("OEM") either after receipt of a quarterly report of their sales made
in a given period or upon receipt of a purchase order.

Customers
purchase maintenance services for an initial period (typically 12 months) as part of the purchase of the license. Generally, the subsequent year maintenance services are
automatically renewable for subsequent 12-month periods, unless either party cancels. Payments for maintenance fees (on initial or renewal orders) are generally made in advance and are
non-refundable. The Group defers revenues for maintenance services and recognizes them ratably over the term of the maintenance sold. Revenues from purchase orders received for consulting,
training and other support services are generally recognized as the services are performed. The revenue recognition policies for services are the same regardless of the sales channel used. Service
revenues are not shared between resellers and the Group. End-users either enter

F-8

---



into
a service contract directly with the Group or with a reseller. We account for the reimbursement of "out-of-pocket" expenses as service revenues, as these costs are
incurred.

Since
licenses are almost always sold with maintenance services, the Group recognizes the amount of license revenue in a license and maintenance package based on the residual value
method. The fee allocated to maintenance services is based upon the fee charged to renew these maintenance services. Significant discounts offered on other services are generally allocated to the
delivered license portion of the fee. License revenues and service revenues that have been prepaid or invoiced but that have not yet been recognized as revenues under the policy are reflected as
deferred revenues.



Cost of revenues is comprised of cost of license revenues and cost of service revenues. Cost of license revenues consists primarily of license fees paid to
third-party software vendors whose software is embedded in our products and, to a lesser extent, the costs of software packaging, production of documentation and shipping. Cost of service revenues
consists primarily of personnel related costs (salaries and facilities) incurred in providing services.



The Group accounts for software development costs in accordance with SFAS 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." Costs incurred prior to establishment of technological feasibility are expensed as incurred and reflected as research and development costs in the consolidated statement of operations.

Research
and development expenses consist primarily of personnel costs (salaries and facilities) associated with software development, amortization of any capitalized software costs, and
technological acquisitions of third party software (which are not considered to have reached technological feasibility at the date of acquisition).

To
date, the establishment of technological feasibility of the Group's products and their general release substantially coincide. As a result, the Group has not capitalized any software
development costs since such costs have not been significant.



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



As of June 30, 2004 and 2003, the carrying values of current financial instruments such as cash and cash equivalents, accounts receivable, accounts
payable, other receivables, accrued liabilities and the current portion of long-term debt approximated their market values, based on the short-term maturities of these
instruments.

F-9

---





Financial instruments that potentially subject the Group to significant concentrations of credit risk consist principally of cash and cash equivalents and
accounts receivable. The Group maintains its cash
and cash equivalents with high credit quality financial institutions. Trade receivables potentially subject the Group to concentrations of credit risk. The Group closely monitors extensions of credit
and has not experienced significant credit losses in the past.



Basic loss per share is computed using the weighted average number of shares outstanding during the period. Diluted loss per share is computed using the weighted
average number of shares and dilutive equivalent shares outstanding during the period. Dilutive equivalent shares consist of stock options and stock warrants granted and not yet exercised, and the
conversion of preferred stock. All dilutive equivalent shares that have an antidilutive effect are excluded from the computation of loss per share.



Advertising costs are expensed as incurred.



The Group accounts for its stock options and purchase stock warrants issued to employees pursuant to the provisions of Accounting Principles Board ("APB") 25,
"Accounting for Stock Issued to Employees," and related interpretations whereby compensation cost is measured, at the measurement date, as the difference between the market value of stock and the
exercise price (the intrinsic value method). The measurement date corresponds to the date on which both the number of shares subject to grant and the exercise price per share are known.



In August 2003, the Emergency Issue Task Force ("EITF") reached a consensus on EITF Issue No. 03-5, Applicability of AICPA Statement of
Position 97-2, Software Revenue Recognition, to Non-Software Deliverables in an Arrangement Containing
More than Incidental Software. EITF Issue No. 03-5 affirms that SOP 97-2 applies to non-software deliverables such as hardware in an arrangement if the
software is essential to the functionality of the non-software deliverables. The Group has adopted and does not expect the adoption of EITF No. 03-5 to have a material
impact on its consolidated financial position, results of operations, or cash flows.

In
November 2003, the EITF reached an interim consensus on Issue No. 03-01, The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments, to require additional disclosure requirements for securities classified as available-for-sale or held-to-maturity
for fiscal years ending after December 15, 2003. Those additional disclosures have been incorporated into the notes to consolidated financial statements. In March 2004, the EITF reached
a final consensus on this Issue, to provide additional guidance, which companies must follow in determining whether investment securities have an impairment, which should be considered
other-than-temporary. The guidance is applicable for reporting periods beginning after June 15, 2004. The Group does not expect the adoption under the final consensus
would have a significant impact on the carrying value of its investments at June 30, 2004.

F-10

---



In
January 2003, the Financial Accounting Standards Board ("FASB") issued Financial Interpretation No. ("FIN") 46,Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51. The primary objectives of FIN 46 were to provide guidance on the identification of entities for which control is achieved
through means other than through voting rights and how to determine when and which business enterprise should consolidate the variable interest entity ("VIE"). This Interpretation applies immediately
to VIEs created after January 31, 2003. In December 2003, the FASB published a revision to FIN 46 ("FIN 46R"), in part to clarify certain of its provisions. Among other things, FIN 46R
deferred the effective date for VIEs created prior to February 1, 2003 to the end of the first reporting period that ends after March 15, 2004. FIN 46R requires consolidation of VIEs by
business enterprises considered to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is the party that absorbs a majority of the entity's expected losses, receives a majority of
its expected residual returns, or both, as a result of holding variable interests, which are ownership, contractual, or other pecuniary interests in an entity. The primary beneficiary is required to
consolidate the assets, liabilities, and results of the activities of the VIE. FIN 46R requires additional disclosures relating to transactions involving VIEs to be made by primary beneficiaries and
enterprises holding significant variable interests in VIEs. The Company has assessed its interests in certain entities to determine whether such entities are considered to be VIEs and concluded that
the entities are not VIEs.

2.     CASH AND CASH EQUIVALENTS

As of June 302004

2003Cash

€
5,070

€
4,779Short-term deposits


21,702


33,121Total cash and cash equivalents

€
26,772

€
37,900


3.     MARKETABLE SECURITITES

The Group maintains a liquid investment portfolio with the intention to support current operations and take advantage of investment opportunities. As a result,
all marketable securities are considered to be available-for-sale and are classified as current assets. On January 17, 2002, the Group invested €6,000 in
KLEBER 2006. The Group has the ability to sell the security on a weekly basis before its maturity date at published market rates. The value of KLEBER 2006 is benchmarked against a collection of equity
investments, but the original cost of €6,000 is guaranteed if held to the maturity date, which is January 2006. As of June 30, 2004 and 2003, the Company recorded
unrealized losses of €96 and €150 and fair value of €5,904 €5,850, respectively for marketable securities
available-for-sale. No realized gains or losses on marketable securities available-for-sale have been included in net loss for the years ended
June 30, 2004, 2003, and 2002.

F-11

---





4.     PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 302004

2003Prepaid expenses

€
618

€
1,230Value Added Taxes receivable


1,417


1,291Other


364


95Total prepaid expenses and other current assets

€
2,399

€
2,616


5.     FIXED ASSETS, NET

|Gross Value            |  | Opening |       | Additions |   | Disposals and
write-offs |  | Reclass |       | Currency
variation |   | Closing
|---------------------- |  | ------- | ----- | --------- | - | ------------------------ |  | ------- | ----- | ------------------ | - | -------
|Purchased software     |  | €       | 1,434 |           | € | 57                       |  | €       | 148   |                    | € | (8     
|Computers & hardware   |  |         | 2,842 |           |   | 372                      |  |         | 237   |                    |   | (16    
|Leasehold improvements |  |         | 1,464 |           |   | 58                       |  |         | 422   |                    |   | (112   
|Furniture & fixtures   |  |         | 924   |           |   | 70                       |  |         | 256   |                    |   | 47     
|                       |  |         |       |           |   |                          |  |         |       |                    |   |        
|Total                  |  | €       | 6,664 |           | € | 557                      |  | €       | 1,063 |                    | € | (89    
|                       |  |         |       |           |   |                          |  |         |       |                    |   |        

|Accumulated Depreciation |  | Opening |       | Additions |   | Disposals and
write-offs |  | Reclass |     | Currency
variation |   | Closing
|------------------------ |  | ------- | ----- | --------- | - | ------------------------ |  | ------- | --- | ------------------ | - | -------
|Purchased software       |  | €       | 894   |           | € | 240                      |  | €       | 83  |                    | € |       
|Computers & hardware     |  |         | 1,403 |           |   | 555                      |  |         | 174 |                    |   | (8     
|Leasehold improvements   |  |         | 512   |           |   | 161                      |  |         | 124 |                    |   | (1     
|Furniture & fixtures     |  |         | 306   |           |   | 77                       |  |         | 74  |                    |   | 8      
|                         |  |         |       |           |   |                          |  |         |     |                    |   |        
|Total                    |  | €       | 3,115 |           | € | 1,033                    |  | €       | 455 |                    | € | (1     
|                         |  |         |       |           |   |                          |  |         |     |                    |   |        

6.     INVESTMENT IN AFFILIATE

As of June 30, 2004 and 2003, the investment in affiliate of €1,027 and €937, respectively, corresponds to
non-cumulative, redeemable preferred stock shares in Network Physics, a private U.S.-based corporation that has recently started its business activities. The Group does not believe that it
currently has significant influence over Network Physics. As a result, the Group has accounted for this investment in affiliate at cost as of June 30, 2004 and 2003. As of June 30, 2004
and 2003, the Group's investment in Network Physics represented approximately 7% and 13% of their outstanding voting stock. Management regularly reviews the continued progress and financial
performance of Network Physics, along with future business plans and other prospective information. As of June 30, 2004, based on the available information, management considers that no
impairment should be recorded to reduce the carrying value of this investment. Network Physics is a related party as mentioned in Note 16Related Party Transactions.

7.     ACQUISITION OF TISS

On December 2, 2000, the Group entered into an agreement to acquire all of the outstanding common shares of TISS Intra GmbH ("TISS"), a
privately-held company that was an InfoVista Business

F-12

---



Solution
Integrator ("BSI") for over a year, implementing complete "SLM" solutions, including training, maintenance and support for clients such as AUDI, Concert, and Deutsche Telekom. Under the terms
of the acquisition agreement, the Group assumed approximately €1,896 of liabilities and paid approximately €3,158 (includes €125 of transaction costs)
in cash to acquire TISS in January 2001. The transaction was accounted for under the purchase method of accounting. TISS's results of operations have been included in the Group's consolidated
financial statements, from December 2000 (the date of the acquisition).

During
the year ended June 30, 2001, the Group finalized the purchase price allocation. A summary of this allocation of the purchase price was as follows:

Total net assets

€
(494
)Intangible assets:Assembled workforce


220Core technology


1,520Goodwill


1,912Total intangible assets


3,652€
3,158


All
of TISS's research and development efforts had reached technological feasibility before the acquisition date, therefore, no in-process research and development existed.
Goodwill, which represented the excess of the purchase price over the fair value of identifiable tangible and intangible assets acquired, less liabilities assumed, was being amortized over the
estimated life of five years up to June 30, 2001.

In
accordance with SFAS 142, "Goodwill and Other Intangible Assets", the Group reclassified the carrying value of the workforce as of July 1, 2001 into goodwill. During
June 2002, the Group performed the annual impairment test of goodwill carrying value of €1,841. As a result of economic conditions in Central Eastern Europe, the Group's future
cash flows forecast for this reporting unit was lowered, which led to an impairment charge for the entire carrying value of the goodwill.

8.     FAIR VALUE OF INSTRUMENTS

As of June 30, 2004 and 2003, the fair value of long-term deposits was €434 and €382 respectively, compared to
book values of €701 and €560, respectively. Fair value is determined based on expected future cash flows, discounted at market interest rates, and other appropriate
valuation methodologies.

9.     INCOME TAXES

The income tax expense consisted of:

Year ended June 30,2004

2003

2002Current income tax expense

€
(254
)
€
(36
)
€
(12
)Deferred income tax expense








€
(254
)
€
(36
)
€
(12
)


F-13

---





Actual income tax differs from the amount that would arise from using the statutory tax rate in France as follows:

Year ended June 30,2004

2003

2002Statutory tax rate in France

34.32
%
34.32
%
34.32
%Deferred tax assets on operating losses and temporary differencesValuation allowance

(48.10
)%
(34.91
)%
(33.80
)%Effect of differences in foreign tax rates

5.10
%
0.07
%
(2.06
)%Permanent differences and others

4.41
%
0.52
%
1.54
%Effective tax rate

(4.27
)%
0.00
%
0.00
%




The approximate income tax effects of the temporary book to tax differences are as follows:

As of June 302004

2003

2002Deferred tax assets on tax loss carry forwards

€
16,470

€
14,748

€
12,056Deferred tax on temporary differences:Depreciation


(39
)

(124
)

(110
)Deferred revenues








460Others


(29
)

1,861


(333
)Total deferred tax assets


16,402


16,485


12,073Valuation allowance


(16,402
)

(16,485
)

(12,073
)Net deferred tax assets

€
0

€
0

€
0




As of June 30, 2004, expiration dates of net operating loss carryforwards were as follows:

Expiration date:2005

€
2006


2007


2008


Between 2013 and 2024


23,330No expiration date


23,218Total net operating loss carryforwards

€
46,548


F-14

---



Fiscal
years ended from June 30, 1997 to June 30, 2004 are subject to tax audit from the respective tax authorities in the countries where the Group's subsidiaries are
incorporated. The Group's management does not believe that adjustments, if any, arising from such audits would have a significant effect on the Group's financial position or results of operations.

Loss
before income taxes and minority interest was as follows:

Year ended June 30,2004

2003

2002France

€
(12,727
)
€
(13,784
)
€
(13,553
)Others


6,777


2,295


1,627Total

€
(5,950
)
€
(11,489
)
€
(11,926
)


10.   DEBT



As of June 30, 2004 and 2003, the Group did not have any available lines of credit.

11.   COMMITMENTS AND CONTINGENCIES



The Group leases its facilities and certain equipment under lease agreements expiring through June 2009. Certain leases have renewal options to extend the
lease periods up to an additional three to six years.

As
of June 30, 2004, future minimum rental payments under these leases, summarized by fiscal year, are as follows:

Year ending June 30,2005

€
1,3582006


9802007


8682008


7422009


594Thereafter


Total

€
4,542


For
the years ended June 30, 2004, 2003 and 2002, the operating rent expenses were €1,815, €2,154 and €2,383, respectively.

F-15

---





As of June 30, 2004, the Group had €486 of purchase obligations that arise from firm purchase orders or contractual obligations with
suppliers that shall expire within one year. On such balance sheet date, the Group has not yet received such goods or services, but is committed to pay for them.



Under French tax law, favorable tax treatment is accorded to the Group and to the employees if, among other things, the shares are held for at least four or five
years, depending on the grant date. Except in certain limited circumstances, if the shares are disposed of prior to the end of this four-year or five-year period, social
security charges will be borne by both the Group and the employee.

Due
to the unfavorable tax consequences to the employees of disposing of these shares before the expiration of the four-year or five-year period, it is considered
unlikely that such disposals would take place. Accordingly, no liability for the Group's portion of the social security charges has been recorded in the financial statements. The amount payable by the
Group in the event an employee did exercise and sell the shares so obtained before the four-year or five-year period elapsed would be approximately 45% of the difference
between the market price of the stock at the exercise date and the exercise price.

Assuming
the exercise of all stock options vested as of June 30, 2004, the taxes payable for the Group would have amounted to €606 calculated using the closing
price of the shares on June 30, 2004. Depending on the future fluctuations of the Group's share price, the taxes payable could be significantly higher. However, based on the significant adverse
tax consequences to the Group's employees, management believes that the sale of these shares by a significant number of employees is improbable. Therefore, the Group has not recognized a provision for
such taxes in the financial statements.



The Group has various lawsuits, claims, commitments and contingent liabilities arising from ordinary conduct of its business. However, they are not expected to
have a material adverse effect on its operating results, financial position and cash flows of the Group.



The Group enters into agreements in the ordinary course of business with, among others, customers, resellers, OEMs, systems integrators and distributors. Most of
these agreements require us to indemnify the other party against third party claims alleging that a Group product infringes a patent or copyright. Certain of these agreements require us to indemnify
the other party against certain claims relating to property damage, personal injury or the acts or omissions of the Group, its employees, agents or representatives. In addition, from time to time we
have made certain guarantees regarding the performance of the Group's products and services to our customers. Based upon our historical experience and information known as of June 30, 2004,
management believes that our liability on the above guarantees and indemnities as of June 30, 2004 is immaterial.

F-16

---



12.   EMPLOYEE RETIREMENT PLANS



Under French law, the Group must make contributions to government-regulated schemes for retirement plans. There is no actuarial liability in connection with these
plans. French law also requires
payment of a lump sum retirement indemnity to employees based upon years of service and compensation at retirement. Benefits do not vest prior to retirement. The Group's obligation as of
June 30, 2004 and 2003 was immaterial.



The U.S. subsidiary has a contributory retirement plan, which covers substantially all employees. Generally, eligible employees are allowed to contribute an
amount not to exceed the lesser of 15% of their compensation or US$ 12. In the event that the plan is determined to be a "top-heavy plan" as defined by the Internal Revenue Code, annual
employer contributions are required under a formula based upon the compensation of the plan participants.

For
the years ended June 30, 2004 and 2003, the U.S. subsidiary made a contribution to the plan of €38 and €21, respectively. For the year ended
June 30, 2002, the U.S. subsidiary made no contributions to the plan.

13.   CAPITAL (COMMON STOCK AND CAPITAL IN EXCESS OF PAR VALUE)



On July 7, 2000, the Group completed an Initial Public Offering ("IPO") of 6,000,000 common shares in the form of American Depositary Shares ("ADS") on the
NASDAQ National Market System and Series O Ordinary shares on the Nouveau Marché of the Paris Bourse. The net proceeds, after related costs of issuance of shares of approximately
€8,150, amounted to approximately €68,650.



During the year ended June 30, 2004 and in accordance with the Group's share buyback program authorized by the annual Shareholder's meeting on December the
5, 2002 and December the 15, 2003, the Group repurchased 1,100,820 shares (of which 820 were ADSs) for €4,310 and sold 30,000 shares that had been repurchased for €71.
During the year ended June 30, 2003, the Group repurchased 1,938,054 shares for €2,912, sold 100,000 shares that had been repurchased for €210 and cancelled
1,080,173 treasury shares for €1,737. During the year ended June 30, 2002, the Group did not repurchase any shares. As of June 30, 2004 and 2003, 1,835,454 and 764,634
shares, respectively, were held as treasury stock and available for general corporate purposes.



The Group has four separate stock option plans (the "1999 Plan", the "2000 Plan", the "2001 Plan" and the "2003 Plan" or, collectively, the "Plans") pursuant to
which stock options may be granted to officers and employees to purchase a specified number of shares at a price determined by the board of directors.

F-17

---





The
1999 Plan, 2000 Plan and 2001 Plan allows the board of directors to grant stock options giving the right to subscribe for 1,126,000, 750,000 and 2,000,000 shares, respectively, for a
period of five years from the date of shareholders' authorization. Under the terms of these plans, stock options granted generally vest over a period of three years with 25% vesting on each of the one
year, two year, two and a half year, and third year anniversary of the date of grant. Under the terms of the 1999 Plan and 2000 Plan, stock options expire eight years from the date of grant; under the
terms of the 2001 Plan, stock options expire ten years from the date of grant.

In
accordance with the 2000 Plan, the board of directors modified the vesting period of 330,830 stock options for seven employees. These stock options shall vest by the earlier of 25% at
the end of each quarter for which the Group will be break even ("adjusted net profit") or under the terms of the 2000 Plan.

On
August 30, 2001, the Group offered eligible employees the opportunity to surrender the right to the benefit from outstanding stock options to subscribe in shares granted on or
after September 1, 2000 under the 2000 Plan and 2001 Plan, with an exercise price greater than €30 per share, for new stock options to subscribe in shares. On May 13,
2002, the new stock options were granted. The number of new stock options granted to each eligible employee was equal to the number of the stock options that was cancelled. The Group did not incur any
stock compensation expense as a result of the stock option surrender and re-grant scheme.

The
2003 Plan allows the board of directors to grant stock options giving the right to purchase 300,000 existing shares, for a period of three years and two months from the date of
shareholders' authorization. All other terms and conditions are similar to the 2001 Plan.

A
summary of the status of the Group's stock options under the Plans is as follows:

|                       |  | Options to subscribe for shares |   | Options to purchase shares |       
|---------------------- |  | ------------------------------- | - | -------------------------- | ------
|
|Balance, June 30, 2001 |  | 2,497,083                       |   | €                          | 15.68 
|                       |  |                                 |   |                            |       
|Granted                |  | 1,267,915                       |   |                            | 2.84  
|Forfeited/Cancelled    |  | (1,229,861                      | ) |                            | (26.63
|Exercised              |  | (27,436                         | ) |                            | (1.45 
|                       |  |                                 |   |                            |       
|Balance, June 30, 2002 |  | 2,507,701                       |   |                            | 3.97  
|                       |  |                                 |   |                            |       
|Granted                |  | 960,800                         |   |                            | 1.71  
|Forfeited/Cancelled    |  | (668,858                        | ) |                            | (4.11 
|Exercised              |  | (16,250                         | ) |                            | (1.22 
|                       |  |                                 |   |                            |       
|Balance, June 30, 2003 |  | 2,783,393                       |   |                            | 3.17  
|                       |  |                                 |   |                            |       
|Granted                |  | 1,225,730                       |   |                            | 2.97  
|Forfeited/Cancelled    |  | (888,447                        | ) |                            | (2.50 
|Exercised              |  | (124,950                        | ) |                            | (2.00 
|                       |  |                                 |   |                            |       
|Balance, June 30, 2004 |  | 2,995,726                       |   | €                          | 2.82  
|                       |  |                                 |   |                            |       

F-18

---



As
of June 30, 2004, the Group had 463,012 and 16,120 options to subscribe for shares and options to purchase shares available for grant, respectively.

The
following table summarizes information concerning outstanding and exercisable stock options under the Plans as of June 30, 2004:

|                     |  | Outstanding |  |      |  |  
|-------------------- |  | ----------- |  | ---- |  | -
|
|
|
|From €1.01 to 2.00   |  | 1,006,112   |  | 5.58 |  | €
|From €2.01 to 5.00   |  | 2,107,744   |  | 8.01 |  |  
|From €5.01 to 10.00  |  | 39,650      |  | 6.97 |  |  
|From €10.01 to 20.00 |  | 101,100     |  | 4.65 |  |  
|Over €20.01          |  | 25,000      |  | 6.24 |  |  
|                     |  |             |  |      |  |  
|Total                |  | 3,279,606   |  | 7.14 |  | €
|                     |  |             |  |      |  |  



A summary of the Group's stock purchase warrants is as follows:

|                       |  | Series O
Warrants |   | Series C
Warrants |  | Series E
Warrants |   | Series F
Warrants |   | Total
Warrants |   | Total
Issuable
Shares |  
|---------------------- |  | ----------------- | - | ----------------- |  | ----------------- | - | ----------------- | - | -------------- | - | --------------------- | -
|Balance, June 30, 2001 |  | 425,420           |   | 57,500            |  | 0                 |   | 0                 |   | 482,920        |   | 241,460               |  
|                       |  |                   |   |                   |  |                   |   |                   |   |                |   |                       |  
|Granted                |  |                  |   |                  |  | 140,624           |   |                  |   | 140,624        |   | 140,624               |  
|Forfeited              |  |                  |   |                  |  |                  |   |                  |   | 0              |   | 0                     |  
|Exercised              |  | (395,420          | ) |                  |  |                  |   |                  |   | (395,420       | ) | (197,710              | )
|                       |  |                   |   |                   |  |                   |   |                   |   |                |   |                       |  
|Balance, June 30, 2002 |  | 30,000            |   | 57,500            |  | 140,624           |   | 0                 |   | 228,124        |   | 184,374               |  
|Granted                |  |                  |   |                  |  |                  |   | 165,624           |   | 165,624        |   | 165,624               |  
|Forfeited              |  |                  |   |                  |  |                  |   |                  |   | 0              |   | 0                     |  
|Exercised              |  |                  |   |                  |  |                  |   |                  |   | 0              |   | 0                     |  
|                       |  |                   |   |                   |  |                   |   |                   |   |                |   |                       |  
|Balance, June 30, 2003 |  | 30,000            |   | 57,500            |  | 140,624           |   | 165,624           |   | 393,748        |   | 349,998               |  
|Granted                |  |                  |   |                  |  |                  |   |                  |   | 0              |   | 0                     |  
|Forfeited              |  |                  |   |                  |  | (25,000           | ) | (16,667           | ) | (41,667        | ) | (41,667               | )
|Exercised              |  | (30,000           | ) |                  |  |                  |   | (8,333            | ) | (38,333        | ) | (23,333               | )
|                       |  |                   |   |                   |  |                   |   |                   |   |                |   |                       |  
|Balance, June 30, 2004 |  | 0                 |   | 57,500            |  | 115,624           |   | 140,624           |   | 313,748        |   | 284,998               |  
|                       |  |                   |   |                   |  |                   |   |                   |   |                |   |                       |  

On
June 30, 1998, the Group issued 1,000,000 Series O stock warrants to certain members of management for aggregate consideration of €15. Two stock warrants
entitle the holder to purchase one share for €1.22. As of June 30, 2004, these stock warrants were fully exercised.

On
December 9, 1999, and in connection with the issuance of common shares, the Group issued to certain investors and members of management 1,600,000 Series C stock warrants
to purchase 800,000

F-19

---



ordinary
shares at an exercise price of €4.88 per share for aggregate consideration of €24. These stock warrants were immediately fully vested and expire on
December 8, 2004.

As
authorized during the shareholders' meeting held on December 13, 2001, the Group issued on February 7, 2002 140,624 Series E stock warrants (out of the 195,624
stock warrants authorized) to six board directors, one director of its subsidiary InfoVista (Asia-Pacific) Pte Ltd and the members of the Advisory Committee of InfoVista
(Asia-Pacific) Pte Ltd. for aggregate consideration of €6. These stock warrants give right to the subscription of the same number of ordinary shares at an exercise
price of €4.31 per share. These stock warrants vest over a period of two years with 1/3 vesting on the issue date, first year and second year anniversary of the issue
date. These stock warrants expire February 6, 2007.

As
authorized during the shareholders' meeting held on December 5, 2002, the Group issued on February 10, 2003 165,624 Series F stock warrants (out of the 190,624
stock warrants authorized) to seven board directors for aggregate consideration of €3. These 165,624 stock warrants give right to the subscription of the same number of ordinary shares
at an exercise price of €1.52 per share. These stock warrants vest over a period of two years with 1/3 vesting on each of the issue date, first year and second year
anniversary of the issue date and. These stock warrants expire February 9, 2008.



The following table illustrates the effect on net income and earnings per share if the Group had applied the fair value recognition provisions of SFAS 123,
"Accounting for Stock-Based Compensation", to stock-based employee compensation.

Year ended June 30,2004

2003

2002Net loss, as reported

€
(6,204
)
€
(11,525
)
€
(11,904
)Total stock-based employee compensation expense included in the determination of net income as reported, net of related tax effects


44


38


317Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects


(1,077
)

(7,646
)

(14,441
)Pro forma net loss

€
(7,237
)
€
(19,133
)
€
(26,028
)Earnings per share:Basic and dilutedas reported

€
(0.35
)
€
(0.61
)
€
(0.60
)Basic and dilutedpro forma

€
(0.41
)
€
(1.02
)
€
(1.32
)


F-20

---



Information
with respect to the Group's stock option grants and the computation of fair value, using the Black Scholes evaluation model method, follows:

Year ended June 30,2004

2003

2002Weighted average fair value per share for stock options and warrants granted

€
1.74

€
1.09

€
2.22Total fair value of stock options and warrants granted

€
2,211

€
1,231

€
851Weighted average assumptions:Expected holding period (years)


3.7


3.6


4.3Risk-free interest rate


2.91
%

3.67
%

4.90
%Volatility


84.77
%

102.40
%

115.36
%Expected dividend yield


N/A


N/A


N/A


14.   SEGMENT INFORMATION



For management purposes, the Group is currently organized on the following basis: (1) it operates in a single business segment, software sales and related
services and (2) its operations focus on three geographical areas, Europe, Americas and Asia-Pacific, where its eight operating entities are located.

The
enterprise's chief operating decision-maker, as defined in SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," the Board of Directors, reviews
operating results on the basis of the organization as described above.



The following tables present revenue by country based on country of invoice and long-lived assets by country based on the location of assets:



Year ended June 30,2004

2003

2002EuropeFrance

€
3,666

€
3,645

€
6,028Others


10,152


8,939


11,056Total


13,818


12,584


17,084Americas


12,063


9,603


10,087Asia-Pacific


2,806


3,335


2,232Total sales to external customers

€
28,687

€
25,522

€
29,403


F-21

---







Long-lived assets reflect net fixed assets.

As of June 30,2004

2003EuropeFrance

€
1,696

€
2,258Others


123


166Total


1,819


2,424Americas


536


1,025Asia-Pacific


94


100Total carrying amount of long-lived assets

€
2,449

€
3,549




For the years ended June 30, 2004, 2003 and 2002, no customer individually accounted for more than 10% of consolidated net revenues.

15.   RESEARCH AND DEVELOPMENT EXPENSES

For the years ended June 30, 2004, 2003, and 2002, technological acquisitions of third party software costs included in research and development expenses
were €0, €959, and €0, respectively.

16.   RELATED PARTY TRANSACTIONS

On February 8, 2001, the Group completed a Second Public Offering ("SPO"). Pursuant to which, certain of the Group's shareholders sold 3,562,500 shares of
the Group (including 464,674 shares as over-allotment option) in a public offering on the Nouveau Marché of Euronext and on NASDAQ (in the form of American Depositary
Shares). For the year ended June 30, 2002, the Group recorded €312 of income from administrative fees related to the services provided for the Secondary Public Offering.

The
Group sells licenses and services to ClariTeam. The Group's Chairman and CEO is a board director of ClariTeam and the Chairman and CEO along with other officers and investors of the
Group are also significant shareholders of ClariTeam. For the years ended June 30, 2004, 2003 and 2002, the Group recognized revenues from sales to ClariTeam amounting to €29,
€52 and €132, respectively. As of June 30, 2004 and 2003, the Group recorded €0 and €8 net trade receivables from ClariTeam,
respectively. As of June 30, 2004 and 2003, the Group recorded €4 and €0 trade payables to ClariTeam, respectively.

Network
Physics, a U.S.-based corporation, develops products within the network service management sector that has developed a network appliance to analyze and improve enterprise
application performance across the Internet. During June 2003, the Group executed a reseller agreement with Network Physics so that the Group may purchase Network Physics appliances for resale
to third parties.

During
May 2003, the Group signed an OEM agreement with Ecensity in order to embed their technology into certain software products. The Group's Chairman and CEO is a board
director of Ecensity

F-22

---



and
the Chairman and CEO along with other officers and investors of the Group are also significant shareholders of Ecensity Corporation. For the year ended June 30, 2004 and 2003, the Group
incurred €34 and €9 of charges related to the OEM agreement. The Group had €0 trade payables with Ecensity as of June 30, 2004 and 2003.

17.   RESTRUCTURING COSTS AND CONSULTING FEE

The following table summarizes the restructuring charges and consulting fees recorded in the Company's consolidated statement of operations:

Year ended June 30,2004

2003

2002Reduction in its workforce

€
795

€
1,514

€
998Office rationalization


1,700


76


699Consulting fee








680Total restructuring costs and consulting fee

€
2,495

€
1,590

€
2,377


The
following information outlines each of the individual restructuring plans and related balance sheet information.



During the year ended June 30, 2004, the Group effected a reduction in its worldwide workforce of 16 employees and adopted an office rationalization
plan to further consolidate its U.S. offices and reduce the size of the Munich office. In accordance with SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities", costs
associated with the office rationalization were incurred on the cease-to-use date per office location in an amount equal to the fair value of remaining term on lease contracts.

The
amounts charged against the provision established in fiscal year 2004 are as follows:

Initial
provision

Utilization
fiscal year
2004

Ending
balance

Non-cash portion of
provisionReduction in workforce

€
795

€
(795
)
€


€
Office rationalization


1,700


(1,700
)




Total

€
2,495

€
(2,495
)
€


€



As
of June 30, 2004, the 2004 restructuring plan was completed. The initial provision of €2,495 was slightly surpassed by €46 of additional charges
that were included in sales and marketing costs.



During the year ended June 30, 2003, the Group effected a reduction in its worldwide workforce of 30 employees and adopted an office rationalization
plan to further consolidate and reduce the size of the Munich office. Costs associated with exiting facilities included estimated sublease losses, commissions and concessions, and other facility
closing costs including rent expense while the office space was vacant.

F-23

---



The
amounts charged against the provision established in fiscal year 2003 are as follows:

Opening
balance

Utilization
fiscal year
2004

Adjustments
fiscal year
2004

Ending balanceReduction in workforce

€
62

€


€
(62
)
€
Office rationalization











Total

€
62

€


€
(62
)
€



Initial
provision

Utilization
fiscal year
2003

Ending
balance

Non-cash
portion of
provisionReduction in workforce

€
1,514

€
(1,452
)
€
62

€
Office rationalization


76


(76
)




Total

€
1,590

€
(1,528
)
€
62

€



During
the year ended June 30, 2004, the plan was deemed complete which resulted in the reversal of an employee severance claim in sales and marketing expenses.



During the year ended June 30, 2002, the Group effected a reduction in its worldwide workforce of 30 employees and adopted an office rationalization
plan to consolidate its offices in Germany and reduce the size of its Columbia, MD office in the U.S. Costs associated with exiting facilities included estimated sublease losses, commissions and
concessions, and other facility closing costs including rent expense while the office space was vacant.

The
amounts charged against the provision established in fiscal year 2002 are as follows:

Opening
balance

Utilization
fiscal year
2003

Adjustments
fiscal year
2003

Ending
balanceReduction in workforce


€


€

€

€Office rationalization


72


(72
)


Total

€
72

€
(72
)
€

€


Initial
provision

Utilization
fiscal year
2002

Ending
balance

Non-cash
portion of
provisionReduction in workforce

€
988

€
(988
)

€

€Office rationalization


699


(627
)

72

Total

€
1,687

€
(1,615
)
€
72

€


During
the year ended June 30, 2003, the plan was deemed complete.

F-24

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During the year ended June 30, 2002, the Group appointed a leading management consultancy, to help assess our global strategy and positioning. During the
year ended June 30, 2002, €800 of consulting fees were incurred of which €120 were included as part of the reduction in its workforce costs.

18.   VALUATION AND QUALIFYING ACCOUNTS

The following table sets forth activity in the Group's accounts receivable reserve account:

|                 |  | Balance at
beginning
of Year |     | Charges
to income
statement |   | Write-offs |  | Currency
variation |      | Balance
at End
of Year
|---------------- |  | ---------------------------- | --- | --------------------------- | - | ---------- |  | ------------------ | ---- | ----------------------
|Fiscal year 2002 |  | €                            | 632 |                             | € | 305        |  | €                  | (330 | )                     
|Fiscal year 2003 |  | €                            | 586 |                             | € | 46         |  | €                  | (122 | )                     
|Fiscal year 2004 |  | €                            | 460 |                             | € | 113        |  | €                  | (165 | )                     

19.   PERSONNEL COSTS

For the years ended June 30, 2004, 2003, and 2002, total personnel costs (salaries, commissions, bonuses and related social charges) amounted to
€19,122, €20,880 and €24,140, respectively. For the years ended June 30, 2004, 2003, and 2002, the aggregate salary costs for the Group's
executive management team and board directors amounted to €1,284 (12 persons), €1,026 (11 persons) and €889 (10 persons), respectively. As of
June 30, 2004 and 2003, the Group's total headcount was 190 and 189 persons. As of June 30, 2004 and 2003, the Group had no loans or cash advances due from any of the executive
management team or board directors.

20.   SUBSEQUENT EVENTS



On August 17, 2004, the Board of Directors granted to officers and employees of the Company options to subscribe for shares and to purchase shares, for up
to 616,300 shares.

Stock
options giving the right to subscribe for 460,100 shares were granted under the 2000 and 2001 Plans. Each option will give the right to subscribe for new shares at the price of
€3.42 per share.

Stock
options giving the right to purchase 156,200 shares of treasury stock out of the 480,000 authorized by the shareholders' meeting of December 15, 2003 were granted under the
2004 Plan. The terms and conditions of the 2004 Plan are similar to those of the 2003 Plan. Each option will give the right to purchase existing shares at the price of €3.92 per share.

F-25

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SIGNATURE

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

|                          |  | INFOVISTA S.A.
|------------------------- |  | --------------
|Dated: September 30, 2004 |  | By:           

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EXHIBITS INDEX

|1    |  | Statuts, or by-laws, of InfoVista (unofficial English translation up to date as of July 21, 2004)                                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | License to Commercialize "ObjectStore," "ObjectStore Performance Expert" and "ObjectStore Runtime," between eXcelon Corporation and InfoVista dated August 23, 2000** (incorporated by reference to exhibit 4.1 to Form 20-F, Commission File
Number 000-30838).
|4.2  |  | 1999 Stock Option Plan (unofficial English translation) (incorporated by reference to exhibit 10.6 to Form F-1, Commission File Number 333-12160)                                                                                                               
|4.3  |  | 2000 Stock Option Plan, as amended (unofficial English translation) (incorporated by reference to exhibit 10.7 to Form F-1, Commission File Number 333-12160)                                                                                                   
|4.4  |  | 2001 Stock Option Plan, as amended (unofficial English translation) (incorporated by reference to exhibit 4.3 to Form S-8, Commission File Number 333-81300)                                                                                                    
|4.5  |  | 2003 Stock Option Plan (unofficial English translation) (incorporated by reference to exhibit 4.6 to Form 20-F, Commission File Number 000-30838)                                                                                                               
|4.6  |  | 2004 Stock Option Plan (unofficial English translation)                                                                                                                                                                                                         
|4.7  |  | Employment Agreement dated January 26, 2004 between InfoVista S.A. and Gad Tobaly                                                                                                                                                                               
|8    |  | Subsidiaries of the Registrant (see "Information on the CompanyGeneral Information Concerning the Share capital of the CompanySubsidiaries and Investments").                                                                                                 
|10.1 |  | Consent of independent accountants                                                                                                                                                                                                                              
|12.1 |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                         
|12.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.                                                                                                                                                         
|13.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                         

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