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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-K

|                                                 |  |                                                                                                 
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------------
|þ                                                |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|                                                
|For the Year Ended December 31,
    2003        
|                                                
|or                                              
|o                                                |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
    from:           to

Commission File Number 0-24720

BUSINESS OBJECTS S.A.

(Exact name of registrant as specified in its
charter)


|                                                    |  |                                            
|--------------------------------------------------- |  | -------------------------------------------
|The Republic of France                              |  | 98-0355777                                 
|(Jurisdiction of incorporation
    or organization) |  | (I.R.S. Employer
    Identification Number)

157-159 Rue Anatole France, 92300
Levallois-Perret, France

(Address of principal executive
offices)


(408) 953-6000

(Registrants telephone number, including
area code)


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

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

|                                                                     |  |                                               
|-------------------------------------------------------------------- |  | ----------------------------------------------
|Title of Each Class:                                                 |  | Name of Each Exchange on Which Registered:    
|                                                                     |  |                                               
|American depositary shares, each representing one
    ordinary share |  | Nasdaq National Market*                       
|Ordinary shares                                                      |  | Premier
    Marché Euronext
    Paris, France



|  |                                                                                                                                                                                                   
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Ordinary shares are not traded in the United
    States, rather they are deposited with The Bank of New York, as
    Depositary. Each American depositary share represents one
    ordinary share.

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

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.     þ Yes          o No

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Securities Exchange Act of
1934).     þ Yes          o No

As of June 30, 2003, the last business day
of our most recently completed second fiscal quarter, there were
64,254,597 ordinary shares of
0.10 nominal
value issued (including 27,989,566 American depositary shares,
each corresponding to one ordinary share, and 1,067,675 treasury
shares). The aggregate market value of our ordinary shares held
by non-affiliates, based upon the closing sale price of our
American depositary shares on June 30, 2003 as reported on
the Nasdaq National Market, was $1,342,335,226. Ordinary shares
and American depositary shares held by each of our officers and
directors and by each person owning, to our knowledge, 5% or
more of our common stock were excluded from the aggregate market
value because such persons may be deemed to be affiliates of
Business Objects. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

As of January 31, 2004, the number of issued
ordinary shares was 94,987,528,
0.10 nominal
value, (including 42,751,336 American depositary shares, each
corresponding to one ordinary share, 1,067,675 treasury shares
and 5,574,370 shares held by Business Objects Option LLC).
As of January 31, 2004, we had issued and outstanding
89,413,158 ordinary shares of
0.10 nominal
value (including 37,176,966 American depositary shares, each
corresponding to one ordinary share, and 1,067,675 treasury
shares). Of the number of issued shares, as of January 31,
2004, 5,574,370 represented shares issued by us to Business
Objects Option LLC, our indirectly wholly



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owned subsidiary. These shares represent shares
issuable upon exercise of the options held by former Crystal
Decisions optionees. As Business Objects Option LLC is an
indirect wholly owned subsidiary of Business Objects, the shares
are not deemed to be outstanding and will not be entitled to
voting rights. In the event any such shares are not needed to
satisfy obligations under outstanding stock options, such as if
stock options expire prior to exercise, Business Objects may
cause such shares to be sold in the market or be used for other
corporate purposes. These shares are not considered outstanding
until such time as the option holders exercise the options.


Documents Incorporated by Reference

We have incorporated by reference into
Part III of this Form 10-K portions of our Proxy
Statement for our 2004 Annual Meeting of Shareholders.











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Trademarks

References in this Form 10-K to the
Company, Business Objects,
we, our, and us refer to
Business Objects S.A. and our consolidated subsidiaries.
Business Objects, BusinessObjects, the Business Objects logo,
BusinessQuery, BusinessObjects Rapid Marts, BusinessObjects
Broadcast Agent, BusinessObjects Set Analyzer, Semantically
Dynamic, WebIntelligence, Crystal Decisions, Crystal Enterprise,
Crystal Reports, Crystal Analysis, Crystal Applications, and
Knowledge Accelerator are trademarks or registered trademarks of
Business Objects S.A. in the United States and/or other
countries. All other trademarks or trade names referenced in
this Form 10-K are the property of their respective owners.

Reporting Currency

All financial information contained in this
document is expressed in U.S. dollars, unless otherwise
stated.

American Depositary Shares

We sponsor a program that provides for the
trading of our ordinary shares in the United States in the form
of American depositary shares (ADSs). Each ADS
represents one ordinary share placed on deposit with The Bank of
New York, as depositary (the Depositary) and is
issued and delivered by the Depositary through its principal
office in New York City at 101 Barclay Street, New York, New
York, 10286. Under the terms of the Deposit Agreement (the
Deposit Agreement) dated September 22, 1994, as
amended and restated on May 8, 1996, December 30, 1998
and October 15, 2003, ordinary shares may be deposited with
the Paris office of BNP Paribas Securities Services, as
custodian (the Custodian), or any successor or
successors to such Custodian. The Depositary provides a variety
of services to our investors. The form of the Deposit Agreement
is incorporated by reference as an exhibit to this
Form 10-K.

-i-



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BUSINESS OBJECTS S.A.

TABLE OF CONTENTS

|                 |  |                                                                                                        |  |      |     | 
|---------------- |  | ------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                 |  |                                                                                                        |  | Page
|                 |  |                                                                                                        |  |     
|PART I          
|Item 1.          |  | Description of Business                                                                                |  |      | 2   | 
|Item 2.          |  | Description of Property                                                                                |  |      | 19  | 
|Item 3.          |  | Legal Proceedings                                                                                      |  |      | 20  | 
|Item 4.          |  | Submission of Matters to a
    Vote of Security Holders                                                |  |      | 22  | 
|PART II         
|Item 5.          |  | Market for Registrants
    Common Equity and Related Shareholder Matters                              |  |      | 24  | 
|Item 6.          |  | Selected Financial Data                                                                                |  |      | 26  | 
|Item 7.          |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations              |  |      | 29  | 
|Item 7A.         |  | Quantitative and Qualitative
    Disclosures About Market Risk                                         |  |      | 60  | 
|Item 8.          |  | Financial Statements and
    Supplementary Data                                                        |  |      | 61  | 
|Item 9.          |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure               |  |      | 106 | 
|Item 9A.         |  | Controls and Procedures                                                                                |  |      | 106 | 
|PART III        
|Item 10.         |  | Directors and Executive
    Officers of Registrant                                                     |  |      | 107 | 
|Item 11.         |  | Executive Compensation                                                                                 |  |      | 107 | 
|Item 12.         |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Shareholder
    Matters |  |      | 107 | 
|Item 13.         |  | Certain Relationships and
    Related Transactions                                                     |  |      | 107 | 
|Item 14.         |  | Principal Auditors Fees and
    Services                                                               |  |      | 107 | 
|PART IV         
|Item 15.         |  | Exhibits, Financial
    Statement Schedules and Reports on Form 8-K                                    |  |      | 108 | 
|EXHIBIT 10.25.01
|EXHIBIT 10.35   
|EXHIBIT 14.1    
|EXHIBIT 21.1    
|EXHIBIT 23.1    
|EXHIBIT 31.1    
|EXHIBIT 31.2    
|EXHIBIT 32.1    
|EXHIBIT 32.2    



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PART I

This discussion contains forward-looking
statements based on our expectations, assumptions, estimates and
projections about Business Objects and our industry as of the
filing date of this Form 10-K. These statements include,
but are not limited to, statements concerning: our business
strategy; our intention to capitalize on the opportunity to lead
the market in enterprise reporting; our intention to continue to
integrate the operations of Crystal Decisions, Inc.
(Crystal Decisions) with ours; and our belief that
the likelihood that certain litigation will not have material
and adverse effect on our results of operations and financial
condition. These forward-looking statements involve risks and
uncertainties. Business Objects actual results could
differ materially from those indicated in these forward-looking
statements as a result of certain factors, as more fully
described in Managements Discussion and Analysis of
Financial Condition and Results of Operationsin the section captioned
Factors Affecting Future Operating Results and
elsewhere in this Form 10-K. Business Objects undertakes no
obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other
events occur in the future.




Item 1.     Description
of Business

Our Company

Business Objects is a leading worldwide provider
of Business Intelligence solutions, which we refer to in this
document as Business Intelligence. We develop,
market and distribute software that enables organizations to
track, understand and manage enterprise performance within and
beyond the enterprise to make better, more informed business
decisions. Users can view and interact with key performance
indicators in a dashboard, create new queries or reports, access
catalogs of reports and do simple or complex analysis of data.
Instead of struggling with complex and technical database
terminology, users interact with data using business
representations of information, or business objects,
with which they are familiar. This proprietary technology is
commonly referred to as the semantic layer. Our
products are designed to be easy to use and architected to be
secure, scalable and extensible. We have sold our products to
more than 24,000 customers in over 80 countries.

In order to implement our vision of offering
customers a complete solution and product suite for Business
Intelligence, we acquired Crystal Decisions in December 2003. We
believe this combination enhanced our leadership position in
Business Intelligence, increased our customer base and
strengthened our product line. We believe that in terms of
product lines, distribution channels, and international
presence, the combination of Business Objects and Crystal
Decisions is highly complementary. We offer our customers what
we believe is the de facto standard in reporting, Crystal
Reports, together with leading interactive query and analysis
solutions, and world-class enterprise performance management
(EPM) products for scorecarding and dashboards. Our
technology suite is complemented by data integration
technologies and specific, customizable analytical applications
that we believe provides best practices in business analysis.
The product line offers a platform for organizations looking to
standardize on a single Business Intelligence solution in order
to reduce total cost of ownership.

We and several of our wholly owned subsidiaries
entered into an agreement and plan to acquire Crystal Decisions
and its majority stockholder Seagate Software (Cayman) Holdings
Corporation (SSCH) (collectively the Crystal
Decisions Acquisition) dated July 18, 2003, and
amended August 29, 2003. On December 11, 2003, the
Crystal Decisions Acquisition closed for total consideration of
$307.6 million in cash and approximately 23.3 million
Business Objects ADSs. As of December 11, 2003, Crystal
Decisions had delivered 15 million product licenses and had
more than 1,800 employees in more than 30 offices
worldwide.

We were incorporated in France in 1990. Our
principal executive offices are located at 157-159, rue Anatole
France, Levallois-Perret, France and 3030 Orchard Parkway,
San Jose, California. Our website is www.businessobjects.com.Information contained on, or accessible

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through, our website is not part of this report.
You may obtain copies of the reports we file with the Securities
and Exchange Commission (SEC) from our website.


Industry Background

Organizations of every size need to analyze and
assess their performance quickly and effectively. As a result,
every organization has a fundamental and widespread need for
useful information. The burden on organizations to make more
effective use of information is growing rapidly in todays
environment, which is characterized by increasing data volume,
uncertain economic trends, intensified competition and
heightened legislative and regulatory requirements for data
collection, reporting and disclosure.

Organizations have spent billions of dollars
implementing relational databases and software systems to
efficiently capture, organize, store and protect data that
measures their performance, including customer sales, expenses,
inventory management and employee data. However, often these
systems do not effectively address the needs of business end
users to access this information to make business decisions. As
a result, there is a basic need to access, analyze, understand
and deliver information more effectively within and among
organizations, in order to allow them to improve performance.

A broad category of software known as Business
Intelligence has been developed to help organizations address
the need to transform the organizations growing amount of
data into useful information.

Organizations have typically deployed Business
Intelligence products that are custom developed or purchased as
stand-alone products in a specific department or for an
individual project. This approach has resulted in a
proliferation of products and systems that are often not
integrated with each other or with existing enterprise systems
and, as a result, only provide a fragmented view of the overall
business. Many of these products and systems are costly and
complex to maintain and support. In addition, many Business
Intelligence products are designed primarily for sophisticated
analytical users and are difficult for the non-technical user to
master. Most non-technical users require intuitive and seamless
access to data as part of their regular work tasks, regardless
of where the data is stored in an organization.

To allow broad user access to data within and
among organizations and to maximize those organizations
return on investment, a Business Intelligence product should
meet a range of complex needs. A Business Intelligence product
should integrate data from disparate systems and applications,
scale to support large numbers of users and offer flexible
reporting that is easy to use and provides a full range of
presentation, interactivity and analysis. We believe there is a
significant opportunity to provide organizations with a
comprehensive Business Intelligence software approach that meets
the needs of all types of enterprises and all types of users. In
order to accomplish this objective, we believe Business
Intelligence products should serve as an underlying information
infrastructure that allows every user to access information in a
form appropriate for the user.

Business Strategy

Our business strategy is focused on three key
Business Intelligence opportunities:

Lead the Market in Enterprise Standardization.Companies are beginning to select a
standard Business Intelligence solution for their enterprise and
we believe this is a significant business opportunity. As
enterprises realize the benefits of deploying Business
Intelligence software, they often look to standardize on a
single enterprise-wide solution that can maximize their return
on investment. To capitalize on this opportunity, we have
designed our software to be used throughout the enterprise by
the maximum number of users with the intention of

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enabling companies to obtain all the components
necessary for their Business Intelligence deployment from a
single supplier.


Capitalize on the Growing Demand for
Enterprise Performance Management.EPM
is the combination of Business Intelligence, metrics and
methodologies to improve enterprise performance. EPM has become
a significant force in the market due to a number of factors.
The recent economic downturn highlighted managements need
to use operational dashboards to help their companies more
closely monitor their performance. There is a general increase
in demand for financial transparency and control. There is
pressure for companies to show a real return on their
investments in Enterprise Resource Planning (ERP)
and Customer Relationship Management (CRM) systems.
While the concepts of EPM are not new, the ability of companies
to implement EPM applications is finally possible. Today, the
enabling infrastructure of data warehouses and ERP and CRM
systems are in place to make EPM meaningful. We believe that we
are well-positioned to take advantage of the market interest in
EPM applications.

Address Demand by Developers for Embedded
Business Intelligence Functionality.A
significant component of our business, strengthened by our
acquisition of Crystal Decisions, is the use of Business
Intelligence technology embedded within other enterprise
software applications. Customers of numerous independent
software vendors (ISVs) require that the ISVs offer
reporting functionality as an embedded complement to the
ISVs primary software applications. Corporate application
developers often need to embed reports into custom applications
and require the use of object-oriented reporting technology to
efficiently address the need. We believe the third-party and
custom application market to be strong and one in which we are
well positioned to be successful.

Products

Business Objects offers a complete suite of
Business Intelligence software that enable organizations to
track, understand and manage enterprise performance. Our
solutions leverage the information that is stored in an array of
corporate databases, ERP and other packaged applications. Our
products include data integration, query, reporting, online
analytical processing, information broadcasting, business
alerts, analytical application frameworks and pre-packaged
analytic applications. Our products also include administration
tools that enable information technology professionals to set up
and deploy our products across an enterprise. The software can
be deployed in web, Windows or mobile environments to provide
greater flexibility.

In April 2003, we released the newest version of
our Business Intelligence product suite, Business Objects
Enterprise 6, which enables organizations to track,
understand and manage their enterprise performance.
Enterprise 6 is an update to the entire Business Objects
product line.

In January 2004, we released the newest version
of our enterprise reporting products, Crystal Version 10,
which combines Crystal Enterprise, an efficiently scalable and
reliable enterprise reporting platform, with the powerful report
design capabilities of Crystal Analysis and Crystal Reports,
which we believe is the de facto standard in reporting.
Together, the Crystal Version 10 products provide
organizations with the ability to make better, faster decisions
for improved business performance.

We have three product families: Business
Intelligence Platform, Enterprise Analytic Applications and Data
Integration.

We currently maintain and support both Business
Objects and Crystal Decisions products. We plan to integrate
them into a unified product suite in the future.

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Business Intelligence Platform

Business Objects
Reporting

Our reporting tools provide richly formatted,
interactive information delivery. They enable the process of
accessing and formatting data, as well as delivering information
inside and outside the organization. Business Objects Reporting
serves as the foundation of a broader Business Intelligence
strategy by providing the most-requested pieces of information
reliably and securely  through the web or embedded in
enterprise applications.

Business Objects Reporting products provide
organizations with the following benefits:



| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Powerful authoring  Provides broad
    data access from any source with data formatting capabilities
    that create graphically rich, interactive reports.                                                  
|
| |  | Scalable infrastructure  Centralizes
    management and on-demand processing, which drive the secure and
    reliable delivery of reports to thousands of users both inside
    and outside the organization.
|
| |  | Open platform  Enables reporting and
    infrastructure components to be embedded in a wide variety of
    applications on all of the platform.                                                              
|
| |  | Proven technology  Leverages the 10th
    generation, industry leading Crystal Reports technology that has
    been licensed to millions of users.                                                           

Our products in this category include Crystal
Reports and Crystal Enterprise.

Business Objects Query
and Analysis

Business Objects Query and Analysis tools allow
end users to interact with business information and answer ad
hoc questions themselves with minimal knowledge of the
underlying data sources and structures.

Business Objects Query and Analysis tools provide
organizations with the following benefits:



| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Easy to use interface  Users can
    author their own reports and queries with minimal knowledge of
    the underlying data sources and structures required. They can
    then intuitively interact with the data and perform additional
    analysis.
|
| |  | Powerful query and analysis 
    Technology resolves complex multi-data source schemas and
    enables more reliable results and consistent performance.                                                                                              
|
| |  | Open platform  Broad platform and
    operating systems support provides query and analysis
    compatibility with existing organizational infrastructures.                                                                                           
|
| |  | Proven technology  Thousands of
    customers have deployed query and analysis within their intranet
    and to customers, partners and suppliers via Business
    Intelligence extranets.                                                            

Our products in this category include
BusinessObjects, BusinessQuery, Crystal Analysis, and
WebIntelligence.

Business Objects
Information Infrastructure

Business Objects Information Infrastructure
provides a set of common services to simplify deployment and
allow for the management of Business Intelligence tools,
reports, performance management and analytic applications.
End-user components include portal, scheduling and software
developer kits, while administrative components include
security, auditing and data access features.

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Business Objects Information Infrastructure
products provide organizations with the following benefits:



| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Broad deployment capability  Built for
    broad-scale, mission-critical deployment of data access,
    reporting and information delivery to the extended enterprise.                  
|
| |  | Centralized management  Information
    technology departments can control data access, system
    performance and user functionality from a central location.                          
|
| |  | Open platform  Designed to integrate
    seamlessly with existing data, web, application and technology
    stack investments without imposing a new set of standards and
    processes.

Our products in this category include
BusinessObjects Developer Suite, BusinessObjects Enterprise
Professional, BusinessObjects InfoView and Crystal Enterprise
Professional.

Enterprise Analytic Applications

Business Objects
Performance Management

Business Objects Performance Management helps
users track and analyze key business metrics via management
dashboards, scorecards and alerting. Goals can be set around
metrics and assigned to owners, thereby aligning people with
strategies. These products also support group decision-making
and analysis through integrated collaboration and workflow
capabilities.

Business Objects Performance Management products
provide organizations with the following benefits:



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Goal management  Manage goals to align
    people with strategy, deploy scorecards to track performance and
    close the loop back to decisions using collaboration and guided
    analysis.
|
| |  | Flexible dashboarding  Define key
    performance indicators, customize dashboard display and extend
    with advanced segmentation and predictive and statistical
    analytics.            
|
| |  | Integrated platform  Use core Business
    Intelligence tools and information infrastructure including
    reports, metadata and security.                                                   

Our products in this category include
BusinessObjects Application Foundation, BusinessObjects
Dashboard Manager, BusinessObjects Performance Manager and
BusinessObjects Set Analysis.

Business Objects Analytic
Applications

Business Objects Analytic Applications provide
pre-packaged metrics, reports and analytics covering customers,
products and services, supply chain, human resource and finance
functions. These applications contain best practices for
business analysis and are supported by a customizable framework
that enables them to be adapted to the unique needs of each
customer.

Business Objects Analytic Applications provide
organizations with the following benefits:



| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Comprehensive suite  These analytical
    applications are focused on customers, products and services,
    supply chain, human resources and finance. These applications
    are supported by powerful analytic engines which provide for
    segmentation, alerting and predictive analysis.
|
| |  | Analytics  Guided analysis provides
    insight into user driven business questions, then intuitively
    navigates to the next relevant business question. Each analytic
    application contains prepackaged metrics and analysis
    techniques, allowing organizations to better          

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| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | understand trends and business drivers such as
    customer churn, product profitability and supply chain
    effectiveness.                                 
|
| |  | Flexibility  Analytic applications are
    built on the core BI tools and information infrastructure
    and are designed to be customizable and extensible.

Our products in this category include
BusinessObjects Analytics, BusinessObjects Customer
Intelligence, BusinessObjects Product and Service Intelligence
and Crystal Applications.

Data Integration



| |                                      
| | -------------------------------------
| | Business Objects Data
    Integration

Business Objects Data Integration drives the
process of extracting data from disparate sources, transforming
and loading it into data marts and warehouses. Delivering data
in batch and real time, enterprise-class data integration helps
accelerate Business Intelligence deployments and provides
metadata management and impact analysis across the Business
Intelligence environment.

Business Objects Data Integration helps provide
organizations with the following benefits:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Productive environment  Easy
    administration from a single graphical tool enabled with
    high-productivity workflows that integrate more data in less
    time.                                                                                                        
|
| |  | Powerful extraction, transformation and loading
    (ETL)  High performance parallel
    architecture that can simplify complex integration and deliver
    data in batch and real time, with the industrys leading
    ERP connectivity support.                        
|
| |  | Complete integration  Reduces time to
    value and total cost of ownership by tightly integrating the
    metadata between data integration products and the Business
    Intelligence platform to provide an integrated, end-to-end
    Business Intelligence environment.

Our products in this category include
BusinessObjects Data Integrator and BusinessObjects Rapid Marts.

Services

We believe that, in addition to our product
offerings, our service and support organization is a critical
component to our success.

Post-Sales Customer Support and Software
Maintenance.Our worldwide network of
customer support centers (Americas  San Jose, Lake
Mary and Atlanta, USA and Vancouver, Canada; Europe 
Maidenhead and Ealing, United Kingdom; and Asia/
Pacific  Tokyo, Japan and Sydney, Australia) are
staffed by highly trained support engineers who answer customer
inquiries by telephone and email. In 2003, the San Jose and
Atlanta support centers earned the prestigious Support Center
Practices Certification that recognizes the high quality and
consistency of Business Objects customer support organization.
This award is presented by Service and Support Professionals
Association and is based on a stringent set of performance
standards and best practices for delivering world-class
technology support. All customer support centers are equipped
with a global case tracking system, and a knowledge base and
problem reporting system designed to enable engineers to share
their knowledge and experience, improve the quality of responses
to customers, and reduce response time for customer inquiries.
Business Objects value-added resellers, systems
integrators, consulting partners and distributors, supported by
Business Objects regional support centers, also provide
technical support.

We offer three levels of customer support
programs, Standard, Elite and Premium Support, to better meet
customers needs. All registered support customers who are
on a current maintenance plan have access 24 hours a day,
seven days a week to our online customer

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support websites. Online support provides
customers with access to up-to-date technical information and
helps customers independently resolve inquiries. Customers can
query multiple technical repositories to find a solution to
their inquiries, participate in online forums to discuss their
Business Intelligence strategies or issues with other users,
download service packs and documentation, or log a case directly
from the site to their local support center. Elite and Premium
customers are assigned a specific team of customer advocates who
focus on the customers individual deployment and provide
extended service hours.


Software maintenance releases and post-sales
technical support are provided to customers for an annual
maintenance fee, which is charged in addition to the initial
product license fee.

Customer Education and Training.We offer a comprehensive education and
training program to customers and third-party consultants who
support our products. Our education services assist customers in
getting the most value out of their Business Intelligence
investment. The approach starts with a training program to plan
for maximizing business value by training both information
technology personnel and end users through the appropriate
education services and delivery options, as well as providing
the right services for continuous on-demand learning. This
comprehensive plan enables each audience to obtain the knowledge
and skills needed to minimize training time, maximize solution
capabilities and increase overall business value.

Education services offers training via standard
or customized courses delivered through classroom and/or on-site
training, as well as virtual classrooms delivered via webcasts.
In 2003, we launched Knowledge Accelerator, a web-based learning
solution. Knowledge Accelerator can be customized to meet the
specific needs of end users of different skill levels within an
organization. It allows customers to quickly deploy
out-of-the-box training and performance support on a variety of
our products via their intranet or server, or on a compact disc.

As users become proficient with our products,
they can benefit from continuous learning on a variety of topics
to keep up with the evolution of the products and continue to
maximize the value they get from Business Intelligence. These
courses are offered as a series of webcasts on specific topics
such as technical updates, migration training, optimization best
practices and custom sessions.

Consulting Services.Our consulting services provide
expertise in the design, development and deployment of
enterprise Business Intelligence systems that meet the technical
and business requirements of its customers. Our consulting
resources are located in major countries around the world and we
supplement our resources with third-party certified consulting
partners. With in-depth knowledge of enterprise Business
Intelligence systems, reporting, enterprise performance
management, analytic applications and data integration, our
consultants ensure that customers can quickly benefit from the
business value that Business Intelligence systems provide.

To help customers succeed with their Business
Intelligence initiatives, we invested heavily in the development
of a comprehensive approach toward Business Intelligence
deployments: the Business Intelligence Solution
Accelerator. This methodology integrates technical and strategic
consulting, life cycle learning and post implementation support
to provide customers with a flexible deployment strategy. Our
consultants have implemented Business Intelligence systems in
multiple vertical markets. Consulting services are generally
charged to customers on a per consultant per day basis.

Sales and Marketing

The Crystal Decisions Acquisition brought us
complementary strengths in sales channels, geographic presence
and marketing.

We market and sell our products and services
directly through our direct sales organizations and indirectly
through other sales channels. Our sales and marketing
organization is comprised of sales teams, each consisting of
employees engaged in telesales, field sales, field technical

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support and field marketing. Each sales and
marketing organization is responsible for the coordination of
both direct and indirect sales in its assigned territory. We
believe that focusing direct sales efforts on identified
customers while supporting indirect sales channels to service
our channel partners customers maximizes the utilization
of our direct sales personnel. Indirect partners include
value-added resellers, original equipment manufacturers, system
integrators, consulting partners and distributors.


Our sales cycle varies from customer to customer,
typically requiring several months from the time of initial
contact until closing a sale. For large customers or larger
deals, the sales cycle can be greater than one year. We believe
that the Crystal Decisions Acquisition will present significant
opportunities for cross-selling and up-selling through our
complementary product lines.

To support our sales efforts, we conduct
marketing programs, including advertising, direct mail, public
relations, web-based and face-to-face seminars and
demonstrations at customer sites and at our offices, appearances
at trade shows and ongoing customer communications programs and
events.

Product Development

We believe that innovation, timeliness of product
releases and high product quality are essential to maintain a
competitive position. Consequently, we dedicate considerable
resources to development efforts to enhance existing products
and to develop new products. To date, Business Objects has
relied primarily on internal development of its products, but
has from time to time licensed or acquired technology or
products from third parties. The product development group is
responsible for the design, development and release of product
enhancements, upgrades and new products. We have two large
development centers in Levallois-Perret, France and Vancouver,
Canada. We also have significant development teams in San Jose,
California, and smaller groups located in the U.K. and, through
an independent third-party in India. Our customers did not fund
any material research and development activities.

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Customers

As of December 31, 2003, we had sold our
products to more than 24,000 customers in over
80 countries. Our customers represent a wide,
cross-industry spectrum of companies and major government and
educational institutions. During each of the last three years,
no customer accounted for 10% or more of our consolidated
revenues. A selected list of customers, by industry segment, who
made purchases of software licenses, exclusive of maintenance
and consulting revenues, in excess of $100,000 in 2003 include:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Consumer/RetailAmerica Online, Inc.
    DeBeers Consolidated Mines Ltd.
    Expedia, Inc.
    Kraft Foods, Inc.
    The Neiman Marcus Group, Inc.
    I Pellettieri dItalia S.p.A.
    The Proctor & Gamble Company
    Sabre Holdings Corporation
    Safeway plc
    Sears, Roebuck and Co.
    The Sherwin-Williams CompanyHealthcare/PharmaceuticalBlue Cross Blue Shield
    Bristol-Myers Squibb Company
    Cardinal Health, Inc.
    Detroit Medical Center
    Eli Lilly & Company
    GlaxoSmithKline plc
    Kaiser Foundation Health Plan, Inc.
    Kyorin Pharmaceutical, Inc.
    Pfizer, Inc.Transportation/AutomotiveAir France S.A.
    American Honda Motor Co., Inc.
    DaimlerChrysler AG
    Ford Motor Company
    Jaguar Cars Limited
    Nissan North America, Inc.
    PSA Peugeot Citroën
    Singapore Airlines Limited
    Suzuki Motor CorporationTechnologyBMC Software, Inc.
    Electronic Data Systems Corporation
    Hewlett Packard Company
    Honeywell International, Inc.
    i2 Technologies, Inc.
    Manugistics Group, Inc.
    Philips Semiconductors
    Samsung Corporation
    Sun Microsystems, Inc.
    Toshiba Corporation |  | TelecommunicationsAT&T Corp.
    BellSouth Corporation
    BT Group plc
    Qwest Communications International Inc.
    Telecom Italia Mobile S.p.A.
    United States Cellular Corporation
    Verizon Information Services
    Vodafone LimitedGovernment/EducationThe American Red Cross
    Brigham Young University
    Internal Revenue Service
    U.S. Air Force
    U.S. Department of Labor
    U.S. Environmental Protection Agency
    U.S. Postal Service
    University of Notre Dame
    Vanderbilt UniversityFinancial Services/InsuranceBanco do Brasil S.A.
    Bank One Corporation
    Fannie Mae
    The Hartford Financial Services Group, Inc.
    Key Bank National Association
    Prudential plc
    Putnam, LLC
    The Royal Bank of Scotland Group plc
    UBS AG
    Wells Fargo Home Mortgage, Inc.

Competition

The market for our Business Intelligence software
is highly competitive, rapidly evolving and subject to rapidly
changing technology. We compete principally with providers of
Business Intelligence software, analytic applications, query and
reporting software, extraction, transformation and loading
software and data warehousing software. Our competitors, which
are

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primarily focused on selling Business
Intelligence products, include Actuate Corporation, Ascential
Software Corporation, Cognos Incorporated, Hyperion Solutions
Corporation (which acquired Brio Software, Inc. in 2003),
Informatica Corporation, Information Builders, MicroStrategy,
Inc. and the SAS Institute. We also compete with large software
companies, including suppliers of enterprise application
software encompassing both ERP and CRM, such as Microsoft
Corporation, Oracle Corporation, PeopleSoft, Inc., SAP AG
and Siebel Systems, Inc. A number of our competitors and
potential competitors have significantly greater financial and
other resources than we have, which may enable them to address
new competitive opportunities more effectively than us. In
addition, some of our competitors, particularly companies that
offer relational database management software systems and ERP
software systems, have well-established relations with some of
our existing and targeted customers.


We believe that the principal competitive factors
that impact the market we serve include: price, performance,
scalability, ease of use, functionality, product architecture,
product quality and reliability, scope of distribution, customer
support, name recognition and the scope of product offering. We
believe that we are successfully addressing each of these
competitive factors. Nonetheless, we expect to face increasing
competitive pressures from both current and future competitors
in the markets we serve.

Patents and Intellectual Property
Protection

We believe that we own or have licensed all
proprietary rights necessary for us to offer our products. Our
success depends in part on our ability to protect our property
rights in our products. To protect our proprietary information,
we use a combination of protections provided by patent,
copyright and trademark laws, trade secret laws, employee and
third-party nondisclosure agreements and licensing arrangements,
including confidentiality provisions.

We currently have five patents issued in the
United States, numbers 5,555,403, 6,247,008 and 6,578,027, which
relate to a Relational Database Access System Using
Semantically Dynamic Objects and numbers 6,289,352 and
6,490,593 which relate to an Apparatus and Method for
Compound Online Analytical Processing in Databases. We
acquired the latter two patents in connection with the Crystal
Decisions Acquisition. Our patents expire at various dates
between 2011 and 2018. In addition, we have 17 patent
applications pending in the U.S. and two foreign patent
applications pending. We cannot be sure that any patents will be
issued as a result of these applications or that any issued
patents will provide effective protection of our intellectual
property. We also have obtained a registered trademark in the
United States, France and other countries for our name, the
Crystal Decisions name, together with our logo, the Crystal
Decisions logo, as well as for certain other product names. In
addition, we have an ongoing trademark registration program.
Despite our efforts, we may not successfully protect our
proprietary rights from misappropriation. While our competitive
position may be affected by our ability to protect our
proprietary information, we believe that factors such as the
technical expertise and innovation skills of our personnel, our
name recognition and ongoing product support and enhancement may
be more significant in maintaining our competitive position.

Litigation may be necessary to protect and defend
our proprietary rights. For example, we are currently involved
in several litigation matters regarding our proprietary rights.
See Item 3  Legal Proceedings.

Our software products are generally licensed to
end users pursuant to perpetual licenses. We also license a
portion of our technology in object code to third parties. We
also license certain software programs from third parties and
incorporate these programs into our software products, including
an object request broker that allows messaging between software
components from Borland Software Corporation and Visual Basic
Application functionality from Microsoft Corporation. We use
this software primarily to add features that we choose not to
develop internally.

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Strategic Relationships

We have developed or acquired relationships with
a wide range of technology vendors and service providers
including industry leaders and influencers such as IBM,
Microsoft and SAP. In many cases, we have integrated our
products with those of the other party and our products are
delivered with theirs. We believe these relationships generate
new sales opportunities, increase our deployment capacity and
enhance our products features.

IBM

Both Business Objects and Crystal Decisions have
had relationships with IBM for many years. In particular, we
have a Master Relationship Agreement which entails joint
selling, marketing and development. We are a certified partner
with IBMs On Demand initiative and, in late 2003, signed
an ISV Advantage Agreement. On the product front, IBM integrates
Crystal Enterprise into its Tivoli Data Warehouse solution and
also resells a limited version of the product to Tivoli
customers.

Microsoft

Both Business Objects and Crystal Decisions have
had relationships with Microsoft for many years. In particular,
Microsoft currently integrates Crystal Reports into its
developer product suite and its Visual Studio.NET and Business
Solutions products. We receive advance notice of planned
upgrades and improvements to Microsofts products so that
we can integrate our products before shipment. We have a full
time staff at Microsofts Redmond, Washington facilities.
We also coordinate sales and marketing efforts with Microsoft
where possible. Through its Business Solutions value-added
reseller channel, Microsoft resells our products with its CRM
and ERP products.

SAP

We have an original equipment manufacturer and
reseller arrangement with SAP whereby SAP incorporates our
Crystal Enterprise and Crystal Reports products into SAPs
BW 3.0 product, its data warehouse product. We receive
advance notice of planned upgrades and improvements to
SAPs products so that we can integrate our products before
shipment. We have full time staff at a site adjacent to
SAPs Walldorf, Germany facility.

Other Strategic Relationships

We also have original equipment manufacturer
relationships with approximately 600 ISVs. These companies
sell and support our products and/or integrate our products into
their applications. As a result of these relationships, we
believe our customers may derive incremental value from the
other applications by using our integrated reporting and
analysis products without a separate deployment or integration
cycle. We consider our relationships with these companies to be
of strategic importance to us because many of these ISVs are
industry leaders and influence adoption of products and
technologies by customers.

Employees

At December 31, 2003, we had 3,924 full-time
employees, including:



| |   |                                         
| | - | ----------------------------------------
| |  | 1,918 in sales and marketing;           
|
| |  | 936 in research and development;        
|
| |  | 529 in customer service and support; and
|
| |  | 541 in finance and administration.      

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Our employees in France have been represented by
the CFDT Union (Confédération Francaise
Démocratique du Travail) since October 2002 and by the
CGT Union (Confédération Générale du
Travail) since November 2002. Our employees in France
represented 17% of our labor force at December 31, 2003.
The collective bargaining agreements we have entered into with
the unions have been and are renewed annually. We have never
experienced any work stoppage.

Under French law, our management is required to
hold monthly meetings with a delegation of an elected employee
representative, called the comité dentreprise,to discuss employment matters and our economic condition and
to provide appropriate information and documents relating to
these matters. As required under French law, two employee
representatives are entitled to be present at meetings of our
board of directors, but do not have any voting rights.

We offer our newly hired employees an orientation
course ranging from one to three weeks in length presented by
Business Objects University, our in-house education program.
Generally, most employees complete at least a one week
orientation course at our local facilities. Our engineers and
other technical staff generally complete a two week training
course, in addition to the one week orientation. Our extended
training program consists of lectures, problem sets and
independent and group projects relating to programmability and
deployment of our products. We believe this emphasis on training
yields highly qualified employees and promotes camaraderie among
our staff.

Directors, Executive Officers and Key
Personnel

The following are our directors, executive
officers and key personnel and certain information about them at
December 31, 2003:

|                 |  |     |    |                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---------------- |  | --- | -- | -------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name             |  | Age |    | Principal Occupation and Business Experience
|                 |  |     |    |                                             
|                 |  |     |    |                                              |  | Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Bernard Liautaud |  |     | 41 |                                              |  | Chairman of the Board and Chief Executive
    Officer.Mr. Liautaud is a
    founder of Business Objects and has served as chairman of our
    board and chief executive officer since our inception in August
    1990. Prior to the founding of Business Objects,
    Mr. Liautaud was the sales marketing manager with Oracle
    Corporations French subsidiary. Mr. Liautaud is the
    son-in-law of Mr. Silverman, one of our directors.
    Mr. Liautaud does not hold directorships other than in
    subsidiaries of Business Objects. Mr. Liautauds term
    of office on our board of directors will expire at the close of
    our 2006 annual shareholders meeting.

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|                    |  |     |    |                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------------- |  | --- | -- | -------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name                |  | Age |    | Principal Occupation and Business Experience
|                    |  |     |    |                                             
|Bernard Charlès     |  |     | 46 |                                              |  | President of Dassault Systèmes S.A.Mr. Charlès has been
    president of Dassault Systèmes S.A., a worldwide leader in
    computer aided design, since September 1995. From 1988 to
    September 1995, he was president of the Dassault Systèmes
    Research & Development. Mr. Charlès is also a
    director of Dassault Data Services S.A., Dassault Systèmes
    Corp., Dassault Systèmes K.K., DELMIA Corp., ENOVIA Corp.,
    Solidworks Corporation, SmarTeam Corporation Ltd. and Dassault
    Systèmes Canada, Inc. Mr. Charlès joined our
    board of directors in 1998. Mr. Charlès is also a
    member of our audit committee, chairman of our compensation
    committee and our lead independent director.
    Mr. Charlès term of office on our board of
    directors will expire at the close of our 2004 annual
    shareholders meeting.                                                       
|Albert Eisenstat    |  |     | 73 |                                              |  | Consultant and Private Investor.Mr. Eisenstat has been a
    consultant and private investor since 1993. Mr. Eisenstat
    was a director and executive vice president for corporate
    development and corporate secretary of Apple Computer, Inc. from
    1988 to 1993. Mr. Eisenstat is a director of Sungard Data
    Systems, Inc. and the Benham Funds of the American Century
    Mutual Funds Group. Mr. Eisenstat joined our board of
    directors in June 1995. Mr. Eisenstats term of office
    on our board of directors will expire at the close of our 2004
    annual shareholders meeting.                                                                                                                                                                                                                                                                                                         
|Jean-François Heitz |  |     | 54 |                                              |  | Consultant and Private Investor.Mr. Heitz was deputy chief
    financial officer at Microsoft Corporation from April 2000 to
    June 2003. Mr. Heitz joined Microsoft in 1989 as deputy
    general manager, and served in a number of different roles
    during his tenure, including treasurer. Prior to Microsoft, he
    spent nine years at Matra SA (Group Lagardère), a
    French multinational high-tech conglomerate, in various business
    and finance positions. Mr. Heitz is a member of the board
    of directors of Infowave Software, Inc. and a member of the
    board of directors and audit committee of Creo, Inc.
    Mr. Heitz joined our board of directors in May 2003,
    and he also serves on our audit committee as chairman and
    financial expert. Mr. Heitzs term of office on our
    board of directors will expire at the close of our 2006 annual
    shareholders meeting.

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|            |  |     |    |                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|----------- |  | --- | -- | -------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name        |  | Age |    | Principal Occupation and Business Experience
|            |  |     |    |                                             
|Gerald Held |  |     | 55 |                                              |  | Consultant.Since
    1999 Dr. Held has been a consultant, helping accelerate the
    growth of early stage ventures. In 1998, Dr. Held was
    CEO-in-residence at the venture capital firm Kleiner
    Perkins Caufield & Byers. Through 1997, Dr. Held was
    senior vice president of Oracles server product division.
    Prior to Oracle, Dr. Held spent 18 years at Tandem
    Computers Incorporated. Dr. Held is the chairman of the
    board of directors of Software Development Technologies, Inc.
    Dr. Held joined our board of directors in
    October 2002. Dr. Held is also the chairman of our
    compensation committee, a member of our corporate governance
    committee and a member our nominating committee.
    Dr. Helds term of office on our board of directors
    will expire at the close of our 2005 annual shareholders
    meeting.                                                                                
|John Olsen  |  |     | 52 |                                              |  | President and Chief Operating Officer.Mr. Olsen joined Business Objects
    as president and chief operating officer in July 2001. Prior to
    joining Business Objects, he was president and chief executive
    officer of Marimba, Inc., a provider of Internet infrastructure
    management solutions, from July 2000 to October 2000. From 1993
    to approximately January 2000, Mr. Olsen served as
    president of the Design Realization Group of Cadence Design
    Systems, Inc. Before joining Cadence in 1993, Mr. Olsen
    held the position of partner, Strategic Services, at KPMG Peat
    Marwick. Mr. Olsen had previously served as regional
    director of sales and marketing for Electronic Data Systems
    Corp. Mr. Olsen joined our board of directors of Business
    Objects in October 2000. Mr. Olsens term of office on
    our board of directors will expire at the close of our 2006
    annual shareholders meeting.

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|                   |  |     |    |                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------ |  | --- | -- | -------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name               |  | Age |    | Principal Occupation and Business Experience
|                   |  |     |    |                                             
|David Peterschmidt |  |     | 56 |                                              |  | Chief Executive Officer of Securify, Inc.Since October 2003,
    Mr. Peterschmidt has served as the chief executive officer
    and co-chairman of the board of directors of Securify, Inc., a
    developer of business infrastructure software.
    Mr. Peterschmidt served as president, chief executive
    officer and a director of Inktomi, Inc., an internet
    infrastructure company, from July 1996 to March 2003, and served
    as chairman of the Inktomi board from December 1997 to March
    2003. From 1991 until joining Inktomi, he served as chief
    operating officer and executive vice president of Sybase, Inc.,
    a database company. From 1988 to 1991, Mr. Peterschmidt was
    a consultant with The Kappa Group, a management consulting firm,
    where he provided senior level sales and marketing training to a
    variety of companies. He currently serves as a member of the
    board of directors of Zambeel Inc. and Electronics For Imaging,
    Inc. He also currently serves as a director and a member of the
    compensation committee of Active Decisions, Inc.
    Mr. Peterschmidt joined our board of directors in May 2003.
    Mr. Peterschmidt is also the chairman of our nominating
    committee and a member of our audit committee.
    Mr. Peterschmidts term of office on our board of
    directors will expire at the close of our 2006 annual
    shareholders meeting.                   
|David J. Roux      |  |     | 46 |                                              |  | Managing Member and Director of Silver Lake
    Technology Management L.L.C.Mr. Roux is a managing member of
    Silver Lake Technology Management, which he co-founded in
    January 1999 and is the advisor to Silver Lake Partners, L.P., a
    private equity firm. From February 1998 to November 1998, he
    served as the chief executive officer and president of Liberate
    Technologies. From September 1994 until December 1998,
    Mr. Roux held various management positions with Oracle,
    most recently as executive vice president of corporate
    development. Before joining Oracle, Mr. Roux served as
    senior vice president, marketing and business development at
    Central Point Software Inc. from April 1992 to July 1994.
    Mr. Roux served as a member of Crystal Decisions
    board of directors from February 2001 to December 2003 and on
    its compensation committee from May 2001 to December 2003. From
    November 2000 until July 2003, Mr. Roux also served as
    chairman of Seagate Technology. Since November 2000,
    Mr. Roux has served as chairman of New SAC. Mr. Roux
    is also director of VERITAS Software Corporation and a director
    and member of the compensation committee of Gartner, Inc. He
    joined our board of directors in December 2003.
    Mr. Rouxs term of office on our board of directors
    will expire at the close of our 2006 annual shareholders meeting.

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|                 |  |     |    |                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|---------------- |  | --- | -- | -------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name             |  | Age |    | Principal Occupation and Business Experience
|                 |  |     |    |                                             
|Arnold Silverman |  |     | 65 |                                              |  | Consultant and Private Investor.Since 1991, Mr. Silverman has
    been a venture capital investor. Mr. Silverman was a
    director of Oracle from 1984 to 1991. Mr. Silverman is a
    director in TimesTen, Inc., Exemplary Software and MAE Software,
    Inc. Mr. Silverman is Mr. Liautauds
    father-in-law. Mr. Silverman joined our board of directors
    in February 1991, and he is also a member of our corporate
    governance committee. Mr. Silvermans term of office
    on our board of directors will expire at the close of our 2004
    annual shareholders meeting.                                        
|                 |  |     |    |                                              |  | Executive Officers and Key Personnel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|James R. Tolonen |  |     | 54 |                                              |  | Chief Financial Officer.Mr. Tolonen joined Business
    Objects as senior group vice president and chief financial
    officer in January 2003. Before joining Business Objects, he
    served as chief operating officer and chief financial officer of
    IGN Entertainment, Inc. from October 1999 to December 2002.
    Mr. Tolonen was a director of IGN Entertainment and a
    director and member of the compensation committee of Closedloop
    Solutions, Inc. until 2003. Prior to that, Mr. Tolonen was
    chief financial officer and a member of the Office of the
    President at Novell, Inc. from 1989 to 1998.
|Susan J. Wolfe   |  |     | 53 |                                              |  | Senior Vice President, General Counsel and
    Secretary.Ms. Wolfe joined
    Business Objects in December 2003 as senior vice president,
    general counsel and secretary. Before joining Business Objects,
    she was the vice president, general counsel and secretary of
    Crystal Decisions and its predecessors from 1996 to December
    2003. Ms. Wolfe was an attorney at Conner Peripherals, Inc.
    from 1994 to 1996. Prior to that she was an attorney at the
    firms of Nolan & Armstrong and Wilson Sonsini
    Goodrich & Rosati, Professional Corporation.                                                  
|David Kellogg    |  |     | 41 |                                              |  | Senior Group Vice President, Marketing.Mr. Kellogg joined Business
    Objects in May 1995 as vice president of product marketing, and
    has served in a number of capacities during his tenure, the most
    recent of which is senior group vice president of worldwide
    marketing, in which capacity he has served since January 2002.
    Before joining Business Objects, he was vice president of
    marketing at Versant Corporation, a provider of enterprise
    database management systems, from June 1992 to April 1995.                                                                                          

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|                |  |     |    |                                              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--------------- |  | --- | -- | -------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name            |  | Age |    | Principal Occupation and Business Experience
|                |  |     |    |                                             
|Hervé Couturier |  |     | 44 |                                              |  | Senior Vice President, Products.Mr. Couturier joined Business
    Objects in May 2002. Prior joining Business Objects, from 1998
    to 2002, he was senior vice president of product development at
    S1 Corporation, a provider of financial software solutions for
    banking, brokerage, and insurance companies. Prior to joining
    S1, Mr. Couturier spent more than 10 years at IBM in
    several positions, including sales and business unit management.
    He also worked for Xrt S.A., a France-based enterprise
    software company in the banking market. Mr. Couturier is a
    director of Clestophe S.A.R.L.

Where You Can Find Additional
Information

The reports and other information we file with
the U.S. Securities and Exchange Commission (the
SEC) can be read and copied at the SECs Public
Reference Room at 450 Fifth Street, N.W.,
Washington D.C. 20549. Copies of these materials can
be obtained at prescribed rates from the Public Reference
Section of the SEC at the principal offices of the SEC,
450 Fifth Street, N.W., Washington D.C. 20549.
You may obtain information regarding the operation of the public
reference room by calling 1(800) SEC-0330. The SEC also
maintains a website at http://www.sec.gov that contains
reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC.

We are subject to the information and periodic
reporting requirements of the Securities Exchange Act of 1934
and accordingly we file periodic reports, proxy statements and
other information with the SEC. We make our annual report on
Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to such reports
available free of charge through our website,
www.businessobjects.com, as soon as reasonably
practicable after we electronically file such material with, or
furnish it to, the SEC.

In addition, as a French company quoted on the
Premier Marchéof Euronext Paris S.A., we are
subject to periodic information disclosures about our annual
financial statements and our quarterly results which are
published in the Bulletin des Annonces Légales
Obligatoires, a French legal newspaper. Such publications
are available in the French language only on the French
Journal Officiel website at
http://balo.journal-officiel.gouv.fr/.

We file further press releases, prospectuses and
notes of information relating to our share repurchase programs
or any forms relating to transactions impacting our securities
with the Autorité des Marchés Financiers(the
AMF, the new entity resulting from the merger of the
Commission des Opérations de Bourse, the Conseil des
Marchés Financiers and the Conseil de Discipline de la
Gestion Financière,which is in charge of the
protection of investors, investors information and the
proper running of the French securities markets). Such filings
are available in the French language only on the AMF website at
www.amf-france.org. Our press releases and our French
annual reports are available free of charge through our website,
www.france.businessobjects.com.

-18-



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Item 2.     Description
of Property

Our corporate headquarters are in
Levallois-Perret, France, a suburb of Paris, and consists of
approximately 163,000 square feet of office space under
lease through 2009, with an option to cancel the lease in 2006
without penalty. We are subleasing approximately
42,000 square feet of this facility.

Our U.S. headquarters are in San Jose,
California, and consist of approximately 126,000 square
feet of office space under lease through 2011, with a right to
extend the lease term for one additional six-year period.

During the third quarter of fiscal 2003, we
terminated the office lease we had for approximately
61,000 square feet in Mountain View, California, which was
the previous headquarters of Acta Technology, Inc.
(Acta or Acta Technology), a company we
acquired in 2002.

We also lease approximately 352,000 square
feet of office space in Vancouver, Canada, under various leases
expiring between 2004 and 2014. We intend to continue to utilize
these facilities. As of December 31, 2003, there was
117,000 square feet of excess capacity at one of the
Vancouver locations, which we are currently in the process of
refurbishing to accommodate our expansion. We lease a facility
in Maidenhead, England, measuring approximately
56,000 square feet, under a lease expiring in 2021. We have
additional smaller leased field sales and software development
offices in the Americas, Europe, Japan and Asia Pacific regions.

Certain of the leases for previous Crystal
Decisions locations will be terminated and the remaining lease
payments or termination costs were accrued net of anticipated
sublease income at December 31, 2003 as part of the
restructuring liability related to Crystal Decisions.

We believe that our existing facilities are
adequate to meet current requirements and that additional space
will be available as needed to accommodate any future expansion
of our operations.

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Item 3.     Legal
Proceedings

On October 17, 2001, we filed a lawsuit in
the United States District Court for the Northern District of
California against MicroStrategy Incorporated for alleged patent
infringement. The lawsuit alleges that MicroStrategy infringes
on our U.S. Patent No. 5,555,403 by making, using,
offering to sell and selling its product currently known as
MicroStrategy Version 7.0. Our complaint requests that
MicroStrategy be enjoined from further infringing the patent and
seeks an as-yet undetermined amount of damages. On June 27,
2003, MicroStrategy filed a motion for summary judgment that its
products do not infringe our patent. On August 29, 2003,
the Court ruled that our patent was not literally infringed and
that we were estopped from asserting the doctrine of equivalents
and dismissed the case. We have appealed the Courts
judgment to the Court of Appeals for the Federal Circuit and
anticipate a ruling on the appeal in early 2005.

On October 30, 2001, MicroStrategy filed an
action for alleged patent infringement in the United States
District Court for the Eastern District of Virginia against us
and our subsidiary, Business Objects Americas. The complaint
alleges that our software products, BusinessObjects Broadcast
Agent Publisher, BusinessObjects Broadcast Agent Scheduler and
BusinessObjects Infoview, infringe MicroStrategys
U.S. Patent Nos. 6,279,033 and 6,260,050. In December
2003, the Court dismissed MicroStrategys claim of
infringement on U.S. Patent No. 6,279,033 without
prejudice. Trial on U.S. Patent No. 6,260,050
originally set for April 12, 2004 has been continued by the
Court to June 2004. We believe that we have valid defenses to
this action and will continue to defend it vigorously.

In April 2002, MicroStrategy obtained leave to
amend its patent claims against us to include claims for
misappropriation of trade secrets, violation of the Computer
Fraud and Abuse Act, tortuous interference with contractual
relations and conspiracy in violation of the Virginia Code
seeking injunctive relief and damages. On December 30, 2002
the Court granted our motion for summary judgment and rejected
MicroStrategys claims for damages as to the causes of
action for misappropriation of trade secrets, Computer Fraud and
Abuse Act and conspiracy in violation of the Virginia Code.
Trial of the trade secret claim for injunctive relief and the
sole remaining damages claim for tortious interference with
contractual relations started on October 20, 2003. On
October 28, 2003, the Court granted judgment as a matter of
law in our favor and dismissed the jury trial on
MicroStrategys allegations that we tortiously interfered
with certain employment agreements between MicroStrategy and its
former employees. The Court took MicroStrategys claim for
misappropriation of trade secrets under submission and has yet
to rule. The only relief which remains available under the
Courts prior rulings is for an injunction. MicroStrategy
also seeks an award of its attorneys fees in an
undisclosed amount, should they prevail on the injunction claim.
We do not believe that any attorneys fees awarded will be
material.

On December 10, 2003, MicroStrategy filed an
action for patent infringement against Crystal Decisions in the
United States District Court for the District of Delaware. We
became a party to this action when we acquired Crystal
Decisions. The complaint alleges that the Crystal Decisions
software products Crystal Enterprise, Crystal Reports, Crystal
Analysis and Crystal Applications infringe MicroStrategys
U.S. Patent Nos. 6,279,033, 6,567,796 and 6,658,432. The
complaint seeks relief in the form of an injunction, unspecified
damages, an award of treble damages and attorney fees. Our
investigation of this matter is at a preliminary stage and no
discovery has been obtained. As a result, we are not in a
position to opine as to the merits of the suit or the potential
exposure to us. We intend vigorously to defend this case.

In November 1997, Vedatech Corporation commenced
an action in the Chancery Division of the High Court of Justice
in the United Kingdom against Crystal Decisions
(UK) Limited, now a wholly owned subsidiary of Business
Objects Americas. The liability phase of the trial was completed
in March 2002, and Crystal Decisions prevailed on all claims
except for the quantum meruit claim. The court ordered the
parties to mediate the amount of that claim and, in August 2002,
the parties came to a mediated settlement. The mediated
settlement was not material to

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Crystal Decisions operations and contained
no continuing obligations. In September 2002, however, Crystal
Decisions received notice that Vedatech was seeking to set aside
the settlement. The mediated settlement and related costs were
accrued in the consolidated financial statements. In April 2003,
Crystal Decisions filed an action in the High Court of Justice
seeking a declaration that the mediated settlement agreement is
valid and binding. In connection with this request for
declaratory relief Crystal Decisions paid the agreed settlement
amount into court.


In October 2003, Vedatech and Mani Subramanian
filed an action against Crystal Decisions, Crystal Decisions
(UK) Limited and Susan J. Wolfe, Vice President, General
Counsel and Secretary of Crystal Decisions, in the United States
District Court, Northern District of California, San Jose
Division, alleging that the August 2002 mediated settlement was
induced by fraud and that the defendants engaged in negligent
misrepresentation and unfair competition. In October 2003,
Crystal Decisions (UK), Crystal Decisions (Japan) K.K. and
Crystal Decisions Inc. filed an application with the High Court
of Justice claiming the proceedings in the United States
District Court, Northern District of California, San Jose
Division were commenced in breach of an exclusive jurisdiction
clause in the settlement agreement and requesting injunctive
relief to restrain Vedatech from pursuing the United States
District Court proceedings. A hearing in the High Court of
Justice took place in January 2004 to determine whether the
injunction should be granted. The hearing was continued and
concluded on March 9, 2004. The Court has not yet rendered
its decision.

Although we believe that Vedatechs basis
for seeking to set aside the mediated settlement and its claims
in the October 2003 complaint is meritless, the outcome cannot
be determined at this time. If the mediated settlement were to
be set aside such an, outcome could adversely affect our
financial position, liquidity and results of operations.

On July 15, 2002, Informatica Corporation
filed an action for alleged patent infringement in the United
States District Court for the Northern District of California
against Acta. We became a party to this action when we acquired
Acta in August 2002. The complaint alleges that the Acta
software products infringe Informaticas U.S. Patent
Nos. 6,014,670, 6,339,775 and 6,208,990. On July 17,
2002, Informatica filed an amended complaint alleging that the
Acta software products also infringe U.S. Patent
No. 6,044,374. The complaint seeks relief in the form of an
injunction, unspecified damages, an award of treble damages and
attorneys fees. We have answered the suit, denying infringement
and asserting that the patents are invalid and other defenses.
We intend to defend ourselves vigorously. The potential costs
associated with an adverse outcome of this matter cannot be
reasonably estimated at this time. The August 16, 2004
trial date previously set by the Court has been vacated.

We are also involved in various other legal
proceedings in the ordinary course of business none of which we
believe to be material to our financial condition and results of
operations.

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

An ordinary and extraordinary general meeting of
shareholders of Business Objects was held on December 11,
2003 at 5:00 p.m., Paris time, at which meeting our shareholders
took the following action.

Within the authority of the extraordinary
general meeting, the following items were voted on:



| |    |                                                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Approval of the acquisition of Crystal Decisions
    and SSCH by Business Objects S.A. and the other transactions
    contemplated by the Agreement and Plan of Merger, dated as of
    July 18, 2003, as amended on August 29, 2003.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 28,309,113 | 
|Against     |  |  | 373,086    | 
|Abstentions |  |  | 3,853      | 



| |    |                                                                                                                                                                                                                                 
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Approval of the method for the calculations of
    consideration, the amount of the capital increase, the amount
    and recording of the contribution premium and approval of the
    amendment of the articles of association.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 28,572,813 | 
|Against     |  |  | 108,091    | 
|Abstentions |  |  | 5,148      | 



| |    |                                                                                                                               
| | -- | ------------------------------------------------------------------------------------------------------------------------------
| | 3. | Authorization to issue warrants to subscribe to a
    maximum number of shares reserved for issuance to Mr. David
    J. Roux.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 27,788,257 | 
|Against     |  |  | 890,300    | 
|Abstentions |  |  | 7,495      | 



| |    |                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 4. | Authorization to increase the share capital
    reserved for subscription by Business Objects S.A. Employee
    Benefits Trust under Business Objects 1995 International
    Employee Stock Purchase Plan.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 28,495,548 | 
|Against     |  |  | 185,106    | 
|Abstentions |  |  | 5,398      | 



| |    |                                                                                                                                   
| | -- | ----------------------------------------------------------------------------------------------------------------------------------
| | 5. | Authorization to increase the share capital
    reserved for subscription by employees under the French Employee
    Savings Plan.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 27,660,835 | 
|Against     |  |  | 1,019,864  | 
|Abstentions |  |  | 5,353      | 



| |    |                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------
| | 6. | Authorization to issue securities giving
    immediate or deferred access to the share capital with
    preferential subscription right.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 27,898,381 | 
|Against     |  |  | 782,198    | 
|Abstentions |  |  | 5,473      | 



| |    |                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------
| | 7. | Authorization to issue securities giving
    immediate or deferred access to the share capital without
    preferential subscription right.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 26,027,110 | 
|Against     |  |  | 2,655,548  | 
|Abstentions |  |  | 3,394      | 

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| |    |                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 8. | Authorization of the modification of the method
    for determination of the maximum annual increase in the number
    of shares which may be subscribed for or purchased pursuant to
    our 2001 Option Plan.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 19,500,125 | 
|Against     |  |  | 9,175,266  | 
|Abstentions |  |  | 10,661     | 

Within the authority of the ordinary general
meeting, the following items were voted on:



| |    |                                                                  
| | -- | -----------------------------------------------------------------
| | 9. | Approval of the appointment of Mr. David
    J. Roux as director.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 28,541,221 | 
|Against     |  |  | 135,761    | 
|Abstentions |  |  | 9,070      | 



| |     |                                                                                    
| | --- | -----------------------------------------------------------------------------------
| | 10. | Approval of the increase of the aggregate amount
    of authorized directors fees.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 28,401,166 | 
|Against     |  |  | 278,097    | 
|Abstentions |  |  | 6,789      | 



| |     |                                                                                                
| | --- | -----------------------------------------------------------------------------------------------
| | 11. | Approval of the full powers of attorney granted
    to carry out registrations and formalities.

|            |  |  |            | 
|----------- |  |  | ---------- | 
|For         |  |  | 28,212,308 | 
|Against     |  |  | 470,033    | 
|Abstentions |  |  | 3,711      | 

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PART II




Item 5.     Market
for Registrants Common Equity and Related Shareholder
Matters

U.S. Market Information

We sponsor a program that provides for the
trading of our ordinary shares in the United States in the form
of ADSs. Each ADS represents one ordinary share placed on
deposit with The Bank of New York, as Depositary and is issued
and delivered by the Depositary through its principal office in
New York City at 101 Barclay Street, New York, New York, 10286.
Under the terms of our deposit agreement with the Depositary,
ordinary shares may also be deposited with the Paris office of
BNP Paribas Securities Services, as Custodian, or any successor
or successors to such Custodian. Our ADSs have been quoted on
the Nasdaq National Market since September 1994 under the symbol
BOBJ.

French Market Information

Our ordinary shares have been listed on the
Premier Marchéof Euronext Paris S.A. since November
1999 under the ISIN code FR0004026250. The Premier
Marché is a regulated market managed and operated by
Euronext Paris S.A., the organization that manages and operates
the Premier Marché.

Admission to the Premier Marchéis
subject to certain capital adequacy and liquidity requirements
determined by Euronext Paris S.A. In addition, companies
applying for listing on the Premier Marchéare
required to publish comprehensive information regularly and to
keep the public informed of events likely to affect the market
price of the securities.

Official trading of listed securities on Euronext
Paris S.A. is transacted through authorized financial
institutions that are members of Euronext Paris S.A. Trading on
the Premier Marchétakes place continuously on each
business day from 9:00 a.m. through 5:25 p.m. (Paris, France
time), with a pre-opening session from 7:15 a.m. through 9:00
a.m., a pre-closing session from 5:25 p.m. to 5:30 p.m. during
which transactions are recorded but not executed, a closing
auction at 5:30 p.m., and a trading-at-last phase from 5:30 p.m.
to 5:40 p.m. each day after the closing call. Any trade that
occurs after the close of a stock exchange session is recorded
on the next business day at the previous sessions closing
price for that security.

Euronext Paris S.A. has introduced continuous
electronic trading during trading hours for most actively traded
securities. Euronext Paris S.A. publishes a daily official price
list that includes, among other things, price information on
listed securities.

Euronext Paris S.A. places securities listed on
the Premier Marchéin one of two categories
(Continuor Fixing) depending on their trading
volume. Our ordinary shares are placed in the category known as
Continu, which includes the most actively traded
securities. To be placed in the category Continu,
Euronext Paris S.A. requires, among other things, that a company
already listed on a regulated market of Euronext Paris S.A. be
the object of a minimum of 2,500 trades per year. Our ordinary
shares are part of the Euronext 150, IT CAC and IT CAC 50
indexes.

Since September 25, 2000, all trading on the
Premier Marchéof Euronext Paris S.A. is performed
on a cash settlement basis on the third day following the trade.
However, a Deferred Settlement Service (Service à
Règlement Différéor SRD) allows
investors who elect this service to benefit from leverage and
other special features of the previous monthly settlement
market. The service is only available for trades in securities
that have both a total market capitalization of at least
1 billion
and represent a minimum daily average trading volume of
1 million
on Euronext Paris S.A. and that are cited in a list published by
Euronext Paris S.A. Investors in shares eligible for SRD can
elect on the determination date (date de liquidation),
which is, at the latest, the fifth trading day before the end of
the month, either to settle the trade by the last trading day of
the month or to pay an additional fee and postpone the settlement

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##### Table of Contents



decision to the determination date of the
following month. Our ordinary shares are eligible for the SRD.


Ownership of equity securities traded on a
deferred settlement basis is considered to have been transferred
only after they have been registered in the purchasers
account. In accordance with French securities regulations, any
sale of securities executed on a deferred settlement basis
during the month of a dividend is deemed to occur after payment
of the dividend. The account of the purchaser having purchased
the securities prior to the date of the dividend payment, but
during the month of a dividend payment date, is credited with an
amount equal to the dividend paid and the sellers account
is debited by the same amount.

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

Trading in securities listed on the Premier
Marchémay be suspended by Euronext Paris S.A. if
quoted prices exceed certain price limits defined by the
regulations of Euronext Paris S.A. In particular, if the quoted
price of a security categorized as Continu varies by more
than 10% from the previous days closing price, Euronext
Paris S.A. may suspend trading for up to 4 minutes. Further
suspensions for up to four minutes are also possible if the
price again varies by more than 10% from the threshold at which
the suspension was initiated. During the continuous trading
session, Euronext Paris S.A. may also suspend trading for a four
minute period if the price varies by more than 2% from the last
traded price. Euronext Paris S.A. may also suspend trading of a
security listed on the Premier Marchéin certain
other limited circumstances, including for example, the
occurrence of unusual trading activity in the security. In
addition, in exceptional cases, the AMF may also suspend trading.

High and Low Price Range

The following table sets forth the range of
quarterly high and low closing sales prices in U.S. dollars for
our ADSs on the Nasdaq National Market and in euros for our
ordinary shares on the Premier Marchéfor each full
quarterly period within the two most recent fiscal years.

|               |  |           |       |           |  |      |       |     |  |  |         |  |  |  |         | 
|-------------- |  | --------- | ----- | --------- |  | ---- | ----- | --- |  |  | ------- |  |  |  | ------- | 
|               |  |           |       |           |  |     
|               |  |           |       | Price per
|               |  | Price per |       | Ordinary 
|               |  | ADS       |       | Share    
|               |  |           |       |          
|               |  | High      |       | Low       |  | High |       | Low
|               |  |           |       |           |  |      |       |    
|2003:          |  |           |       |           |  |      |       |     |  |  |         |  |  |  |         | 
|Fourth Quarter |  | $         | 34.74 |           |  | $    | 25.48 |     |  |  |  29.46 |  |  |  |  21.47 | 
|Third Quarter  |  | $         | 29.59 |           |  | $    | 19.63 |     |  |  |  26.89 |  |  |  |  17.67 | 
|Second Quarter |  | $         | 25.00 |           |  | $    | 16.66 |     |  |  |  21.90 |  |  |  |  15.30 | 
|First Quarter  |  | $         | 19.10 |           |  | $    | 15.44 |     |  |  |  17.95 |  |  |  |  14.47 | 
|2002:          |  |           |       |           |  |      |       |     |  |  |         |  |  |  |         | 
|Fourth Quarter |  | $         | 19.99 |           |  | $    | 9.28  |     |  |  |  20.92 |  |  |  |  9.36  | 
|Third Quarter  |  | $         | 27.15 |           |  | $    | 10.62 |     |  |  |  28.00 |  |  |  |  10.25 | 
|Second Quarter |  | $         | 44.25 |           |  | $    | 22.88 |     |  |  |  48.33 |  |  |  |  22.80 | 
|First Quarter  |  | $         | 44.27 |           |  | $    | 34.50 |     |  |  |  50.35 |  |  |  |  37.70 | 

At December 31, 2003, there were 94,903,697
ordinary shares of
0.10 nominal
value issued (including 43,736,285 ADSs, each corresponding
to one ordinary share which were held by 64 shareholders of
record, 1,067,675 treasury shares and 5,737,437 shares
held by Business Objects Option LLC). Of these issued shares
there were 89,166,260 ordinary shares outstanding
(including 37,998,848 ADSs, each corresponding to one
ordinary share and

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##### Table of Contents



1,067,675 treasury shares). Of the number of
issued shares 5,737,437 represented shares issued by us to
Business Objects Option LLC, our indirectly wholly owned
subsidiary. These shares represent shares issuable upon exercise
of the options held by former Crystal Decisions optionees. As
Business Objects Option LLC is an indirect wholly owned
subsidiary of Business Objects, the shares are not deemed to be
outstanding and will not be entitled to voting rights. In the
event any such shares are not deemed to satisfy obligations
under outstanding stock options, such as if stock options expire
prior to exercise, Business Objects may cause such shares to be
sold in the market or be used for other corporate purposes.
These shares are not considered outstanding until such time as
the option holders exercise the options.


We have not declared or distributed any cash
dividends on our ordinary shares. Payment of dividends is fixed
by the ordinary general meeting of shareholders at which the
annual accounts are approved following recommendations of the
board of directors. Net income in each fiscal year after
deduction for legal reserves is available for distribution to
our shareholders as dividends, subject to the requirements of
French law and our bylaws. We currently intend to retain our
earnings to finance future growth and, therefore, do not
anticipate paying any cash dividends on our ordinary shares in
the foreseeable future.






|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The following selected financial data should be
read in conjunction with the Consolidated Financial Statements
and related Notes thereto appearing elsewhere in this
Form 10-K. We have derived that statement of income data
for the years ended December 31, 2003, 2002 and 2001 and
the balance sheet data as of December 31, 2003 and
December 31, 2002 from the consolidated audited financial
statements included elsewhere in this Annual Report on
Form 10-K. The statement of income data for the years ended
December 31, 2000 and 1999 and the balance sheet data as of
December 31, 2001, 2000 and 1999 were derived from the
consolidated audited financial statements that are not included
in this Annual Report. The consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States
(U.S. GAAP) and adjusted to reflect the
three-for-two stock split effected March 12, 2001 and the
two-for-one stock split effected January 20, 2000. We have
not declared or distributed any cash dividends on our ordinary
shares. Historical results are not necessarily indicative of
results to be expected for future periods, particularly in light
of the Crystal Decisions Acquisition.

|                         |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |         |         | 
|------------------------ | ---------------- | ---------------------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                         |                  |                                         
|                         |                  | Year Ended December 31,                 
|                         |                  |                                         
|                         |                  | 2003                                     |   | 2002    |         | 2001 |   | 2000    |         | 1999
|                         |                  |                                          |   |         |         |      |   |         |         |     
|                         |                  |                                         
|                         |                  | (in thousands, except per ordinary share
|                         |                  | and ADS data)                           
|Statement of Income Data |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |        
|Revenues:                |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |        
|                         | Net license fees |                                          | $ | 275,261 |         |      | $ | 243,955 |         |      | $ | 249,594 |         |  | $ | 220,845 |         |  | $ | 153,747 |        
|                         | Services         |                                          |   | 285,564 |         |      |   | 210,844 |         |      |   | 166,200 |         |  |   | 128,089 |         |  |   | 87,896  |        
|                         |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |        
|                         |                  | Total revenues                           |   |         | 560,825 |      |   |         | 454,799 |      |   |         | 415,794 |  |   |         | 348,934 |  |   |         | 241,643 | 
|Cost of revenues:        |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |        
|                         | Net license fees |                                          |   | 5,951   |         |      |   | 3,102   |         |      |   | 2,155   |         |  |   | 2,569   |         |  |   | 4,297   |        
|                         | Services         |                                          |   | 89,005  |         |      |   | 71,489  |         |      |   | 63,497  |         |  |   | 53,101  |         |  |   | 35,467  |        
|                         |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |        
|                         |                  | Total cost of revenues                   |   |         | 94,956  |      |   |         | 74,591  |      |   |         | 65,652  |  |   |         | 55,670  |  |   |         | 39,764  | 
|                         |                  |                                          |   |         |         |      |   |         |         |      |   |         |         |  |   |         |         |  |   |        
|                         |                  | Gross profit                             |   |         | 465,869 |      |   |         | 380,208 |      |   |         | 350,142 |  |   |         | 293,264 |  |   |         | 201,879 | 

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|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |         |         | 
|----------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                                            |                                              |                                         
|                                                                                                            |                                              | Year Ended December 31,                 
|                                                                                                            |                                              |                                         
|                                                                                                            |                                              | 2003(1)                                  |         | 2002(2) |         | 2001 |         | 2000    |         | 1999
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |     
|                                                                                                            |                                              |                                         
|                                                                                                            |                                              | (in thousands, except per ordinary share
|                                                                                                            |                                              | and ADS data)                           
|Operating expenses:                                                                                         |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                                            | Sales and marketing                          |                                          |         | 250,870 |         |      |         | 222,243 |         |      |         | 203,655 |         |   |         | 167,519 |         |   |         | 117,960 |        
|                                                                                                            | Research and development                     |                                          |         | 95,399  |         |      |         | 74,991  |         |      |         | 55,246  |         |   |         | 40,725  |         |   |         | 26,746  |        
|                                                                                                            | General and administrative                   |                                          |         | 44,655  |         |      |         | 29,387  |         |      |         | 24,256  |         |   |         | 21,741  |         |   |         | 16,538  |        
|                                                                                                            | Acquired in-process research and development |                                          |         | 27,966  |         |      |         | 2,000   |         |      |         |        |         |   |         |        |         |   |         |        |        
|                                                                                                            | Restructuring costs                          |                                          |         | 7,782   |         |      |         | 3,871   |         |      |         |        |         |   |         |        |         |   |         |        |        
|                                                                                                            | Amortization of goodwill                     |                                          |         |        |         |      |         |        |         |      |         | 4,492   |         |   |         | 4,254   |         |   |         | 3,143   |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|                                                                                                            |                                              | Total operating expenses                 |         |         | 426,672 |      |         |         | 332,492 |      |         |         | 287,649 |   |         |         | 234,239 |   |         |         | 164,387 | 
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Income from operations                                                                                      |                                              |                                          | 39,197  |         |         |      | 47,716  |         |         |      | 62,493  |         |         |   | 59,025  |         |         |   | 37,492  |        
|Interest and other income, net                                                                              |                                              |                                          | 14,334  |         |         |      | 18,959  |         |         |      | 10,460  |         |         |   | 11,647  |         |         |   | 3,101   |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Income before provision for income taxes                                                                    |                                              |                                          | 53,531  |         |         |      | 66,675  |         |         |      | 72,953  |         |         |   | 70,672  |         |         |   | 40,593  |        
|Provision for income taxes                                                                                  |                                              |                                          | (30,969 | )       |         |      | (26,095 | )       |         |      | (28,075 | )       |         |   | (28,269 | )       |         |   | (16,813 | )      
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Net income                                                                                                  |                                              | $                                        | 22,562  |         |         | $    | 40,580  |         |         | $    | 44,878  |         |         | $ | 42,403  |         |         | $ | 23,780  |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Basic net income per ordinary share and ADS                                                                 |                                              | $                                        | 0.35    |         |         | $    | 0.66    |         |         | $    | 0.74    |         |         | $ | 0.71    |         |         | $ | 0.44    |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Diluted net income per ordinary share and ADS                                                               |                                              | $                                        | 0.34    |         |         | $    | 0.63    |         |         | $    | 0.70    |         |         | $ | 0.65    |         |         | $ | 0.40    |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Ordinary shares and ADS used in computing basic
    net income per ordinary share and ADS                   |                                              |                                          | 64,584  |         |         |      | 61,888  |         |         |      | 60,879  |         |         |   | 59,741  |         |         |   | 54,159  |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        
|Ordinary shares and ADS and equivalents used in
    computing diluted net income per ordinary share and ADS |                                              |                                          | 66,168  |         |         |      | 63,933  |         |         |      | 64,361  |         |         |   | 65,292  |         |         |   | 59,303  |        
|                                                                                                            |                                              |                                          |         |         |         |      |         |         |         |      |         |         |         |   |         |         |         |   |         |        

|                                                                       |  |                 |           |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|---------------------------------------------------------------------- |  | --------------- | --------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                       |  |                
|                                                                       |  | At December 31,
|                                                                       |  |                
|                                                                       |  | 2003            |           | 2002 |  | 2001 |         | 2000 |  | 1999
|                                                                       |  |                 |           |      |  |      |         |      |  |     
|                                                                       |  |                
|                                                                       |  | (in thousands) 
|Balance Sheet Data                                                     |  |                 |           |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Cash, cash equivalents, short-term investments
    and restricted cash |  | $               | 254,623   |      |  | $    | 299,527 |      |  | $    | 249,673 |  |  | $ | 211,934 |  |  | $ | 176,233 | 
|Total assets                                                           |  |                 | 1,775,062 |      |  |      | 551,808 |      |  |      | 421,469 |  |  |   | 369,014 |  |  |   | 272,546 | 
|Working capital                                                        |  |                 | 49,513    |      |  |      | 225,513 |      |  |      | 193,150 |  |  |   | 164,439 |  |  |   | 138,604 | 
|Long-term obligations                                                  |  |                 | 4,950     |      |  |      | 17,441  |      |  |      | 3,174   |  |  |   | 4,288   |  |  |   | 2,924   | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We acquired Crystal Decisions and SSCH on
    December 11, 2003 for a total purchase price of
    $1.2 billion as further described in
    Managements Discussion and Analysis of Financial
    Condition and Results of Operationsin Item 7 of
    this Annual Report on Form 10-K. The purchase price
    consisted of the payment of $307.6 million in cash to
    former stockholders of Crystal Decisions and SSCH, which was
    paid out of general cash reserves, and 23.3 million ADSs.
    We acquired the fair value of the net tangible and intangible
    assets on purchase, including $978.0 million of goodwill
    and $142.7 million of amortizable intangible assets. The
    statement of income for 2003 includes the revenues and expenses
    of Crystal Decisions for the 20 days ended
    December 31, 2003. The Crystal Decisions Acquisition had a
    $38.1 million negative impact on operating income for 2003
    due to the $28.0 million write-off of acquired in-process
    research and development, $2.2 million in amortization of
    acquired intangible assets and deferred compensation,
    $7.5 million in integration related costs and
    $7.8 million in restructuring costs for the combined
    company in 2003. These costs were partially offset by the
    $7.4 million of operating income earned by Crystal
    Decisions during the 20 days in 2003 that we operated as a
    combined company.
|   
|(2) | Effective with our adoption of Statement of
    Financial Accounting Standard No. 142, Goodwill
    and Other Intangible Assets(FAS 142)
    effective January 1, 2002 we no longer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | amortize goodwill. See Note 4 in Item 8
    of this Form 10-K for a reconciliation of reported net
    income and net income adjusted for the adoption of FAS 142 for
    the years ended December 31, 2003, 2002 and 2001.

US-French GAAP Reconciliation

As we are listed on both the Premier
Marchéand the Nasdaq National Market in the United
States, we are required to separately report consolidated
financial statements prepared in accordance with accounting
principles generally accepted in France (French
GAAP) and in accordance with U.S. GAAP. Prior to
2002, there were not significant differences from operating
results presented under French GAAP and U.S. GAAP.
Effective 2002, there was a significant difference in the
results of operations and financial position due to the adoption
of FAS 142 under U.S. GAAP, but not French GAAP. As a
result of the Crystal Decisions Acquisition, there were
additional differences identified in 2003.

The following table sets forth the reconciliation
of net income under U.S. GAAP to French GAAP (in thousands):

|                                                                           |  |                         |         |      |  |      |        |   |  |   |        | 
|-------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                                                           |  |                        
|                                                                           |  | Year Ended December 31,
|                                                                           |  |                        
|                                                                           |  | 2003                    |         | 2002 |  | 2001
|                                                                           |  |                         |         |      |  |     
|                                                                           |  | (Unaudited)             |         |      |  |     
|Net income in accordance with U.S. GAAP                                    |  | $                       | 22,562  |      |  | $    | 40,580 |   |  | $ | 44,878 | 
|Goodwill amortization net of tax benefit of
    $(1,992), $3,550 and $0(1) |  |                         | (29,458 | )    |  |      | (5,325 | ) |  |   |       | 
|Forward contracts(2)                                                       |  |                         | (235    | )    |  |      |       |   |  |   |       | 
|Deferred compensation(3)                                                   |  |                         | 1,717   |      |  |      |       |   |  |   |       | 
|                                                                           |  |                         |         |      |  |      |        |   |  |   |        | 
|Net income (loss) in accordance with French GAAP                           |  | $                       | (5,414  | )    |  | $    | 35,255 |   |  | $ | 44,878 | 
|                                                                           |  |                         |         |      |  |      |        |   |  |   |        | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In accordance with FAS 142, we no longer
    amortize goodwill and other indefinite lived intangible assets,
    but instead review them annually for impairment or more
    frequently if impairment indicators arise. As French GAAP does
    not have a rule similar to FAS 142, we continue to amortize
    goodwill and other indefinite lived intangible assets on a
    straight-line basis over their estimated useful lives for French
    GAAP reporting.                                                                                                                                                                                                                                                                    
|   
|(2) | FAS 133, Accounting for Derivative
    Instruments and Hedging Activities requires the we
    recognize all derivative instruments either as assets or
    liabilities in the balance sheet at fair value. Gains or losses
    resulting from changes in the value of derivatives are accounted
    for depending on the intended use of the derivative and whether
    it qualifies for hedge accounting. Under French GAAP, derivative
    instruments are commitments and are not recorded on the balance
    sheet.                                                                                                                                                                                                              
|   
|(3) | Business Objects assumed the as-converted
    outstanding options of former Crystal Decisions optionees. These
    options were valued at fair value under French GAAP and an
    unrealized loss on the options was recorded based on the
    difference between the fair value of the shares and the exercise
    price of the underlying options. Any exercises of these options
    are accounted for as a decrease in the unrealized loss on
    options. Under U.S. GAAP, any exercise of options is
    accounted for as an increase in shareholders equity. In
    addition, under French GAAP, the deferred compensation on
    unvested options and the related amortization over the service
    period are not recognized.

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

The following discussion and analysis should
be read together with our Consolidated Financial Statements and
the Notes to those statements included elsewhere in this
Form 10-K. This discussion contains forward looking
statements based on our current expectations, assumptions,
estimates and projections about Business Objects and our
industry. These forward-looking statements involve risks and
uncertainties. Business Objects actual results could
differ materially from those indicated in these forward looking
statements as a result of certain factors, as more fully
described in the Factors Affecting Future Operating
Results section of this Managements Discussion and
Analysis of Financial Condition and Results of Operations and
elsewhere in this Form 10-K. Business Objects undertakes no
obligation to update publicly any forward looking statements for
any reason, even if new information becomes available or other
events occur in the future.

OVERVIEW

Our Business

Business Objects is a leading worldwide provider
of Business Intelligence solutions. We develop, market and
distribute software that enables organizations to track,
understand and manage enterprise performance within and beyond
the enterprise to make better, more informed business decisions.
Users can view and interact with key performance indicators in a
dashboard, create queries and reports, access catalogs of
reports and do simple or complex analysis of data. Users
generally interact with data using business representations of
information, or business objects, with which they
are familiar. We have one reportable segment 
Business Intelligence software products.

Sources of Revenues and Expenses



| |                 
| | ----------------
| | Net License Fees

We generate net license fees from the sale of
licenses to use our software products. Historically, we have
recognized a substantial portion of our revenues in the last
month of a quarter.



| |                  
| | -----------------
| | Services Revenues

We derive our software license updates and
support (maintenance) revenues from selling technical support
services and rights to receive product updates, when and if we
make them available, to customers who have bought software
licenses from us. Our maintenance agreements generally have a
term of one year and are typically renewed on an annual basis.

Our professional services organization earns
revenues for consulting and training to plan and execute the
deployment of our products when requested by the customer. In
addition, we provide training to our customers employees
to enhance their ability to fully utilize the features and
functionality of the products purchased.



| |                  
| | -----------------
| | Costs of Revenues

Our cost of net license fees consists primarily
of materials, product packaging, distribution costs, related
fulfillment personnel and third-party royalties. Our cost of
license updates and support revenues (cost of maintenance
revenues) consists primarily of personnel and related overhead
costs for technical support, training, consulting and the cost
of materials delivered with product upgrades and enhancements.

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| |                   
| | ------------------
| | Operating Expenses

Sales and marketing expenses include salaries,
benefits, commissions and bonuses earned by sales and marketing
personnel, advertising, product promotional campaigns,
promotional materials, travel, facilities and other overhead and
related costs. Research and development expenses are expensed as
incurred and consist primarily of personnel and related costs
associated with the development of new products, the enhancement
of existing products, quality assurance and testing, and
facilities and other related costs. General and administrative
expenses consist primarily of personnel costs for finance,
legal, human resources and other administrative costs. Acquired
in-process research and development expense represents the fair
value of projects of acquired companies that had not reached
technological feasibility and had no future alternative use.
Restructuring expenses include costs to involuntarily terminate
employees and exit facilities in accordance with an approved
restructuring plan.

Key Performance Indicators

|                                              |  |                                 |       |      |  |      |       |   |  |   |       |  
|--------------------------------------------- |  | ------------------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                              |  |                                
|                                              |  | Year Ended December 31,        
|                                              |  |                                
|                                              |  | 2003                            |       | 2002 |  | 2001
|                                              |  |                                 |       |      |  |     
|                                              |  |                                
|                                              |  | (In millions of dollars, except
|                                              |  | per share data)                
|Revenues                                      |  | $                               | 560.8 |      |  | $    | 454.8 |   |  | $ | 415.8 |  
|Growth of Revenues                            |  |                                 | 23    | %    |  |      | 9     | % |  |   | 19    | %
|Operating income                              |  | $                               | 39.2  |      |  | $    | 47.7  |   |  | $ | 62.5  |  
|Operating income as a percentage of revenues  |  |                                 | 7     | %    |  |      | 11    | % |  |   | 15    | %
|Diluted net income per ordinary share and ADS |  | $                               | 0.34  |      |  | $    | 0.63  |   |  | $ | 0.70  |  

Operating income and net income per ordinary
share and ADS decreased in 2003 and 2002, in spite of growth in
revenues, largely due to purchase accounting, integration and
restructuring charges related to business acquisitions in 2003
and 2002.

Key Events



| |                                     
| | ------------------------------------
| | Acquisition of Crystal
    Decisions

On December 11, 2003, we acquired Crystal
Decisions, for its complementary geographical strengths,
products, services and solutions that allow us to provide a more
complete suite of Business Intelligence products to a broader
range of business users. The Crystal Decisions Acquisition did
not result in any new reportable segments.

The Crystal Decisions Acquisition had a
$38.1 million negative impact on operating income for 2003
due to the $28.0 million write-off of acquired in-process
research and development, $2.2 million in amortization of
acquired intangible assets and deferred compensation,
$7.5 million in integration related costs and
$7.8 million in restructuring costs for the combined
company in 2003. These costs were partially offset by the
$7.4 million of operating income earned by Crystal
Decisions during the 20 days in 2003 that we operated as a
combined company.

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As our 2003 results of operations included only
20 days of Crystal Decisions revenues and expenses,
our historical results are not expected to be indicative of our
future results. In addition, we will incur certain acquisition
related charges in the future at levels that we have not
experienced in the past. The following table shows 2003 actual
and estimated 2004 to 2008 acquisition related amortization,
restructuring and in-process technology expenses resulting from
the Crystal Decisions Acquisition.

|                                             |  |                          |      |           |  |      |      |      |  |      |      |      |  |   |      |  |  |   |      |  |  |   |      | 
|-------------------------------------------- |  | ------------------------ | ---- | --------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- |  |  | - | ---- | 
|                                             |  |                          |      |          
|                                             |  | Actual                   |      | Estimated
|                                             |  |                          |      |          
|                                             |  | 2003                     |      | 2004      |  | 2005 |      | 2006 |  | 2007 |      | 2008
|                                             |  |                          |      |           |  |      |      |      |  |      |      |     
|                                             |  |                         
|                                             |  | (In millions of dollars)
|Write-off of in-process technology           |  | $                        | 28.0 |           |  | $    |     |      |  | $    |     |      |  | $ |     |  |  | $ |     |  |  | $ |     | 
|Amortization of developed technology         |  |                          | 1.0  |           |  |      | 18.5 |      |  |      | 18.5 |      |  |   | 18.5 |  |  |   | 18.5 |  |  |   | 17.6 | 
|Amortization of other intangible assets      |  |                          | 0.6  |           |  |      | 10.0 |      |  |      | 10.0 |      |  |   | 10.0 |  |  |   | 10.0 |  |  |   | 9.5  | 
|Amortization of deferred compensation(1)     |  |                          | 0.6  |           |  |      | 7.5  |      |  |      | 6.2  |      |  |   | 3.8  |  |  |   | 0.9  |  |  |   |     | 
|Restructuring expenses                       |  |                          | 7.8  |           |  |      | 3.3  |      |  |      |     |      |  |   |     |  |  |   |     |  |  |   |     | 
|Other charges to exit duplicative facilities |  |                          |     |           |  |      | 2.2  |      |  |      |     |      |  |   |     |  |  |   |     |  |  |   |     | 
|                                             |  |                          |      |           |  |      |      |      |  |      |      |      |  |   |      |  |  |   |      |  |  |   |      | 
|Total                                        |  | $                        | 38.0 |           |  | $    | 41.5 |      |  | $    | 34.7 |      |  | $ | 32.3 |  |  | $ | 29.4 |  |  | $ | 27.1 | 
|                                             |  |                          |      |           |  |      |      |      |  |      |      |      |  |   |      |  |  |   |      |  |  |   |      | 




|    |                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------
|(1) | We reversed $0.8 million in December 2003 of
    deferred compensation as the result of the forfeiture of
    unvested stock options.

New
Products

We acquired a suite of leading enterprise
reporting products through the Crystal Decisions Acquisition
that we believe will strengthen the enterprise reporting
capability of our Business Intelligence product offerings. We
recognized $26.5 million in net license and service
revenues from these products during the 20 days in 2003
following the acquisition.

We released Enterprise 6, a new version of our
core Business Intelligence products, in the second quarter of
2003. This was a key business driver in the second half of 2003
as it replaced our maturing product lines. Enterprise 6
represented 17% of total net license fees in 2003 and reached
34% of total net license fees in the fourth quarter of 2003.

In August 2002, we acquired our data integration
product family through the purchase of Acta. Data integration
products added $14.0 million in net license fees in 2003, and
$3.9 million in 2002 during the four months following the
acquisition.

In recent years, we have developed a suite of
analytic applications products that have accounted for
$25.7 million, $20.9 million and $8.0 million in
net license fees in 2003, 2002 and 2001, respectively.

Impact of Foreign Currency Exchange Rate
Fluctuations on Results of Operations

The translated U.S. dollar value of our revenues
and expenses are impacted by changes in foreign currency
exchange rates because we conduct a significant portion of our
business in currencies other than the U.S. dollar, the currency
in which we report our financial statements. Historically, we
have generated a significant portion of our revenues and
incurred a significant portion of our expenses in euros, British
pounds sterling and Japanese yen. In the future, we will incur a
significant portion of our expenses in Canadian dollars because
of the Crystal Decisions Acquisition.

The impact of fluctuations in foreign currency
exchange rates on our net operating income has been mitigated by
the fact that the level of our foreign denominated expenses have
tended to be largely offset by the level of our foreign
denominated revenues.

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The following table summarizes the impact of
fluctuations in foreign currency exchange rates, assuming for
2003 results that foreign exchange rates in 2003 had remained
constant with 2002 rates, for 2002 results that foreign exchange
rates in 2002 had remained constant with 2001 rates and for 2001
rates that foreign exchange rates in 2001 had remained constant
with 2000 rates.

|                         |  |                          |      |      |  |      |      |   |  |   |       |  
|------------------------ |  | ------------------------ | ---- | ---- |  | ---- | ---- | - |  | - | ----- | -
|                         |  | 2003                     |      | 2002 |  | 2001
|                         |  |                          |      |      |  |     
|                         |  |                         
|                         |  | (In millions of dollars)
|Total revenues           |  | $                        | 43.3 |      |  | $    | 8.6  |   |  | $ | (10.8 | )
|Cost of revenues         |  |                          | 6.6  |      |  |      | 1.4  |   |  |   | (1.6  | )
|Total operating expenses |  |                          | 34.1 |      |  |      | 8.2  |   |  |   | (6.5  | )
|                         |  |                          |      |      |  |      |      |   |  |   |       |  
|Income from operations   |  | $                        | 2.6  |      |  | $    | (1.0 | ) |  | $ | (2.7  | )
|                         |  |                          |      |      |  |      |      |   |  |   |       |  

Our operating results may be adversely impacted
by foreign currency exchange rate fluctuations in the future. As
of December 31, 2003, we held forward exchange contracts to
mitigate some of our exposure to the risk of changes in foreign
currency exchange rates. We cannot predict the effect of
exchange rate fluctuations upon our future results. Although we
may hedge our foreign exchange risk in the future, we cannot be
sure that any hedging techniques we may implement will be
successful or that our business, results of operations,
financial condition or cash flows will not be adversely affected
by exchange rate fluctuations.

RESULTS OF OPERATIONS

Revenues

The following table shows the change in revenues
(in millions of dollars, except percent changes):

|                  |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |       | 
|----------------- | ------------------------------------ | ---- | ----- | -------- |  | ---- | -- | -------- |  | ---- | ----- | ----- |  |  | - | --- | - | - | ----- | ----- | 
|                  |                                      | 2003 |       | % Change |  | 2002 |    | % Change |  | 2001
|                  |                                      |      |       |          |  |      |    |          |  |     
|Net license fees: |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |      
|                  | Business intelligence platform       |      | $     | 235.5    |  |      |    | 7        |  |      | $     | 219.2 |  |  |   | (9  | ) |   | $     | 241.6 | 
|                  | Enterprise analytic applications     |      |       | 25.7     |  |      |    | 23       |  |      |       | 20.9  |  |  |   | 160 |   |   |       | 8.0   | 
|                  | Data integration                     |      |       | 14.0     |  |      |    | 262      |  |      |       | 3.9   |  |  |   | n/a |   |   |       |      | 
|                  |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |      
|                  | Total net license fees               |      |       | 275.2    |  |      |    | 13       |  |      |       | 244.0 |  |  |   | (2  | ) |   |       | 249.6 | 
|Service revenues: |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |      
|                  | Software license updates and support |      |       | 210.8    |  |      |    | 40       |  |      |       | 150.4 |  |  |   | 44  |   |   |       | 104.8 | 
|                  | Professional services and other      |      |       | 74.8     |  |      |    | 24       |  |      |       | 60.4  |  |  |   | (2  | ) |   |       | 61.4  | 
|                  |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |      
|                  | Total service revenues               |      |       | 285.6    |  |      |    | 35       |  |      |       | 210.8 |  |  |   | 27  |   |   |       | 166.2 | 
|                  |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |      
|Total revenues    |                                      | $    | 560.8 |          |  |      | 23 |          |  | $    | 454.8 |       |  |  | 9 |     |   | $ | 415.8 |      
|                  |                                      |      |       |          |  |      |    |          |  |      |       |       |  |  |   |     |   |   |       |      

Net License
Fees

Net license fees grew 13% in 2003 compared to
2002 primarily due to 20 days of revenues from Crystal
Decisions (included in the Business Intelligence Platform
product family), which was acquired on December 11, 2003,
our first full year of data integration sales compared to only
four months of sales in 2002 and favorable fluctuations in
foreign exchange rates.

The 2% decrease in net license fees in 2002
compared to 2001 was primarily attributable to the weak
information technology spending environment in 2002 offset
partially by net license fees from our newer product families,
Enterprise Analytic Applications and Data Integration.

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Service
Revenues

Revenues from services increased as a percentage
of total revenues during both 2003 and 2002 to 51% and 46%,
respectively, from 40% in 2001, primarily due to growth in
software license updates and support (maintenance) revenues
resulting from the continued expansion of our installed customer
base and a greater percentage of customers renewing maintenance
contracts. Maintenance revenues also increased in 2003 and 2002
due to favorable fluctuations in foreign exchange rates.

Professional services and other revenues grew 24%
in 2003 compared to 2002 primarily due to a $14.8 million
increase in consulting revenues as a result of our increased
focus on our consulting business by expanding the breadth and
depth of solutions we offer our clients. The decline in
professional services and other revenues in 2002 compared to
2001 was primarily due to a decrease in training revenues
attributable to reduced customer spending and travel in response
to the general economic slowdown in 2002.

Geographic Revenues
Mix

The following shows the geographic mix of total
revenues.

|              |                |                    |    |      |   |      |    |     |   |  |    |     |  
|------------- | -------------- | ------------------ | -- | ---- | - | ---- | -- | --- | - |  | -- | --- | -
|              |                |                   
|              |                | For the Year Ended
|              |                | December 31,      
|              |                |                   
|              |                | 2003               |    | 2002 |   | 2001
|              |                |                    |    |      |   |     
|Europe        |                |                    | 49 | %    |   |      | 47 | %   |   |  | 53 | %  
|Americas      |                |                    | 43 | %    |   |      | 47 | %   |   |  | 40 | %  
|Rest of world |                |                    | 8  | %    |   |      | 6  | %   |   |  | 7  | %  
|              |                |                    |    |      |   |      |    |     |   |  |    |    
|              | Total revenues |                    |    | 100  | % |      |    | 100 | % |  |    | 100 | %
|              |                |                    |    |      |   |      |    |     |   |  |    |    

European revenues increased as a percentage of
total revenues in 2003 compared to 2002 primarily due to
favorable fluctuations in the euro and the British pound and a
rebound in the European economy. European revenues decreased as
a percentage of total revenues in 2002 compared to 2001
primarily due to an economic downturn in Europe during 2002.

Revenues from the Americas decreased as a
percentage of total revenues in 2003 compared to 2002 primarily
because of the growth in European revenues in U.S. dollars.
Revenues from the Americas increased as a percentage of total
revenues in 2002 compared to 2001 primarily because the
information technology spending environment was worse in Europe
in 2002 than in the United States. Our geographic revenues mix
is further described in Note 12 to our consolidated financial
statements.

Operating Income Margin

Summary

Our operating margin decreased by 4% of total
revenues in 2003 compared to 2002 primarily due to a one-time,
non-cash $28.0 million expense of in-process technology
resulting from the Crystal Decisions Acquisition, which
represented 5% of total revenues for 2003. In addition, sales
and marketing expenses decreased by 4% of total revenues in 2003
compared to 2002, offset by a 2% of total revenues increase of
general and administrative expenses and a 1% of total revenues
increase in cost of service revenues.

Operating margin decreased by 4% in 2002 compared
to 2001 primarily due to increased research and development
expenses related to the acquisition and integration of Acta as
we added Actas data integration product family to our
suite of Business Intelligence products.

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The following table shows gross margin and
operating expenses as a percentage of total revenues.

|                       |                                              |                          |     |      |    |      |     |    |    |  |     |    |    | 
|---------------------- | -------------------------------------------- | ------------------------ | --- | ---- | -- | ---- | --- | -- | -- |  | --- | -- | -- | 
|                       |                                              |                         
|                       |                                              | For the Year Ended,     
|                       |                                              | December 31,            
|                       |                                              |                         
|                       |                                              | 2003                     |     | 2002 |    | 2001
|                       |                                              |                          |     |      |    |     
|Total revenues         |                                              |                          | 100 | %    |    |      | 100 | %  |    |  | 100 | % 
|                       |                                              |                          |     |      |    |      |     |    |    |  |     |   
|Gross margin           |                                              |                          | 83  |      |    |      | 84  |    |    |  | 84  |   
|Operating expenses:    |                                              |                          |     |      |    |      |     |    |    |  |     |   
|                       | Sales and marketing                          |                          |     | 45   |    |      |     | 49 |    |  |     | 49 |   
|                       | Research and development                     |                          |     | 17   |    |      |     | 17 |    |  |     | 13 |   
|                       | General and administrative                   |                          |     | 8    |    |      |     | 6  |    |  |     | 6  |   
|                       | Acquired in-process research and development |                          |     | 5    |    |      |     |   |    |  |     |   |   
|                       | Restructuring                                |                          |     | 1    |    |      |     | 1  |    |  |     |   |   
|                       | Goodwill amortization                        |                          |     |     |    |      |     |   |    |  |     | 1  |   
|                       |                                              |                          |     |      |    |      |     |    |    |  |     |   
|                       |                                              | Total operating expenses |     |      | 76 |      |     |    | 73 |  |     |    | 69 | 
|                       |                                              |                          |     |      |    |      |     |    |    |  |     |   
|Income from operations |                                              |                          | 7   | %    |    |      | 11  | %  |    |  | 15  | % 
|                       |                                              |                          |     |      |    |      |     |    |    |  |     |   

Cost of
Revenues

Cost of revenues remained relatively constant as
a percentage of total revenues for 2003, 2002 and 2001.

Cost of net license fees increased to 2% of net
license fees in 2003 compared to 1% of net license fees in 2002
and 2001 primarily due to the amortization of developed
technology acquired through the acquisitions of Crystal
Decisions and Acta in 2003 and 2002, respectively.

Cost of service revenues decreased to 31% of
service revenues in 2003 compared with 34% in 2002 and 38% in
2001 primarily because we better utilized our existing capacity
as service revenues increased and higher margin maintenance
revenues represented a larger percentage of total service
revenues.

As a result of the application of the purchase
method of accounting, we were unable to recognize a portion of
the deferred revenues recorded on Crystal Decisions
consolidated balance sheet on the date of acquisition. As we
will perform the services corresponding to the deferred revenues
that we were unable to recognize, we expect cost of service
revenues may increase as a percentage of service revenues in
2004.

We expect that the cost of net license fees and
the cost of service revenues will increase in the future due to
the amortization of developed technology, and maintenance and
support contract intangible assets acquired in the Crystal
Decisions Acquisition.

Sales and Marketing
Expenses

Sales and marketing expenses decreased by 4% of
total revenues in 2003 compared to 2002 primarily because a
lower amount of sales and marketing expenses than revenues were
denominated in foreign currencies. Sales and marketing expenses
remained constant as a percentage of total revenues in 2002
compared to 2001.

Research and Development
Expenses

Research and development expenses remained
constant as a percentage of total revenues at 17% in 2003 and
2002. Research and development expenses increased by 4% of total
revenues in 2002 compared to 2001 primarily due to increased
expenses related to the acquisition and integration of Acta as
we added Actas data integration product family to our
suite of Business Intelligence products.

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General and
Administrative Expenses

General and administrative expenses increased as
a percentage of revenues in 2003 compared to 2002 primarily due
to increased employee related costs, integration expenses
related to our acquisition, and expenses related to the former
Crystal Decisions business during the 20 days that we
operated as a combined company in 2003. General and
administrative expenses remained relatively constant as a
percentage of revenues in 2002 compared to 2001. We incurred
higher legal expenses related to patent litigation and increased
salary expenses in 2002 compared with 2001, which were partially
offset by a $1.1 million reversal of bad debt expense in
2002 based on a review of outstanding invoices and the age of
receivables.

Acquired In-process
Research and Development

In-process research and development
(IPR&D) represents projects that had not reached
technological feasibility and had no future alternative uses at
the time of an acquisition. In the fourth quarter of 2003, at
the time of the Crystal Decisions Acquisition, we classified
certain Crystal Decisions products in development as IPR&D
in accordance with FIN No. 4, Applicability of FASB
Statement No. 2 to Business Combinations Accounted for by
the Purchase Method, (FIN 4).The
majority of value of IPR&D related to the development and
completion of versions 10 and 11 of Crystal Decisions
products. The nature of the efforts required to develop the
IPR&D into commercially viable products included the
completion of all planning, designing, prototyping, verification
and testing activities necessary to establish that the products
meet their design specifications, including functions, features
and technical performance requirements. At December 11,
2003, version 10 products were approximately 89% complete, with
estimated costs to complete of approximately $3.2 million.
At the time of the Crystal Decisions Acquisition, management
expected version 10 products to be completed by
June 30, 2004. At December 11, 2003, version
11 products were approximately 8% complete, with estimated
costs to complete of approximately $25.8 million.
Management expects version 11 products to be completed by the
end of 2004. We cannot be sure that we will complete version 10
and version 11 products when anticipated. There was no
significant change to the above information from
December 11, 2003 to December 31, 2003. In 2002, we
expensed $2.0 million of IPR&D in connection with our
acquisition of Acta. IPR&D expense is only expected to be
incurred in periods in which acquisitions occur.

Restructuring
Costs

Crystal Decisions Acquisition
Restructuring.In December 2003, we
approved and committed Business Objects to a restructuring plan
to eliminate duplicative activities, focus on strategic products
and reduce the companys cost structure as a result of the
Crystal Decisions Acquisition. This resulted in an expense of
$7.8 million related to pre-acquisition Business Objects.
Restructuring costs related to Crystal Decisions did not affect
results of operations as they were included as a cost of the
acquisition.

We plan to pay the $7.8 million in severance
and other associated benefits related to pre-acquisition
Business Objects during 2004. In addition, we expect estimated
additional charges of approximately $5.5 million in 2004
related to the exit of duplicative facilities related to
pre-acquisition Business Objects. Of this amount,
$3.3 million were considered to be restructuring charges
under the definition of FAS 146, Cost Associated
with Exit or Disposal Activities(FAS 146) and will be charged to
restructuring costs within operating expenses on the statement
of income. The remaining estimated $2.2 million will be
charged to regular operating expenses.

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The balance of the accrued restructuring charges
related to employee severance for the pre-acquisition Business
Objects organization were as follows at December 31, 2003
(in millions):

|                                                                        |  |   |      |  
|----------------------------------------------------------------------- |  | - | ---- | -
|Restructuring costs                                                     |  | $ | 7.8  |  
|Less non cash stock based compensation                                  |  |   | (0.3 | )
|Impact of foreign currency exchange rates on
    translation of accrual |  |   | 0.3  |  
|                                                                        |  |   |      |  
|Balance at December 31, 2003                                            |  | $ | 7.8  |  
|                                                                        |  |   |      |  

We estimate cost savings of approximately
$20.0 million related to terminated employees and abandoned
facilities in the full year following completion of the
restructuring plan.

Other
Restructurings.In 2002 we implemented
a restructuring plan to eliminate approximately
50 positions in our European field operations to better
align the revenues and cost structure in Europe in response to
the regions overall weak information technology spending
environment. In addition, we eliminated excess office space in
France, Italy, Spain and Switzerland. The total expense related
to the involuntary termination of employees and the exit of
facilities was $3.9 million. The remaining
$0.5 million accrual as of December 31, 2003
represented estimated remaining legal costs or payments to
terminated employees who have initiated legal action against us.

The following table summarizes the accrued
restructuring costs related to the 2002 restructuring plan at
December 31, 2003 (in millions of dollars):

|                                                                        |  |             |      |              |  |       |      |   |  |   |      |  
|----------------------------------------------------------------------- |  | ----------- | ---- | ------------ |  | ----- | ---- | - |  | - | ---- | -
|                                                                        |  | Severance   |      |              |  |      
|                                                                        |  | and Other   |      | Estimated    |  |      
|                                                                        |  | Employee    |      | Cost of      |  |      
|                                                                        |  | Termination |      | Excess       |  |      
|                                                                        |  | Benefits    |      | Office Space |  | Total
|                                                                        |  |             |      |              |  |      
|Restructuring charge                                                    |  | $           | 3.1  |              |  | $     | 0.8  |   |  | $ | 3.9  |  
|Adjustments to original plan                                            |  |             | (0.5 | )            |  |       | (0.1 | ) |  |   | (0.6 | )
|Additional restructuring charges                                        |  |             | 0.7  |              |  |       |     |   |  |   | 0.7  |  
|Cash payments                                                           |  |             | (2.3 | )            |  |       | (0.5 | ) |  |   | (2.8 | )
|Impact of foreign currency exchange rates on
    translation of accrual |  |             | 0.2  |              |  |       |     |   |  |   | 0.2  |  
|                                                                        |  |             |      |              |  |       |      |   |  |   |      |  
|Balance at December 31, 2002                                            |  | $           | 1.2  |              |  | $     | 0.2  |   |  | $ | 1.4  |  
|Adjustments to the original plan                                        |  |             | (0.1 | )            |  |       |     |   |  |   | (0.1 | )
|Cash payments during the first quarter of 2003                          |  |             | (0.8 | )            |  |       | (0.2 | ) |  |   | (1.0 | )
|Impact of foreign currency exchange rates on
    translation of accrual |  |             | 0.2  |              |  |       |     |   |  |   | 0.2  |  
|                                                                        |  |             |      |              |  |       |      |   |  |   |      |  
|Balance at December 31, 2003                                            |  | $           | 0.5  |              |  | $     |     |   |  | $ | 0.5  |  
|                                                                        |  |             |      |              |  |       |      |   |  |   |      |  

Interest and Other Income, Net

Interest and other income, net was composed of
the following (in millions of dollars):

|                                                                       |                                                        |                    |      |      |  |      |      |      |  |   |      |     | 
|---------------------------------------------------------------------- | ------------------------------------------------------ | ------------------ | ---- | ---- |  | ---- | ---- | ---- |  | - | ---- | --- | 
|                                                                       |                                                        |                   
|                                                                       |                                                        | For the Year Ended
|                                                                       |                                                        | December 31,      
|                                                                       |                                                        |                   
|                                                                       |                                                        | 2003               |      | 2002 |  | 2001
|                                                                       |                                                        |                    |      |      |  |     
|Net interest income                                                    |                                                        | $                  | 7.1  |      |  | $    | 7.7  |      |  | $ | 8.4  |    
|Patent infringement settlement income, net of
    litigation expenses: |                                                        |                    |      |      |  |      |      |      |  |   |      |    
|                                                                       | Cognos (net of $3.1 million in legal fees in
    2002) |                    |      | 7.0  |  |      |      | 10.4 |  |   |      |    | 
|                                                                       | Brio                                                   |                    |      |     |  |      |      | 1.5  |  |   |      | 2.5 | 
|Net foreign exchange losses                                            |                                                        |                    | (0.4 | )    |  |      | (0.7 | )    |  |   |     |    
|Other income (expense), net                                            |                                                        |                    | 0.6  |      |  |      | 0.1  |      |  |   | (0.4 | )  
|                                                                       |                                                        |                    |      |      |  |      |      |      |  |   |      |    
|Interest and other income, net                                         |                                                        | $                  | 14.3 |      |  | $    | 19.0 |      |  | $ | 10.5 |    
|                                                                       |                                                        |                    |      |      |  |      |      |      |  |   |      |    

Under the terms of the agreement to settle our
patent infringement lawsuit against Cognos, Cognos licensed the
rights to our technology under U.S. Patent No. 5,555,403 in
exchange for payments totaling $24.0 million. The license
covers both past and future use of our technology.

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We received a $10.0 million first
installment representing past use during June 2002 and
classified this payment as interest income and other, net in our
2002 consolidated statement of income, net of $3.1 million
of related legal expenses. The remaining balance represented
Cognos future use of our patented technology and is due in
eight quarterly installments of $1.75 million, which commenced
in the quarter ended September 30, 2002. Due to inherent
uncertainties regarding performance on the part of Cognos in
making the future payments over the next two years, consistent
with the cost recovery method and with other literature on
extended payment terms including SOP 97-2, we will
recognize the remaining settlement as net other income once the
amounts become due. In 2003, we recognized $7.0 million in
net other income related to the Cognos settlement. For 2002, we
recognized net other income of $10.4 million related to the
Cognos settlement, comprised of the $6.9 million June 2002
net payment plus two quarterly installments of
$1.75 million each received in July and October 2002.


We settled our patent infringement lawsuit
against Brio in September 1999. As part of the settlement, we
dismissed our pending lawsuit against Brio involving our
U.S. Patent No. 5,555,403 and Brio dismissed its
pending lawsuit against us involving U.S. Patent
No. 5,915,257 and agreed to pay us $10.0 million
payable quarterly in $1.0 million payments beginning
September 30, 1999. We received and recognized
$1.5 million during 2002, as compared to $2.5 million
in 2001 and $4.0 million in 2000. As of December 31,
2002, the settlement was paid in full.

Income Taxes

Our effective tax rate was 58% in 2003, 39% in
2002 and 38% in 2001. The increases in 2003 and 2002 were due to
the nondeductibility of IPR&D expense incurred as a result
of the Crystal Decisions Acquisition and the acquisition of Acta.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our principal source of liquidity is our
operating cash flow. The following shows our cash flow and
changes in cash, cash equivalents and short-term investments (in
millions of dollars).

|                                                                                 |  |                     |        |      |  |      |        |   |  |   |       |  
|-------------------------------------------------------------------------------- |  | ------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                                                                 |  |                    
|                                                                                 |  | For the Years Ended
|                                                                                 |  | December 31,       
|                                                                                 |  |                    
|                                                                                 |  | 2003                |        | 2002 |  | 2001
|                                                                                 |  |                     |        |      |  |     
|Cash flow provided by operations                                                 |  | $                   | 98.5   |      |  | $    | 67.2   |   |  | $ | 80.9  |  
|Cash flow used by investing activities                                           |  |                     | (134.4 | )    |  |      | (118.1 | ) |  |   | (34.4 | )
|Cash flow provided by financing activities                                       |  |                     | 29.1   |      |  |      | 9.5    |   |  |   | 5.0   |  
|Effects of changes in currency exchange rates on
    cash and cash equivalents   |  |                     | 8.2    |      |  |      | 35.0   |   |  |   | (10.6 | )
|Change in short-term investments                                                 |  |                     | (46.6  | )    |  |      | 46.7   |   |  |   |      |  
|                                                                                 |  |                     |        |      |  |      |        |   |  |   |       |  
|Net increase (decrease) in cash, cash
    equivalents and short-term investments |  | $                   | (45.2  | )    |  | $    | 40.3   |   |  | $ | 40.9  |  
|                                                                                 |  |                     |        |      |  |      |        |   |  |   |       |  

For all periods presented our operations have
funded themselves. The increase in net cash provided by
operating activities from 2002 to 2003 was primarily due to
increases in revenues, especially in services where our
installed customer base continued to expand and more customers
chose to renew their support contracts, and from cash received
as deferred maintenance revenues. The decrease in net cash
provided by operating activities from 2001 to 2002 was primarily
due to the increases in our costs of sales for services and our
operating expenses, particularly our research and development
expenses which grew from 13% of revenues to 17% of revenues, and
to restructuring payments in 2002.

The increase in net cash used by investing
activities from 2002 to 2003 was primarily due to the Crystal
Decisions Acquisition, net of the acquired cash of
$178.3 million, partially offset by the sale of short-term
investments for $53.7 million. The increase in net cash
used by investing

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activities from 2001 to 2002 was primarily due to
the acquisition of Acta for $62.5 million net of acquired
cash and the purchase of short-term investments for
$45.2 million.


The increases in net cash provided by financing
activities were primarily due to the issuance of ordinary shares
for $29.7 million in 2003, $15.5 million in 2002 and
$10.1 million in 2001, respectively, which were offset by
treasury shares purchased for $4.1 million in 2002 and
$4.4 million in 2001.

The following table shows our cash ,cash
equivalents and short-term investment resources (in millions of
dollars):

|                                                  |  |                 |       |      |  |      |       |  |  |   |       | 
|------------------------------------------------- |  | --------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                                  |  |                
|                                                  |  | At December 31,
|                                                  |  |                
|                                                  |  | 2003            |       | 2002 |  | 2001
|                                                  |  |                 |       |      |  |     
|Cash, cash equivalents and short-term investments |  | $               | 235.4 |      |  | $    | 280.6 |  |  | $ | 240.4 | 

At December 31, 2003, $170.6 million of
our $235.4 million in cash and cash equivalents was
denominated in currencies other than the U.S. dollar. During
2003, our cash was positively impacted by changes in foreign
currency exchange rates. However, fluctuations in foreign
currency exchange rates could have a negative impact on our cash
balances in the future.

Future Liquidity Requirements

Changes in the demand for our products and
services could impact our operating cash flow. However, based on
our forecasts, we believe that our existing cash and cash
equivalents will be sufficient to meet our consolidated cash
requirements for the foreseeable future. Although we expect to
continue to generate cash from operations, we may seek
additional financing from debt or equity issuances which we
believe would be available on reasonable terms. In order to
provide flexibility to obtain cash availability on a short-term
basis, we obtained a
60.0 million
short-term line of credit in the fourth quarter of 2003 which
can be drawn in euros, U.S. dollars or Canadian dollars to
support our cash management practices. Drawings are limited to
advances in duration of 10 days to 12 months. The
agreement restricts certain of our activities including the
extension of a mortgage, lien, pledge, security interest or
other rights related to all or part of our existing or future
assets or revenues, as security for any existing or future debt
for money borrowed. At December 31, 2003, we had not used
this line of credit. In addition, we assumed an overdraft credit
facility from Crystal Decisions that provides up to Canadian
$2.0 million credit for certain overdrafts plus a foreign
exchange forward trading line supporting notional contracts
between Canadian $4.0 million and $6.0 million. This
overdraft credit facility is secured by a Canadian
$2.0 million deposit plus interest earned thereon which is
classified as current restricted cash.

Contractual Obligations

The following table summarizes our outstanding
contractual obligations as of December 31, 2003.

|                                   |  |                        |       |               |  |           |      |           |  |                   |      |  |  |   |      |  |  |   |      | 
|---------------------------------- |  | ---------------------- | ----- | ------------- |  | --------- | ---- | --------- |  | ----------------- | ---- |  |  | - | ---- |  |  | - | ---- | 
|                                   |  |                       
|                                   |  | Payments due by Period
|                                   |  |                       
|Contractual Obligations            |  | Total                  |       | Within 1 Year |  | 2-3 Years |      | 4-5 Years |  | More than 5 Years
|                                   |  |                        |       |               |  |           |      |           |  |                  
|                                   |  |                       
|                                   |  | (in millions)         
|Operating leases                   |  | $                      | 191.9 |               |  | $         | 33.4 |           |  | $                 | 56.8 |  |  | $ | 50.6 |  |  | $ | 51.1 | 
|French profit sharing plan         |  |                        | 5.8   |               |  |           | 5.8  |           |  |                   |     |  |  |   |     |  |  |   |     | 
|                                   |  |                        |       |               |  |           |      |           |  |                   |      |  |  |   |      |  |  |   |      | 
|Total contractual cash obligations |  | $                      | 197.7 |               |  | $         | 39.2 |           |  | $                 | 56.8 |  |  | $ | 50.6 |  |  | $ | 51.1 | 
|                                   |  |                        |       |               |  |           |      |           |  |                   |      |  |  |   |      |  |  |   |      | 

We expect to pay for our operating lease and
profit sharing commitments from our operating cash flow.

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Guarantees

From time to time, we enter into certain types of
contracts that require us to indemnify parties contingently
against third party claims. These contracts primarily relate to:
(i) certain real estate leases, under which we may be
required to indemnify property owners for environmental and
other liabilities, and other claims arising from our use of the
applicable premises; (ii) certain agreements with our
officers, directors and employees and third parties, under which
we may be required to indemnify such persons for liabilities
arising out of their duties to us and (iii) agreements
under which we indemnify customers and partners for claims
arising from intellectual property infringement.

The terms of such obligations vary. Generally, a
maximum obligation is not explicitly stated. Because the
obligated amounts of these types of agreements often are not
explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. Historically, we have not been
obligated to make significant payments for these obligations,
and no liabilities have been recorded for these obligations on
our balance sheets as of December 31, 2003 or 2002.

Additionally, we warrant that our software
products will operate substantially in conformity with product
documentation and that the physical media will be free from
defect. The specific terms and conditions of the warranties are
generally 30 days but may vary depending upon the country
in which the software is sold. We accrue for known warranty
issues if a loss is probable and can be reasonably estimated,
and accrue for estimated incurred but unidentified warranty
issues based on historical activity. To date we have had no
material warranty claims. Due to thorough product testing, the
short time between product shipments and the detection and
correction of product failures, no history of material warranty
claims, and the fact that no significant warranty issues have
been identified, we have not recorded a warranty accrual to date.

We have entered into certain real estate leases
that require us to indemnify property owners against certain
environmental and other liabilities and other claims.

Environmental
Liabilities.We only engage in the
development, marketing and distribution of software, and we have
never had any environment related claim. Therefore, the
likelihood of incurring a loss related to these environmental
indemnifications is remote and thus we are unable to reasonably
estimate the amount. Therefore, we have not recorded a related
liability in accordance with the recognition and measurement
provisions of FAS 143, Accounting for Asset
Retirement Obligations (FAS 143).

Other Liabilities and Other
Claims.We are responsible for certain
costs of restoring leased premises to their original condition,
and in accordance with the recognition and measurement
provisions of FAS 143, we measured the fair value of these
obligations and determined them to be immaterial.

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ACQUISITIONS

Crystal Decisions Acquisition



| |            
| | -----------
| | Transaction

The total purchase price of $1.229 billion
consisted of $307.6 million in cash, $768.6 million in
shares issued, $139.1 million in stock options assumed and
$13.9 million in direct transaction costs. The total
purchase price was allocated to the following fair values of
Crystal Decisions assets and liabilities at
December 11, 2003 (in millions of dollars):

|                                                |  |   |         | 
|----------------------------------------------- |  | - | ------- | 
|Net tangible assets acquired                    |  | $ | 60.8    | 
|Amortizable intangible assets acquired          |  |   | 142.7   | 
|Deferred compensation on unvested stock options |  |   | 19.8    | 
|In-process technology                           |  |   | 28.0    | 
|Goodwill                                        |  |   | 978.0   | 
|                                                |  |   |         | 
|Total purchase price                            |  | $ | 1,229.3 | 
|                                                |  |   |         | 



| |              
| | -------------
| | Restructuring

Prior to the Crystal Decisions Acquisition, we
began to assess and formulate a plan to restructure the combined
companys operations to eliminate duplicative activities,
focus on strategic products and reduce the companys cost
structure. Our board of directors approved and committed to the
plan shortly after the completion of the acquisition. The
restructuring charge is also discussed in detail in Note 13
to the Consolidated Financial Statements in Item 8 of this
Form 10-K.

In 2003, we accrued severance-related costs in
connection with the involuntary termination of employees and
other restructuring costs in connection with the abandonment of
facilities. Qualifying restructuring expenses related to Crystal
Decisions were accounted for in the purchase price allocation.
However, restructuring charges related to Business Objects were
expensed. We incurred $7.8 million in restructuring
expenses related to pre-acquisition Business Objects in 2003. In
addition, we expect to incur charges of approximately
$5.5 million in 2004 related to the exit of duplicative
facilities that were occupied by Business Objects prior to the
Crystal Decisions Acquisition. Of this amount, $3.3 million
are expected to be considered restructuring charges under the
definition of FAS 146 and charged to restructuring costs within
operating expenses on the statement of income. The remaining
estimated $2.2 million are expected to be charged to the
applicable operating expense category.

The restructuring accruals were based on our best
estimates. However, if actual amounts paid for the Crystal
Decisions restructuring activities differ from those we
estimated, the purchase price allocation may be adjusted in
future periods. If actual amounts paid for the restructuring
related to pre-acquisition Business Objects differ from those we
estimated, our liability would be adjusted as an increase or
decrease to expense in the period that we change the estimate.

As of December 31, 2003, we had paid
approximately $1.1 million related to the Crystal Decisions
restructuring. We expect to pay the remaining liability during
2004. The balance of the accrued restructuring charges related
to Crystal Decisions were as follows at December 31, 2003
(in millions of dollars):

|                             |  |             |      |            |  |       |     |  |  |   |      |  
|---------------------------- |  | ----------- | ---- | ---------- |  | ----- | --- |  |  | - | ---- | -
|                             |  | Employee    |      |            |  |      
|                             |  | Severance   |      | Costs to   |  |      
|                             |  | and Related |      | Abandon    |  |      
|                             |  | Benefits    |      | Facilities |  | Total
|                             |  |             |      |            |  |      
|Restructuring costs          |  | $           | 10.8 |            |  | $     | 2.7 |  |  | $ | 13.5 |  
|Cash payments                |  |             | (1.1 | )          |  |       |    |  |  |   | (1.1 | )
|                             |  |             |      |            |  |       |     |  |  |   |      |  
|Balance at December 31, 2003 |  | $           | 9.7  |            |  | $     | 2.7 |  |  | $ | 12.4 |  
|                             |  |             |      |            |  |       |     |  |  |   |      |  

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Acquisition of Acta



| |            
| | -----------
| | Transaction

On August 23, 2002, we acquired Acta, a
privately held data integration software vendor. The acquisition
provided us with a comprehensive enterprise analytic platform
for the delivery of custom-developed and pre-packaged analytic
applications. The acquisition and the accounting for the
transaction are also described in detail in Note 4 to the
Consolidated Financial Statements.

The purchase price of $65.5 million in cash
was allocated to the following fair values of Actas net
tangible and intangible assets as of the date of the acquisition:

|                             |  |                          |      |  
|---------------------------- |  | ------------------------ | ---- | -
|                             |  | (In millions of dollars)
|Net tangible assets acquired |  | $                        | (5.3 | )
|In-process technology        |  |                          | 2.0  |  
|Other intangible assets      |  |                          | 7.2  |  
|Goodwill                     |  |                          | 61.6 |  
|                             |  |                          |      |  
|Total purchase price         |  | $                        | 65.5 |  
|                             |  |                          |      |  



| |              
| | -------------
| | Restructuring

Immediately prior to our acquisition of Acta,
Actas management initiated and approved plans to
restructure Actas operations. The restructuring plan
reduced Actas cost structure and better aligned product
and operating expenses with existing general economic
conditions. Acta capitalized approximately $13.5 million of
restructuring costs which were recorded as liabilities as part
of the purchase price allocation. The restructuring liability
consisted primarily of severance, other employee benefits and
costs of vacating duplicate facilities.

During 2003 the lease for Actas Mountain
View, California facility was terminated through an action to
take the property by eminent domain by the Santa Clara Valley
Transportation Authority. Upon termination of the lease, the
remaining $2.7 million accrual related to this facility was
reversed as an adjustment to goodwill.

The balance of the accrued restructuring charges
was capitalized as a cost of the acquisition and was as follows
on December 31, 2003 (in millions of dollars):

|                             |  |                    |      |                        |  |       |      |   |  |   |      |  
|---------------------------- |  | ------------------ | ---- | ---------------------- |  | ----- | ---- | - |  | - | ---- | -
|                             |  | Employee Severance |      | Leasehold Abandonment  |  |      
|                             |  | and Other          |      | and Write-off of       |  |      
|                             |  | Related Benefits   |      | Property and Equipment |  | Total
|                             |  |                    |      |                        |  |      
|Restructuring costs          |  | $                  | 4.4  |                        |  | $     | 9.1  |   |  | $ | 13.5 |  
|Cash payments                |  |                    | (4.4 | )                      |  |       | (1.1 | ) |  |   | (5.5 | )
|Non-cash charges             |  |                    |     |                        |  |       | (1.2 | ) |  |   | (1.2 | )
|                             |  |                    |      |                        |  |       |      |   |  |   |      |  
|Balance at December 31, 2002 |  |                    |     |                        |  |       | 6.8  |   |  |   | 6.8  |  
|Cash payments during 2003    |  |                    |     |                        |  |       | (3.4 | ) |  |   | (3.4 | )
|Reversal of shutdown accrual |  |                    |     |                        |  |       | (2.7 | ) |  |   | (2.7 | )
|                             |  |                    |      |                        |  |       |      |   |  |   |      |  
|Balance at December 31, 2003 |  | $                  |     |                        |  | $     | 0.7  |   |  | $ | 0.7  |  
|                             |  |                    |      |                        |  |       |      |   |  |   |      |  

The remaining accrual of $0.7 million at
December 31, 2003 was for estimated future minimum lease
payments for Actas U.K. facility, which includes payments
until 2005.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have any off-balance sheet
arrangements at December 31, 2003.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1  Organization and
Summary of Significant Accounting Policies  to the
Consolidated Financial Statements in Item 8 of this
Form 10-K.

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CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes
included elsewhere in this Annual Report on Form 10-K are
prepared in accordance with U.S. GAAP. These accounting
principles require us to make certain estimates, judgments and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. These estimates, judgments
and assumptions are based upon information available to us at
the time that they are made. To the extent there are material
differences between these estimates, judgments or assumptions
and actual results, our financial statements will be affected.
We believe the following critical accounting policies reflect
our most significant estimates, judgments and assumptions used
in the preparation of our consolidated financial statements:



| |   |                                 
| | - | --------------------------------
| |  | Recognition of revenues         
|
| |  | Business combinations           
|
| |  | Restructuring accruals          
|
| |  | Impairment of long-lived assets 
|
| |  | Contingencies and litigation    
|
| |  | Allowances for doubtful accounts
|
| |  | Deferred Income tax assets      

We have reviewed these critical accounting
policies and related disclosures with our Audit Committee. See
the Notes to the Consolidated Financial Statements in
Item 8 of this Form 10-K, which contain additional
information regarding our accounting policies and estimates.



| |                        
| | -----------------------
| | Recognition of Revenues

Our revenue recognition policy is significant
because revenues are a key component of our results from
operations. We follow very specific and detailed guidelines in
measuring revenues; however, certain judgments and estimates
affect the application of the revenue policy.

We enter into arrangements for the sale of
1) licenses of software products and related maintenance
contracts; 2) bundled license, maintenance and services and
3) services on a time and material basis. In instances
where maintenance is bundled with a license of software
products, such maintenance terms are typically one year.

For each arrangement, we determine whether
evidence of an arrangement exists, delivery has occurred, the
fee is fixed or determinable and collection is probable. If any
of these criteria are not met, we defer recognition of revenues
until such time as all of the criteria are met. In software
arrangements that include rights to multiple software products
and/or services, we use the residual method, under which
revenues are allocated to the undelivered elements based on
vendor specific objective evidence of fair value of such
undelivered elements and we allocate the residual amount of
revenues to the delivered elements.

For those contracts that consist solely of
license and maintenance we recognize net license fees based upon
the residual method after all licensed software product has been
delivered as prescribed by Statement of Position 98-9
Modification of SOP No. 97-2 with Respect to
Certain Transactions.We recognize maintenance
revenues over the term of the maintenance contract. The
maintenance rates for both license agreements with and without
stated renewal rates are based upon our price list. Vendor
specific objective evidence of the fair value of maintenance for
license agreements that do not include stated renewal rates is
determined by reference to the price paid by our customers when
maintenance is sold separately (that is, the renewal rate). Past
history has shown that the rate we charge for maintenance on
license agreements with a stated renewal rate is similar to the
rate we charge for maintenance on license agreements without a
stated renewal rate.

Services can consist of maintenance, training
and/or consulting services. In all cases, we assess whether the
service element of the arrangement is essential to the
functionality of the

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other elements of the arrangement. When software
services are considered essential or the arrangement involves
customization or modification of the software, we recognize both
the net license fees and service revenues under the arrangement
under the percentage of completion method of contract
accounting, based on input measures of hours. For those
arrangements for which we have concluded that the service
element is not essential to the other elements of the
arrangement we determine whether the services are available from
other vendors, do not involve a significant degree of risk or
unique acceptance criteria and whether we have sufficient
experience in providing the service to be able to separately
account for the service. When the service qualifies for separate
accounting, we use vendor specific objective evidence of fair
value for the services and the maintenance to account for the
arrangement using the residual method, regardless of any
separate prices stated within the contract for each element.
Revenues allocable to services are recognized as the services
are performed. Vendor-specific objective evidence of fair value
of consulting services is based upon average daily rates. As
previously noted, we enter into contracts for services alone and
such contracts are on a time and material basis.


For sales to resellers, value added resellers and
strategic system integrators, we provide no right of return or
price protection. We do not accept orders from these partners
when we are aware that the partner does not have a purchase
order from an end-user. For sales to distributors that have a
right of return, we recognize revenues as the products are sold
to the distributor and we reserve an amount equal to our
estimate of all products subject to rights of return. Some of
the factors that we consider in determining this estimate
include historical experience of returns received and level of
inventory in the distribution channels. The reserve reduces the
revenues and the related receivables. For sales to original
equipment manufacturers, we recognize revenues when the original
equipment manufacturer reports sales that have occurred to an
end user customer, provided that collection is probable. Some
original equipment manufacturer arrangements include the payment
of an upfront arrangement fee which is deferred and recognized
either ratably over the contractual period or when the original
equipment manufacturer reports sales that have occurred to an
end user customer, in accordance with the contractual terms.

Deferred revenues represent amounts under license
and service arrangements for which the earnings process has not
been completed. These amounts relate primarily to provision of
maintenance and technical support services with future
deliverables and arrangements where specified customer
acceptance has not yet occurred.



| |                      
| | ---------------------
| | Business Combinations

We are required to allocate the purchase price of
acquired companies to the tangible and intangible assets
acquired and liabilities assumed, including IPR&D, based on
their estimated fair values. Such a valuation requires
management to make significant estimates and assumptions,
especially with respect to intangible assets. Critical estimates
in valuing certain intangible assets include but are not limited
to future expected cash flows from customer contracts, customer
lists, distribution agreements and acquired developed
technologies; expected costs to develop IPR&D into
commercially viable products and estimating cash flows from
projects when completed and discount rates. Our estimates of
fair value are based upon assumptions believed to be reasonable,
but which are inherently uncertain and unpredictable and, as a
result, actual results may differ from estimates. Other
estimates, such as restructuring accruals associated with the
accounting for acquisitions, may change as additional
information becomes available regarding the assets acquired and
liabilities assumed.



| |                       
| | ----------------------
| | Restructuring Accruals

In 2003 and 2002 we recorded charges to
restructure our business. These charges included estimated
expenses for employee severance and outplacement costs, lease
cancellations, and other restructuring costs. The process to
estimate these costs is complex and involves periodic
reassessments of estimates made at the time the original
decisions were made. We continually

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evaluate the adequacy of the remaining
liabilities under our restructuring initiatives. Although we
believe that these estimates accurately reflect the costs of our
restructuring plans, actual results may differ, thereby
requiring us to record additional provisions or reverse a
portion of provisions already recorded.




| |                                                                          
| | -------------------------------------------------------------------------
| | Impairment of Goodwill, Intangible Assets
    and Other Long-Lived Assets

We evaluate our identifiable goodwill, intangible
assets and other long-lived assets for impairment on an annual
basis and whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable based
on expected undiscounted cash flows attributable to that asset.
Future impairment evaluations could result in impairment
charges, which would result in an expense in the period of
impairment and a reduction in the carrying value of these assets.



| |                             
| | ----------------------------
| | Contingencies and Litigation

We evaluate contingent liabilities including
threatened or pending litigation in accordance with FAS
No. 5, Accounting for Contingencies. If
the potential loss from any claim or legal proceeding is
considered probable and the amount can be estimated, we accrue a
liability for the estimated loss. Because of uncertainties
related to these matters, accruals are based on the best
information available at the time. As additional information
becomes available, we reassess the potential liability related
to our pending claims and litigation and may revise our
estimates. Such revisions in the estimates could have a material
impact on our results of operations and financial position. See
Note 6 of the Notes to the Consolidated Financial
Statements in Item 8 of this Form 10-K for a
description of our material legal proceedings.



| |                                     
| | ------------------------------------
| | Allowances for Doubtful
    Accounts

We make judgments regarding our ability to
collect outstanding receivables and provide allowances for the
portion of receivables when collection becomes doubtful.
Provisions are made based upon a specific review of all
significant outstanding invoices. For those invoices not
specifically reviewed, provisions are provided at differing
rates, based upon the age of the receivable. In determining
these percentages, we analyze our historical collection
experience and current economic trends. If the historical data
we use to calculate the allowance for doubtful accounts does not
reflect the future ability to collect outstanding receivables,
additional provisions for doubtful accounts may be needed and
our future results of operations could be materially affected.



| |                           
| | --------------------------
| | Deferred Income Tax Assets

We record a valuation allowance to reduce our
deferred tax assets to the amount of future tax benefit that is
more likely than not to be realized. We have considered future
taxable income and prudent and feasible tax planning strategies
in determining the need for a valuation allowance. A full
valuation allowance against net deferred tax assets in the
United States is maintained because of no history of taxable
income, largely because of tax deductions attributable to
employee stock option exercises. In the event that we determine
that we would not be able to realize all or part of our net
deferred tax assets, an adjustment to the deferred tax assets
would be charged to earnings in the period such determination is
made. Likewise, if we later determine that it is more likely
than not that the net deferred tax assets would be realized,
then the previously provided valuation allowance would be
reversed. Our current valuation allowance relates to benefits
from the exercise of employee stock options and deferred tax
assets of acquired companies. If these tax benefits are
realized, the valuation allowance reduction would result in an
increase to additional paid in capital or a decrease to
goodwill, respectively.

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Factors Affecting Future Operating
Results



| |                                                       
| | ------------------------------------------------------
| | Risks Related to the Crystal Decisions
    Acquisition

We may not realize the benefits that we
anticipate from the Crystal Decisions Acquisition within the
time periods that we expect, or at all, because of integration
and other challenges.

On December 11, 2003, we acquired Crystal
Decisions for total consideration of $307.6 million in cash
and approximately 23.3 million of our ADSs. If we fail to
successfully integrate Crystal Decisions into our operations or
fail to realize any of the anticipated benefits of the
acquisition, our business and results of operations could be
severely harmed. Realizing the benefits of the acquisition will
depend in part on the integration of our operations, people and
technology. This integration effort is a complex, time-consuming
and expensive process that, without proper planning and
implementation, could significantly disrupt our business. We may
be unable to integrate the two companies successfully in a
timely manner, if at all.

Combining our product offerings is a complex and
lengthy process involving a number of intermediate steps in
which we will seek to achieve increasing degrees of integration
of our products. We have informed our customers of our expected
timing for various key milestones in our product integration
efforts. Technical or other challenges in integrating our
products could delay or prevent the successful integration of
our products or cause us to incur unanticipated costs. If we
fail to achieve one or more of these milestones as planned, our
ability to market our products and our revenues and operating
results could be seriously harmed.

To market our products effectively, we will need
to train sales and marketing employees who have historically
marketed either Business Objects or Crystal Decisions products
and services to market our combined product and service
offerings. While we are devoting significant efforts to training
our employees to market our combined products, we cannot be sure
that these efforts will be successful. If we do not successfully
integrate and train our sales and marketing force, our ability
to market our products and services and our revenues could
suffer.

The challenges involved in this integration
effort also include the following:



| |   |                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | demonstrating to our customers that the
    acquisition will not result in adverse changes in our client
    service standards or business focus;                                                                                                                                   
|
| |  | preserving distribution, marketing or other
    important relationships of both companies and resolving
    potential conflicts that may arise;                                                                                                                                     
|
| |  | coordinating and rationalizing research and
    development efforts to integrate our overlapping products and
    technologies successfully;                                                                                                                                        
|
| |  | integrating the research and development teams,
    which is made more difficult because they are located in
    disparate geographies;                                                                                                                                             
|
| |  | aligning the business cultures of the two
    companies while maintaining employee morale and retaining key
    employees;                                                                                                                                                          
|
| |  | dedicating the significant management attention
    and financial resources needed to integrate the two companies
    without harming existing businesses;                                                                                                                          
|
| |  | consolidating and rationalizing information
    technology, enterprise resource planning and administrative
    infrastructures while avoiding significant errors, delays or
    other break- downs in our business processes such as order
    processing or technical support; and
|
| |  | managing a more complex corporate structure which
    requires additional resources for such responsibilities as tax
    planning, foreign currency management, financial reporting and
    risk management.                                                                        

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The market price of our shares may decline as
a result of the Crystal Decisions Acquisition.

A number of factors could cause the market price
of our shares to decline as a result of the Crystal Decisions
Acquisition, including if:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our integration effort is not completed in a
    timely and efficient manner;                                                                                                                                      
|
| |  | our assumptions about the business model and
    operations of Crystal Decisions were incorrect, or its role in
    our business does not develop as we planned;                                                   
|
| |  | the effect of the Crystal Decisions Acquisition
    on our financial results is not consistent with the expectations
    of financial or industry analysts; or                                                     
|
| |  | shareholders that hold relatively large interests
    in our company decide to dispose of their shares because the
    results of the Crystal Decisions Acquisition are not consistent
    with their expectations.

Charges to earnings resulting from the Crystal
Decisions Acquisition may adversely affect the market value of
our shares.

In accordance with U.S. GAAP, we have
accounted for the Crystal Decisions Acquisition using the
purchase method of accounting. The impact of one-time and future
charges associated with this acquisition, including any charges
for impairment of goodwill, could have a material adverse effect
on the market value of our shares. Under purchase accounting, we
recorded as the cost of the transaction the market value of the
acquisition consideration and the amount of direct transaction
costs. We have allocated the cost of the transaction to our net
tangible assets, amortizable intangible assets, intangible
assets with indefinite lives and in-process research and
development, based on their fair values as of the date of
completion of the transaction, and recorded the excess of the
purchase price over those fair values as goodwill. The portion
of the estimated purchase price allocated to in-process research
and development was expensed in the three months ended
December 31, 2003. We expect to incur additional
depreciation and amortization expense over the useful lives of
certain of the net tangible and intangible assets acquired in
connection with the acquisition, which will reduce our operating
results through 2008. In addition, we recorded goodwill of
$978 million in connection with the Crystal Decisions
Acquisition. If this goodwill, other intangible assets with
indefinite lives or other assets acquired in the Crystal
Decisions Acquisition become impaired, we may be required to
incur material charges relating to the impairment of those
assets. Any significant impairment charges will have a negative
effect on our operating results and could reduce the market
price of our shares.

In addition, we expect to incur restructuring
expenses and other charges to exit duplicative facilities during
2004, which we currently estimate to be approximately
$5.5 million. We cannot be sure that these expenses and
charges will not be higher than we currently anticipate. Our
results of operations could be adversely affected by these and
any additional restructuring expenses and charges.

The Crystal Decisions Acquisition could have
an adverse effect on our revenues and profitability in the near
term if customers delay, defer or cancel purchases as a result
of the transaction.

In response to the Crystal Decisions Acquisition
and our product transition announcements, customers may seek to
cancel existing purchases or delay or defer purchasing decisions
which could have an adverse effect on our business. Prospective
customers could determine not to purchase our products or
services until we have demonstrated our ability to integrate our
products with Crystal Decisions or until we release one or
more future products that integrate capabilities and features of
both Business Objects and Crystal Decisions
products. In addition, prospective customers could be reluctant
to purchase licenses for our products or services if the
customers are uncertain about our strategic direction, the
continuation of specific product offerings or our willingness to
support and maintain existing products. These factors could cause

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a significant customer or a significant number of
customers not to purchase or to delay purchase decisions, which
could have an adverse effect on our results of operations and
quarterly revenues such that they could be substantially below
the expectations of market analysts, which could reduce the
market price of our shares.


Uncertainty regarding the effects of the
Crystal Decisions Acquisition could cause our strategic partners
or key employees to make decisions which could adversely affect
our business and operations.

Some of our original equipment manufacturers,
distributors and other strategic partners could decide to
terminate their existing arrangements, or fail to renew those
arrangements, as a result of the Crystal Decisions Acquisition.
In addition, our key employees may decide to terminate their
employment due to the Crystal Decisions Acquisition and other
employees may experience uncertainty about their future with us,
which could adversely affect our ability to retain key
management, sales, technical and marketing personnel.

Risks Related
to Our Business

Our quarterly operating results will be
subject to fluctuations.

Historically, both our quarterly operating
results and Crystal Decisions quarterly operating results
have varied substantially from quarter to quarter, and we
anticipate that this pattern will continue as we operate as a
combined company. The fluctuation occured principally because
our net license fees vary from quarter to quarter, while a high
percentage of our operating expenses are relatively fixed and
are based on anticipated levels of revenues. While the
variability of our net license fees is partially due to factors
that would influence the quarterly results of any company, our
business is particularly susceptible to quarterly variations
because:



| |   |                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we expect to receive a substantial amount of our
    revenues in the last weeks of the last month of a quarter,
    rather than evenly throughout the quarter;                                                                                                                                                                         
|
| |  | our customers typically wait until the fourth
    quarter, the end of their annual budget cycle, before deciding
    whether to purchase new software;                                                                                                                                                                                 
|
| |  | economic activity in Europe generally slows
    during the summer months;                                                                                                                                                                                                                                                              
|
| |  | customers may delay purchasing decisions in
    anticipation of our new pricing structure and integrated product
    line, which reflects both Business Objects and Crystal Decisions
    products, other new products, product enhancements or platforms
    or in response to announced pricing changes by us or our
    competitors;
|
| |  | we expect our revenues to vary based on the mix
    of products and services of, and the amount of consulting
    services, our customers orders;                                                                                                                                                                                      
|
| |  | we partly depend on large orders and any delay in
    closing a large order may result in the realization of
    potentially significant net license fees being postponed from
    one quarter to the next; and                                                                                                                        
|
| |  | we expect our revenues to be sensitive to the
    timing of offers of new products that successfully compete with
    our products on the basis of functionality, price or otherwise.                                                                                                                                                  

General market conditions and other domestic or
international macroeconomic and geopolitical factors unrelated
to our performance also affect our quarterly revenues and
operating results. For these reasons, quarter-to-quarter
comparisons of our revenues and operating results may not be
meaningful and you should not rely on them as indicative of our
future performance.

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The market price of our shares will be
susceptible to changes in our operating results and to stock
market fluctuations.

Our operating results may be below the
expectations of public market analysts and investors; and
therefore, the market price of our shares may fall. In addition,
the stock markets in the United States and France have
experienced significant price and volume fluctuations in recent
periods, which have particularly affected the market prices of
many software companies and which have often been unrelated to
the operating performance of these companies. The market
fluctuations have affected our stock price in the past and could
affect our stock price in the future.

We may be unable to sustain or increase our
profitability.

While both Crystal Decisions and we were
profitable in our most recent fiscal quarters absent the impact
of the one-time acquisition related expenses, our ability to
sustain or increase profitability on a quarterly or annual basis
as a combined company will be affected by changes in our
business. We expect our operating expenses to increase as our
business grows, and we anticipate that we will make investments
in our business. Therefore, our results of operations will be
harmed if our revenues do not increase at a rate equal to or
greater than increases in our expenses or are insufficient for
us to sustain profitability.

If we overestimate revenues, we may be unable
to reduce our expenses to avoid or minimize a negative impact on
our quarterly results of operations.

Our revenues will be difficult to forecast and
are likely to fluctuate significantly from quarter to quarter.
Our estimates of sales trends may not correlate with actual
revenues in a particular quarter or over a longer period of
time. Variations in the rate and timing of conversion of our
sales prospects into actual licensing revenues could cause us to
plan or budget inaccurately and those variations could adversely
affect our financial results. In particular, delays, reductions
in amount or cancellation of customers purchases would
adversely affect the overall level and timing of our revenues
and our business, results of operations and financial condition
could be harmed.

In addition, because our costs will be relatively
fixed in the short term, we may be unable to reduce our expenses
to avoid or minimize the negative impact on our quarterly
results of operations if anticipated revenues are not realized.
As a result, our quarterly results of operations could be worse
than anticipated.

Our market is highly competitive and
competition could harm our ability to sell products and services
and reduce our market share.

The market in which we compete is intensely
competitive, highly fragmented and characterized by changing
technology and evolving standards. Our competitors may announce
new products, services or enhancements that better meet the
needs of customers or changing industry standards. Increased
competition may cause price reductions and loss of market share,
any of which could have a material adverse effect on our
business, results of operations and financial condition.

Some of our competitors may have greater
financial, technical, sales, marketing and other resources. In
addition, some of these competitors may enjoy greater name
recognition and a larger installed customer base than we do.
These competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or
devote greater resources to the development, promotion, sale and
support of their products. In addition, some of our competitors
may be more successful than we are in attracting and retaining
customers. Moreover, some of our competitors, particularly
companies that offer relational database management software
systems, enterprise resource planning software systems and

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customer relationship management systems may have
well-established relationships with some of our existing and
targeted customers. This competition could harm our ability to
sell products and services, which may lead to lower prices for
our products, reduced revenues and reduced gross margins.


Additionally, we may face competition from many
companies with whom we have strategic relationships, including
Hyperion Solutions Corporation, International Business Machines
Corporation, Lawson Software, Inc., Microsoft Corporation,
PeopleSoft, Inc. and SAP AG, all of whom offer Business
Intelligence products that compete with our products. For
example, Microsoft has extended its SQL Server Business
Intelligence platform to include reporting capabilities which
compete with our enterprise reporting solutions. These companies
could bundle their Business Intelligence software with their
other products at little or no cost, giving them a potential
competitive advantage over us. Because our products will be
specifically designed and targeted to the Business Intelligence
software market, we may lose sales to competitors offering a
broader range of products.

Acquisitions of, or other strategic
transactions by, our competitors could weaken our competitive
position or reduce our revenues.

If one or more of our competitors were to merge
or partner with another of our competitors, the change in the
competitive landscape could adversely affect our ability to
compete effectively. For example, in October 2003, Hyperion
acquired Brio Software. Furthermore, companies larger than ours
could enter the market through internal expansion or by
strategically aligning themselves with one of our competitors
and providing products that cost less than our products. Our
competitors may also establish or strengthen cooperative
relationships with our current or future distributors,
resellers, original equipment manufacturers or other parties
with whom we have relationships, thereby limiting our ability to
sell through these channels and reducing promotion of our
products.

We have strategic relationships with Microsoft
and SAP which, if terminated, could reduce our revenues and harm
our operating results.

As a result of the Crystal Decisions Acquisition,
we have additional strategic relationships with Microsoft and
SAP that enable us to bundle our products with those of
Microsoft and SAP, and we are also developing certain utilities
and products to be a part of Microsofts and SAPs
products. We will have limited control, if any, as to whether
Microsoft or SAP will devote adequate resources to promoting and
selling our products. Microsoft and SAP have designed their own
Business Intelligence software. If either Microsoft or SAP
reduces its efforts on our behalf or discontinues its
relationship with us and instead develops a relationship with
one of our competitors or increases its selling efforts of its
own Business Intelligence software, our revenues and operating
results may be reduced. For example, recently Microsoft began
actively marketing its reporting product for its SQL Server
Business Intelligence platform.

We target our products solely to the Business
Intelligence software market and, if sales of our products in
this market decline, our operating results will be seriously
harmed.

We generate substantially all of our revenues
from licensing, support and service fees in conjunction with the
sale of our products in the Business Intelligence software
market. Accordingly, our future revenues and profits will depend
significantly on our ability to further penetrate the Business
Intelligence software market. If we are not successful in
selling our products in our targeted market due to competitive
pressures, technological advances by others or other reasons,
our operating results would suffer.

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If the market in which we sell Business
Intelligence software does not grow as anticipated, our future
profitability could be negatively affected.

The Business Intelligence software market is
still emerging, and our success depends upon the growth of this
market. Our potential customers may:



| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | not fully value the benefits of using Business
    Intelligence products;                     
|
| |  | not achieve favorable results using Business
    Intelligence products;                       
|
| |  | experience technical difficulty in implementing
    Business Intelligence products; or        
|
| |  | use alternative methods to solve the problems
    addressed by Business Intelligence software.

These factors may cause the market for Business
Intelligence software not to grow as quickly or become as large
as we anticipate, which may adversely affect our revenues.

If the current economic uncertainty continues,
our customers may reduce, delay or cancel purchases of our
products and services, in which case our results of operations
will be harmed.

We cannot predict what impact the current
economic uncertainty will have on the Business Intelligence
software market or our business, but it may result in fewer
purchases of licenses of our software, extended sales cycles,
downward pricing pressures or lengthening of payment terms. Our
customers may also discontinue their renewals of our maintenance
and technical support services due to shrinking budgets. If our
customers reduce, delay or cancel purchases of our products and
services, our results of operations will be harmed.

Our software may have defects and errors which
may lead to a loss of revenues or product liability
claims.

Our products and platforms are internally complex
and may contain defects or errors, especially when first
introduced or when new versions or enhancements are released.
Despite extensive testing, we may not detect errors in our new
products, platforms or product enhancements until after we have
commenced commercial shipments. If defects and errors are
discovered after commercial release of either new versions or
enhancements of our products and platforms:



| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | potential customers may delay purchases;                                                                                 
|
| |  | customers may react negatively, which could
    reduce further sales;                                                    
|
| |  | our reputation in the marketplace may be damaged;                                                                        
|
| |  | we may have to defend product liability claims;                                                                          
|
| |  | we may be required to indemnify our customers,
    distributors, original equipment manufacturers or other
    resellers;
|
| |  | we may incur additional service and warranty
    costs; and                                                              
|
| |  | we may have to divert additional development
    resources to correct the defects and errors.                            

If any or all of the foregoing occur, we may lose
revenues, incur higher operating expenses and lose market share,
any of which could severely harm our financial condition and
operating results.

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We may have difficulties providing and
managing large-scale deployments, which could cause a decline or
delay in recognition of our revenues and an increase in our
expenses.

We generally depend on large-scale deployments of
our products for a substantial portion of our revenues. We may
have difficulty managing the timeliness of these large-scale
deployments and our internal allocation of personnel and
resources. Any difficulty could cause us to lose existing
customers, face potential customer disputes or limit the number
of new customers who purchase our products or services, which
could cause a decline in or delay in recognition of revenues,
and could cause us to increase our research and development and
technical support costs, either of which could adversely affect
our operating results.

In addition, we generally have long sales cycles
for our large-scale deployments. During a long sales cycle,
events may occur that could affect the size, timing or
completion of the order. For example, the potential
customers budget and purchasing priorities may change, the
economy may experience a downturn or new competing technology
may enter the marketplace, any of which could reduce our
revenues.

The software market in which we operate is
subject to rapid technological change and new product
introductions, which could negatively affect our product
sales.

The market for Business Intelligence software is
characterized by rapid technological advances, changes in
customer requirements and frequent new product introductions and
enhancements. The emergence of new industry standards in related
fields may adversely affect the demand for our products. To be
successful, we must develop new products, platforms and
enhancements to our existing products that keep pace with
technological developments, changing industry standards and the
increasingly sophisticated requirements of our customers. If we
are unable to respond quickly and successfully to these
developments and changes, we may lose our competitive position.
In addition, even if we are able to develop new products,
platforms or enhancements to our existing products, these
products, platforms and product enhancements may not be accepted
in the marketplace. Further, if we do not adequately time the
introduction or the announcement of new products or enhancement,
to our existing products, or if our competitors introduce or
announce new products, platforms and product enhancements, our
customers may defer or forego purchases of our existing products.

We are currently a party to several lawsuits
with MicroStrategy. The prosecution of these lawsuits could have
a substantial negative impact on our business. Should
MicroStrategy prevail, we may be required to pay substantial
monetary damages or be prevented from selling some of our
products.

On October 17, 2001, we filed a lawsuit in
the United States District Court for the Northern District of
California against MicroStrategy for alleged patent
infringement. The lawsuit alleges that MicroStrategy infringes
on our U.S. Patent No. 5,555,403 by making, using,
offering to sell and selling its product currently known as
MicroStrategy Version 7.0. Our complaint requests that
MicroStrategy be enjoined from further infringing the patent and
seeks an as-yet undetermined amount of damages. On June 27,
2003, MicroStrategy filed a motion for summary judgment that its
products do not infringe our patent. On August 29, 2003,
the Court ruled that our patent was not literally infringed and
that we were estopped from asserting the doctrine of equivalents
and dismissed the case. We have appealed the Courts
judgment to the Court of Appeals for the Federal Circuit and
anticipate a ruling on the appeal in early 2005.

On October 30, 2001, MicroStrategy filed an
action for alleged patent infringement in the United States
District Court for the Eastern District of Virginia against us
and our subsidiary, Business Objects Americas. The complaint
alleges that our software products, BusinessObjects Broadcast
Agent Publisher, BusinessObjects Broadcast Agent Scheduler and
BusinessObjects Infoview, infringe MicroStrategys
U.S. Patent Nos. 6,279,033 and 6,260,050. In December
2003, the Court dismissed MicroStrategys claim of
infringement on U.S. Patent No. 6,279,033 without

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prejudice. Trial on U.S. Patent No. 6,260,050
originally set for April 12, 2004 has been continued by the
Court to June 2004.


In April 2002, MicroStrategy obtained leave to
amend its patent claims against us to include claims for
misappropriation of trade secrets, violation of the Computer
Fraud and Abuse Act, tortuous interference with contractual
relations and conspiracy in violation of the Virginia Code
seeking injunctive relief and damages. On December 30, 2002
the Court granted our motion for summary judgment and rejected
MicroStrategys claims for damages as to the causes of
action for misappropriation of trade secrets, Computer Fraud and
Abuse Act and conspiracy in violation of the Virginia Code.
Trial of the trade secret claim for injunctive relief and the
sole remaining damages claim for tortious interference with
contractual relations started on October 20, 2003. On
October 28, 2003, the Court granted judgment as a matter of
law in our favor and dismissed the jury trial on
MicroStrategys allegations that we tortiously interfered
with certain employment agreements between MicroStrategy and its
former employees. The Court took MicroStrategys claim for
misappropriation of trade secrets under submission and has yet
to rule. The only relief which remains available under the
Courts prior rulings is for an injunction. MicroStrategy
also seeks an award of its attorneys fees in an
undisclosed amount, should they prevail on the injunction claim.
We do not believe that any attorneys fees awarded will be
material. We believe that MicroStrategys claims are
meritless and will continue to defend the lawsuits vigorously.

On December 10, 2003, MicroStrategy filed an
action for patent infringement against Crystal Decisions in the
United States District Court for the District of Delaware. We
became a party to this action when we acquired Crystal
Decisions. The complaint alleges that the Crystal Decisions
software products: Crystal Enterprise, Crystal Reports, Crystal
Analysis and Crystal Applications infringe MicroStrategys
U.S. Patent Nos. 6,279,033, 6,567,796 and 6,658,432.
The complaint seeks relief in the form of an injunction,
unspecified damages, an award of treble damages and attorneys
fees. Our investigation of this matter is at a preliminary stage
and no discovery has been obtained. As a result, we are not in a
position to opine as to the merits of the suit or the potential
exposure to us. We intend vigorously to defend this case.

We believe that we have meritorious defenses to
MicroStrategys various allegations and claims in each of
the suits and we intend to continue to defend ourselves
vigorously. However, because of the inherent uncertainty of
litigation in general, and the fact that the discovery related
to certain of these suits is ongoing, we cannot assure you that
we will ultimately prevail. Should MicroStrategy ultimately
succeed in the prosecution of its claims, we could be
permanently enjoined from selling some of our products and
deriving related maintenance revenues. In addition, we could be
required to pay substantial monetary damages to MicroStrategy.
Litigation such as the suits MicroStrategy has brought against
us can take years to resolve and can be expensive to defend. An
adverse judgment, if entered in favor of any MicroStrategy
claim, could seriously harm our business, financial position and
results of operations and cause our stock price to decline
substantially. In addition, the MicroStrategy litigation, even
if ultimately determined to be without merit, will be time
consuming to defend, divert our managements attention and
resources and could cause product shipment delays or require us
to enter into royalty or license agreements. These royalty or
license agreements may not be available on terms acceptable to
us, if at all, and the prosecution of the MicroStrategy
allegations and claims could significantly harm our business,
financial position and results of operations and cause our stock
price to decline substantially.

We are a party to litigation with Vedatech
Corporation and in the event of an adverse judgment against us,
we may have to pay damages, which could adversely affect our
financial position and results of operations.

We became a party to the following action when we
acquired Crystal Decisions in December 2003. In November 1997,
Vedatech commenced an action in the Chancery Division of the
High Court of Justice in the United Kingdom against Crystal
Decisions (UK) Limited, now a wholly

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owned subsidiary of Business Objects Americas.
The liability phase of the trial was completed in March 2002,
and Crystal Decisions prevailed on all claims except for the
quantum meruit claim. The court ordered the parties to mediate
the amount of that claim and, in August 2002, the parties came
to a mediated settlement. The mediated settlement was not
material to Crystal Decisions operations and contained no
continuing obligations. In September 2002, however, Crystal
Decisions received a notice that Vedatech was seeking to set
aside the settlement. The mediated settlement and related costs
were accrued in the consolidated financial statements. In April
2003, Crystal Decisions filed an action in the High Court of
Justice seeking a declaration that the mediated settlement
agreement is valid and binding. In connection with this request
for declaratory relief Crystal Decisions paid the agreed
settlement amount into court.


In October 2003, Vedatech and Mani Subramanian
filed an action against Crystal Decisions, Crystal Decisions
(UK) Limited and Susan J. Wolfe, Vice President, General Counsel
and Secretary of Crystal Decisions, in the United States
District Court, Northern District of California, San Jose
Division, alleging that the August 2002 mediated settlement was
induced by fraud and that the defendants engaged in negligent
misrepresentation and unfair competition. In October 2003,
Crystal Decisions (UK), Crystal Decisions (Japan) K.K. and
Crystal Decisions, Inc. filed an application with the High Court
of Justice claiming the proceedings in United States District
Court, Northern District of California, San Jose Division were
commenced in breach of an exclusive jurisdiction clause in the
settlement agreement and requesting injunctive relief to
restrain Vedatech from pursuing the United States District Court
proceedings. A hearing in the High Court of Justice took place
in January 2004 to determine whether the injunction should be
granted. The hearing was continued, and concluded on
March 9, 2004. The court has not yet rendered its decision,
and we cannot assure you that the outcome will be favorable to
us.

Although we believe that Vedatechs basis
for seeking to set aside the mediated settlement and its claims
in the October 2003 complaint is meritless, the outcome cannot
be determined at this time. If the mediated settlement were to
be set aside, an ultimate damage award could adversely affect
our financial position, liquidity and results of operations.

We are a party to litigation with Informatica
and, in the event of an adverse judgment against us, we may have
to pay damages or be prevented from selling some of our
products, which could adversely affect our financial position
and results of operations.

On July 15, 2002, Informatica filed an
action for alleged patent infringement in the United States
District Court for the Northern District of California against
Acta. We became a party to this action when we acquired Acta in
August 2002. The complaint alleges that the Acta software
products infringe Informaticas U.S. Patents
Nos. 6,014,670, 6,339,775 and 6,208,990. On July 17,
2002, Informatica filed an amended complaint alleging that the
Acta software products also infringe U.S. Patent
No. 6,044,374. The complaint seeks relief in the form of an
injunction, unspecified damages, an award of treble damages and
attorneys fees. We have answered the suit, denying infringement
and asserting that the patents are invalid and other defenses.
We intend to defend ourselves vigorously. The potential costs
associated with an adverse outcome of this matter cannot be
reasonably estimated at this time. The August 16, 2004
trial date previously set by the Court has been vacated.

Although we believe that Informaticas basis
for its suit is meritless, the outcome cannot be determined at
this time. Because of the inherent uncertainty of litigation in
general and that fact that this litigation is ongoing, we cannot
assure you that we will prevail. Should Informatica ultimately
succeed in the prosecution of its claims, we could be
permanently enjoined from selling some of our products and be
required to pay damages.

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The protection of our intellectual property
rights is crucial to our business and, if third parties use our
intellectual property without our consent, our business could be
damaged.

Our success is heavily dependent on protecting
intellectual property rights in our proprietary technology,
which is primarily our software. It is difficult for us to
protect and enforce our intellectual property rights for a
number of reasons, including:



| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | policing unauthorized copying or use of our
    products is difficult and expensive;      
|
| |  | software piracy is a persistent problem in the
    software industry;                     
|
| |  | our patents may be challenged, invalidated or
    circumvented; and                       
|
| |  | our shrink-wrap licenses may be unenforceable
    under the laws of certain jurisdictions.

In addition, the laws of many countries do not
protect intellectual property rights to as great an extent as
those of the United States and France. We believe that effective
protection of intellectual property rights is unavailable or
limited in certain foreign countries, creating an increased risk
of potential loss of proprietary technology due to piracy and
misappropriation. For example, we began doing business in the
Peoples Republic of China recently, where the status of
intellectual property law is unclear, and we may expand our
presence there in the future.

Although our name, together with our logo, is
registered as a trademark in France, the United States and a
number of other countries, we may have difficulty asserting our
trademark rights in the name Business Objects as
some jurisdictions consider the name Business
Objects to be generic or descriptive in nature. As a
result, we may be unable to effectively police the unauthorized
use of our name or otherwise prevent our name from becoming a
part of the public domain.

We are involved in litigation to protect our
intellectual property rights, and we may become involved in
further litigation in the future. This type of litigation is
costly and could negatively impact our operating results. For
example, we are currently involved in a patent infringement
action with MicroStrategy.

Third parties have asserted that our
technology infringes upon their proprietary rights, and other
may do so in the future, which has resulted in costly litigation
and could adversely affect our ability to distribute our
products.

From time to time, companies in the industry in
which we compete receive claims that they are infringing upon
the intellectual property rights of third parties. We believe
that software products that are offered in our target markets
will increasingly be subject to infringement claims as the
number of products and competitors in the industry segment grows
and product functionalities begin to overlap. For example, we
are defending one patent infringement suit brought by
Informatica, one brought by MicroStrategy against us and one
brought by MicroStrategy against Crystal Decisions.

The potential effects on our business operations
resulting from third party infringement claims that have been
filed against and may be filed against us in the future include
the following:



| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | we could be forced to cease selling our products;                                                                       
|
| |  | we are forced to commit management resources in
    defense of the claim;                                               
|
| |  | we may incur substantial litigation costs in
    defense of the claim;                                                  
|
| |  | we may have to expend significant development
    resources to redesign our products; and                               
|
| |  | we may be required to enter into royalty and
    licensing agreements with such third party under unfavorable
    terms.

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We may also be required to indemnify customers,
distributors, original equipment manufacturers and other
resellers for third-party products incorporated in our products
if such third partys products infringe upon the
intellectual property rights of others. Although many of these
third parties will be obligated to indemnify us if their
products infringe the intellectual property rights of others,
the indemnification may not be adequate.

In addition, from time to time, there have been
claims challenging the ownership of open source software against
companies that incorporate open source software into their
products. We use a limited amount of open source software in our
products and may use more open source software in the future. As
a result, we could be subject to suits by parties challenging
ownership of what we believe to be our proprietary software. Any
of this litigation could be costly for us to defend, have a
negative effect on our results of operations and financial
condition or require us to devote additional research and
development resources to redesign our products.

Our loss of rights to use software licensed
from third parties could harm our business.

We license software from third parties and
sub-license this software to our customers. In addition, we
license software from third parties and incorporate it into our
products. In the future, we may be forced to obtain additional
third party software licenses to enhance our product offerings
and compete more effectively. By utilizing third party software
in our business, we incur risks that are not associated with
developing software internally. For example, third party
licensors may discontinue or modify their operations, terminate
their relationships with us, or generally become unable to
fulfill their obligations to us. If any of these circumstances
were to occur, we might be forced to seek alternative technology
of inferior quality, which has lower performance standards or
which might not be available on commercially reasonable terms.
If we are unable to maintain our existing licenses or obtain
alternate third party software licenses on commercially
reasonably terms, our revenues could be reduced, our costs could
increase and our business could suffer.

We depend on strategic relationships and
business alliances for continued growth of our
business.

Our development, marketing and distribution
strategies depend on our success to create and maintain
long-term strategic relationships with major vendors, many of
whom are substantially larger than us. These business
relationships often consist of joint marketing programs or
partnerships with original equipment manufacturers or value
added resellers. Although certain aspects of these relationships
are contractual in nature, many important aspects of these
relationships depend on the continued cooperation of each party.
Divergence in strategy, change in focus, competitive product
offerings or contract defaults by any of these companies might
interfere with our ability to develop, market, sell or support
our products, which in turn could harm our business.

Although no one of our resellers currently
accounts for a material percentage of our total revenues, if one
or more of our other large resellers were to terminate their
co-marketing agreements with us it could have an adverse effect
on our business, financial condition and results of operations.
In addition, our business, financial condition and results of
operations could be adversely affected if major distributors,
such as Ingram Micro, Inc., that formerly purchased products
from Crystal Decisions were to materially reduce their purchases
from us. Ingram Micro accounted for 16% of Crystal
Decisions total revenues in fiscal 2001, 10% of Crystal
Decisions total revenues in fiscal 2002 and less than 10%
of Crystal Decisions total revenues in fiscal 2003.
Business Objects had no customers who accounted for 10% or more
of our sales in 2001, 2002 or 2003.

Our distributors and other resellers generally
carry and sell product lines that are competitive with ours.
Because distributors and other resellers generally are not be
required to make a specified level of purchases from us, we
cannot be sure that they will prioritize selling

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our products. We rely on our distributors and
other resellers to sell our products, report the results of
these sales to us and to provide services to certain of the end
user customers of our products. If the distributors and other
resellers do not sell our products, report sales accurately and
in a timely manner and adequately service those end user
customers, our revenues and the adoption rates of our products
could be harmed.


We may pursue strategic acquisitions and
investments that could have an adverse effect on our business if
they are unsuccessful.

As part of our business strategy, we have
acquired companies, technologies and product lines in the past
to complement our internally developed products. We expect that
we will have a similar business strategy going forward. Critical
to the success of this strategy in the future and, ultimately,
our business as a whole, is the orderly, effective integration
of acquired businesses, technologies and products lines into our
organization. If our integration of future acquisitions is
unsuccessful, our business will suffer.

Our executive officers and key employees are
crucial to our business, and we may not be able to recruit and
retain the personnel we need to succeed.

Our success depends upon a number of key
management and technical personnel, including our co-founder,
Bernard Liautaud, who is our chairman of the board of directors
and chief executive officer, the loss of whom could adversely
affect our business. The loss of the services of any key
personnel or the inability to attract and retain highly skilled
technical, management, sales and marketing personnel could also
harm our business. Competition for such personnel in the
computer software industry is intense, and we may be unable to
attract and retain such personnel successfully.

We have multinational operations that are
subject to risks inherent in international operations.

We have significant international operations
including development facilities, sales personnel and customer
support operations. Our international operations are subject to
certain inherent risks including:



| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | technical difficulties associated with product
    localization;                                                                                                                                                    
|
| |  | challenges associated with coordinating product
    development efforts among geographically dispersed development
    centers;                                                                                     
|
| |  | lack of experience in certain geographic markets;                                                                                                                                                                   
|
| |  | longer payment cycles for sales in certain
    foreign countries;                                                                                                                                                   
|
| |  | seasonal reductions in business activity in the
    summer months in Europe and certain other countries;                                                                                                            
|
| |  | the significant presence of some of our
    competitors in some international markets;                                                                                                                              
|
| |  | potentially adverse tax consequences;                                                                                                                                                                               
|
| |  | management, staffing, legal and other costs of
    operating an enterprise spread over various countries;                                                                                                           
|
| |  | political instability in the countries where we
    are doing business; and                                                                                                                                         
|
| |  | fears concerning travel or health risks that may
    adversely affect our ability to sell our products and services
    in any country in which the business sales culture encourages
    face-to-face interactions.

These factors could have an adverse effect on our
business, results of operations and financial condition.

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Fluctuations in exchange rates between the
euro, the U.S. dollar and the Canadian dollar, as well as
other currencies in which we do business, may adversely affect
our operating results.

We may experience substantial foreign exchange
gains or losses due to the volatility of other currencies
compared to the U.S. dollar. In the past, we generated a
significant portion of our revenues and expenses in euros.
Historically, our euro-denominated revenues have offset the
currency exchange rate impact of our euro-denominated expenses.
With the Crystal Decisions Acquisition, we expect to also pay a
portion of our expenses in Canadian dollars and British pounds
and receive a larger portion of our revenues in U.S. dollars.

Generally, we have not engaged in a foreign
currency hedging program to cover our currency transaction or
translation exposure and may not do so in the future. Failure to
hedge or otherwise manage foreign currency risks properly could
adversely affect our operating results.

Business disruptions could seriously harm our
future revenues and financial condition and increase our costs
and expenses.

A number of factors, including natural disasters,
computer viruses or failure to successfully evolve operational
systems to meet evolving business conditions, could disrupt our
business, which could seriously harm our revenues or financial
condition and increase our costs and expenses. For example, some
of our offices are located in potential earthquake or flood
zones which could subject these offices, product development
facilities and associated computer systems to disruption.

In addition, experienced computer programmers and
hackers may be able to penetrate our network security and
misappropriate our confidential information or temporarily
disrupt our operations. As a result, we could incur significant
expenses in addressing problems created by security breaches of
our own network. The costs to eliminate computer viruses and
alleviate other security problems could be significant. The
efforts to address these problems could result in interruptions,
delays or cessation of our operations. Further, we work
continually to upgrade and enhance our computer systems, and
anticipate implementing several system upgrades during the
coming years. Failure to smoothly migrate existing systems to
newer systems could cause business disruptions.

Even short-term disruptions from any of the above
mentioned causes or other causes could result in revenue
disruptions, delayed product deliveries or customer service
disruptions, which could result in decreases in revenues or
increases in costs of operations.



| |                                                              
| | -------------------------------------------------------------
| | Risks Related to Ownership of Our Ordinary
    Shares or ADSs

New SAC and affiliates own a substantial
percentage of our shares and their interests could conflict with
those of our other shareholders. In addition, if New SAC and
these other parties were to sell significant amounts of these
shares in the future it could adversely affect the market price
of our shares.

New SAC and their affiliates own a significant
percentage of our company as a result of the Crystal Decisions
Acquisition, and their interests could conflict with those of
our other shareholders. As a result of Crystal Decisions
Acquisition, New SAC and their affiliates beneficially owned
approximately 24% of our shares as of January 31, 2004. The
interests of these shareholders could conflict with those of our
other shareholders. As a result of their ownership position, New
SAC and these other parties collectively will be able to
significantly influence all matters requiring shareholder
approval, including the election of directors and approval of
significant corporate transactions. Such concentration of
ownership may also have the effect of delaying or preventing a
change in control of our company. In addition, sales of
significant amounts of shares held by New SAC and

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these other parties, or the prospect of these
sales, could adversely affect the market price of our shares.


Provisions of our organizational documents and
French law could have anti-takeover effects and could deprive
shareholders who do not comply with such provisions of some or
all of their voting rights.

Provisions of our organizational documents and
French law may impede the accumulation of our shares by third
parties seeking to gain a measure of control over our company.
For example, French law provides that any individual or entity
directly or indirectly holding more than 5%, 10%, 20%,
33 1/3%, 50% or 66 2/3% of the share capital or voting
rights of our company or that increases or decreases our
shareholding or voting rights by any of the percentage
thresholds, is required to notify us and the AMF, within five
trading days of crossing any of the applicable percentage
thresholds, of the number of shares and voting rights held by
it. Additionally, any person acquiring more than 10% or 20% of
the share capital or voting rights of our company must notify us
and the AMF within 10 trading days of crossing any of these
thresholds, and file a statement of their intentions relating to
future acquisitions or participation in the management of our
company for the following 12-month period. Any shareholder who
fails to comply with these requirements will have voting rights
for all shares in excess of the relevant threshold suspended for
two years following the completion of the required notification
and may have all or part of its voting rights within our company
suspended for up to five years by the relevant commercial court
at the request of our chairman, any of our shareholders or the
AMF. In addition, such shareholders may be subject to a fine of
18,000 for
violation of the share ownership notification requirement and up
to 1,500,000 for
violation of the notification requirement regarding the
statement of intentions.

Furthermore, our articles of association provide
that the notification obligation will apply each time the
percentage reaches 5% of the share capital or voting rights of
our company, or any multiple thereof. In the event any
shareholder fails to notify us within 15 days of crossing
any of the applicable thresholds, such shareholder may, at the
request of one or more shareholders holding together at least 5%
of the share capital or voting rights of our company, be
deprived of voting rights for all shares in excess of the
relevant notification threshold for two years.

Under the terms of the deposit agreement relating
to our ADSs, if a holder of ADSs fails to instruct the
depositary in a timely and valid manner how to vote such
holders ADSs with respect to a particular matter, the
depositary will deem that such holder has given a proxy to the
chairman of the meeting to vote in favor of each proposal
recommended by our board of directors and against each proposal
opposed by our board of directors and will vote the ordinary
shares underlying the ADSs accordingly. Such provision of the
depositary agreement could deter or delay hostile takeovers,
proxy contests and changes in control or management of our
company.

Holders of our shares have limited rights to
call shareholders meetings or submit shareholder
proposals, which could adversely affect their ability to
participate in governance of our company.

In general, our board of directors may call a
meeting of our shareholders. A shareholders meeting may
also be called by a court-appointed agent, in limited
circumstances, such as at the request of the holders of 5% or
more of our outstanding shares held in the form of ordinary
shares. In addition, only shareholders or groups of shareholders
holding a defined number of shares held in the form of ordinary
shares may submit proposed resolutions for meetings of
shareholders. The minimum number of shares required depends on
the amount of the share capital of our company and is equal to
2,186,537 ordinary shares based on our share capital as of
December 31, 2003. Similarly, a duly qualified association,
registered with the AMF and us, of shareholders who have held
their ordinary shares in registered form for at least two years
and together hold at least a defined percentage of our voting
rights, equivalent to 1,761,972 ordinary

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shares based on our companys voting rights
as of December 31, 2003, may submit proposed resolutions
for meetings of shareholders. As a result, the ability of our
shareholders to participate in and influence the governance of
our company will be limited.


Interests of our shareholders will be diluted
if they are not able to exercise preferential subscription
rights for our shares.

Under French law, shareholders have preferential
subscription rights (droits préférentiels de
souscription) to subscribe for cash for issuances of new
shares or other securities giving preferential subscription
rights, directly or indirectly, to acquire additional shares on
a pro rata basis. Shareholders may waive their rights
specifically in respect of any offering, either individually or
collectively, at an extraordinary general meeting. Preferential
subscription rights, if not previously waived, are transferable
during the subscription period relating to a particular offering
of shares and may be quoted on the exchange for such securities
in Paris. Holders of our ADSs may not be able to exercise
preferred subscription rights for these shares unless a
registration statement under the Securities Act is effective
with respect to such rights or an exemption from the
registration requirements is available.

If these preferential subscription rights cannot
be exercised by holders of ADSs, we will make arrangements to
have the preferential subscription rights sold and the net
proceeds of the sale paid to such holders. If such rights cannot
be sold for any reason, we may allow such rights to lapse. In
either case, the interest of holders of ADSs in our company will
be diluted, and, if the rights lapse, such holders will not
realize any value from the granting of preferential subscription
rights.

It may be difficult for holders of our ADSs
rather than our ordinary shares to exercise some of their rights
as shareholders.

It may be more difficult for holders of our ADSs
to exercise their rights as shareholders than it would be if
they directly held our ordinary shares. For example, if we offer
new ordinary shares and a holder of our ADSs has the right to
subscribe for a portion of them, the depositary is allowed, in
it own discretion, to sell for such ADS holders benefit
that right to subscribe for new ordinary shares of our company
instead of making it available to such holder. Also, to exercise
their voting rights, holders of our ADSs must instruct the
depositary how to vote their shares. Because of this extra
procedural step involving the depositary, the process for
exercising voting rights will take longer for a holder of our
ADSs than it would for holders of our ordinary shares.

Fluctuation in the value of the US dollar
relative to the euro may cause the price of our ordinary shares
to deviate from the price of our ADSs.

Our ADSs trade in U.S. dollars and our ordinary
shares trade in euros. Fluctuations in the exchange rates
between the U.S. dollar and the euro may result in temporary
differences between the value of our ADSs and the value of our
ordinary shares, which may result in heavy trading by investors
seeking to exploit such differences.

We have not distributed any cash dividends to
our shareholders and do not anticipate doing so in the near
future.

We currently intend to use all of our operating
cash flow to finance our business for the foreseeable future. We
have never distributed cash dividends to our shareholders, and
we do not anticipate distributing cash dividends in the near
term. Although we may in the future distribute a portion of our
earnings as dividends to shareholders, the determination of
whether to declare dividends and, if so, the amount of such
dividends will be based on facts and circumstances existing at
the time of determination. We may not distribute dividends in
the near future, or at all.

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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About
    Market Risk

Market risk represents the risk of loss that may
impact our financial position due to adverse changes in
financial market prices and rates. Our market risk exposure is
primarily a result of fluctuations in interest rates and foreign
exchange rates. We do not hold or issue financial instruments
for trading purposes. This discussion contains forward-looking
statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors
including those set forth in Management Discussion and
Analysis of Financial Condition and Results of Operations
 Factors Affecting Future Operating Results.



| |                   
| | ------------------
| | Interest Rate Risk

Our exposure to market rate risk for changes in
interest rates relates primarily to our investment portfolio. We
maintain, or have maintained, an investment portfolio in a
variety of financial instruments, including fixed rate corporate
bonds, money market instruments and bank certificates of
deposit. All of our cash, cash equivalents and short-term
investments were classified as available-for-sale and recorded
on our balance sheet at fair value at December 31, 2003 and
December 31, 2002.

At December 31, 2003, we did not hold any
short-term investments. As of December 31, 2002, we had a
$5.3 million investment in a fixed-rate corporate bond.
This investment carried a degree of interest rate risk as the
fair market value declines as interest rates rise. Additionally,
although the principal portion of our other investments is not
subject to interest rate risk, declines in interest rates over
time will reduce our interest income. We do not attempt to
reduce or eliminate our exposure to interest rate risk through
the use of derivative financial instruments due to the
short-term nature of investments. A hypothetical 10% decrease in
interest rates would not have a material impact on future net
earnings over the next year.



| |                      
| | ---------------------
| | Foreign Exchange Risk

We conduct a significant portion of our business
in currencies other than the U.S. dollar, the currency in which
we report our financial statements. Assets and liabilities of
our subsidiaries are translated into U.S. dollars at exchange
rates in effect as of the applicable balance sheet date and any
resulting translation adjustments are included as an adjustment
to shareholders equity. Revenues and expenses generated
from these subsidiaries are translated at average monthly
exchange rates during the quarter the transactions occur. Gains
and losses from these currency transactions are included in net
earnings. Historically, we have generated a significant portion
of our revenues and incurred a significant portion of our
expenses in euros, British pounds and the Japanese yen. In the
future, we will incur a significant portion of our expenses in
the Canadian dollar. As a result, our operating results have
been in certain years in the past and may be in the future,
adversely impacted by currency exchange rate fluctuations upon
our future operating results. As of December 31, 2003, we
held forward exchange contracts to mitigate our exposure to the
risk of changes in foreign currency rates. These forward
contracts were not considered hedged instruments.

We cannot predict the effect of exchange rate
fluctuations upon our future results. Although we may begin to
hedge in the future, we cannot be sure that any hedging
techniques we may implement will be successful or that our
business, results of operations, financial condition or cash
flows will not be adversely affected by exchange rate
fluctuations.

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Item 8.     Financial
Statements and Supplementary Data

BUSINESS OBJECTS S.A.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                         |  |      |    | 
|-------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                         |  | Page
|                                                                                                         |  |     
|Report of Ernst & Young LLP, Independent
    Auditors                                                    |  |      | 62 | 
|Consolidated Balance Sheets as at
    December 31, 2003 and 2002                                         |  |      | 63 | 
|Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001               |  |      | 64 | 
|Consolidated Statements of Shareholders
    Equity for the years ended December 31, 2003, 2002 and 2001 |  |      | 65 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001           |  |      | 66 | 
|Notes to Consolidated Financial Statements                                                               |  |      | 67 | 

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Report of Ernst & Young LLP, Independent
Auditors

The Board of Directors and Shareholders

Business Objects S.A.


We have audited the accompanying consolidated
balance sheets of Business Objects S.A. as of December 31,
2003 and 2002 and the related consolidated statements of income,
shareholders equity and cash flows for each of the three
years in the period ended December 31, 2003. Our audits
also included the financial schedule listed in Item 15(a).
These financial statements and schedule are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these financial statements and schedule
based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the 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. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of Business
Objects S.A. at December 31, 2003 and 2002 and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.



| |                      
| | ---------------------
| | /s/ ERNST & YOUNG LLP

San Jose, California

February 2, 2004


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BUSINESS OBJECTS S.A.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per ordinary share amounts)


|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |         |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------ | --------- | ------- | --------- |  | ------- | ------- | ------- | 
|                                                                                                                                                                                                                |                                                                               |                                           
|                                                                                                                                                                                                                |                                                                               | December 31,                              
|                                                                                                                                                                                                                |                                                                               |                                           
|                                                                                                                                                                                                                |                                                                               | 2003                                       |           | 2002   
|                                                                                                                                                                                                                |                                                                               |                                            |           |        
|ASSETS                                                                                                                                                                                                          |                                                                               |                                            |           |         |           |  |         |        
|Current assets:                                                                                                                                                                                                 |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                | Cash and cash equivalents                                                     |                                            | $         | 235,380 |           |  | $       | 233,941 |        
|                                                                                                                                                                                                                | Short-term investments                                                        |                                            |           |        |           |  |         | 46,678  |        
|                                                                                                                                                                                                                | Restricted cash  current                                                     |                                            |           | 19,243  |           |  |         | 8,654   |        
|                                                                                                                                                                                                                | Accounts receivable, net of allowances of $9,847
    and $2,891, respectively |                                            |           | 187,885 |           |  |         | 98,623  |        
|                                                                                                                                                                                                                | Deferred tax assets, net                                                      |                                            |           | 261     |           |  |         | 12,920  |        
|                                                                                                                                                                                                                | Prepaid and other current assets                                              |                                            |           | 33,797  |           |  |         | 14,131  |        
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                |                                                                               | Total current assets                       |           |         | 476,566   |  |         |         | 414,947 | 
|Goodwill                                                                                                                                                                                                        |                                                                               |                                            | 1,051,111 |         |           |  | 75,416  |        
|Other intangible assets, net                                                                                                                                                                                    |                                                                               |                                            | 149,143   |         |           |  | 10,810  |        
|Property and equipment, net                                                                                                                                                                                     |                                                                               |                                            | 61,187    |         |           |  | 37,341  |        
|Deposits and other assets                                                                                                                                                                                       |                                                                               |                                            | 19,092    |         |           |  | 3,040   |        
|Restricted cash  long term                                                                                                                                                                                     |                                                                               |                                            |          |         |           |  | 10,254  |        
|Long term deferred tax assets                                                                                                                                                                                   |                                                                               |                                            | 17,963    |         |           |  |        |        
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                |                                                                               | Total assets                               |           | $       | 1,775,062 |  |         | $       | 551,808 | 
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|LIABILITIES AND SHAREHOLDERS
    EQUITY                                                                                                                                                                        |                                                                               |                                            |           |         |           |  |         |        
|Current liabilities:                                                                                                                                                                                            |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                | Accounts payable                                                              |                                            | $         | 47,790  |           |  | $       | 20,105  |        
|                                                                                                                                                                                                                | Accrued payroll and related expenses                                          |                                            |           | 84,686  |           |  |         | 48,537  |        
|                                                                                                                                                                                                                | Income taxes payable                                                          |                                            |           | 75,727  |           |  |         | 7,187   |        
|                                                                                                                                                                                                                | Deferred revenues                                                             |                                            |           | 135,977 |           |  |         | 75,490  |        
|                                                                                                                                                                                                                | Restructuring liability                                                       |                                            |           | 21,331  |           |  |         | 8,191   |        
|                                                                                                                                                                                                                | Other current liabilities                                                     |                                            |           | 51,814  |           |  |         | 28,207  |        
|                                                                                                                                                                                                                | Notes payable  current portion                                               |                                            |           | 9,728   |           |  |         | 1,717   |        
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                |                                                                               | Total current liabilities                  |           |         | 427,053   |  |         |         | 189,434 | 
|Notes and escrow payable                                                                                                                                                                                        |                                                                               |                                            |          |         |           |  | 9,728   |        
|Long-term accrued rent                                                                                                                                                                                          |                                                                               |                                            | 4,950     |         |           |  | 7,713   |        
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                |                                                                               | Total liabilities                          |           |         | 432,003   |  |         |         | 206,875 | 
|Commitments and contingencies                                                                                                                                                                                   |                                                                               |                                            |           |         |           |  |         |        
|Shareholders
    equity:                                                                                                                                                                                       |                                                                               |                                            |           |         |           |  |         |        
|Ordinary shares 
    0.10 nominal
    value ($0.13 U.S. as of December 31, 2003): authorized
    114,809 and 81,378; issued  94,903 and 63,463; issued
    and outstanding  89,166 and 63,463, respectively |                                                                               |                                            | 9,927     |         |           |  | 6,731   |        
|Additional paid-in capital                                                                                                                                                                                      |                                                                               |                                            | 1,121,910 |         |           |  | 168,939 |        
|Treasury and Business Objects Option LLC shares,
    6,841 and 1,068, respectively                                                                                                                              |                                                                               |                                            | (13,104   | )       |           |  | (13,104 | )      
|Retained earnings                                                                                                                                                                                               |                                                                               |                                            | 202,597   |         |           |  | 180,035 |        
|Unearned compensation                                                                                                                                                                                           |                                                                               |                                            | (18,353   | )       |           |  |        |        
|Accumulated other comprehensive income                                                                                                                                                                          |                                                                               |                                            | 40,082    |         |           |  | 2,332   |        
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                |                                                                               | Total shareholders equity                 |           |         | 1,343,059 |  |         |         | 344,933 | 
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        
|                                                                                                                                                                                                                |                                                                               | Total liabilities and shareholders equity |           | $       | 1,775,062 |  |         | $       | 551,808 | 
|                                                                                                                                                                                                                |                                                                               |                                            |           |         |           |  |         |        

See accompanying notes.

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BUSINESS OBJECTS S.A.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per ordinary share and ADS
data)


|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |         |         | 
|----------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------ | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                                                            |                                              |                         
|                                                                                                            |                                              | Year Ended December 31, 
|                                                                                                            |                                              |                         
|                                                                                                            |                                              | 2003                     |         | 2002    |         | 2001
|                                                                                                            |                                              |                          |         |         |         |     
|Revenues:                                                                                                   |                                              |                          |         |         |         |      |         |         |         |   |         |        
|                                                                                                            | Net license fees                             |                          | $       | 275,261 |         |      | $       | 243,955 |         |   | $       | 249,594 |        
|                                                                                                            | Services                                     |                          |         | 285,564 |         |      |         | 210,844 |         |   |         | 166,200 |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|                                                                                                            |                                              | Total revenues           |         |         | 560,825 |      |         |         | 454,799 |   |         |         | 415,794 | 
|Cost of revenues:                                                                                           |                                              |                          |         |         |         |      |         |         |         |   |         |        
|                                                                                                            | Net license fees                             |                          |         | 5,951   |         |      |         | 3,102   |         |   |         | 2,155   |        
|                                                                                                            | Services                                     |                          |         | 89,005  |         |      |         | 71,489  |         |   |         | 63,497  |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|                                                                                                            |                                              | Total cost of revenues   |         |         | 94,956  |      |         |         | 74,591  |   |         |         | 65,652  | 
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Gross profit                                                                                                |                                              |                          | 465,869 |         |         |      | 380,208 |         |         |   | 350,142 |        
|Operating expenses:                                                                                         |                                              |                          |         |         |         |      |         |         |         |   |         |        
|                                                                                                            | Sales and marketing                          |                          |         | 250,870 |         |      |         | 222,243 |         |   |         | 203,655 |        
|                                                                                                            | Research and development                     |                          |         | 95,399  |         |      |         | 74,991  |         |   |         | 55,246  |        
|                                                                                                            | General and administrative                   |                          |         | 44,655  |         |      |         | 29,387  |         |   |         | 24,256  |        
|                                                                                                            | Acquired in-process research and development |                          |         | 27,966  |         |      |         | 2,000   |         |   |         |        |        
|                                                                                                            | Restructuring costs                          |                          |         | 7,782   |         |      |         | 3,871   |         |   |         |        |        
|                                                                                                            | Amortization of goodwill                     |                          |         |        |         |      |         |        |         |   |         | 4,492   |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|                                                                                                            |                                              | Total operating expenses |         |         | 426,672 |      |         |         | 332,492 |   |         |         | 287,649 | 
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Income from operations                                                                                      |                                              |                          | 39,197  |         |         |      | 47,716  |         |         |   | 62,493  |        
|Interest and other income, net                                                                              |                                              |                          | 14,334  |         |         |      | 18,959  |         |         |   | 10,460  |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Income before provision for income taxes                                                                    |                                              |                          | 53,531  |         |         |      | 66,675  |         |         |   | 72,953  |        
|Provision for income taxes                                                                                  |                                              |                          | (30,969 | )       |         |      | (26,095 | )       |         |   | (28,075 | )      
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Net income                                                                                                  |                                              | $                        | 22,562  |         |         | $    | 40,580  |         |         | $ | 44,878  |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Basic net income per ordinary share and ADS                                                                 |                                              | $                        | 0.35    |         |         | $    | 0.66    |         |         | $ | 0.74    |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Diluted net income per ordinary share and ADS                                                               |                                              | $                        | 0.34    |         |         | $    | 0.63    |         |         | $ | 0.70    |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Ordinary shares and ADS used in computing basic
    net income per ordinary share and ADS                   |                                              |                          | 64,584  |         |         |      | 61,888  |         |         |   | 60,879  |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        
|Ordinary shares and ADS and equivalents used in
    computing diluted net income per ordinary share and ADS |                                              |                          | 66,168  |         |         |      | 63,933  |         |         |   | 64,361  |        
|                                                                                                            |                                              |                          |         |         |         |      |         |         |         |   |         |        

See accompanying notes.

-64-



---



##### Table of Contents



BUSINESS OBJECTS S.A.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

(In thousands)


|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |         |  
|--------------------------------------------------------------------------------------------------------------- | ---------------------- | --------------- | ------ | ---------- |  | ---------- | ----- | ---------------- |  | -------- | --------- | ------------- |  | ------------- | ----- | ------------- |  | ------ | ------- | - |  | - | ------- | ------ |  | - | ------- | - |  | - | ------- | ------- | - | - | --------- | ------- | -
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |              
|                                                                                                                |                        |                 |        |            |  |            |       | Treasury and     |  |          |           |               |  |               |       |              
|                                                                                                                |                        |                 |        |            |  |            |       | Business Objects |  |          |           |               |  |               |       |              
|                                                                                                                |                        |                 |        |            |  | Option LLC |       |                  |  |          |           | Accumulated   |  |              
|                                                                                                                |                        | Ordinary Shares |        | Additional |  | Shares     |       |                  |  |          |           | Other         |  | Total        
|                                                                                                                |                        |                 |        | Paid-In    |  |            |       | Retained         |  | Unearned |           | Comprehensive |  | Shareholders
|                                                                                                                |                        | Shares          |        | Amount     |  | Capital    |       | Shares           |  | Amount   |           | Earnings      |  | Compensation  |       | Income (Loss) |  | Equity
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |       
|Balance at December 31, 2000                                                                                    |                        |                 | 60,584 |            |  | $          | 6,471 |                  |  | $        | 138,390   |               |  |               | 575   |               |  | $      | (4,611  | ) |  | $ | 94,577  |        |  | $ |        |   |  | $ | (23,892 | )       |   | $ | 210,935   |        
|Issuance of ordinary shares pursuant to employee
    stock option plans                                         |                        |                 | 1,137  |            |  |            | 99    |                  |  |          | 6,482     |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 6,581     |        
|Issuance of ordinary shares under employee stock
    purchase plans                                             |                        |                 | 155    |            |  |            | 14    |                  |  |          | 3,204     |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 3,218     |        
|Directors warrants exercise                                                                                    |                        |                 | 52     |            |  |            | 5     |                  |  |          | 341       |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 346       |        
|Purchase of treasury shares                                                                                     |                        |                 |       |            |  |            |      |                  |  |          |          |               |  |               | 243   |               |  |        | (4,438  | ) |  |   |        |        |  |   |        |   |  |   |        |         |   |   | (4,438    | )      
|Tax benefit of nonqualified stock options                                                                       |                        |                 |       |            |  |            |      |                  |  |          | 1,472     |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 1,472     |        
|Components of comprehensive income                                                                              |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|                                                                                                                | Translation adjustment |                 |        |           |  |            |       |                 |  |          |           |              |  |               |       |              |  |        |         |  |  |   |         |       |  |   |         |  |  |   |         | (10,326 | ) |   |           | (10,326 | )
|                                                                                                                | Net income             |                 |        |           |  |            |       |                 |  |          |           |              |  |               |       |              |  |        |         |  |  |   |         | 44,878 |  |   |         |  |  |   |         |        |   |   |           | 44,878  |  
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|Total comprehensive income                                                                                      |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   | 34,552    |        
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|Balance at December 31, 2001                                                                                    |                        |                 | 61,928 |            |  |            | 6,589 |                  |  |          | 149,889   |               |  |               | 818   |               |  |        | (9,049  | ) |  |   | 139,455 |        |  |   |        |   |  |   | (34,218 | )       |   |   | 252,666   |        
|Issuance of ordinary shares pursuant to employee
    stock option plans                                         |                        |                 | 1,066  |            |  |            | 99    |                  |  |          | 10,184    |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 10,283    |        
|Issuance of ordinary shares under employee stock
    purchase plans                                             |                        |                 | 388    |            |  |            | 36    |                  |  |          | 4,943     |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 4,979     |        
|Directors warrants exercise                                                                                    |                        |                 | 81     |            |  |            | 7     |                  |  |          | 274       |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 281       |        
|Purchase of treasury shares                                                                                     |                        |                 |       |            |  |            |      |                  |  |          |          |               |  |               | 250   |               |  |        | (4,055  | ) |  |   |        |        |  |   |        |   |  |   |        |         |   |   | (4,055    | )      
|Tax benefit of nonqualified stock options                                                                       |                        |                 |       |            |  |            |      |                  |  |          | 3,649     |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 3,649     |        
|Components of comprehensive income                                                                              |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|                                                                                                                | Translation adjustment |                 |        |           |  |            |       |                 |  |          |           |              |  |               |       |              |  |        |         |  |  |   |         |       |  |   |         |  |  |   |         | 36,550  |   |   |           | 36,550  |  
|                                                                                                                | Net income             |                 |        |           |  |            |       |                 |  |          |           |              |  |               |       |              |  |        |         |  |  |   |         | 40,580 |  |   |         |  |  |   |         |        |   |   |           | 40,580  |  
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|Total comprehensive income                                                                                      |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   | 77,130    |        
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|Balance at December 31, 2002                                                                                    |                        |                 | 63,463 |            |  |            | 6,731 |                  |  |          | 168,939   |               |  |               | 1,068 |               |  |        | (13,104 | ) |  |   | 180,035 |        |  |   |        |   |  |   | 2,332   |         |   |   | 344,933   |        
|Issuance of ordinary shares in connection with
    purchase business combination, net of exchange costs of $201 |                        |                 | 23,301 |            |  |            | 2,912 |                  |  |          | 904,613   |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 907,525   |        
|Shares issued to Business Objects Option LLC                                                                    |                        |                 |       |            |  |            |      |                  |  |          |          |               |  |               | 6,310 |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   |          |        
|Stock-based compensation                                                                                        |                        |                 |       |            |  |            |      |                  |  |          | 992       |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 992       |        
|Deferred stock-based compensation                                                                               |                        |                 |       |            |  |            |      |                  |  |          |          |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   | (19,788 | ) |  |   |        |         |   |   | (19,788   | )      
|Amortization of stock-based compensation                                                                        |                        |                 |       |            |  |            |      |                  |  |          |          |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   | 646     |   |  |   |        |         |   |   | 646       |        
|Forfeiture of unvested stock options                                                                            |                        |                 |       |            |  |            |      |                  |  |          |          |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   | 789     |   |  |   |        |         |   |   | 789       |        
|Tax benefit of nonqualified stock options                                                                       |                        |                 |       |            |  |            |      |                  |  |          | 17,974    |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 17,974    |        
|Issuance of ordinary shares pursuant to employee
    stock option plans                                         |                        |                 | 1,893  |            |  |            | 227   |                  |  |          | 23,797    |               |  |               | (537  | )             |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 24,024    |        
|Issuance of ordinary shares under employee stock
    purchase plans                                             |                        |                 | 389    |            |  |            | 43    |                  |  |          | 4,928     |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 4,971     |        
|Directors warrants exercise                                                                                    |                        |                 | 120    |            |  |            | 14    |                  |  |          | 667       |               |  |               |      |               |  |        |        |   |  |   |        |        |  |   |        |   |  |   |        |         |   |   | 681       |        
|Components of comprehensive income                                                                              |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|                                                                                                                | Translation adjustment |                 |        |           |  |            |       |                 |  |          |           |              |  |               |       |              |  |        |         |  |  |   |         |       |  |   |         |  |  |   |         | 37,750  |   |   |           | 37,750  |  
|                                                                                                                | Net income             |                 |        |           |  |            |       |                 |  |          |           |              |  |               |       |              |  |        |         |  |  |   |         | 22,562 |  |   |         |  |  |   |         |        |   |   |           | 22,562  |  
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|Total comprehensive income                                                                                      |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   | 60,312    |        
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        
|Balance at December 31, 2003                                                                                    |                        |                 | 89,166 |            |  | $          | 9,927 |                  |  | $        | 1,121,910 |               |  |               | 6,841 |               |  | $      | (13,104 | ) |  | $ | 202,597 |        |  | $ | (18,353 | ) |  | $ | 40,082  |         |   | $ | 1,343,059 |        
|                                                                                                                |                        |                 |        |            |  |            |       |                  |  |          |           |               |  |               |       |               |  |        |         |   |  |   |         |        |  |   |         |   |  |   |         |         |   |   |           |        

See accompanying notes.

-65-



---



##### Table of Contents



BUSINESS OBJECTS S.A.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |        |         |  
|------------------------------------------------------------------------------------- | ----------------------------------------------------------- | -------------------------------------------------------- | -------- | ------- | -------- | ---- | ------- | ------ | -------- | - | ------- | ------ | ------- | -
|                                                                                      |                                                             |                                                         
|                                                                                      |                                                             | Year Ended December 31,                                 
|                                                                                      |                                                             |                                                         
|                                                                                      |                                                             | 2003                                                     |          | 2002    |          | 2001
|                                                                                      |                                                             |                                                          |          |         |          |     
|Operating activities                                                                  |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Net income                                                                            |                                                             | $                                                        | 22,562   |         |          | $    | 40,580  |        |          | $ | 44,878  |       
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|                                                                                      | Depreciation and amortization of property and
    equipment |                                                          |          | 18,269  |          |      |         | 14,746 |          |   |         | 12,572 |        
|                                                                                      | Amortization of goodwill and other intangible
    assets    |                                                          |          | 4,344   |          |      |         | 3,363  |          |   |         | 5,960  |        
|                                                                                      | Stock-based compensation expense                            |                                                          |          | 1,638   |          |      |         |       |          |   |         |       |        
|                                                                                      | Acquired in-process research and development                |                                                          |          | 27,966  |          |      |         | 2,000  |          |   |         |       |        
|                                                                                      | Deferred income taxes                                       |                                                          |          | (1,664  | )        |      |         | (2,882 | )        |   |         | (2,224 | )      
|                                                                                      | Tax benefits from employee stock plans                      |                                                          |          | 17,974  |          |      |         | 3,649  |          |   |         | 1,472  |        
|Changes in operating assets and liabilities:                                          |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|                                                                                      | Accounts receivable, net                                    |                                                          |          | (36,973 | )        |      |         | 784    |          |   |         | (2,550 | )      
|                                                                                      | Prepaid and other current assets                            |                                                          |          | (16,489 | )        |      |         | 3,319  |          |   |         | 175    |        
|                                                                                      | Accounts payable                                            |                                                          |          | 8,118   |          |      |         | (2,216 | )        |   |         | (1,491 | )      
|                                                                                      | Accrued payroll and related expenses                        |                                                          |          | 13,383  |          |      |         | 6,754  |          |   |         | 8,124  |        
|                                                                                      | Income taxes payable                                        |                                                          |          | 14,539  |          |      |         | (6,294 | )        |   |         | (2,495 | )      
|                                                                                      | Deferred revenues                                           |                                                          |          | 35,657  |          |      |         | 7,947  |          |   |         | 11,866 |        
|                                                                                      | Restructuring liability and other current
    liabilities   |                                                          |          | (10,825 | )        |      |         | (4,559 | )        |   |         | 4,582  |        
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|                                                                                      |                                                             | Net cash provided by operating activities                |          |         | 98,499   |      |         |        | 67,191   |   |         |        | 80,869  |  
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Investing activities                                                                  |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Purchases of property and equipment, net                                              |                                                             |                                                          | (12,453  | )       |          |      | (10,405 | )      |          |   | (26,330 | )     
|Change in estimate in restructuring accrual for
    Acta acquisition                  |                                                             |                                                          | 2,741    |         |          |      |        |        |          |   |        |       
|Business acquisitions and other investments, net
    of acquired cash                 |                                                             |                                                          | (178,327 | )       |          |      | (62,454 | )      |          |   | (8,043  | )     
|Sales (purchases) of short-term investments                                           |                                                             |                                                          | 53,662   |         |          |      | (45,240 | )      |          |   |        |       
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|                                                                                      |                                                             | Net cash used in investing activities                    |          |         | (134,377 | )    |         |        | (118,099 | ) |         |        | (34,373 | )
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Financing activities                                                                  |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Issuance of shares                                                                    |                                                             |                                                          | 29,677   |         |          |      | 15,542  |        |          |   | 10,145  |       
|Purchase of treasury shares                                                           |                                                             |                                                          |         |         |          |      | (4,055  | )      |          |   | (4,438  | )     
|Increase in escrow payable                                                            |                                                             |                                                          |         |         |          |      | 9,728   |        |          |   | 1,768   |       
|Change in restricted cash                                                             |                                                             |                                                          | 1,150    |         |          |      | (9,106  | )      |          |   | 3,050   |       
|Notes payable reductions                                                              |                                                             |                                                          | (1,717   | )       |          |      | (2,656  | )      |          |   | (5,559  | )     
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|                                                                                      |                                                             | Net cash provided by financing activities                |          |         | 29,110   |      |         |        | 9,453    |   |         |        | 4,966   |  
|Effect of foreign exchange rates changes on cash
    and cash equivalents             |                                                             |                                                          | 8,207    |         |          |      | 34,975  |        |          |   | (10,622 | )     
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|                                                                                      |                                                             | Net increase (decrease) in cash and cash
    equivalents |          |         | 1,439    |      |         |        | (6,480   | ) |         |        | 40,840  |  
|Cash and cash equivalents at the beginning of the
    year                            |                                                             |                                                          | 233,941  |         |          |      | 240,421 |        |          |   | 199,581 |       
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Cash and cash equivalents at the end of the year                                      |                                                             | $                                                        | 235,380  |         |          | $    | 233,941 |        |          | $ | 240,421 |       
|                                                                                      |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Supplemental cash flow information:                                                   |                                                             |                                                          |          |         |          |      |         |        |          |   |         |       
|Cash paid for interest expense                                                        |                                                             | $                                                        | 14       |         |          | $    | 169     |        |          | $ | 112     |       
|Cash paid for income taxes, net of refunds                                            |                                                             | $                                                        | 33,218   |         |          | $    | 34,401  |        |          | $ | 32,968  |       
|Value of shares issued for the Crystal Decisions
    Acquisition                      |                                                             | $                                                        | 768,609  |         |          | $    |        |        |          | $ |        |       

See accompanying notes.

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##### Table of Contents



BUSINESS OBJECTS S.A.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|   |                                                                
|-- | ---------------------------------------------------------------
|1. | Organization and Summary of Significant
    Accounting Policies



| |                                           
| | ------------------------------------------
| | Organization and Basis of
    Presentation

Business Objects S.A. (the Company)
was organized in 1990 as a société anonyme,a
corporation, under the laws of the Republic of France. Business
Objects develops, markets and supports business intelligence
solutions. The accompanying consolidated financial statements
include the accounts of the Company and its wholly owned and
majority controlled subsidiaries, after elimination of
intercompany transactions and balances. The consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States,
(U.S. GAAP), applied on a consistent basis.

On December 11, 2003, the Company acquired
Crystal Decisions, Inc. and Seagate Software (Cayman) Holdings
Corporation (SSCH), (collectively Crystal
Decisions) through a series of statutory mergers. The
acquisition of Crystal Decisions is referred to here as the
Crystal Decisions Acquisition and is discussed in
detail in Note 4 hereof.



| |                 
| | ----------------
| | Use of Estimates

The preparation of the financial statements in
conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Estimates are used
for, but are not limited to, revenue recognition, business
combinations, restructuring accruals, impairment of long-lived
assets, contingencies and litigation, allowances for doubtful
accounts and income taxes. Actual results could differ from
those estimates.



| |                                                            
| | -----------------------------------------------------------
| | Translation of Financial Statements of
    Foreign Entities

The functional currency of the Company and its
subsidiaries is the applicable local currency in accordance with
Statement of Financial Accounting Standards (FAS)
No. 52, Foreign Currency Translation,
while the Companys reporting currency is the U.S. dollar.
Assets and liabilities of the Company and its subsidiaries with
functional currencies other than the U.S. dollar are translated
into U.S. dollar equivalents at the rate of exchange in effect
on the balance sheet date. Revenues and expenses are translated
at the weighted average monthly exchange rates throughout the
year. Translation gains or losses are recorded as a separate
component of shareholders equity and transaction gains and
losses are reflected in net income.

Due to the number of currencies involved, the
constant change in currency exposures and the substantial
volatility of currency exchange rates, the effect of exchange
rate fluctuations upon future operating results could be
significant.



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

The Company enters into arrangements for the sale
of: 1) licenses of software products and related
maintenance contracts; 2) bundled license, maintenance and
services; and 3) services on a time and material basis. In
instances where maintenance is bundled with a license of
software products, such maintenance terms are typically one year.

For each arrangement, the Company determines
whether evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable and collection is
probable. If any of these criteria are not met, revenue
recognition is deferred until such time as all of the criteria
are met. In software arrangements that include rights to
multiple software products and/or services, the Company uses the
residual method, under which revenues are allocated to the
undelivered

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


elements based on vendor specific objective
evidence of fair value of such undelivered elements and the
residual amount of revenues are allocated to the delivered
elements.

For those contracts that consist solely of
license and maintenance the Company recognizes net license
revenues based upon the residual method after all licensed
software product has been delivered as prescribed by Statement
of Position 98-9 Modification of SOP No. 97-2 with
Respect to Certain Transactions.The Company
recognizes maintenance revenues over the term of the maintenance
contract. The maintenance rates for both license agreements with
and without stated renewal rates are based upon the
Companys price list. Vendor specific objective evidence of
the fair value of maintenance for license agreements that do not
include stated renewal rates is determined by reference to the
price paid by the Companys customers when maintenance is
sold separately (that is, the renewal rate). Past history has
shown that the rate the Company charges for maintenance on
license agreements with a stated renewal rate is similar to the
rate the Company charges for maintenance on license agreements
without a stated renewal rate.

Services can consist of maintenance, training
and/or consulting services. In all cases, the Company assesses
whether the service element of the arrangement is essential to
the functionality of the other elements of the arrangement. When
software services are considered essential or the arrangement
involves customization or modification of the software, both the
net license and service revenues under the arrangement are
recognized under the percentage of completion method of contract
accounting, based on input measures of hours. For those
arrangements for which the Company has concluded that the
service element is not essential to the other elements of the
arrangement the Company determines whether the services are
available from other vendors, do not involve a significant
degree of risk or unique acceptance criteria and whether the
Company has sufficient experience in providing the service to be
able to separately account for the service. When the service
qualifies for separate accounting, the Company uses vendor
specific objective evidence of fair value for the services and
the maintenance to account for the arrangement using the
residual method, regardless of any separate prices stated within
the contract for each element. Revenues allocable to services
are recognized as the services are performed. Vendor-specific
objective evidence of fair value of consulting services is based
upon average daily rates. As previously noted, the Company
enters into contracts for services alone and such contracts are
based upon time and material basis.

For sales to resellers, value added resellers and
strategic system integrators, there is no right of return or
price protection. The Company does not accept orders from these
partners when the Company is aware that the partner does not
have a purchase order from an end-user. For sales to
distributors that have a right of return, the revenue is
recognized as it is sold to the distributor and the Company
reserves an amount equal to its estimate of all products subject
to rights of return. Some of the factors that are considered in
determining this estimate include historical experience of
returns received and level of inventory in the distribution
channels. The reserve reduces the revenues and the related
receivables. For sales to original equipment manufacturers
(OEMs), revenues are recognized when the OEM reports
sales that have occurred to an end user customer, provided that
collection is probable. Some OEM arrangements include the
payment of an upfront arrangement fee which is deferred and
recognized either ratably over the contractual period or when
the OEM reports sales that have occurred to an end user
customer, in accordance with the contractual terms.

Deferred revenues represent amounts under license
and service arrangements for which the earnings process has not
been completed. These amounts relate primarily to provision of

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


maintenance and technical support services with
future deliverables and arrangements where specified customer
acceptance has not yet occurred.



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

Accounts receivable are stated at cost net of
allowances for doubtful accounts. The Company makes judgments as
to its ability to collect outstanding receivables and provides
allowances for the portion of receivables when collection
becomes doubtful. Provisions are made based upon a specific
review of all significant outstanding invoices. For those
invoices not specifically reviewed, provisions are provided at
differing rates, based upon the age and geography of the
receivable. In determining these percentages, the Company
analyzes its historical collection experience and current
economic trends. Invoices that are unpaid at 210 days past
invoice date are written off.



| |                                          
| | -----------------------------------------
| | Net Income Per Ordinary Share and
    ADS

Basic net income per ordinary share and ADS is
computed using the weighted average number of ordinary shares
outstanding during the period. Diluted net income per ordinary
share and ADS is computed using the weighted average number of
ordinary shares and dilutive ordinary equivalent shares
outstanding during the period using the treasury stock method.
Dilutive ordinary equivalent shares consist of stock options and
warrants where the calculated market price is in excess of the
exercise price of these equity instruments. Net income per
ordinary share and ADS has been adjusted for all periods
presented to reflect the three for two stock split in the form
of a dividend effective March 2001.



| |                                                                         
| | ------------------------------------------------------------------------
| | Cash and Cash Equivalent, Restricted Cash
    and Short-Term Investments

Cash equivalents are highly liquid investments
with original maturity dates of three months or less at the date
of purchase. Investments with maturity dates of greater than
three months but less than one year are considered to be
short-term investments. Restricted cash consists of amounts held
in deposits that are required as collateral under letters of
credit, acquisition agreements and an overdraft credit facility.

In accordance with FAS No. 115,
Accounting for Certain Investments in Debt and Equity
Securities, and based on the Companys intent to
have marketable securities available to support its current
operations, all of the Companys short-term investments are
classified as available-for-sale. All investments are recorded
at amortized cost, which approximates fair value based on quoted
market prices. Material unrecognized holding gains and losses on
available-for-sale securities are recorded net of tax in
shareholders equity until their disposition. Material
realized gains and losses and declines in value judged to be
other than temporary on available-for-sale securities are
included in net interest income. There have been no material
unrecognized or realized holdings gains or losses in 2003, 2002
or 2001.



| |                                     
| | ------------------------------------
| | Derivative Financial
    Instruments

The Company accounts for derivatives in
accordance with FAS No. 133, Accounting for
Derivative Instruments and Hedging Activities
(FAS 133). FAS 133, as amended by FAS No. 149,
requires companies to recognize all derivative instruments as
either assets or liabilities in the balance sheet at fair value.
The accounting for changes in the fair value of a derivative
instrument depends on whether the derivative has been designated
and qualifies as part of a hedging relationship and, further, on
the type of hedging relationship. For those derivative

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


instruments that are designated and qualify as
hedging instruments, a company must designate the hedging
instrument, based upon the exposure being hedged, as a fair
value hedge, cash flow hedge or hedge of a net investment in a
foreign operation.

The Company has entered into forward exchange
contracts to hedge certain forecasted Canadian dollar expenses
against U.S. and Canadian currency fluctuations. At
December 31, 2003, 28% of the Business Objects employee
headcount resided in Canada as a result of the Crystal Decisions
Acquisition. The purpose of these forward contracts is to
protect the Company from risk that the eventual dollar cash
flows resulting from Canadian dollar expenses will be adversely
affected by changes in the exchange rates. At December 11,
2003, a forward contract asset of $1,783,000 existed and was
assumed in the acquisition of Crystal Decisions. All changes in
the fair value of the forward contract asset are charged to the
statement of income. As of December 31, 2003, the Company
held Canadian dollar foreign exchange forward contracts with a
notional amount of $40,300,000. The forward contracts have
semi-monthly maturities from January 2, 2004 to
July 2, 2004. These forward contracts do not qualify for
hedge accounting as the functional currency of the Canadian
subsidiary is Canadian dollars.



| |                      
| | ---------------------
| | Business Combinations

Business Combinations are accounted for in
accordance with FAS No. 141, Business
Combinations(FAS 141) which effectively
requires that the purchase method of accounting for business
combinations be followed. In accordance with FAS 141, the
Company determines the recognition of intangible assets based on
the following criteria: (1) the intangible asset arises
from contractual or other rights, or (2) the intangible is
separable or divisible from the acquired entity and capable of
being sold, transferred, licensed, returned or exchanged. In
conjunction with business combinations, the Company may record
restructuring liabilities of the acquired company in accordance
with Emerging Issues Task Force (EITF) Issue
No. 95-3, Recognition of Liabilities in Connection
with a Purchase Business Combination.These costs
represent liabilities that are recorded as part of the purchase
price allocation for the acquisition.



| |                    
| | -------------------
| | Restructuring Costs

Effective prospectively for exit or disposal
activities initiated after December 31, 2002, FAS
No. 146, Cost Associated with Exit or Disposal
Activities (FAS 146) applies to the
Company. FAS 146 nullifies EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity.
Commitment to a plan to exit an activity or dispose of
long-lived assets will no longer be sufficient to record a
one-time charge for most anticipated costs. FAS 146 requires
that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only
when the liability is incurred. The adoption of FAS 146 may
affect the timing of recognizing any future restructuring costs
as well as the amount recognized.



| |                                   
| | ----------------------------------
| | Goodwill and Intangible
    Assets

Goodwill and other intangible assets are
accounted for in accordance with FAS No. 142
Goodwill and Other Intangible Assets(FAS 142). Under FAS 142, goodwill and
indefinite lived intangible assets are no longer amortized but
instead are reviewed annually for impairment, or more frequently
if impairment indicators arise. Separable intangible assets that
are not deemed to have an indefinite life will continue to be
amortized over their useful lives.

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are stated at cost less
accumulated depreciation and amortization. Office and computer
equipment are depreciated using the straight-line method over
estimated useful lives ranging from three to five years.
Leasehold improvements are amortized over the shorter of the
asset life or the remaining lease term.



| |                                    
| | -----------------------------------
| | Impairment of Long-Lived
    Assets

In October 2001, the FASB issued FAS
No. 144, Impairment of Long-Lived Assets(FAS 144). FAS 144 supercedes FAS
No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of (FAS 121). FAS 144 retains
the requirements of FAS 121 to (a) recognize an
impairment loss only if the carrying amount of a long-lived
asset is not recoverable from its undiscounted cash flows and
(b) measure an impairment loss as the difference between
the carrying amount and the fair value of the asset.
FAS 144 removes goodwill from its scope. There were no
long-lived assets that were considered to be impaired during
2003, 2002 or 2001.



| |                           
| | --------------------------
| | Software Development Costs

The Company capitalizes eligible software
development costs upon achievement of technological feasibility
subject to net realizable value considerations. Based on the
Companys development process, technological feasibility is
generally established upon completion of a working model.
Research and development costs prior to the establishment of
technological feasibility are expensed as incurred. Because the
period between achievement of technological feasibility and the
general release of the Companys products has been of
relatively short duration, costs qualifying for capitalization
were insignificant during 2003, 2002 and 2001. Accordingly,
there were no material capitalized software development costs at
December 31, 2003 and 2002.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject
the Company to credit risk consist primarily of cash
equivalents, short-term investments and accounts receivable. The
Company places its cash equivalents and short-term investments
with high credit-quality financial institutions. The Company
invests its excess cash primarily in bank certificates of
deposit, commercial paper, money market funds and corporate
bonds. The Company has established guidelines relative to credit
ratings, diversification and maturities that seek to maintain
safety and liquidity.

The Company sells its products to many companies
in various industries throughout the world, which minimizes the
concentration of credit risk related to accounts receivables.
The Company performs ongoing credit evaluations of its customers
and maintains allowances for potential credit losses. Such
losses have been within managements expectations. The
Company generally requires no collateral from its customers. The
majority of the Companys license revenues have been
derived from the successive releases of one product family and,
as a consequence, any factor adversely affecting any release of
this product family would have a material adverse effect on the
Company.

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




| |                    
| | -------------------
| | Deferred Tax Assets

Deferred tax assets and liabilities are
recognized for the expected tax consequences of temporary
differences between the tax bases of assets and liabilities and
their reported amounts, using enacted tax rates in effect for
the year, the differences are expected to reverse. The Company
records a valuation allowance to reduce the deferred tax assets
to the amount that is more likely than not to be realized.



| |                          
| | -------------------------
| | Other Current Liabilities

Other current liabilities include accruals for
sales, use and value added taxes, accrued rent, accrued
professional fees, deferred compensation under the
Companys deferred compensation plan and other accruals,
none of which individually account for more than 5% of total
current liabilities.



| |                             
| | ----------------------------
| | Contingencies and Litigation

We evaluate contingent liabilities including
threatened or pending litigation in accordance with FAS
No. 5, Accounting for Contingencies.We
assess the likelihood of any adverse judgments or outcomes to a
potential claim or legal proceeding, as well as potential ranges
of probable losses, when the outcome of the claims or
proceedings are probable and reasonably estimable. A
determination of the amount of accrued liabilities required, if
any, for these contingencies is made after analysis of each
matter. Because of uncertainties related to these matters, we
base our estimates on the information available at the time. As
additional information becomes available, we reassess the
potential liability related to our pending claims and litigation
and may revise our estimates. Any revisions in the estimates of
potential liabilities could have a material impact on our
results of operations and financial position.



| |                     
| | --------------------
| | Comprehensive Income

Accumulated other comprehensive income is
comprised of foreign currency translation gains and losses. The
Company has reported the components of comprehensive income on
the consolidated statements of shareholders equity.



| |                         
| | ------------------------
| | Stock-based Compensation

The Company has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees(APB 25) and
related interpretations in accounting for its employee stock
options. The Company generally grants stock options for a fixed
number of shares to employees with an exercise price equal to
the fair market value of the shares at the date of grant and no
compensation expense is recorded. The Company recognizes
compensation expense for those options granted with an exercise
price less than the fair market value of the underlying common
shares at the date of grant. At December 31, 2003, the
Company had seven approved compensation plans, including two
employee savings purchase plans, which are described in Note 7.

The Company adopted FAS 148, Accounting
for Stock-Based Compensation  Transition and
Disclosure  an Amendment of FASB Statement
No. 123(FAS 148) on December 1,
2002. This statement amends FAS No. 123,
Accounting for Stock-Based Compensation(FAS 123), to provide alternate methods of
transition for an entity that voluntarily changes to the fair
value based method of accounting for stock-based compensation
under FAS 123. In

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


addition, FAS 148 amends the disclosure
requirements of FAS 123 and Accounting Principles Board Opinion
No. 28, Interim Financial Reporting (APB
28) to require prominent disclosure of the effects of an
entitys accounting policy on stock-based employee
compensation on reported net income and net income per ordinary
share in annual and interim financial statements.

The following table sets forth the effect on net
income and net income per ordinary share and ADS if the Company
had accounted for its stock option and stock purchase plans
under the fair value-based method of accounting under FAS 123,
as amended by FAS 148 (in thousands, except per share amounts):

|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                                                                  |  |                        
|                                                                                                                                  |  | Year Ended December 31,
|                                                                                                                                  |  |                        
|                                                                                                                                  |  | 2003                    |         | 2002 |  | 2001
|                                                                                                                                  |  |                         |         |      |  |     
|Net income as reported                                                                                                            |  | $                       | 22,562  |      |  | $    | 40,580  |   |  | $ | 44,878  |  
|Add: Stock-based employee compensation expense
    included in reported net income, net of tax                                    |  |                         | 1,015   |      |  |      |        |   |  |   |        |  
|Deduct: Stock-based employee compensation expense
    determined under the fair value based method for all awards, net
    of tax |  |                         | (26,946 | )    |  |      | (31,782 | ) |  |   | (31,399 | )
|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  
|Pro forma net income (loss)                                                                                                       |  | $                       | (3,369  | )    |  | $    | 8,798   |   |  | $ | 13,479  |  
|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  
|Net income per ordinary share and ADS as
    reported  basic                                                                     |  | $                       | 0.35    |      |  | $    | 0.66    |   |  | $ | 0.74    |  
|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  
|Pro forma net income (loss) per ordinary
    share and ADS  basic                                                                |  | $                       | (0.05   | )    |  | $    | 0.14    |   |  | $ | 0.22    |  
|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  
|Net income per ordinary share and ADS as
    reported  diluted                                                                   |  | $                       | 0.34    |      |  | $    | 0.63    |   |  | $ | 0.70    |  
|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  
|Pro forma net income (loss) per ordinary
    share and ADS  diluted                                                              |  | $                       | (0.05   | )    |  | $    | 0.14    |   |  | $ | 0.21    |  
|                                                                                                                                  |  |                         |         |      |  |      |         |   |  |   |         |  

The stock-based compensation expense included in
reported net income is the result of (a) the amortization
of deferred compensation on unvested options that arose on the
acquisition of Crystal Decisions as further described in Note 4;
and (b) the modification of certain stock option agreements
from their original terms.

The tax benefit for stock-based employee
compensation as calculated under FAS 123 was calculated on the
total pro forma stock-based employee compensation expense at the
effective rate of 38% for all years presented. As this
calculation is based on certain assumptions about the
deductibility of the expense, the timing of the deduction and
the ability to use it, the actual tax benefit could vary
materially from this estimate. If no amount of the tax benefit
were available on the estimated stock-based employee
compensation, pro forma net loss would have been $19,261,000 for
2003 with a net loss per basic and diluted ordinary share and
ADS, respectively, of $0.30 and $0.29. For 2002, pro forma net
loss would have been $10,997,000 with a net loss per basic and
diluted ordinary share and ADS, respectively, of $0.18 and
$0.17. For 2001, pro forma net loss would have been $6,079,000
with a net loss per basic and diluted ordinary share and ADS,
respectively, of $0.10 and $0.09.

For purposes of required pro forma disclosures,
the estimated fair value of the options is amortized to expense
over the options vesting period. The pro forma effects of
applying FAS 123 to the periods presented are not likely to
be representative of the pro forma effects of future periods as
the stock options usually vest over a period of four years, the
number of stock options awarded varies from one period to
another and the Black-Scholes fair value of each award depends
on the assumptions at the grant date.

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




| |                  
| | -----------------
| | Advertising Costs

The Company expenses advertising expenses as
incurred. Advertising expenses totaled $4,843,000, $3,503,000
and $4,112,000 for 2003, 2002 and 2001, respectively.



| |                  
| | -----------------
| | Reclassifications

Certain prior year amounts have been reclassified
to conform to current year presentation.

Recent Accounting Pronouncements



| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Disclosure Requirements Related to Pensions
    and Other Postretirement Benefits

In December 2003, the FASB issued FAS
No. 132, Employers Disclosures about
Pensions and Other Postretirement Benefits  an
amendment of FASB Statements No. 87, 88, and 106(FAS 132). This statement requires
additional disclosures to those in the original FAS 132
about the assets, obligations, cash flows and net periodic
benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. The statement does not change the
measurement or recognition provisions of these statements. As
the Company currently only has a foreign plan, the statement is
effective for financial statements with fiscal years ending
after June 15, 2004. The Company intends to adopt the
additional disclosure requirements by that time.



| |                                                                              
| | -----------------------------------------------------------------------------
| | Financial Instruments with Characteristics
    of Both Liabilities and Equity

In May 2003, the FASB issued FAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity,
(FAS 150) which is effective for all financial
instruments created or modified after May 31, 2003 and
otherwise effective at the beginning of the first interim period
beginning after June 15, 2003. On October 29, 2003,
the FASB deferred for an indefinite period the application of
the guidance in FAS 150 to noncontrolling interests in
limited-life subsidiaries. The FASB decided to defer the
application of FAS 150 to these non-controlling interests
until it could consider some of the resulting implementation
issues associated with the measurement and recognition guidance
for these noncontrolling interests. The statement establishes
standards for classifying and measuring as liabilities certain
financial instruments that embody obligations of the issuer and
have characteristics of both liabilities and equity. The
adoption of FAS 150 did not have a material impact on the
Companys financial position, results of operations or cash
flows.



| |                                                                                
| | -------------------------------------------------------------------------------
| | Amendment of Statement 133 on Derivative
    Instruments and Hedging Activities

In April 2003, the FASB issued FAS No. 149,
Amendment of Statement 133 on Derivative
Instruments and Hedging Activities,
(FAS 149).FAS 149 is intended
to result in more consistent reporting of contracts as either
freestanding derivative instruments subject to
Statement 133 in its entirety, or as hybrid instruments
with debt host contracts and embedded derivative features. In
addition, FAS 149 clarifies the definition of a derivative
by providing guidance on the meaning of initial net investments
related to derivatives. FAS 149 is effective for contracts
entered into or modified after June 30, 2003. The adoption
of FAS 149 did not have a material effect on the
Companys financial position, results of operations or cash
flows.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




| |                           
| | --------------------------
| | Variable Interest Entities

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities, an interpretation of Accounting Research Bulletin
No. 51(FIN 46). FIN 46
establishes accounting guidance for consolidation of variable
interest entities that function to support the activities of the
primary beneficiary. FIN 46 applies to any business
enterprise, both public and private, that has a controlling
interest, contractual relationship or other business
relationship with a variable interest entity. FIN 46 if
effective immediately for all new variable interest entities
created or acquired after January 31, 2003. In December
2003, the FASB issued FIN 46R which superceded FIN 46.
FIN46R will be applicable to all non-SPEs created prior to
February 1, 2003 by Public Entities that are not small
business issuers at the end of the first interim period of the
first annual reporting period ending after March 15, 2004.
We currently have no contractual relationship or other business
relationship with a variable interest entity and therefore the
Company does not expect that the adoption will have an effect on
its consolidated financial position or results of operations.



|   |                                                      
|-- | -----------------------------------------------------
|2. | Cash, Cash Equivalents and Short-term
    Investments

The Companys cash and cash equivalents and
short-term investments are summarized in the table below. Both
holding gains and losses on available-for-sale securities at
December 31, 2003 and 2002 and gross realized gains and
losses on sales of available-for-sale securities during 2003,
2002 and 2001 were not significant.

|                                                            |                                 |                |         |         |  |   |         |         | 
|----------------------------------------------------------- | ------------------------------- | -------------- | ------- | ------- |  | - | ------- | ------- | 
|                                                            |                                 |               
|                                                            |                                 | December 31,  
|                                                            |                                 |               
|                                                            |                                 | 2003           |         | 2002   
|                                                            |                                 |                |         |        
|                                                            |                                 |               
|                                                            |                                 | (in thousands)
|Cash                                                        |                                 | $              | 115,708 |         |  | $ | 9,333   |        
|Cash equivalents:                                           |                                 |                |         |         |  |   |         |        
|Bank certificates of deposit                                |                                 |                | 30,823  |         |  |   | 25,277  |        
|Commercial paper                                            |                                 |                |        |         |  |   | 97,012  |        
|Guaranteed investment certificates                          |                                 |                | 10,725  |         |  |   |        |        
|Money market funds                                          |                                 |                | 78,124  |         |  |   | 102,319 |        
|                                                            |                                 |                |         |         |  |   |         |        
|                                                            | Total cash equivalents          |                |         | 119,672 |  |   |         | 224,608 | 
|                                                            |                                 |                |         |         |  |   |         |        
|                                                            | Total cash and cash equivalents |                |         | 235,380 |  |   |         | 233,941 | 
|                                                            |                                 |                |         |         |  |   |         |        
|Short-term investments:                                     |                                 |                |         |         |  |   |         |        
|Commercial paper                                            |                                 |                |        |         |  |   | 41,405  |        
|Corporate bonds                                             |                                 |                |        |         |  |   | 5,273   |        
|                                                            |                                 |                |         |         |  |   |         |        
|                                                            | Total short-term investments    |                |         |        |  |   |         | 46,678  | 
|                                                            |                                 |                |         |         |  |   |         |        
|Total cash, cash equivalents and short-term
    investments |                                 | $              | 235,380 |         |  | $ | 280,619 |        
|                                                            |                                 |                |         |         |  |   |         |        



|   |                       
|-- | ----------------------
|3. | Property and Equipment

Property and equipment, at cost, consist of the
following (in thousands):

|                              |                                           |              |        |         |   |   |        |         |  
|----------------------------- | ----------------------------------------- | ------------ | ------ | ------- | - | - | ------ | ------- | -
|                              |                                           |             
|                              |                                           | December 31,
|                              |                                           |             
|                              |                                           | 2003         |        | 2002   
|                              |                                           |              |        |        
|Office and computer equipment |                                           | $            | 85,039 |         |   | $ | 62,210 |        
|Leasehold improvements        |                                           |              | 25,842 |         |   |   | 18,762 |        
|                              |                                           |              |        |         |   |   |        |        
|                              | Total property and equipment              |              |        | 110,881 |   |   |        | 80,972  |  
|                              | Accumulated depreciation and amortization |              |        | (49,694 | ) |   |        | (43,631 | )
|                              |                                           |              |        |         |   |   |        |        
|Property and equipment, net   |                                           | $            | 61,187 |         |   | $ | 37,341 |        
|                              |                                           |              |        |         |   |   |        |        

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Depreciation and amortization expense related to
property and equipment totaled $18,269,000, $14,746,000 and
$12,572,000 for 2003, 2002 and 2001, respectively. Fully
amortized assets not in use amounted to $18,872,000 and were
written-off in 2003. The balance of accumulated depreciation and
amortization is impacted by the change on conversion of foreign
denominated balances. As a result of the Crystal Decisions
Acquisition, the Company acquired $25,255,000 of property and
equipment.



|   |             
|-- | ------------
|4. | Acquisitions

In accordance with FAS 141, the Company
allocates the purchase price of its acquisitions to the tangible
assets, liabilities and intangible assets acquired, including
acquired in-process research and development
(IPR&D), based on their estimated fair values.
The excess purchase price over those fair values is recorded as
goodwill.



| |                        
| | -----------------------
| | Crystal Decisions, Inc.

Business Objects, Crystal Decisions, SSCH and
three wholly owned subsidiaries of Business Objects entered into
an Agreement and Plan of Merger, dated as of July 18, 2003,
as amended August 29, 2003 (the Merger
Agreement), pursuant to which Crystal Decisions and SSCH
merged with and into wholly owned subsidiaries of Business
Objects and ceased to exist as separate entities on
December 11, 2003. The results of Crystal Decisions
operations were included in the consolidated financial
statements after that date. The Crystal Decisions Acquisition
was accounted for under the purchase method of accounting.

The total purchase price of $1.2 billion for
the Crystal Decisions Acquisition consisted of $307,642,000 in
cash, approximately 23.3 million newly issued ordinary
shares or ADSs, the fair value of stock options assumed in
connection with the transaction and estimated transaction costs.
Business Objects funded the cash portion of the consideration
for the Crystal Decisions Acquisition using cash on hand. The
Company also assumed options to acquire approximately
6.3 million ADSs in the Crystal Decisions Acquisition that
were outstanding under the Crystal Decisions 1999 Stock Option
Plan at the time the transaction was completed. The basis for
determining the value of the acquisition was set forth in the
Merger Agreement.

The total purchase price of the Crystal Decisions
Acquisition was as follows (in thousands):

|                                                                |  |   |           | 
|--------------------------------------------------------------- |  | - | --------- | 
|Value of Business Objects ordinary shares or ADSs
    issued    |  | $ | 768,609   | 
|Cash paid to former Crystal Decisions and SSCH
    stockholders |  |   | 307,642   | 
|Assumption of Crystal Decisions vested stock
    options        |  |   | 87,739    | 
|Assumption of Crystal Decisions unvested stock
    options      |  |   | 51,378    | 
|Estimated direct transaction costs                              |  |   | 13,933    | 
|                                                                |  |   |           | 
|Total purchase price                                            |  | $ | 1,229,301 | 
|                                                                |  |   |           | 

The purchase price under the Merger Agreement was
fixed and there was no contingent consideration. The value of
Business Objects ordinary shares, or ADSs, of $768,609,000 was
equal to approximately 23.3 million newly issued Business
Objects shares valued at Business Objects average market price
per share of $32.99 at the measurement date. Each Business
Objects ordinary share is convertible at the option of the
holder to one Business Objects ADS. In accordance with EITF
Issue No. 99-12, Accounting for Formula
Arrangements under Issue No. 95-19, Determination of
the Measurement Date for the Market Price of Acquirer Securities
Issued in a Purchase Business Combination, Business
Objects used a measurement date of December 11, 2003, the
date of the completion of the Crystal Decisions Acquisition and
the first

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


date on which the number of Business Objects
shares and amount of cash consideration became fixed without
subsequent revision. The average market price was based on an
average of the closing prices of Business Objects ADSs as
listed on the Nasdaq National Market for the five days up to and
including the measurement date of December 11, 2003.

Business Objects also assumed approximately
6.3 million options held by employees of Crystal Decisions
entitling the holders to purchase approximately 6.3 million
Business Objects ADSs at a weighted average exercise price
of $14.88 (after conversion using the stock option exchange
ratio of 0.4021). The fair value of the outstanding options,
both vested and unvested, was determined using the Black-Scholes
valuation model with the following assumptions: no dividend
yield; a weighted average expected volatility of 66%; and a
risk-free interest rate of 2.03%. The model assumed a weighted
average expected life of 2.4 years for assumed stock
options.

The Company has not identified any
pre-acquisition contingencies where the related asset, liability
or impairment is probable and the amount of the asset, liability
or impairment can be reasonably estimated. Prior to the end of
the purchase price allocation period, if information becomes
available which would indicate it is probable that such events
have occurred and the amounts can be reasonably estimated, such
items will be included in the purchase price allocation.

Estimated direct transaction costs represent
expenses incurred by Business Objects directly related to the
Crystal Decisions Acquisition. The purchase price allocation is
preliminary. The final amount of these costs may change within
the purchase price allocation period if information becomes
known that results in a change in estimate of the transaction
costs, in which case the initial purchase price allocation would
change. This charge will be accounted for as a change to
goodwill.

In accordance with FAS 141, the total
purchase price as shown in the table preceding is allocated to
Crystal Decisions net tangible and intangible assets,
including acquired in-process research and development, based on
their fair values as of the date of the completion of the
Crystal Decisions Acquisition. The following table presents the
preliminary fair value of assets acquired and the liabilities
assumed at the date of acquisition (in thousands):

|                                                   |  |   |           |  
|-------------------------------------------------- |  | - | --------- | -
|Cash and cash equivalents                          |  | $ | 125,315   |  
|Restricted cash                                    |  |   | 8,029     |  
|Accounts receivable, net                           |  |   | 41,726    |  
|Inventories, net                                   |  |   | 482       |  
|Prepaid and other current assets                   |  |   | 7,931     |  
|Property and equipment, net                        |  |   | 25,255    |  
|Accounts payable                                   |  |   | (16,580   | )
|Accrued payroll and related expenses               |  |   | (16,447   | )
|Accrued expenses and other current liabilities     |  |   | (19,881   | )
|Restructuring liability                            |  |   | (13,525   | )
|Incomes taxes payable                              |  |   | (36,837   | )
|Deferred revenues                                  |  |   | (16,888   | )
|Deferred tax liabilities                           |  |   | (27,727   | )
|                                                   |  |   |           |  
|Net tangible assets acquired                       |  |   | 60,853    |  
|Goodwill(1)                                        |  |   | 978,017   |  
|Amortizable intangible assets acquired(2)          |  |   | 142,677   |  
|Deferred compensation on unvested stock options(3) |  |   | 19,788    |  
|Acquired in-process research and development(2)    |  |   | 27,966    |  
|                                                   |  |   |           |  
|Total estimated purchase price allocation          |  | $ | 1,229,301 |  
|                                                   |  |   |           |  

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Business Objects performed a review to determine
whether all tangible assets and liabilities were recorded in
Crystal Decisions general ledger in accordance with
U.S. GAAP. It was estimated that the net book value
approximated fair value pursuant to the guidance within
FAS 141, par. 27. Business Objects estimated the
preliminary value of all intangible assets that meet the
recognition criteria in FAS 141, par. 39. Detailed
discussions were held with Crystal Decisions financial,
operating, marketing and engineering personnel concerning the
nature of the assets acquired. Business Objects also performed
research as to the existence and materiality of possible
intangible assets such as assembled workforce, patents,
trademarks and trade names, customer relationships, non-compete
agreements, developed product technology and in-process research
and development. In addition, Business Objects management
performed analyses of audited and unaudited historical financial
statements, forecasted financial information and other financial
and operational data concerning Crystal Decisions. The fair
value estimates for the identified intangible assets were made
under the assumption that those assets remained a part of a
separate and standalone on-going entity.

The approach to the estimation of the fair value
of Crystal Decisions intangible assets involved the
following steps:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | Preparation of discounted cash flow analysis;                                                                                              
|
| |  | Deduction of the fair value of tangible assets;                                                                                            
|
| |  | Determination of the fair value of identified
    material intangible assets;                                                              
|
| |  | Determination of the fair value of developed
    technology and in-process research and development using a cash
    flow allocation model;
|
| |  | Allocation of the residual purchase price to
    other intangible assets generally in the nature of goodwill; and                          
|
| |  | Reconciliation of the individual assets returns
    with the weighted average cost of capital.                                             

The purchase price allocation to the assets
acquired was made on a fair value basis, in accordance with the
guidelines established in FAS No. 2 Accounting for
Research and Development Costs, FAS 141 and FASB
Interpretations (FIN) No. 4 and No. 6. The
residual value remaining after allocation to the net assets
assumed and the total fair value of identified intangibles
assets was assigned to goodwill.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Goodwill represents the excess of the purchase
    price for Crystal Decisions over the fair value of the
    underlying net tangible and intangible assets. Of the total
    purchase price, $978,017,000 was allocated to goodwill. Goodwill
    is not deductible for tax purposes under U.S. law. In
    accordance with FAS 142, goodwill resulting from business
    combinations completed subsequent to June 30, 2001 is not
    amortized under U.S. GAAP but instead is reviewed annually for
    impairment or more frequently if impairment indicators arise. In
    the event that management determines that the goodwill has
    become impaired, the Company would incur an accounting charge
    for the amount of impairment during the quarter in which the
    determination is made. Goodwill includes a portion of value for
    assembled workforce which is not separately classified from
    goodwill in accordance with FAS 142.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Of the total purchase price, $170,643,000 was
    allocated to the fair value of intangible assets, including
    acquired in-process research and development. This amount
    excludes goodwill. Under FAS 142, separable intangible
    assets that are not deemed to have an indefinite life are
    amortized over their estimated useful lives. The intangible
    assets acquired and their useful lives were as follows (in
    thousands):

|                                             |  |            |         |             |  |  |         | 
|-------------------------------------------- |  | ---------- | ------- | ----------- |  |  | ------- | 
|                                             |  |            |         | Estimated  
|                                             |  | Fair Value |         | Useful Life
|                                             |  |            |         |            
|Developed technology                         |  | $          | 92,560  |             |  |  | 5 years | 
|Trade names                                  |  |            | 6,377   |             |  |  | 5 years | 
|Maintenance and support contracts            |  |            | 43,740  |             |  |  | 5 years | 
|                                             |  |            |         |             |  |  |         | 
|Total amortizable assets                     |  | $          | 142,677 |             |  |  |         | 
|Acquired in-process research and development |  |            | 27,966  |             |  |  |         | 
|                                             |  |            |         |             |  |  |         | 
|Total intangible assets acquired             |  | $          | 170,643 |             |  |  |         | 
|                                             |  |            |         |             |  |  |         | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The IPR&D represented projects that had not
    reached technological feasibility and had no future alternative
    uses. These were classified as IPR&D and expensed in the
    fourth quarter of 2003 at the time of acquisition in accordance
    with FIN No. 4, Applicability of FASB Statement
    No. 2 to Business Combinations Accounted for by the
    Purchase Method, (FIN 4).The
    majority of value of IPR&D related to the development and
    completion of versions 10 and 11 of certain Crystal
    Decisions products. The nature of the efforts required to
    develop the IPR&D into commercially viable products included
    the completion of all planning, designing, prototyping,
    verification and testing activities necessary to establish that
    the products meet their design specifications, including
    functions, features and technical performance requirements. At
    December 11, 2003, version 10 products were
    approximately 89% complete, with estimated costs to complete of
    approximately $3.2 million. Business Objects expects the
    Crystal Decisions version 10 products to be completed by
    June 30, 2004. At December 11, 2003, the Crystal
    Decisions version 11 products were approximately 8%
    complete, with estimated costs to complete of approximately
    $25.8 million. Business Objects currently expects version
    11 products to be completed by the end of 2004. There have been
    no significant changes to the above information to
    December 31, 2003.
|
| | Costs to restructure Crystal Decisions were
    accounted for in accordance with EITF No. 95-3,
    (EITF 95-3) Recognition of Liabilities
    in Connection with a Purchase Business Combination.Restructuring costs related to estimated costs associated
    with Crystal Decisions exit activities totaled $13,525,000
    which represented a liability to Business Objects on the closing
    of the Crystal Decisions Acquisition. These costs were recorded
    as liabilities assumed as part of the purchase price allocation.
    The restructuring liabilities related to severance, other
    employee benefits and relocation costs related to Crystal
    Decisions employees, costs of vacating some Crystal Decisions
    facilities, or other costs associated with exiting activities of
    Crystal Decisions. The severance and other employee benefits
    related to the planned termination of 194 employees worldwide.
    Other related restructuring charges consisted primarily of the
    cost of vacating duplicate facilities, including future minimum
    lease payments, net of sublease income. The Company plans to pay
    the remaining liability related to severance and other related
    benefits during 2004. Should the estimates of restructuring
    costs set up as a purchase price liability change within the                                                                                                                                                                                              

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | purchase price allocation period, there will be a
    resulting change to the balance of goodwill. See Note 13
    for further information.



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (3) | Deferred compensation, or unearned compensation
    cost, on assumed unvested options was based on the portion of
    the intrinsic value (market price less the exercise price) as
    calculated on December 11, 2003 related to the future
    vesting period of the stock options. In accordance with FIN
    No. 44, Accounting for Certain Transactions
    Involving Stock Compensation, an Interpretation of APB
    No. 25, the market price used to calculate the
    intrinsic value was the closing price of Business Objects
    ADSs as quoted on the Nasdaq National Market on
    December 11, 2003, which was $33.22. Unearned compensation
    cost was calculated as the aggregate value of the replacement
    awards at December 11, 2003 multiplied by the ratio of
    remaining service period to the total service period, the latter
    being 48 months. This calculation was done on an option
    grant by option grant basis. The amortization of non-cash
    stock-based compensation expense is reflected in the cost of
    revenues and applicable operating expense lines of the
    statements of income.

The following pro forma combined results of
operations for the years ended December 31, 2003 and 2002
are presented as if the Crystal Decisions Acquisition had
occurred at the beginning of each period. The charges associated
with acquired in-process research and development have not been
reflected in the following pro forma summary as they are
non-recurring.

|                                                    |  |              |         |      |  |   |         | 
|--------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                                    |  |             
|                                                    |  | Year Ended  
|                                                    |  | December 31,
|                                                    |  |             
|                                                    |  | 2003         |         | 2002
|                                                    |  |              |         |     
|Net revenues                                        |  | $            | 846,339 |      |  | $ | 708,568 | 
|Income before provision for income taxes            |  | $            | 53,972  |      |  | $ | 56,299  | 
|Net income                                          |  | $            | 33,325  |      |  | $ | 31,359  | 
|Net income per ordinary share and ADS 
    basic   |  | $            | 0.38    |      |  | $ | 0.37    | 
|                                                    |  |              |         |      |  |   |         | 
|Net income per ordinary share and ADS 
    diluted |  | $            | 0.36    |      |  | $ | 0.35    | 
|                                                    |  |              |         |      |  |   |         | 



| |                      
| | ---------------------
| | Acta Technology, Inc.

On August 23, 2002, the Company acquired all
the outstanding shares of Acta Technology, Inc.
(Acta or Acta Technology), a
privately-held data integration software vendor. The results of
Actas operations have been included in the consolidated
financial statements since that date. The acquisition provided
Business Objects with a comprehensive enterprise analytic
platform for the delivery of custom-developed and pre-packaged
analytic applications. The aggregate purchase price was
$65,465,000 of cash, including $700,000 of transactions costs.
Of the purchase price, $9,310,000 was placed in an escrow
account for the benefit of former Acta stockholders. In
addition, another $944,000 was placed in an employee escrow
account, representing withholdings from payments due to Acta
management pursuant to change of control clauses and other
employees future bonuses. Both funds are security for the
indemnification obligations set forth in the merger agreement
and will be available for release in February 2004, subject to
any open or pending claims for indemnification. As further
described in Note 6, Informatica Corporation has filed an
action for alleged patent infringement against Acta Technology
and as such the full amounts held in escrow are not available
for release. The Company has accounted for the escrow funds on
its consolidated balance sheet as short-term restricted cash and
it has recorded a related short-term liability for $9,310,000
due to former Acta

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Technology stockholders and $418,000 due to
employees. See Note 14 for a summary of the balance of
outstanding notes payable related to this acquisition.

The acquisition was accounted for under the
purchase method of accounting and the total purchase price was
allocated as follows: $4,500,000 to developed technology,
$2,700,000 to maintenance contracts  both of which
are being amortized to cost of services revenues over their five
year estimated useful lives, and $61,556,000 to goodwill, which
under FAS 142 will not be amortized but instead reviewed
annually for impairment. During 2003, a reduction in estimated
future minimum lease payments for the property previously
occupied by Acta Technology employees resulted in the reduction
of goodwill of $2,741,000 as the amount was determined during
the purchase price allocation period. In addition, acquired
in-process research and development of $2,000,000 was
written-off in 2002 related to this acquisition.



| |                   
| | ------------------
| | Blue Edge Software

During December 2001, the Company acquired all
the outstanding shares of Blue Edge Software (Blue
Edge), a privately-held software company based in Leeds,
England, that developed and marketed applications that
specialize in web-based information delivery. The purchase was
undertaken to extend the Companys information delivery
capabilities by leveraging Blue Edges information
distribution architecture to provide intuitive report access,
navigation and analysis to further empower both passive and
interactive information consumers. The total purchase price,
including direct acquisition costs, was $6,728,000 consisting of
$4,400,000 of cash, notes payable totaling $1,768,000 and
$560,000 of assumed liabilities and transaction costs. The notes
which were fully repaid in 2003 were partially secured by a
restricted escrow account, which was released. The acquisition
was accounted for under the purchase method of accounting and
the total purchase price was allocated as $5,091,000 to
developed technology that is being amortized to cost of service
revenues over its five year estimated useful life, $1,137,000
allocated to employment related contingencies that were
amortized to research and development expense over the term of
the related notes payable and $500,000 allocated to goodwill.
Key elements of the purchase that were not valued separately in
purchase accounting, such as the members of the Blue Edge
management team and workforce, contributed to the generation of
goodwill.



| |                              
| | -----------------------------
| | Other Prior Year Acquisitions

The Company has previously entered into, and may
in the future enter into, other acquisitions. Previously
disclosed acquisitions completed by Business Objects prior to
2001 include: Executive Computing Group, Olap@Work and Next
Action Technology. The consolidated financial statements of the
Company include goodwill and intangible assets, and the
amortization thereof, related to these acquisitions.

5.     Goodwill and
Other Intangible Assets

Goodwill represents the excess purchase price for
net tangible and intangible assets acquired in business
combinations over their estimated fair value. Other intangible
assets primarily represent developed technology, acquired
maintenance and support contracts, employment contracts and
trade names. In accordance with FAS 142, goodwill and
purchased intangible assets with indefinite useful lives
acquired after June 30, 2001 are not amortized but instead
reviewed at least annually for impairment. Purchased intangible
assets with finite lives are amortized on a straight-line basis
over their estimated useful lives.

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


In June 2003, the Company performed the required
annual impairment test for goodwill and concluded that no
impairment existed. The test consisted of a comparison of the
fair value of the consolidated Company with its carrying value
including goodwill. The fair value of the reporting unit was
determined based on the income approach, which estimates the
fair value based on the estimated future discounted cash flows.
Under the income approach, the Company assumed a cash flow
period of 5 years, long-term annual growth rates of 8% to
10%, a discount rate of 35% and terminal value growth rates of
1.5%. Based on the analysis, the Company determined that the
fair value of goodwill was in excess of the carrying amount. In
December 2003, management assessed that there were no indicators
of impairment.

The following table presents the change in the
carrying value of net goodwill (in thousands):

|                                                                                                              |  |              |           |      |  |   |        | 
|------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- | ---- |  | - | ------ | 
|                                                                                                              |  |             
|                                                                                                              |  | December 31,
|                                                                                                              |  |             
|                                                                                                              |  | 2003         |           | 2002
|                                                                                                              |  |              |           |     
|Balance as of the beginning of the year                                                                       |  | $            | 75,416    |      |  | $ | 13,648 | 
|Add: Goodwill acquired during the year
    (Note 4)                                                           |  |              | 978,017   |      |  |   | 61,556 | 
|Reduction in carrying value of Acta goodwill
    related to savings from early termination of lease (Note 13) |  |              | (2,741    | )    |  |   |       | 
|Impact of foreign currency fluctuations on
    goodwill                                                       |  |              | 419       |      |  |   | 212    | 
|                                                                                                              |  |              |           |      |  |   |        | 
|Balance as of the end of the year                                                                             |  | $            | 1,051,111 |      |  | $ | 75,416 | 
|                                                                                                              |  |              |           |      |  |   |        | 

During the fourth quarter of 2003, the Company
completed the Crystal Decisions Acquisition, resulting in
goodwill of $978,017,000 as previously described in Note 4.
During 2002, as further described in Note 4, the Company
acquired Acta Technology resulting in $61,556,000 of goodwill.
The Company reduced the carrying value of Acta goodwill by
$2,741,000 in 2003 to reflect a reduction in estimate of the
future minimum lease payments for its Mountain View, California
facility as further described in Note 6 
Agreement to Terminate Lease.

Other intangible assets, at cost, consisted of
the following (in thousands):

|                                  |                               |              |         |         |   |   |        |        |  
|--------------------------------- | ----------------------------- | ------------ | ------- | ------- | - | - | ------ | ------ | -
|                                  |                               |             
|                                  |                               | December 31,
|                                  |                               |             
|                                  |                               | 2003         |         | 2002   
|                                  |                               |              |         |        
|Employment contracts              |                               | $            | 7,434   |         |   | $ | 7,434  |       
|Developed technology              |                               |              | 102,151 |         |   |   | 9,591  |       
|Maintenance and support contracts |                               |              | 46,440  |         |   |   | 2,700  |       
|Trade names                       |                               |              | 6,377   |         |   |   |       |       
|                                  |                               |              |         |         |   |   |        |       
|                                  | Total other intangible assets |              |         | 162,402 |   |   |        | 19,725 |  
|                                  | Accumulated amortization      |              |         | (13,259 | ) |   |        | (8,915 | )
|                                  |                               |              |         |         |   |   |        |       
|Other intangible assets, net      |                               | $            | 149,143 |         |   | $ | 10,810 |       
|                                  |                               |              |         |         |   |   |        |       

The aggregate intangible amortization expense was
$4,344,000, $3,363,000 and $1,468,000 for 2003, 2002 and 2001,
respectively. Employment contracts are amortized over periods
ranging from one to three years and are amortized to the
statement of income based on the department of employee under
employment contracts. Developed technology and maintenance and
support contracts are amortized to cost of services revenues
over their estimated useful lives which is generally five years.
Trade names are amortized to operating expenses over their
estimated useful lives which is five years. Intangible assets
are classified as net of related amortization on the
consolidated balance sheets.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


The estimated amortization expense for
amortizable intangibles for the next five years is as follows
(in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2004 |  | $ | 31,057 | 
|2005 |  | $ | 30,885 | 
|2006 |  | $ | 30,885 | 
|2007 |  | $ | 29,411 | 
|2008 |  | $ | 26,905 | 

The following table sets forth the required pro
forma disclosures of the effect on net income and net income per
ordinary share and ADS to exclude goodwill amortization
recognized prior to the adoption of FAS 142 on
January 1, 2002 (in thousands, except per ordinary share
and ADS amounts):

|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 
|---------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                                                   |  |                        
|                                                                                   |  | Year Ended December 31,
|                                                                                   |  |                        
|                                                                                   |  | 2003                    |        | 2002 |  | 2001
|                                                                                   |  |                         |        |      |  |     
|Reported net income                                                                |  | $                       | 22,562 |      |  | $    | 40,580 |  |  | $ | 44,878 | 
|Add back: goodwill amortization, net of tax
    benefit of $1,500 for fiscal 2001. |  |                         |       |      |  |      |       |  |  |   | 2,992  | 
|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 
|Adjusted net income                                                                |  | $                       | 22,562 |      |  | $    | 40,580 |  |  | $ | 47,870 | 
|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 
|Net income per ordinary share and
    ADS  basic:                                 |  |                         |        |      |  |      |        |  |  |   |        | 
|Reported                                                                           |  | $                       | 0.35   |      |  | $    | 0.66   |  |  | $ | 0.74   | 
|Add back: goodwill amortization, net of tax
    benefit                            |  |                         |       |      |  |      |       |  |  |   | 0.05   | 
|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 
|Adjusted                                                                           |  | $                       | 0.35   |      |  | $    | 0.66   |  |  | $ | 0.79   | 
|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 
|Net income per ordinary share and
    ADS  diluted:                               |  |                         |        |      |  |      |        |  |  |   |        | 
|Reported                                                                           |  | $                       | 0.34   |      |  | $    | 0.63   |  |  | $ | 0.70   | 
|Add back: goodwill amortization, net of tax
    benefit                            |  |                         |       |      |  |      |       |  |  |   | 0.04   | 
|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 
|Adjusted                                                                           |  | $                       | 0.34   |      |  | $    | 0.63   |  |  | $ | 0.74   | 
|                                                                                   |  |                         |        |      |  |      |        |  |  |   |        | 



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



| |            
| | -----------
| | Commitments

The Company leases its facilities and certain
equipment under operating leases that expire at various times
through 2021. Future minimum lease payments under operating
leases due for the years ending December 31, net of
sublease income under non-cancelable agreements and excluding
lease commitments accrued as part of the Crystal Decisions
Acquisition facilities shutdown accrual (see Note 13), are
as follows (in thousands):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2004       |  | $ | 33,440  | 
|2005       |  |   | 29,873  | 
|2006       |  |   | 26,939  | 
|2007       |  |   | 25,784  | 
|2008       |  |   | 24,781  | 
|Thereafter |  |   | 51,129  | 
|           |  |   |         | 
|Total      |  | $ | 191,946 | 
|           |  |   |         | 

Rent expense, net of sublease income, under all
operating leases was $26,884,000, $22,848,000, and $19,968,000
for 2003, 2002 and 2001, respectively. Sublease income totaled
$2,689,000, $3,317,000 and $3,366,000 for 2003, 2002 and 2001,
respectively. The total future minimum sublease rental income
estimated to be earned under all non-cancelable subleases at
December 31, 2003 was $2,744,000, $2,137,000 and $1,962,000
for 2004, 2005 and 2006, respectively, and an aggregate of
$4,621,000 thereafter.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


The Company leases certain facilities under
operating leases that contain free rent periods and or rent
escalation clauses. Rent expense under these leases has been
recorded on a straight-line basis over the lease term. The
difference between amounts paid and rent expense is recorded as
accrued rent and is included in other current liabilities and as
long-term accrued rent. The total liability for accrued rent was
$5,376,000 and $9,492,000 at December 31, 2003 and 2002,
respectively. The Companys obligations under its
San Jose, California, lease facility are collateralized by
letters of credit totaling $6,954,000. The letters of credit are
renewable and are secured by restricted cash. See Note 14.



| |                             
| | ----------------------------
| | Agreement to Terminate Lease

On July 15, 2002, the Santa Clara Valley
Transportation Authority (VTA) initiated an action
against John A. Sobrato (Landlord) et al. in
the Santa Clara County Superior Court Case
No. CV 809425 seeking to take by eminent domain
property in which the Company owned a leasehold interest as a
result of its acquisition of Acta Technology. The Company
subsequently became a party to this condemnation action. The
disputed issue related to the permissible time for termination
of the lease. During 2003, the parties agreed to settle the
matter in accordance with an agreement, under which the
effective termination of the lease was August 31, 2003.
During the third quarter of 2003, the Company paid the VTA the
sum of $1,671,000, and this amount, plus $351,000 in regular
lease payments in the U.S. and U.K., for Acta Technology,
reduced the restructuring accrual. Upon termination of the
lease, the remaining $2,741,000 accrual related to the Mountain
View facility, was reversed as an adjustment to goodwill. See
Note 5, Goodwill and Other Intangible Assets, and
Note 13, Restructuring Costs.



| |              
| | -------------
| | Legal matters

On October 17, 2001, the Company filed a
lawsuit in the United States District Court for the Northern
District of California against MicroStrategy Incorporated
(MicroStrategy) for alleged patent infringement. The
lawsuit alleges that MicroStrategy infringes on the
Companys U.S. Patent No. 5,555,403 by making, using,
offering to sell and selling its product currently known as
MicroStrategy Version 7.0. The Companys complaint
requested that MicroStrategy be enjoined from further infringing
the patent and seeks an as-yet undetermined amount of damages.
On June 27, 2003, MicroStrategy filed a motion for summary
judgment that its products do not infringe the Companys
patent. On August 29, 2003, the Court ruled that the
Companys patent is not literally infringed and that the
Company was estopped from asserting the doctrine of equivalents
and dismissed the case. The Company has appealed the
Courts judgment to the Court of Appeals for the Federal
Circuit and anticipate a ruling on the appeal in early 2005. The
Company cannot reasonably estimate at this time whether a
monetary settlement will be reached.

On October 30, 2001, MicroStrategy filed an
action for alleged patent infringement in the United States
District Court for the Eastern District of Virginia against the
Company and its subsidiary, Business Objects Americas. The
complaint alleges that the Companys software products,
BusinessObjects Broadcast Agent Publisher, BusinessObjects
Broadcast Agent Scheduler and BusinessObjects Infoview, infringe
MicroStrategys U.S. Patent Nos. 6,279,033 and
6,260,050. In December 2003, the Court dismissed
MicroStrategys claim of infringement on U.S. Patent
No. 6,279,033 without prejudice. Trial on U.S. Patent
No. 6,260,050 originally set for April 12, 2004 has
been continued by the Court to June 2004. The Company believes
that it has valid defenses to this action and will continue to
defend it vigorously. The potential costs associated with an
adverse outcome cannot be reasonably estimated at this time.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


In April 2002, MicroStrategy obtained leave
to amend its patent claims against the Company to include claims
for misappropriation of trade secrets, violation of the Computer
Fraud and Abuse Act, tortuous interference with contractual
relations and conspiracy in violation of the Virginia Code
seeking injunctive relief and damages. On December 30,
2002, the Court granted the Companys motion for summary
judgment and rejected MicroStrategys claims for damages as
to the causes of action for misappropriation of trade secrets,
Computer Fraud and Abuse Act and conspiracy in violation of the
Virginia Code. Trial of the trade secret claim for injunctive
relief and the sole remaining damages claim for tortious
interference with contractual relations started on
October 20, 2003. On October 28, 2003, the Court
granted judgment as a matter of law in favor of the Company and
dismissed the jury trial on MicroStrategys allegations
that the Company tortiously interfered with certain employment
agreements between MicroStrategy and its former employees. The
Court took MicroStrategys claim for misappropriation of
trade secrets under submission and has yet to rule. The only
relief which remains available under the Courts prior
rulings is for an injunction. MicroStrategy also seeks an award
of its attorneys fees in an undisclosed amount, should
they prevail on the injunction claim. The Company does not
believe that any attorneys fees awarded will be material.

On December 10, 2003, MicroStrategy filed an
action for patent infringement against Crystal Decisions in the
United States District Court for the District of Delaware. The
Company became a party to this action when it acquired Crystal
Decisions on December 11, 2003. The complaint alleges that
the Crystal Decisions software products Crystal Enterprise,
Crystal Reports, Crystal Analysis and Crystal Applications
infringe MicroStrategys U.S. Patent
Nos. 6,279,033, 6,567,796 and 6,658,432. The complaint
seeks relief in the form of an injunction, unspecified damages,
an award of treble damages and attorneys fees. The
Companys investigation of this matter is at a preliminary
stage and no discovery has been obtained. As a result, the
Company is not in a position to opine as to the merits of the
suit or the potential exposure to the Company. The Company
intends vigorously to defend this case.

The Company became party to the following action
when it acquired Crystal Decisions in December 2003. In
November 1997, Vedatech Corporation (Vedatech)
commenced an action in the Chancery Division of the High Court
of Justice in the United Kingdom against Crystal Decisions (UK)
Limited, now a wholly owned subsidiary of Business Objects
Americas. The liability phase of the trial was completed in
March 2002, and Crystal Decisions prevailed on all claims
except for the quantum meruit claim. The court ordered the
parties to mediate the amount of that claim and, in
August 2002, the parties came to a mediated settlement. The
mediated settlement was not material to Crystal Decisions
operations and contained no continuing obligations. In September
2002, however, Crystal Decisions received a notice that Vedatech
was seeking to set aside the settlement. The mediated settlement
and related costs were accrued in the consolidated financial
statements. In April 2003, Crystal Decisions filed an
action in the High Court of Justice seeking a declaration that
the mediated settlement agreement is valid and binding. In
connection with this request for declaratory relief Crystal
Decisions paid the agreed settlement amount into court.

In October 2003, Vedatech and Mani
Subramanian filed an action against Crystal Decisions, Crystal
Decisions (UK) Limited and Susan J. Wolfe, Vice President,
General Counsel and Secretary of Crystal Decisions, in the
United States District Court, Northern District of California,
San Jose Division, alleging that the August 2002
mediated settlement was induced by fraud and that the defendants
engaged in negligent misrepresentation and unfair competition.
In October 2003, Crystal Decisions (UK), Crystal Decisions
(Japan) K.K. and Crystal Decisions filed an application with the
High Court of Justice claiming the proceedings in the United
States

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


District Court, Northern District of California,
San Jose Division were commenced in breach of an exclusive
jurisdiction clause in the settlement agreement and requesting
injunctive relief to restrain Vedatech from pursuing the United
States District Court proceedings. A hearing in the High Court
of Justice took place in January 2004 to determine whether
the injunction should be granted. The hearing was continued, and
concluded March 9, 2004. The court has not yet rendered its
decision.

Although Business Objects believes that
Vedatechs basis for seeking to set aside the mediated
settlement and its claims in the October 2003 complaint is
meritless, the outcome cannot be determined at this time. If the
mediated settlement were to be set aside such an outcome
adversely affect Business Objects financial position,
liquidity and results of operations.

On July 15, 2002, Informatica Corporation
(Informatica) filed an action for alleged patent
infringement in the United States District Court for the
Northern District of California against Acta Technology. The
Company became a party to this action when it acquired Acta
Technology in August 2002. The complaint alleges that the
Acta Technology software products infringe Informaticas
U.S. Patent Nos. 6,014,670, 6,339,775 and 6,208,990. On
July 17, 2002, Informatica filed an amended complaint
alleging that the Acta software products also infringe U.S.
Patent No. 6,044,374. The complaint seeks relief in the
form of an injunction, unspecified damages, an award of treble
damages and attorneys fees. The Company has answered the
suit, denying infringement and asserting that the patents are
invalid and other defenses. The Company intends to defend itself
vigorously. The potential costs associated with an adverse
outcome of this matter cannot be reasonably estimated at this
time. The August 16, 2004 trial date previously set by the
Court has been vacated.

The Company is also involved in various other
legal proceedings in the ordinary course of business and none
are believed to be material to its financial condition and
results of operations. Where the Company believes a loss is
probable and can be reasonably estimated, the estimated loss is
accrued in the consolidated financial statements. Where the
outcome of these matters is not determinable no provision is
made in the financial statements until the loss, if any, is
probable and can be reasonably estimated or the outcome becomes
known.



|   |                     
|-- | --------------------
|7. | Stockholders Equity



| |                          
| | -------------------------
| | Share Repurchase Programs

On May 15, 2003, the general meeting of
shareholders of the Company authorized a share repurchase
program under which the Board of Directors authorized the
repurchase of up to 5,000,000 of its ordinary shares at a
maximum purchase price of
25.00 per share
for a period of eighteen months ending on November 15,
2004. This share repurchase program does not allow the aggregate
repurchase price to exceed
75 million
or the U.S. dollar equivalent. This authorization
supercedes the share repurchase program previously authorized by
the general meeting of shareholders held on June 5, 2002.
No repurchases occurred during 2003.

On June 5, 2002, the general meeting of
shareholders of the Company authorized the repurchase of up to
2,000,000 of its ordinary shares at a maximum purchase price of
70.00 per share.
On September 29, 2002, the Board of Directors authorized
the repurchase of up to U.S. $50,000,000 or the euro
equivalent of its ordinary shares. In compliance with the Board
of Directors authorization, the Company had the option to
repurchase up to 2,000,000 of its ordinary shares at a price not
to exceed 20.00
per share. This program superceded the stock repurchase program
previously announced in September 2001. Under the foregoing
mentioned

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Board authorization and during
November 2002, the Company repurchased a total of 250,000
ordinary shares for an aggregate cost of $4,055,000 on the
Premier Marchéof Euronext Paris S.A. There were no
other repurchases before expiration of the authorization.

On September 19, 2001, the Board of
Directors authorized the repurchase of up to 2,000,000 of its
ordinary shares at a maximum price of
60.00 per share,
in accordance with the shareholders authorization of
June 12, 2001. In September 2001, the Company
repurchased a total of 243,175 ordinary shares for an aggregate
cost of $4,438,000 on the Premier Marchéof Euronext
Paris S.A.



| |                                   
| | ----------------------------------
| | Stock Option Exchange
    Programs

2002 Stock
Option Exchange Program

On October 11, 2002, the Company announced a
voluntary stock option exchange program for its eligible
employees. This program included two separate offers: one to
eligible France based employees (the 2002 French
Offer) and the other to eligible international employees
including employees in the United States (the 2002
International Offer). Pursuant to the terms and conditions
of each offer, as amended, eligible employees were given the
opportunity to renounce the right to the benefit of all
outstanding stock options having an exercise price of
30.00 per share
or higher granted under the Business Objects S.A. 1999 and 2001
Stock Option Plans, as amended. In exchange new options were
granted on May 22, 2003 equal to the amount obtained by
multiplying the number of shares to which a benefit had been
renounced by the applicable exchange percentage. If an eligible
employee renounced the right to the benefit of any one option,
the employee was required to renounce the right to the benefit
of all options granted to the employee during the six-month
period prior to the commencement of the offer regardless of the
options exercise prices.

Both offers expired on November 19, 2002. In
total, the Company accepted for cancellation options to
subscribe to 2,773,279 ordinary shares and granted an aggregate
of 1,034,126 new options. Pursuant to the 2002 International
Offer, the Company accepted for cancellation options to
subscribe to 2,464,537 ordinary shares and granted 912,610 new
options with an exercise price of
17.30 per share,
except for Italian-based employees who received new options with
an exercise price of
19.32 per share
in accordance with the terms of the exchange agreement. Pursuant
to the 2002 French Offer, the Company accepted for cancellation
options to subscribe to 308,742 ordinary shares and granted
121,516 new options with an exercise price of
18.39 per share.
All grants were made either at or above the fair market value of
the ordinary shares on the date of grant.

The new options granted under the 2002
International Offer retained the vesting schedule of the old
options they replaced. The new options granted under the 2002
French Offer retained substantially the same vesting schedule as
the old options, except that the new options do not become
exercisable until one year following the date of grant of the
new options.

The offers were not available to: (i) the
Companys officers who were also members of our Board of
Directors; (ii) former employees; and (iii) any of the
Companys employees resident in Sweden and Switzerland. In
addition, new options were not granted to individuals who were
not employees of Business Objects S.A. or one of our affiliates
as of the grant date of the new options.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


2001 Stock
Option Exchange Program

On May 16, 2001, the Company announced a
voluntary stock option exchange program for its eligible
employees. This program included two separate offers: one to
eligible France based employees (the 2001 French
Offer) and the other to eligible international employees
including employees in the United States (the 2001
International Offer). Pursuant to the terms and conditions
of each offer, eligible employees were given the opportunity to
renounce the right to the benefit of all outstanding stock
options granted on or after January 1, 2000 under the
Business Objects S.A. 1999 Stock Option Plan, as amended, in
exchange for an equal number of new options to be granted on or
after December 18, 2001. If an employee renounced the right
to the benefit of any one option, the employee was required to
renounce the right to the benefit of all options granted to the
employee during the six-month period prior to the cancellation
of any options. Both offers expired June 14, 2001. A total
of 140 eligible employees elected to participate in the 2001
French Offer, representing a total of 329,287 options. A total
of 301 eligible employees elected to participate in the 2001
International Offer, representing 1,083,554 options. As a result
of the two separate offers, an aggregate of 441 eligible
employees tendered an aggregate of 1,412,841 options in return
for the promise to grant new options.

On December 18, 2001, the Company regranted
the cancelled options. Under the 2001 French Offer, a total of
314,137 options with an exercise price of
36.60 per share
were regranted. Under the 2001 International Offer, a total of
1,068,015 options were regranted with an exercise price of
36.60 per share,
except for Italian-based employees where the exercise price was
set at 37.94 per
share in accordance with Italian tax regulations. Fewer options
were regranted than were canceled due to employee terminations.

The exercise price of the new options was
calculated as 100% of the closing price of the Companys
ordinary shares as reported on the Premier Marché on
the last trading day before the date of grant, as was required
under French law. In addition, for eligible employees who were
Italian-based employees, the exercise price per share could not
have been less than 100% of the average of the closing prices of
the Companys ordinary shares on the Premier
Marché over the thirty days preceding the grant date.

The new options granted under the 2001
International Offer retained the vesting schedule of the options
they replaced. The new options granted under the 2001 French
Offer retained substantially the vesting schedule of the old
options they replaced, except that the new options did not
become exercisable until one year following the date of grant of
the new options.

The programs were not available to:
(i) members of the Companys extended executive
committee, (ii) employees with general management and/or
management responsibility for multiple countries,
(iii) employees with general sales management
responsibility for named strategically important countries, (iv)
employees responsible for sales representing 10% or more of the
Companys consolidated budget revenues for fiscal 2001,
(v) former employees, and (vi) any of the
Companys employees who were resident in Belgium or
Switzerland. In addition, new options were not granted to
individuals who were not employees as of the grant date of the
new options.

Stock
Splits.During February
2001, the Companys shareholders and Board of Directors
approved a three for two stock split in the form of a dividend
of its ordinary shares and ADSs, which was effective on
March 12, 2001. Because the three for two stock split was
in the form of a dividend, the nominal value per share and ADS
was not adjusted. During January 2000, the Companys
shareholders and Board of Directors approved a two for one stock
split, for which

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


the nominal value per share and ADS was adjusted.
The split was effective January 20, 2000. All share and per
share information has been adjusted to give effect to both
splits.

Dividend Rights.Net income in each year after
deduction for legal reserves is available for distribution to
shareholders of the Company as dividends, subject to the
requirements of French law and the Companys
statuts, or bylaws. Dividends may also be distributed
from reserves of the Company, subject to approval by the
shareholders and certain limitations. Payment of dividends is
fixed by the ordinary general meeting of shareholders at which
the annual accounts are approved following recommendations of
the Board of Directors. If net income is sufficient, the Board
of Directors has the authority, subject to French law and
regulation and without the approval of shareholders, to
distribute interim dividends. The Company has not distributed
any dividends since its inception.

The Company is required to maintain a legal
reserve equal to 10% of the aggregate nominal value of its
issued share capital. This legal reserve is funded by the
transfer of at least 5% of the Companys net income per
year to such legal reserve, capped by the 10% aggregate nominal
value of share capital. The legal reserve balance requirement
was $1,186,000 and $666,000 as of December 31, 2003 and
2002, respectively. The legal reserve is distributable only upon
the liquidation of the Company. The Companys
statuts also provide that distributable profits, after
deduction of any amounts required to be allocated to the legal
reserve, can be allocated to one or more special purpose
reserves or distributed as dividends as may be determined by the
general meeting of shareholders.

Liquidation Rights.In the event that the Company is
liquidated, the assets of the Company remaining after payment of
debts, liquidation expenses and all remaining obligations will
be distributed first to repay in full the capital of any
outstanding shares. The surplus, if any, will then be
distributed pro rata among the shareholders in proportion to the
nominal value of their share holdings and subject to special
rights granted to holders of priority shares, if any.

Preemptive Subscription Rights.Shareholders have preemptive
rights to subscribe for additional shares issued by the Company
for cash on a pro rata basis. Shareholders may waive such
preemptive subscription rights at an extraordinary general
meeting of shareholders under certain circumstances. Preemptive
subscription rights, if not previously waived, are transferable
during the subscription period relating to a particular offer of
shares.

Stock Based Compensation
Plans

The Company issues stock options or share
warrants to its employees and outside directors and provides
employees the right to purchase its stock pursuant to
shareholder approved stock option and employee stock purchase
programs. The Company accounts for its stock-based compensation
plans under the intrinsic value method of accounting as defined
by APB 25 and related interpretations. All options granted under
the Business Objects plans and the Crystal Decisions stock
option plan had an exercise price equal to the fair market value
of the underlying common stock on the date of grant. In
conjunction with the Crystal Decisions Acquisition, the Company
recorded $19,788,000 of deferred compensation to unearned
compensation as part of shareholders equity. At
December 31, 2003, $18,353,000 of this balance remained in
shareholders equity with $646,000 charged to the statement
of income as stock-based compensation and $789,000 reversed
against unearned compensation as the result of the forfeiture of
unvested options. This unamortized stock-based compensation will
be amortized to stock-based compensation in the respective
functional areas on a straight-line basis over the remaining
vesting period of the option. In accordance with FASB
Interpretation No. 44,

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Accounting for Certain Transactions
involving Stock Compensation  an interpretation of
ABP 25,the Company will
make adjustments to the total amount of deferred compensation
calculated on the acquisition to adjust for the forfeiture of
unvested options.



| |                   
| | ------------------
| | Stock Option Plans

A summary of the Companys stock option
activity under all Plans, as described following the tables, is
summarized as follows, excluding warrant activity. The
options available for grant information includes
only the 2001 Stock Option Plan (the 2001 Plan) and
1999 Stock Option Plan (the 1999 Plan) as no other
Plans provide for the grant of additional options.

|                                                 |  |               |            |                     |  |                  |            |   |  |   |       | 
|------------------------------------------------ |  | ------------- | ---------- | ------------------- |  | ---------------- | ---------- | - |  | - | ----- | 
|                                                 |  |               |            |                    
|                                                 |  |               |            | Options Outstanding
|                                                 |  |               |            |                    
|                                                 |  | Options       |            |                     |  | Weighted Average
|                                                 |  | Available for |            | Number of           |  | Exercise Price  
|                                                 |  | Grant         |            | Shares              |  | in Euros        
|                                                 |  |               |            |                     |  |                 
|Balance at December 31, 2000.                    |  |               | 3,033,888  |                     |  |                  | 8,267,354  |   |  |  | 28.09 | 
|Shares reserved                                  |  |               | 3,450,000  |                     |  |                  |           |   |  |   |      | 
|Granted                                          |  |               | (5,738,150 | )                   |  |                  | 5,738,150  |   |  |   | 36.70 | 
|Canceled                                         |  |               | 2,186,027  |                     |  |                  | (2,421,523 | ) |  |   | 49.97 | 
|Exercised                                        |  |               |           |                     |  |                  | (1,136,982 | ) |  |   | 6.62  | 
|                                                 |  |               |            |                     |  |                  |            |   |  |   |       | 
|Balance at December 31, 2001.                    |  |               | 2,931,765  |                     |  |                  | 10,446,999 |   |  |   | 30.10 | 
|Granted                                          |  |               | (3,147,045 | )                   |  |                  | 3,147,045  |   |  |   | 32.89 | 
|Canceled                                         |  |               | 4,370,894  |                     |  |                  | (4,502,626 | ) |  |   | 40.72 | 
|Exercised                                        |  |               |           |                     |  |                  | (1,066,222 | ) |  |   | 10.58 | 
|                                                 |  |               |            |                     |  |                  |            |   |  |   |       | 
|Balance at December 31, 2002.                    |  |               | 4,155,614  |                     |  |                  | 8,025,196  |   |  |   | 27.83 | 
|Granted                                          |  |               | (4,968,271 | )                   |  |                  | 4,968,271  |   |  |   | 22.16 | 
|Shares reserved                                  |  |               | 3,212,729  |                     |  |                  |           |   |  |   |      | 
|Options assumed in Crystal Decisions Acquisition |  |               |           |                     |  |                  | 6,306,939  |   |  |   | 13.12 | 
|Canceled                                         |  |               | 1,077,901  |                     |  |                  | (1,214,343 | ) |  |   | 34.31 | 
|Exercised                                        |  |               |           |                     |  |                  | (1,893,522 | ) |  |   | 10.78 | 
|                                                 |  |               |            |                     |  |                  |            |   |  |   |       | 
|Balance at December 31, 2003.                    |  |               | 3,477,973  |                     |  |                  | 16,192,541 |   |  |  | 21.87 | 
|                                                 |  |               |            |                     |  |                  |            |   |  |   |       | 

The following table summarizes the Companys
stock options outstanding and exercisable at December 31,
2003:

|                                 |  |                     |            |                  |  |                |     |           |  |                |       |  |  |  |           |  |  |   |       | 
|-------------------------------- |  | ------------------- | ---------- | ---------------- |  | -------------- | --- | --------- |  | -------------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                                 |  |                    
|Options Outstanding              |  | Exercisable Options
|                                 |  |                    
|                                 |  | Weighted Average    |            | Weighted         |  |                |     | Weighted 
|                                 |  | Remaining           |            | Average          |  |                |     | Average  
|                                 |  | Number of           |            | Contractual Life |  | Exercise       |     | Number of |  | Exercise      
|Range of Exercise Prices in Euro |  | Shares              |            | (in years)       |  | Price in Euros |     | Shares    |  | Price in Euros
|                                 |  |                     |            |                  |  |                |     |           |  |               
| 0.00 
    6.76                |  |                     | 608,822    |                  |  |                | 3.6 |           |  |               | 3.94  |  |  |  | 608,822   |  |  |  | 3.94  | 
| 6.77 
    12.96               |  |                     | 5,068,938  |                  |  |                | 7.2 |           |  |                | 10.11 |  |  |  | 3,810,906 |  |  |   | 9.83  | 
| 12.96 
    18.14              |  |                     | 2,420,371  |                  |  |                | 8.6 |           |  |                | 16.12 |  |  |  | 669,465   |  |  |   | 15.95 | 
| 18.15 
    27.03              |  |                     | 3,068,752  |                  |  |                | 9.0 |           |  |                | 23.35 |  |  |  | 379,531   |  |  |   | 20.25 | 
| 27.04 
    33.79              |  |                     | 2,309,140  |                  |  |                | 8.6 |           |  |                | 30.21 |  |  |  | 532,212   |  |  |   | 31.93 | 
| 33.80 
    54.06              |  |                     | 2,025,431  |                  |  |                | 7.0 |           |  |                | 38.61 |  |  |  | 1,308,165 |  |  |   | 38.36 | 
| 54.07 
    60.82              |  |                     | 351,200    |                  |  |                | 6.1 |           |  |                | 54.93 |  |  |  | 315,556   |  |  |   | 54.94 | 
| 60.83 
    67.58              |  |                     | 339,887    |                  |  |                | 6.5 |           |  |                | 66.16 |  |  |  | 290,218   |  |  |   | 66.15 | 
|                                 |  |                     |            |                  |  |                |     |           |  |                |       |  |  |  |           |  |  |   |       | 
|                                 |  |                     | 16,192,541 |                  |  |                | 7.8 |           |  |               | 21.87 |  |  |  | 7,914,875 |  |  |  | 20.46 | 
|                                 |  |                     |            |                  |  |                |     |           |  |                |       |  |  |  |           |  |  |   |       | 

-90-



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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Business Objects 1999 Stock Option Plan.During December 2003, Business
Objects assumed the as-converted outstanding options of former
Crystal Decisions optionees which were granted under the Crystal
Decisions 1999 Stock Option Plan. The former Crystal Decisions
1999 Plan now exists as part of Business Objects and is
hereafter known as the BOSA 1999 Plan. The grant agreements
under this plan continue to be in force with all terms of the
previous grant agreements remaining unchanged. Business Objects
did not assume any authorized but ungranted options under the
Crystal Decisions 1999 Plan and may not regrant any options from
forfeited shares.

An aggregate of 6,310,234 ordinary shares were
issued to Business Objects Option LLC. Of these shares,
6,306,939 represented shares issuable upon exercise of the
options held by former Crystal Decisions optionees at
December 11, 2003. As Business Objects Option LLC is an
indirect wholly owned subsidiary of Business Objects, the shares
are not deemed to be outstanding and will not be entitled to
voting rights until such time as the option holders exercise
their options. During the 20 days ended December 31,
2003, optionees exercised approximately 573,000 of these
options. If any of the 6,310,234 ordinary shares are not needed
to satisfy obligations under outstanding stock options, Business
Objects has the right to sell such shares on the open market or
use them for other corporate purposes.

With the exception of options outstanding under
the BOSA 1999 Plan, all options granted by the Company are for
ordinary shares and are priced in euros. The assumed BOSA 1999
Plan options are for ADSs, which until exercise are held by
Business Objects Option LLC, and the exercise price for options
exercised under the BOSA 1999 Plan is stated in
U.S. dollars. Where the preceding tables reference
outstanding options, the options outstanding under the BOSA 1999
Plan are included and converted from the U.S. dollar
denominated amount to euros.

2001 Stock Option
Plan.During February 2001, the
shareholders of the Company approved a stock option plan in the
form of an evergreen plan pursuant to which the
Board of Directors was authorized to issue options corresponding
to 3,450,000 shares, plus an annual increase to be added on
June 30 of each year beginning in 2002 equal to the lesser
of (i) 4,500,000 shares, (ii) 5% of the total shares
of the Company on such date, or (iii) a lesser amount
determined by the Board. As of December 31, 2002, the
Companys Board of Directors had not authorized any annual
increase in the amount of shares authorized under the 2001 plan.
During fiscal 2003, the Companys Board of Directors
authorized and reserved 3,212,729 additional shares under the
2001 Plan. On December 11, 2003, the shareholders approved
the amendment of the terms of the plan and authorized the Board
of Directors to increase annually, on one or more occasions, the
number of shares of Business Objects which may be subscribed for
or purchased upon the exercise of stock options granted pursuant
to the 2001 Plan, within the limit of the lowest of the
following amounts: (i) 6,500,000 shares with a nominal
value of 0.10
each per share, (ii) the number of shares corresponding to
5% of the total number of Business Objects shares outstanding as
of June 30 or (iii) any lesser amount as determined by
the Board of Directors.

1999 Stock Option
Plan.During May 1999, the
shareholders of the Company approved a stock option plan
pursuant to which the Board of Directors was authorized to issue
options corresponding to 2,625,000 shares. During June 2000, the
shareholders approved an additional 4,500,000 shares reserved
for issuance under the 1999 Plan.

General Stock Option
Terms.In accordance with French
regulations applicable to companies listed on a French stock
exchange the 2001 and 1999 Plans provide that the option price
may not be less than the higher of (i) 100% of the closing
price as reported on the French

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


stock exchange on the last trading day prior to
the date of grant, or (ii) 80% of the average of the
closing prices on such market over the twenty trading days
preceding the grant date.

The 2001 and 1999 Plans are intended to qualify
as incentive stock option plans within the meaning of
Section 422 of the U.S. Internal Revenue Code of 1986, as
amended. The Board of Directors determines the vesting schedule
of option grants, which generally vest at a rate of 25% per year
subject to a minimum of one year of continued service with the
Company. The options granted under both Plans are exercisable up
to ten years from the date of grant (other than options granted
to employees in the United Kingdom, which have a term of seven
years less one day).

In December 1996, the French parliament adopted a
law that requires French companies to pay French social
contributions and certain salary-based taxes of up to 45% for
France-based employees on the difference between the exercise
price of a stock option and the fair market value of the
underlying shares on the exercise date, if the beneficiary
disposes of the shares before a five-year period (four years for
options granted after May 2000) following the grant of the
option. Currently, for options issued to France-based employees
after January 1, 1997, holders of such options are not
permitted to sell or dispose of their shares within five years
of the date of grant (four years for options granted after May
2000) and, therefore, no social charges will be due on these
options. Certain options previously issued by Crystal Decisions
to France-based employees allow for exercise within four years
of the date of grant and, therefore, social charges will be due
on these options should the employee exercise within four years.
No liability has been assessed at December 31, 2003.

Warrants.On
December 11, 2003, the Companys shareholders approved
the issuance of warrants to purchase an aggregate of
15,000 shares reserved to one director. As of
December 31, 2003 these warrants were not issued. On
January 23, 2004, the Board of Directors issued these
warrants at an exercise price of
26.95 per share.
The warrants vest at the rate of 33.33% per year on June 1,
2004, 2005 and 2006.

On July 22, 2003, the Companys
shareholders approved the issuance of warrants to purchase an
aggregate of 45,000 shares at an exercise price of
19.45 per share
to three directors in compliance with the authorization of the
shareholders meeting of May 15, 2003. The warrants for two
of the directors vest at the rate of 33.33% per year on
June 1, 2004, 2005 and 2006. The warrants for the other
director vest at a rate of 50% per year on June 1, 2004 and
2005. As of December 31, 2003, all warrants were
outstanding and none were exercisable.

On June 5, 2002, the Companys
shareholders approved the issuance of warrants to purchase an
aggregate of 15,000 shares to a director at an exercise price of
28.00 per share.
The warrants vest at the rate of 33.33% per year on June 1,
2003, 2004 and 2005. On October 30, 2002, the director
resigned and all warrants were canceled.

On June 12, 2001, the Companys
shareholders approved the issuance of warrants to purchase an
aggregate of 45,000 shares at an exercise price of
36.13 per share
to three directors. The warrants vest at the rate of 33.33% per
year on June 1, 2002, 2003 and 2004. As of
December 31, 2003, all warrants were outstanding and 30,000
were vested and exercisable.

On February 6, 2001, the Companys
shareholders approved the issuance of warrants to purchase an
aggregate of 22,500 shares to a director at an exercise
price of 57.97
per share. The warrants vest at the rate of 33.33% per year on
May 1, 2001, 2002 and 2003. As of December 31, 2003,
all 22,500 warrants were outstanding and exercisable.

-92-



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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


In May 1999, the Companys shareholders
approved the issuance of warrants to purchase an aggregate of
45,000 shares at an exercise price of
7.59 per share
to a director. These warrants were fully exercised during the
year ended December 31, 2001.

On April 28, 1998, the Board of Directors
approved the issuance of warrants to purchase an aggregate of
210,000 shares to five directors. The warrants were issued
on June 18, 1998 after formal shareholder approval and had
an exercise price of
4.91 per share
and vested at a rate of 33.33% per year from June 18, 1998.
Of these warrants, 120,000 were exercised in 2003, 45,000 were
exercised in 2002, 7,500 were exercised in 2001 and 37,500 were
exercised in 2000, leaving no outstanding warrants as of
December 31, 2003.

On April 28, 1997, the Board of Directors
approved the issuance of warrants to purchase a total of 144,000
shares to four directors, with an exercise price of
2.81 per share.
These warrants vested monthly over three years commencing
January 1, 1997. The warrants were issued in June 1997
after formal shareholder approval. The difference between the
exercise price and the estimated fair value of such warrants was
immaterial. Of these warrants, 108,000 were exercised in 2000
and 36,000 were exercised in 2002, leaving no outstanding
warrants as of December 31, 2003.

In summary, warrants to purchase an aggregate of
112,500 shares were outstanding as of December 31, 2003 at
exercise prices ranging from
19.45 to
57.97 per share
and a weighted average exercise price of
33.83 per share.

Employee Stock Purchase Plans.The Company has an International
Employee Stock Purchase Plan intended to qualify under the
provisions of Sections 421 and 423 of the
U.S. Internal Revenue Code of 1986, as amended. Under the
terms of this plan, employees may contribute via payroll
deductions up to 10% of their eligible compensation to purchase
shares at a price equal to 85% of the lower of the fair market
value as of the beginning or end of the six-month offering
period. The Company issued approximately 273,600 shares under
the plan in 2003, 278,300 shares in 2002 and
153,000 shares in 2001. The Companys shareholders
periodically approve the issuance of additional shares to the
total pool; 550,000 shares were authorized in 2003. There
were 550,000 shares remaining available for issuance under
the plan as of December 31, 2003.

In addition, the Company also has an Employee
Stock Purchase Plan available to the Companys French
employees, who are excluded from the International Plan. The
French plan is part of the Employee Savings Plan, which is
qualified under the provisions of French tax regulations. Stock
purchases are limited under this plan to 10% of an
employees compensation received during the offering
period, generally every six months. The Company issued
approximately 114,900 shares under the plan in 2003,
109,200 shares in 2002 and 2,000 shares in 2001. The
Companys shareholders periodically approve the issuance of
additional shares to the total pool; 150,000 shares were
authorized in 2003. There were approximately 309,600 shares
remaining available for issuance under the plan as of
December 31, 2003.

Pro forma Effect of Stock Based
Compensation.Business Objects has
elected to measure compensation expense for its compensation
plans using the intrinsic value method prescribed by APB 25 and
related interpretations. Pro forma information regarding net
income and net income per share is required by FAS 123, as
modified by FAS 148, and has been determined as if the
Company had accounted for its employee stock options under the
fair value method of FAS 123. This disclosure is provided
in Note 1 under Stock-based Compensation. For purposes of
the pro forma disclosure, management estimates the fair value of
stock options issued to employees

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


using the Black-Scholes option valuation model.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options that have no
vesting restrictions, are fully transferable and do not have
employment or trading restrictions. The model requires the input
of highly subjective assumptions including the expected stock
price volatility. Because the Companys employee stock
options have characteristics significantly different from those
of traded options and because the changes in the subjective
input assumptions can materially affect the fair value estimate,
in managements opinion, the existing models do not
necessarily provide a reliable single measure of the fair value
of its employee stock options.

The weighted average assumptions used and the
resulting estimates of weighted-average fair value of options
granted under the Stock Option Plans during the following
periods were as follows:

|                                                                                              |  |                         |       |      |  |      |       |   |  |   |       |  
|--------------------------------------------------------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                                                              |  |                        
|                                                                                              |  | Year Ended December 31,
|                                                                                              |  |                        
|                                                                                              |  | 2003                    |       | 2002 |  | 2001
|                                                                                              |  |                         |       |      |  |     
|Expected life of stock options plans (in years)                                               |  |                         | 3.00  |      |  |      | 3.00  |   |  |   | 3.00  |  
|Volatility                                                                                    |  |                         | 71    | %    |  |      | 71    | % |  |   | 86    | %
|Risk-free interest rate                                                                       |  |                         | 2.2   | %    |  |      | 3.2   | % |  |   | 4.2   | %
|Dividend yields                                                                               |  |                         | 0     | %    |  |      | 0     | % |  |   | 0     | %
|Weighted-average fair value of options under
    stock option plans granted during the period |  | $                       | 12.34 |      |  | $    | 11.15 |   |  | $ | 13.48 |  

The weighted average assumptions used and the
resulting estimates of weighted-average fair value of options
granted under the Employee Stock Purchase Plans during the
following periods were as follows:

|                                                                                                            |  |                         |      |      |  |      |      |   |  |   |       |  
|----------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  | - | ----- | -
|                                                                                                            |  |                        
|                                                                                                            |  | Year Ended December 31,
|                                                                                                            |  |                        
|                                                                                                            |  | 2003                    |      | 2002 |  | 2001
|                                                                                                            |  |                         |      |      |  |     
|Expected life of employee stock purchase plans
    (in months)                                              |  |                         | 6.00 |      |  |      | 6.00 |   |  |   | 6.00  |  
|Weighted average volatility for year                                                                        |  |                         | 67   | %    |  |      | 71   | % |  |   | 86    | %
|Risk-free interest rate                                                                                     |  |                         | 1.5  | %    |  |      | 2.5  | % |  |   | 5.0   | %
|Dividend yields                                                                                             |  |                         | 0    | %    |  |      | 0    | % |  |   | 0     | %
|Weighted-average fair value of options under the
    employee stock purchase plan granted during the period |  | $                       | 4.59 |      |  | $    | 8.38 |   |  | $ | 17.77 |  



|   |                       
|-- | ----------------------
|8. | Employee Savings Plans

The Company has an Employee Savings Plan that
allows voluntary contributions by all full-time employees who
are employed by the French parent company and have completed at
least three months of service. Eligible employees may contribute
up to 25% of pre-tax earnings to the Employee Savings Plan, of
which a maximum of 10% of pre-tax earnings may be used to
purchase the Companys shares. See Note 7
Shareholders Equity  Employee Stock Purchase
Plans. The Company does not match Employee Savings Plan
contributions.

The Company is subject to a Legal Profit Sharing
Plan for substantially all of the employees of its French
entity. Contributions under the Legal Plan are based on a
formula prescribed by French law. In addition, employees of the
Companys French entity may receive contributions from a
separate statutory profit sharing plan sponsored by the Company.
Contributions under this plan are based on the achievement of
certain goals established by the Board of Directors.
Contributions under this statutory plan are reduced by
contributions required to be made under the Legal Plan. The
Company accrued an aggregate of $5,816,000 for all plans related
to contributions for 2003, $3,876,000 for 2002 and $3,166,000
for 2001.

The Companys U.S. subsidiary has a
defined contribution 401(k) Plan covering substantially all of
its U.S. employees. Participants may contribute up to 20% of
their annual

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


compensation to the 401(k) Plan, limited to
a maximum annual amount as set periodically by the Internal
Revenue Service. The Company matches employee contributions at a
rate of $0.50 for each U.S. dollar contributed up to a
maximum of $1,500 per year per person, subject to a three year
vesting schedule. Company matching contributions to the
401(k) Plan totaled approximately $804,000 in 2003,
$653,000 in 2002 and $603,000 in 2001.

The Companys U.S. subsidiary also has
a nonqualified Deferred Compensation Plan which permits eligible
officers and employees to defer up to a maximum of 85% of their
base salary and up to 100% of their bonuses per year. The
Company does not contribute to the Deferred Compensation Plan.
Participants may elect to receive distributions from the plan at
a pre-determined date or upon termination of employment or
retirement, based upon years of service. Deferred compensation
and investment earnings are held as a Company asset within a
trust, which is subject to the claims of the general creditors
of the Company. The trusts assets, consisting of an
investment in a variable universal life insurance policy,
totaled $3,332,000 and $1,982,000 at December 31, 2003 and
2002, respectively, and are included in prepaid expenses. The
liability under the Deferred Compensation Plan was approximately
$3,980,000 and $2,337,000 at December 31, 2003 and 2002,
respectively, and is included in other current liabilities.

The Company contributes to pensions for personnel
in France in accordance with French law by contributing amounts
based on salaries to the relevant government agencies. There
exists 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 Companys obligation amounted to $979,000
and $572,000 as of December 31, 2003 and 2002,
respectively, and is calculated as the present value of
estimated future benefits to be paid, using the following
assumptions: (a) Retirement age: 62 years;
(b) Discount rate: 5.5% (6%  2002); and
(c) Rate of compensation increase: 4%. In 2002, the Company
transferred the management of its benefit obligations and
liabilities to a financial institution. Consequently, the
financial institution will pay retirement indemnities directly
to the employees of Business Objects France.



|   |                   
|-- | ------------------
|9. | Earnings Per Share

The following table sets forth the computation of
basic and diluted net income per ordinary share and ADS (in
thousands, except per ordinary share and ADS amounts):

|                                                                                                                                                |  |                         |        |      |  |      |        |  |  |   |        | 
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                                                                                                                |  |                        
|                                                                                                                                                |  | Year Ended December 31,
|                                                                                                                                                |  |                        
|                                                                                                                                                |  | 2003                    |        | 2002 |  | 2001
|                                                                                                                                                |  |                         |        |      |  |     
|Numerator:                                                                                                                                      |  |                         |        |      |  |      |        |  |  |   |        | 
|Net income                                                                                                                                      |  | $                       | 22,562 |      |  | $    | 40,580 |  |  | $ | 44,878 | 
|Denominator:                                                                                                                                    |  |                         |        |      |  |      |        |  |  |   |        | 
|Weighed average ordinary shares and ADSs
    outstanding  basic                                                                                |  |                         | 64,584 |      |  |      | 61,888 |  |  |   | 60,879 | 
|Incremental ordinary shares and ADSs attributable
    to shares exercisable under employee stock plans and warrants
    (treasury stock method) |  |                         | 1,584  |      |  |      | 2,045  |  |  |   | 3,482  | 
|                                                                                                                                                |  |                         |        |      |  |      |        |  |  |   |        | 
|Denominator for diluted earnings per ordinary
    share and ADSs                                                                                |  |                         | 66,168 |      |  |      | 63,933 |  |  |   | 64,361 | 
|                                                                                                                                                |  |                         |        |      |  |      |        |  |  |   |        | 
|Net income per ordinary share and ADS 
    basic                                                                                               |  | $                       | 0.35   |      |  | $    | 0.66   |  |  | $ | 0.74   | 
|                                                                                                                                                |  |                         |        |      |  |      |        |  |  |   |        | 
|Net income per ordinary share and ADS 
    diluted                                                                                             |  | $                       | 0.34   |      |  | $    | 0.63   |  |  | $ | 0.70   | 
|                                                                                                                                                |  |                         |        |      |  |      |        |  |  |   |        | 

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


The effect of options to purchase 4,717,000,
4,464,000 and 4,734,000 ordinary shares and ADSs was not
included in the computation of the 2003, 2002 and 2001 diluted
earnings per ordinary share and ADS, respectively, because the
options exercise price was greater than the average market
price of ordinary shares and such impact would not be dilutive.



|    |                               
|--- | ------------------------------
|10. | Interest and Other Income, Net

Interest and other income, net primarily
represents net interest income, patent infringement settlement
income, net of litigation expenses, net gains and losses
resulting from foreign currency exchange rate changes and other
income (loss).

The following table sets forth information
regarding the Companys interest and other income, net (in
thousands):

|                                                                       |                                    |                         |        |       |  |      |        |        |  |   |        |       | 
|---------------------------------------------------------------------- | ---------------------------------- | ----------------------- | ------ | ----- |  | ---- | ------ | ------ |  | - | ------ | ----- | 
|                                                                       |                                    |                        
|                                                                       |                                    | Year Ended December 31,
|                                                                       |                                    |                        
|                                                                       |                                    | 2003                    |        | 2002  |  | 2001
|                                                                       |                                    |                         |        |       |  |     
|Net interest income                                                    |                                    | $                       | 7,142  |       |  | $    | 7,679  |        |  | $ | 8,389  |      
|Patent infringement settlement income, net of
    litigation expenses: |                                    |                         |        |       |  |      |        |        |  |   |        |      
|                                                                       | Cognos payments, net of legal fees |                         |        | 7,000 |  |      |        | 10,361 |  |   |        |      | 
|                                                                       | Brio payments                      |                         |        |      |  |      |        | 1,500  |  |   |        | 2,500 | 
|Net exchange losses                                                    |                                    |                         | (406   | )     |  |      | (710   | )      |  |   | (11    | )    
|Other income (loss), net                                               |                                    |                         | 598    |       |  |      | 129    |        |  |   | (418   | )    
|                                                                       |                                    |                         |        |       |  |      |        |        |  |   |        |      
|Total interest and other income, net                                   |                                    | $                       | 14,334 |       |  | $    | 18,959 |        |  | $ | 10,460 |      
|                                                                       |                                    |                         |        |       |  |      |        |        |  |   |        |      

During May 2002, the Company entered into an
agreement in settlement of its patent infringement lawsuit with
Cognos, Inc. and Cognos Corporation (collectively
Cognos). Under the terms of the agreement, Cognos
licensed the rights to the Companys technology under
U.S. Patent No. 5,555,403 in exchange for payments
totaling $24.0 million. The license covers both past and
future use of the Companys technology. A
$10.0 million first installment representing past use was
received during June 2002 and was classified as Interest and
other income, net on the consolidated statements of income, net
of $3.1 million of related legal fees. The remaining
balance represents Cognos future use of our patented
technology and is due in eight quarterly installments of
$1.75 million, which commenced in the quarter ended
September 30, 2002. Due to inherent uncertainties regarding
performance on the part of Cognos in making the future payments,
consistent with the cost recovery method and with other
literature on extended payment terms including SOP 97-2,
the Company will recognize the remaining settlement as other
income once the amounts become due. The Company recognized
$7.0 million of other income related to this settlement
during 2003.

As of September 1999, the Company entered into an
agreement in settlement of its patent infringement lawsuit
against Brio Software, Inc. (Brio). As part of this
settlement, the Company dismissed its pending lawsuit involving
the U.S. Patent No. 5,555,403 and Brio dismissed its
pending lawsuit related to U.S. Patent No. 5,915,257,
with Brio agreeing to pay the Company $10.0 million payable
in quarterly instalments of $1.0 million commencing on
September 30, 1999. Actual payments received included:
$1.5 million, $2.5 million, $4.0 million and
$2.0 million for 2002, 2001, 2000 and 1999, respectively.

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BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)




|    |             
|--- | ------------
|11. | Income Taxes

Income before provision for income taxes consists
of the following (in thousands):

|              |       |                         |        |        |  |      |        |        |  |   |        |        | 
|------------- | ----- | ----------------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|              |       |                        
|              |       | Year Ended December 31,
|              |       |                        
|              |       | 2003                    |        | 2002   |  | 2001
|              |       |                         |        |        |  |     
|France        |       | $                       | 21,612 |        |  | $    | 40,969 |        |  | $ | 37,949 |       
|Rest of world |       |                         | 31,919 |        |  |      | 25,706 |        |  |   | 35,004 |       
|              |       |                         |        |        |  |      |        |        |  |   |        |       
|              | Total |                         | $      | 53,531 |  |      | $      | 66,675 |  |   | $      | 72,953 | 
|              |       |                         |        |        |  |      |        |        |  |   |        |       

The provision for income taxes consists of the
following (in thousands):

|              |                |                         |         |         |   |      |        |        |   |   |        |        |  
|------------- | -------------- | ----------------------- | ------- | ------- | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|              |                |                        
|              |                | Year Ended December 31,
|              |                |                        
|              |                | 2003                    |         | 2002    |   | 2001
|              |                |                         |         |         |   |     
|Current:      |                |                         |         |         |   |      |        |        |   |   |        |       
|France        |                | $                       | 21,202  |         |   | $    | 16,595 |        |   | $ | 16,708 |       
|Rest of world |                |                         | 69,347  |         |   |      | 12,520 |        |   |   | 13,809 |       
|              |                |                         |         |         |   |      |        |        |   |   |        |       
|              | Total current  |                         | $       | 90,549  |   |      | $      | 29,115 |   |   | $      | 30,517 |  
|              |                |                         |         |         |   |      |        |        |   |   |        |       
|Deferred:     |                |                         |         |         |   |      |        |        |   |   |        |       
|France        |                | $                       | (15,867 | )       |   | $    | (2,933 | )      |   | $ | (2,500 | )     
|Rest of world |                |                         | (43,713 | )       |   |      | (87    | )      |   |   | 58     |       
|              |                |                         |         |         |   |      |        |        |   |   |        |       
|              | Total deferred |                         | $       | (59,580 | ) |      | $      | (3,020 | ) |   | $      | (2,442 | )
|              |                |                         |         |         |   |      |        |        |   |   |        |       
|              | Total          |                         | $       | 30,969  |   |      | $      | 26,095 |   |   | $      | 28,075 |  
|              |                |                         |         |         |   |      |        |        |   |   |        |       

Tax benefits resulting from the exercise of
nonqualified stock options and the disqualifying disposition of
shares acquired under the Companys incentive stock option
plan reduced taxes currently payable as shown above by
approximately $17,974,000, $3,649,000 and $1,472,000 during the
years ended December 31, 2003, 2002 and 2001, respectively.
Such benefits were credited to additional paid-in capital when
realized.

A reconciliation of income taxes computed at the
French statutory rate (35.43% in 2003, 35.43% in 2002, and
36.38% in 2001) to the provision for income taxes is as follows
(in thousands):

|                                                                |               |                         |        |        |  |      |        |        |  |   |        |        | 
|--------------------------------------------------------------- | ------------- | ----------------------- | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                                                |               |                        
|                                                                |               | Year Ended December 31,
|                                                                |               |                        
|                                                                |               | 2003                    |        | 2002   |  | 2001
|                                                                |               |                         |        |        |  |     
|Income tax provision computed at the French
    statutory rate  |               | $                       | 18,966 |        |  | $    | 23,623 |        |  | $ | 26,541 |       
|Non-deductible acquired in-process research and
    development |               |                         | 9,963  |        |  |      | 709    |        |  |   |       |       
|Operating losses not utilized                                   |               |                         | 667    |        |  |      | 289    |        |  |   | 271    |       
|Income at higher (lower) tax rates                              |               |                         | 255    |        |  |      | 96     |        |  |   | (433   | )     
|Research credits                                                |               |                         | (3,595 | )      |  |      | (1,046 | )      |  |   | (1,100 | )     
|Other individually immaterial items                             |               |                         | 4,713  |        |  |      | 2,424  |        |  |   | 2,796  |       
|                                                                |               |                         |        |        |  |      |        |        |  |   |        |       
|                                                                | Total current |                         | $      | 30,969 |  |      | $      | 26,095 |  |   | $      | 28,075 | 
|                                                                |               |                         |        |        |  |      |        |        |  |   |        |       

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


Deferred taxes reflect the net effects of loss
and credit carryforwards and temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes.
Significant components of the Companys deferred taxes
consist of the following (in thousands):

|                                                                    |                                |                            |         |         |        |   |         |        |        | 
|------------------------------------------------------------------- | ------------------------------ | -------------------------- | ------- | ------- | ------ | - | ------- | ------ | ------ | 
|                                                                    |                                |                           
|                                                                    |                                | December 31,              
|                                                                    |                                |                           
|                                                                    |                                | 2003                       |         | 2002   
|                                                                    |                                |                            |         |        
|Deferred tax assets:                                                |                                |                            |         |         |        |   |         |       
|Net operating loss carryforwards                                    |                                | $                          | 27,332  |         |        | $ | 40,356  |       
|Cognos settlement                                                   |                                |                            | 1,630   |         |        |   | 3,705   |       
|Deferred revenue                                                    |                                |                            | 4,310   |         |        |   | 2,967   |       
|Accrued bonuses and compensation                                    |                                |                            | 13,482  |         |        |   | 2,928   |       
|Amortization of intangible assets                                   |                                |                            | 13,611  |         |        |   | 7,306   |       
|Accrued rent                                                        |                                |                            | 1,248   |         |        |   | 3,385   |       
|Prepaid expenses                                                    |                                |                            | 13,205  |         |        |   |        |       
|Depreciation                                                        |                                |                            | 6,995   |         |        |   |        |       
|Other, including reserves and accruals not
    currently deductible |                                |                            | 9,472   |         |        |   | 7,536   |       
|                                                                    |                                |                            |         |         |        |   |         |       
|Total deferred tax assets                                           |                                |                            | 91,285  |         |        |   | 68,183  |       
|Valuation allowance                                                 |                                |                            | (49,265 | )       |        |   | (54,615 | )     
|                                                                    |                                |                            |         |         |        |   |         |       
|                                                                    | Total deferred tax assets      |                            | $       | 42,020  |        |   | $       | 13,568 |       
|                                                                    |                                |                            |         |         |        |   |         |       
|Deferred tax liabilities:                                           |                                |                            |         |         |        |   |         |       
|Intangible assets                                                   |                                | $                          | (16,759 | )       |        | $ |        |       
|Items eliminated in purchase accounting                             |                                |                            | (8,672  | )       |        |   |        |       
|Other, including individually immaterial items                      |                                |                            | (2,676  | )       |        |   | (648    | )     
|                                                                    |                                |                            |         |         |        |   |         |       
|                                                                    | Total deferred tax liabilities |                            |         | (28,107 | )      |   |         | (648   | )     
|                                                                    |                                |                            |         |         |        |   |         |       
|                                                                    |                                | Net deferred tax assets(1) |         | $       | 13,913 |   |         | $      | 12,920 | 
|                                                                    |                                |                            |         |         |        |   |         |       




|    |                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | At December 31, 2003, balance sheet
    classification includes: $261,000 included in current deferred
    tax assets, $17,963,000 included in long-term deferred tax
    assets, offset by $4,312,000 of current deferred tax liabilities
    included in other current liabilities. All deferred tax assets
    were classified as current at December 31, 2002.

The valuation allowance for deferred tax assets
decreased by $5,350,000 in 2003 and increased by $28,313,000 in
2002. Of the valuation allowance, $9,400,000 is attributable to
stock options, the benefit of which will be credited to
additional paid-in capital when realized. The remaining
$39,865,000 of the valuation allowance is attributable to
acquired deferred tax assets from Acta Technology and Crystal
Decisions, the eventual realization of which will be credited to
goodwill.

As of December 31, 2003, the Company has
U.S. federal and state net operating loss carryforwards of
approximately $72,435,000 and $13,589,000, respectively. These
net operating loss carryforwards will expire in the years 2004
through 2033, if not utilized. The Companys future ability
to utilize the Acta Technology net operating loss carryforwards
is subject to limitation under the Section 382 change of
ownership rules of the U.S. Internal Revenue Code of 1986, as
amended.



|    |                                                  
|--- | -------------------------------------------------
|12. | Financial, Segment and Geographic
    Information

Financial.Crystal
Decisions revenues and operating income were $26.5 million
and $7.4 million, respectively, prior to the acquired
in-process research and development charge, amortization of
acquired intangible assets and deferred compensation,
integration costs and restructuring costs for the 20 days
following the Crystal Decisions Acquisition. The Company has

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


reported these amounts separately, because the
information was directly available, however, going forward the
Company will not have discrete financial information available.

Segment.The Company
has one reportable segment  business intelligence
software products. The Company recognizes its net license fees
from three product families: Business Intelligence Platform,
Enterprise Analytic Applications and Data Integration. The
Company does not track services revenues by product family as it
is impracticable to do so. The following table summarizes net
license fees recognized from each product family (in thousands):

|                                  |                        |                         |         |         |  |      |         |         |  |   |         |         | 
|--------------------------------- | ---------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                  |                        |                        
|                                  |                        | Year Ended December 31,
|                                  |                        |                        
|                                  |                        | 2003                    |         | 2002    |  | 2001
|                                  |                        |                         |         |         |  |     
|Business Intelligence Platform(1) |                        | $                       | 235,539 |         |  | $    | 219,195 |         |  | $ | 241,569 |        
|Enterprise Analytic Applications  |                        |                         | 25,754  |         |  |      | 20,899  |         |  |   | 8,025   |        
|Data Integration                  |                        |                         | 13,968  |         |  |      | 3,861   |         |  |   |        |        
|                                  |                        |                         |         |         |  |      |         |         |  |   |         |        
|                                  | Total net license fees |                         | $       | 275,261 |  |      | $       | 243,955 |  |   | $       | 249,594 | 
|                                  |                        |                         |         |         |  |      |         |         |  |   |         |        




|    |                                     
|--- | ------------------------------------
|(1) | Includes Crystal Decisions products.

Geography.Operations outside of France consist
principally of sales, marketing, finance, customer support and
research and development activities. The following is a summary
of revenues and long-lived assets by geographic location (in
thousands):

|          |                                              |                         |   |         |         |      |   |         |         |  |   |         |         | 
|--------- | -------------------------------------------- | ----------------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|          |                                              |                        
|          |                                              | Year Ended December 31,
|          |                                              |                        
|          |                                              | 2003                    |   | 2002    |         | 2001
|          |                                              |                         |   |         |         |     
|Revenues: |                                              |                         |   |         |         |      |   |         |         |  |   |        
|          | France                                       |                         | $ | 72,088  |         |      | $ | 53,752  |         |  | $ | 60,444  |        
|          | Rest of Europe                               |                         |   | 201,627 |         |      |   | 158,628 |         |  |   | 161,740 |        
|          | Americas, including Canada and Latin America |                         |   | 241,911 |         |      |   | 212,874 |         |  |   | 164,318 |        
|          | Rest of world                                |                         |   | 45,199  |         |      |   | 29,545  |         |  |   | 29,292  |        
|          |                                              |                         |   |         |         |      |   |         |         |  |   |        
|          |                                              | Total revenues          |   | $       | 560,825 |      |   | $       | 454,799 |  |   | $       | 415,794 | 
|          |                                              |                         |   |         |         |      |   |         |         |  |   |        

The following is a summary of long-lived assets
by geographic location (in thousands):

|                   |                                              |                         |   |           |           |  |   |        |         | 
|------------------ | -------------------------------------------- | ----------------------- | - | --------- | --------- |  | - | ------ | ------- | 
|                   |                                              |                        
|                   |                                              | Year Ended             
|                   |                                              | December 31,           
|                   |                                              |                        
|                   |                                              | 2003                    |   | 2002     
|                   |                                              |                         |   |          
|Long-lived assets: |                                              |                         |   |           |           |  |   |       
|                   | France                                       |                         | $ | 24,336    |           |  | $ | 14,081 |        
|                   | Rest of Europe                               |                         |   | 122,624   |           |  |   | 18,309 |        
|                   | Americas, including Canada and Latin America |                         |   | 1,145,449 |           |  |   | 99,971 |        
|                   | Rest of world                                |                         |   | 6,087     |           |  |   | 4,500  |        
|                   |                                              |                         |   |           |           |  |   |       
|                   |                                              | Total long-lived assets |   | $         | 1,298,496 |  |   | $      | 136,861 | 
|                   |                                              |                         |   |           |           |  |   |       



|    |                    
|--- | -------------------
|13. | Restructuring Costs



| |                                                      
| | -----------------------------------------------------
| | Non-Acquisition-related Restructuring
    Liabilities

During the quarter ended June 30, 2002, the
Company implemented a restructuring plan to eliminate
approximately 50 positions in the Companys European field
operations in order to better align the Companys revenues
and cost structure in Europe in response to the regions
overall weak information technology spending environment. In
addition, the Company eliminated excess office space in France,
Italy, Spain and Switzerland. Implementation of the plan
resulted in restructuring charges to earnings totaling
$3,871,000 for severance and other employee

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


termination benefits and costs associated with
exiting facilities, representing the excess of lease costs over
anticipated sublease income.

During the quarter ended December 31, 2002,
the Company substantially completed its restructuring plan, at
which time the Company reversed $610,000 of previously accrued
expenses. The reversal was primarily due to savings from planned
termination costs resulting from normal employee attrition for
three of the 50 positions that were to be eliminated, lower than
planned costs per head and utilization of certain facilities
originally scheduled for abandonment. In addition, during the
quarter ended December 31, 2002, the Company adopted an
additional restructuring plan to eliminate an additional four
positions as part of its ongoing measures to better align
operating expenses with revenues. Implementation of this plan
resulted in restructuring charges to earnings totaling $725,000
for severance and other employee termination benefits.

The Company completed the implementation of both
restructuring plans as of December 31, 2003. The remaining
$513,000 restructuring accrual at December 31, 2003 relates to
estimated remaining legal costs or payments to terminated
employees who have initiated legal action against the Company.
The Company does not expect a resolution in these lawsuits until
at least the fourth quarter of 2004.

The following table summarizes the Companys
accrued restructuring costs at December 31, 2003 (in
thousands):

|                                                                        |  |             |        |                |  |       |      |   |  |   |        |  
|----------------------------------------------------------------------- |  | ----------- | ------ | -------------- |  | ----- | ---- | - |  | - | ------ | -
|                                                                        |  | Severance   |        |                |  |      
|                                                                        |  | and Other   |        |                |  |      
|                                                                        |  | Employee    |        | Estimated Cost |  |      
|                                                                        |  | Termination |        | of Excess      |  |      
|                                                                        |  | Benefits    |        | Office Space   |  | Total
|                                                                        |  |             |        |                |  |      
|Restructuring charge at June 30, 2002                                   |  | $           | 3,151  |                |  | $     | 720  |   |  | $ | 3,871  |  
|Adjustments to the original plan                                        |  |             | (532   | )              |  |       | (78  | ) |  |   | (610   | )
|Additional restructuring charges                                        |  |             | 725    |                |  |       |     |   |  |   | 725    |  
|Cash payments during 2002                                               |  |             | (2,268 | )              |  |       | (564 | ) |  |   | (2,832 | )
|Impact of foreign currency exchange rates on
    translation of accrual |  |             | 144    |                |  |       | 75   |   |  |   | 219    |  
|                                                                        |  |             |        |                |  |       |      |   |  |   |        |  
|Balance at December 31, 2002                                            |  | $           | 1,220  |                |  | $     | 153  |   |  | $ | 1,373  |  
|Adjustments to the original plan                                        |  |             | (63    | )              |  |       |     |   |  |   | (63    | )
|Cash payments during 2003                                               |  |             | (815   | )              |  |       | (167 | ) |  |   | (982   | )
|Impact of foreign currency exchange rates on
    translation of accrual |  |             | 171    |                |  |       | 14   |   |  |   | 185    |  
|                                                                        |  |             |        |                |  |       |      |   |  |   |        |  
|Balance at December 31, 2003                                            |  | $           | 513    |                |  | $     |     |   |  | $ | 513    |  
|                                                                        |  |             |        |                |  |       |      |   |  |   |        |  



| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Acquisition-related Restructuring
    Liabilities Included as a Cost of Acquisition



| |                      
| | ---------------------
| | Acta Technology, Inc.

Immediately prior to the Companys
acquisition of Acta Technology, Actas management initiated
and approved plans to restructure Actas operations. The
restructuring plan reduced Actas cost structure and better
aligned product and operating expenses with existing general
economic conditions. Acta Technology recorded approximately
$13,527,000 of restructuring costs in connection with
restructuring the pre-acquisition Acta Technology organization.
Costs to restructure pre-acquisition Acta Technology were
accounted for under EITF Issue No. 95-3. These costs were
recorded as liabilities assumed as part of the purchase price
allocation.

This restructuring liability consisted primarily
of severance, other employee benefits and costs of vacating
duplicate facilities. The severance and other employee benefits
related to the planned termination of approximately 50 employees
worldwide. Other related restructuring

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


charges consisted primarily of the cost of
vacating duplicate facilities and the write-down of excess
equipment. The charge for the write-down of excess equipment was
$1,220,000. The charge for lease abandonment was $7,926,000,
representing total future minimum lease payments due through
2007, net of projected sublease income of $4,188,000 for
Actas Mountain View, California, headquarters and other
smaller European offices.

The balance of the accrued restructuring charges
included as a cost of acquisition related to Acta Technology
were as follows at December 31, 2003 (in thousands):

|                                                                                  |  |               |        |                 |  |       |        |   |  |   |        |  
|--------------------------------------------------------------------------------- |  | ------------- | ------ | --------------- |  | ----- | ------ | - |  | - | ------ | -
|                                                                                  |  |               |        | Leasehold       |  |      
|                                                                                  |  | Employee      |        | Abandonment     |  |      
|                                                                                  |  | Severance and |        | and Write-off   |  |      
|                                                                                  |  | Other Related |        | of Property and |  |      
|                                                                                  |  | Benefits      |        | Equipment       |  | Total
|                                                                                  |  |               |        |                 |  |      
|Restructuring charge at August 2002                                               |  | $             | 4,381  |                 |  | $     | 9,146  |   |  | $ | 13,527 |  
|Cash payments during 2002                                                         |  |               | (4,381 | )               |  |       | (1,108 | ) |  |   | (5,489 | )
|Non-cash charges                                                                  |  |               |       |                 |  |       | (1,220 | ) |  |   | (1,220 | )
|                                                                                  |  |               |        |                 |  |       |        |   |  |   |        |  
|Balance of December 31, 2002                                                      |  | $             |       |                 |  | $     | 6,818  |   |  | $ | 6,818  |  
|Net cash payments during 2003                                                     |  |               |       |                 |  |       | (3,400 | ) |  |   | (3,400 | )
|Reversal of excess U.S. facilities shutdown
    accrual adjusted through goodwill |  |               |       |                 |  |       | (2,741 | ) |  |   | (2,741 | )
|                                                                                  |  |               |        |                 |  |       |        |   |  |   |        |  
|Balance at December 31, 2003                                                      |  | $             |       |                 |  | $     | 677    |   |  | $ | 677    |  
|                                                                                  |  |               |        |                 |  |       |        |   |  |   |        |  

During 2003, the restructuring accrual was
reduced by cash payments of $3,400,000, including a $1,671,000
payment to terminate the lease for Actas Mountain View,
California, facility through an action by the VTA to take the
property by eminent domain, and $1,729,000 in regular lease
payments in the U.S. and the United Kingdom, net of returned
deposits. Upon termination of the lease, the remaining
$2,741,000 accrual related to the Mountain View facility, was
reversed as an adjustment to goodwill. The remaining accrual of
$677,000 at December 31, 2003 is for estimated future
minimum lease payments for Actas U.K. facility which
includes payments until 2005.



| |                        
| | -----------------------
| | Crystal Decisions, Inc.

In December 2003, prior to the Crystal Decisions
Acquisition, management began to assess and formulate a plan to
restructure the combined companys operations to eliminate
duplicative activities, focus on strategic products and reduce
the companys cost structure. Management approved and
committed the company to the plan shortly after the completion
of the acquisition. The plan consisted primarily of the
involuntary termination of 353 employees and the exit of certain
facilities.

Accrued restructuring costs of $7,782,000 related
to pre-acquisition Business Objects were expensed in accordance
with FAS 146. Restructuring costs of $13,525,000 related to
Crystal Decisions were accounted for under EITF 95-3. These
costs were recognized as a liability assumed in the purchase
business combination and included in the allocation of the cost
to acquire Crystal Decisions.



| |                                         
| | ----------------------------------------
| | Restructuring Costs Expensed in
    2003

The charge of $7,782,000 related to
pre-acquisition Business Objects consisted primarily of
severance and related benefits for 159 employees across all
functions worldwide and duplicative facilities in the Americas,
Europe, Japan and Asia Pacific. The Company plans to pay the

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


severance and other related benefits during 2004.
The Company anticipates that there will be additional charges
related to exiting certain facilities previously leased by
Business Objects.

The balance of accrued restructuring charges
related to the pre-acquisition Business Objects organization
were as follows at December 31, 2003 (in thousands):

|                                                                        |  |               |       |  
|----------------------------------------------------------------------- |  | ------------- | ----- | -
|                                                                        |  | Employee     
|                                                                        |  | Severance and
|                                                                        |  | Other Related
|                                                                        |  | Benefits     
|                                                                        |  |              
|Restructuring costs                                                     |  | $             | 7,782 |  
|Less: non-cash stock based compensation expense                         |  |               | (332  | )
|Impact of foreign currency exchange rates on
    translation of accrual |  |               | 302   |  
|                                                                        |  |               |       |  
|Balance at December 31, 2003                                            |  | $             | 7,752 |  
|                                                                        |  |               |       |  



| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Restructuring Costs Included as a Cost of
    the Crystal Decisions Acquisition in 2003

The charge of $13,525,000 related to the Crystal
Decisions Acquisition consisted primarily of severance and
related benefits for 194 employees across all functions
worldwide and duplicative facilities in the Americas, Europe and
Japan. Benefits of approximately $1,136,000 had been paid as of
December 31, 2003. The Company expects to pay the remaining
liability during 2004. Costs to abandon 11 facilities primarily
include future minimum lease payments, net of estimated sublease
income of $450,000, that are expected to be remaining once the
facilities are vacated through dates to 2008.

The balance of the accrued restructuring charges
included as a cost of acquisition related to Crystal Decisions
were as follows at December 31, 2003 (in thousands):

|                             |  |               |        |            |  |       |       |  |  |   |        |  
|---------------------------- |  | ------------- | ------ | ---------- |  | ----- | ----- |  |  | - | ------ | -
|                             |  | Employee      |        |            |  |      
|                             |  | Severance and |        | Costs to   |  |      
|                             |  | Other Related |        | Abandon    |  |      
|                             |  | Benefits      |        | Facilities |  | Total
|                             |  |               |        |            |  |      
|Restructuring costs          |  | $             | 10,780 |            |  | $     | 2,745 |  |  | $ | 13,525 |  
|Cash payments during 2003    |  |               | (1,136 | )          |  |       |      |  |  |   | (1,136 | )
|                             |  |               |        |            |  |       |       |  |  |   |        |  
|Balance at December 31, 2003 |  | $             | 9,644  |            |  | $     | 2,745 |  |  | $ | 12,389 |  
|                             |  |               |        |            |  |       |       |  |  |   |        |  

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


14.     Notes and
Escrows Payable and Restricted Cash

Notes and escrows payable and restricted cash
consisted of the following (in thousands):

|                                                                                                                                                                       |  |                         |        |                 |  |      |        |      |  |   |         |   |  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | --------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                                                                                                                       |  |                        
|                                                                                                                                                                       |  | Year Ended December 31,
|                                                                                                                                                                       |  |                        
|                                                                                                                                                                       |  |                         |        |                
|                                                                                                                                                                       |  | Notes and               |        |                
|                                                                                                                                                                       |  | Escrows Payable         |        | Restricted Cash
|                                                                                                                                                                       |  |                         |        |                
|                                                                                                                                                                       |  | 2003                    |        | 2002            |  | 2003 |        | 2002
|                                                                                                                                                                       |  |                         |        |                 |  |      |        |     
|Non-interest bearing notes issued in connection
    with the purchase of Acta Technology due February 2004, subject
    to indemnification obligations                 |  | $                       | 9,310  |                 |  | $    | 9,310  |      |  | $ | 9,310   |   |  | $ | 9,310  |  
|Bonuses to former Acta Technology employees
    subject to indemnification obligations, due February 2004.                                                             |  |                         | 418    |                 |  |      | 418    |      |  |   | 418     |   |  |   | 418    |  
|Non-interest bearing notes issued in connection
    with the purchase of OLAP@Work, subject to employment related
    contingencies                                    |  |                         |       |                 |  |      | 833    |      |  |   |        |   |  |   | 833    |  
|Non-interest bearing notes issued in connection
    with the purchase of Blue Edge Software, subject to
    indemnification obligations                                |  |                         |       |                 |  |      | 567    |      |  |   |        |   |  |   |       |  
|Notes bearing interest at 2.5% issued in
    connection with the purchase of Blue Edge Software, subject to
    employment related contingencies                       |  |                         |       |                 |  |      | 317    |      |  |   |        |   |  |   | 317    |  
|Cash subject to withdrawal restrictions related
    to overdraft credit facility and foreign exchange forward
    trading line                                         |  |                         |       |                 |  |      |       |      |  |   | 2,035   |   |  |   |       |  
|Cash subject to withdrawal restrictions on
    deposit of security for bonuses to be paid to Acta Technology
    employees subject to employment related contingencies |  |                         |       |                 |  |      |       |      |  |   | 526     |   |  |   | 526    |  
|Cash subject to withdrawal restrictions on deposit                                                                                                                     |  |                         |       |                 |  |      |       |      |  |   | 6,954   |   |  |   | 7,504  |  
|                                                                                                                                                                       |  |                         |        |                 |  |      |        |      |  |   |         |   |  |   |        |  
|Total balances                                                                                                                                                         |  | $                       | 9,728  |                 |  | $    | 11,445 |      |  | $ | 19,243  |   |  | $ | 18,908 |  
|Current portion                                                                                                                                                        |  |                         | (9,728 | )               |  |      | (1,717 | )    |  |   | (19,243 | ) |  |   | (8,654 | )
|                                                                                                                                                                       |  |                         |        |                 |  |      |        |      |  |   |         |   |  |   |        |  
|Total long term                                                                                                                                                        |  | $                       |       |                 |  | $    | 9,728  |      |  | $ |        |   |  | $ | 10,254 |  
|                                                                                                                                                                       |  |                         |        |                 |  |      |        |      |  |   |         |   |  |   |        |  

During 2003, $9,728,000 in notes payable
consisting of $9,310,000 in non-interest bearing notes issued in
connection with the purchase of Acta and $418,000 in bonuses
payable to former Acta employees were classified as current,
from long-term, as they are due in the first quarter of 2004
subject to indemnification obligations. As Informatica has filed
an action for alleged patent infringement against Acta
Technology, the full amounts held in escrow are not currently
available for release. The related restricted cash, plus
$526,000 in cash on deposit for bonuses to be paid to Acta
employees was also classified to current from long-term during
fiscal 2003. In April 2003, the Company paid $833,000 in notes
issued in connection with the purchase of OLAP@Work in April
2000 and released a corresponding amount of restricted cash. In
December 2003, the Company paid $884,000 in notes issued in
connection with the acquisition of Blue Edge Software and
released $317,000 in restricted cash.

The Company assumed an overdraft credit facility
from Crystal Decisions. This overdraft credit facility is
secured by a $2,000,000 deposit plus interest earned thereon
which is classified as current restricted cash. The overdraft
credit facility provides up to Canadian $2,000,000 credit for
certain overdrafts plus a foreign exchange forward trading line
supporting notional contracts of between $4,000,000 and
$6,000,000.

15.     Credit
Line

In November 2003, Business Objects executed a
line of credit for the duration of one year ending
November 25, 2004. The line provides up to
60 million which
can be drawn in euros, U.S. dollars or Canadian dollars for
general working capital requirements. The available amount is
reduced by the aggregate of all outstanding drawings against the
line of credit. Drawings are

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


limited to advances in duration of ten days to
twelve months and must be at least equal to
1 million
or the converted currency equivalent in U.S. dollars or Canadian
dollars or a whole number multiple of these amounts. All
drawings and interest amounts are due on the agreed upon credit
repayment date determined at the time of the drawing. Interest
is calculated dependent on the currency in which the draw
originally occurs. The line is subject to a commitment fee on
the available funds, payable on the first day of each quarter.
The terms of the agreement do not allow for the prepayment of
any drawings without the prior approval of the bank. The Company
has the option to reduce the credit available in multiples of
5 million,
without penalty. No drawings were made by the Company at
December 31, 2003. The agreement restricts certain of the
Companys activities including the extension of a mortgage,
lien, pledge, security interest or other rights related to all
or part of its existing or future assets or revenues, as
security for any existing or future debt for money borrowed.

16.     Accounting
for and Disclosure of Guarantees

Guarantors Accounting for
Guarantees.The Company from
time-to-time enters into certain types of contracts that
contingently require the Company to indemnify parties against
third party claims. These contracts primarily relate to:
(i) certain real estate leases, under which the Company may
be required to indemnify property owners for environmental and
other liabilities, and other claims arising from the
Companys use of the applicable premises; (ii) certain
agreements with the Companys officers, directors and
employees and third parties, under which the Company may be
required to indemnify such persons for liabilities arising out
of their duties to the Company and (iii) agreements under
which the Company indemnifies customers and partners for claims
arising from intellectual property infringement.

The terms of such obligations vary. Generally, a
maximum obligation is not explicitly stated. Because the
obligated amounts of these types of agreements often are not
explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. Historically, the Company has
not been obligated to make significant payments for these
obligations, and no liabilities have been recorded for these
obligations on its balance sheet as of December 31, 2003
and 2002.

The Company warrants to its customers that its
software products will operate substantially in conformity with
product documentation and that the physical media will be free
from defect. The specific terms and conditions of the warranties
are generally 30 days but may vary depending upon the
country in which the software is sold. The Company accrues for
known warranty issues if a loss is probable and can be
reasonably estimated, and accrues for estimated incurred but
unidentified warranty issues based on historical activity. To
date the Company has had no material warranty claims. Due to
thorough product testing, the short time between product
shipments and the detection and correction of product failures,
no history of material warranty claims, and the fact that no
significant warranty issues have been identified, the Company
has not recorded a warranty accrual to date.

The Company has entered into certain real estate
leases that require the Company to indemnify property owners
against certain environmental and other liabilities and other
claims.

Environmental Liabilities.The Company only engages in the
development, marketing and distribution of software, and it has
never had any environment related claim. Therefore, the
likelihood of incurring a loss related to these environmental
indemnifications is remote and thus the Company is unable to
reasonably estimate the amount. Therefore, the company has not

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##### Table of Contents



BUSINESS OBJECTS S.A.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(continued)


recorded a related liability in accordance with
the recognition and measurement provisions of FAS 143,
Accounting for Asset Retirement Obligations(FAS 143).

Other Liabilities and Other
Claims.The Company is responsible for
certain costs of restoring leased premises to their original
condition, and in accordance with the recognition and
measurement provisions of FAS 143, the Company measured the
fair value of these obligations and determined them to be
immaterial.

17.     Supplemental
Financial Information (Unaudited)  Selected Quarterly
Data

The following table presents unaudited quarterly
operating results for each of the eight quarters in the two-year
period ended December 31, 2003 (in thousands, expect per
share data). This information has been prepared on the same
basis as the annual information presented elsewhere herein and,
in managements opinion, includes all adjustments,
consisting only of normal recurring accruals, necessary for a
fair presentation of the information for the quarters presented.
The operating results for any quarter are not necessarily
indicative of results of any future period.

|                                                    |  |                                       |         |          |  |          |         |          |  |          |         |          |  |          |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         | 
|--------------------------------------------------- |  | ------------------------------------- | ------- | -------- |  | -------- | ------- | -------- |  | -------- | ------- | -------- |  | -------- | ------- | -------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                    |  |                                      
|                                                    |  | Three Months Ended                   
|                                                    |  |                                      
|                                                    |  | Dec. 31,                              |         | Sept 30, |  | June 30, |         | Mar. 31, |  | Dec. 31, |         | Sept 30, |  | June 30, |         | Mar. 31,
|                                                    |  | 2003(1)                               |         | 2003     |  | 2003     |         | 2003     |  | 2002     |         | 2002     |  | 2002     |         | 2002    
|                                                    |  |                                       |         |          |  |          |         |          |  |          |         |          |  |          |         |         
|                                                    |  |                                      
|                                                    |  | (in thousands, except per share data)
|Total revenues                                      |  | $                                     | 184,203 |          |  | $        | 129,112 |          |  | $        | 128,987 |          |  | $        | 118,523 |          |  | $ | 126,183 |  |  | $ | 109,882 |  |  | $ | 111,196 |  |  | $ | 107,538 | 
|Gross profit                                        |  |                                       | 154,388 |          |  |          | 106,422 |          |  |          | 107,423 |          |  |          | 97,636  |          |  |   | 106,119 |  |  |   | 91,104  |  |  |   | 93,045  |  |  |   | 89,940  | 
|Acquired in-process research and development        |  |                                       | 27,966  |          |  |          |        |          |  |          |        |          |  |          |        |          |  |   |        |  |  |   | 2,000   |  |  |   |        |  |  |   |        | 
|Restructuring costs                                 |  |                                       | 7,782   |          |  |          |        |          |  |          |        |          |  |          |        |          |  |   | 115     |  |  |   | 3,756   |  |  |   |        |  |  |   |        | 
|Income from operations                              |  |                                       | 329     |          |  |          | 13,418  |          |  |          | 14,984  |          |  |          | 10,466  |          |  |   | 17,024  |  |  |   | 4,642   |  |  |   | 10,286  |  |  |   | 15,764  | 
|Net income (loss)                                   |  | $                                     | (8,604  | )        |  | $        | 10,827  |          |  | $        | 11,527  |          |  | $        | 8,812   |          |  | $ | 12,813  |  |  | $ | 4,868   |  |  | $ | 11,878  |  |  | $ | 11,021  | 
|                                                    |  |                                       |         |          |  |          |         |          |  |          |         |          |  |          |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         | 
|Net income per ordinary share and ADS 
    basic   |  | $                                     | (0.12   | )        |  | $        | 0.17    |          |  | $        | 0.18    |          |  | $        | 0.14    |          |  | $ | 0.21    |  |  | $ | 0.08    |  |  | $ | 0.19    |  |  | $ | 0.18    | 
|                                                    |  |                                       |         |          |  |          |         |          |  |          |         |          |  |          |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         | 
|Net income per ordinary share and ADS 
    diluted |  | $                                     | (0.12   | )        |  | $        | 0.17    |          |  | $        | 0.18    |          |  | $        | 0.14    |          |  | $ | 0.20    |  |  | $ | 0.08    |  |  | $ | 0.18    |  |  | $ | 0.17    | 
|                                                    |  |                                       |         |          |  |          |         |          |  |          |         |          |  |          |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The quarter ended December 31, 2003 includes
    the consolidated results of operations for Crystal Decisions
    from December 12, 2003 to December 31, 2003. In
    accordance with FAS 141, the acquired in-process research
    and development of $27,966,000 relating to the Crystal Decisions
    Acquisition was written off in the fourth quarter of 2003.
    Restructuring costs of $7,782,000 were incurred by Business
    Objects during the quarter ended December 31, 2003.

-105-



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##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure

None.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

(a)     Evaluation of
Disclosure Controls and Procedures.

Our management, with the participation of our
Chief Executive Officer and Chief Financial Officer, evaluated
the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities Exchange Act)
as of the end of the period covered by this report. Based on
that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures as
of the end of the period covered by this report were effective
in ensuring that information required to be disclosed by us in
reports that we file or submit under the Securities Exchange Act
is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.

Our management, including the Chief Executive
Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures will prevent all errors and
all fraud. Because of inherent limitations on any systems of
disclosure controls and procedures, no evaluation of controls
can provide absolute assurance that all errors or fraud, if any,
within a company may be detected.

(b)     Changes in
internal controls.

In connection with the Crystal Decisions
Acquisition on December 11, 2003, there were significant
changes to our internal controls over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act). We believe
that these changes, although significant, did not materially
affect and are not reasonably likely to materially affect our
internal controls over financial reporting.

Our independent auditor, Ernst & Young
LLP, issued its annual management letter to our audit committee
and management which included a reportable condition related to
the operation of certain internal controls. At December 31,
2003, certain account reconciliations, analyses and supporting
documentation were not prepared or reviewed on a timely basis
due to multiple priorities as a result of the timing of the
close of the Crystal Decisions Acquisition and the
implementation of a significant restructuring and integration
plan.

Prior to the issuance of our financial
statements, we completed the account reconciliations, analysis
and our management review such that we can certify that the
information contained in our financial statements as of and for
each of the three years in the period ended December 31,
2003 fairly presents in all material respects the financial
condition and results of operations of Business Objects.

-106-



---



##### Table of Contents






PART III






|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of
    Registrant

Information required by this item concerning our
directors and executive officers is set forth in Part I of
this Form 10-K in the section titled Business
 Directors, Executive and Key Personnel.

Information regarding compliance with
Section 16(a) of the Securities Exchange Act of 1934, as
amended, is hereby incorporated herein by reference from the
section titled, Compliance with Section 16(a) of
the Exchange Act of the Companys Proxy Statement
for Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission within 120 days after
December 31, 2003 (the 2004 Proxy Statement).

We have adopted the Business Objects S.A. Code of
Ethics for Principal Executive and Senior Financial Officers
(Code of Ethics) which applies to our principal
executive officer, unless we have both a Chief Executive Officer
and a President, in which case it is applicable to both, our
principal financial officer, our principal accounting officer,
controller and divisional vice presidents of finance. Our Code
of Ethics is publicly available on our website at
www.businessobjects.com. We intend to disclose on our
website or on Form 8-K any amendments to our Code of Ethics
and any waiver from a provision of this Code granted to our
Chief Executive Officer, President, Chief Financial Officer,
Controller or divisional vice presidents of finance. The
information contained on or connected to our Internet website is
not incorporated by reference into this Form 10-K and
should not be considered part of this or any other report that
we file with or furnish to the SEC.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Information required by this item concerning our
directors and executive officers is incorporated by reference to
the 2004 Proxy Statement.






|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Shareholder Matters

Information required by this item regarding
security ownership of certain beneficial owners and management
as well as equity compensation plans, is incorporated by
reference to the information set forth in the sections titled
Beneficial Share Ownership by Principal Shareholders
and Management and Equity Compensation
Plan in the 2004 Proxy Statement.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

Information required by this item regarding
certain relationships and related transactions is incorporated
by reference to the information set forth in the section titled
Certain Relationships and Related
Transactions in the 2004 Proxy Statement.






|         |                                     
|-------- | ------------------------------------
|Item 14. | Principal Auditors Fees and Services

Information required by this item regarding
principal auditors fees and services is incorporated by
reference to the information set forth in the sections titled
Relationship with Independent Auditors in the
2004 Proxy Statement.

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##### Table of Contents






PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K



|       |                                   
|------ | ----------------------------------
|(a)(1) | Consolidated Financial Statements.

This Annual Report on Form 10-K contains the
following financial statements which appear under Part II,
Item 8 of this Form 10-K on the pages noted below:

|                                                                                                         |  |      |    | 
|-------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                         |  | Page
|                                                                                                         |  |     
|Report of Ernst & Young LLP, Independent
    Auditors                                                    |  |      | 62 | 
|Consolidated Balance Sheets as at
    December 31, 2003 and 2002                                         |  |      | 63 | 
|Consolidated Statements of Income for the years
    ended December 31, 2003, 2002 and 2001               |  |      | 64 | 
|Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2003, 2002 and 2001 |  |      | 65 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001           |  |      | 66 | 
|Notes to Consolidated Financial Statements                                                               |  |      | 67 | 

(a)(2)     Financial
Statement Schedules.

Schedule II: Valuation and Qualifying
Accounts  Business Objects S.A.

|                                                                  |  |                         |       |      |  |      |        |   |  |   |       |  
|----------------------------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                                                  |  |                        
|                                                                  |  | Year Ended December 31,
|                                                                  |  |                        
|Allowance for doubtful accounts and distribution channel returns: |  | 2003                    |       | 2002 |  | 2001
|                                                                  |  |                         |       |      |  |     
|Balance at beginning of year                                      |  | $                       | 2,891 |      |  | $    | 3,861  |   |  | $ | 3,987 |  
|Acquired through acquisition                                      |  |                         | 6,628 |      |  |      | 537    |   |  |   |      |  
|Provisions                                                        |  |                         | 1,102 |      |  |      | (1,102 | ) |  |   | 806   |  
|Deductions                                                        |  |                         | (638  | )    |  |      | (585   | ) |  |   | (807  | )
|Translation adjustments                                           |  |                         | (136  | )    |  |      | 180    |   |  |   | (125  | )
|                                                                  |  |                         |       |      |  |      |        |   |  |   |       |  
|Balance                                                           |  | $                       | 9,847 |      |  | $    | 2,891  |   |  | $ | 3,861 |  
|                                                                  |  |                         |       |      |  |      |        |   |  |   |       |  

|                                         |  |                         |         |      |  |      |        |   |  |   |        | 
|---------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                         |  |                        
|                                         |  | Year Ended December 31,
|                                         |  |                        
|Deferred tax asset, valuation allowance  |  | 2003                    |         | 2002 |  | 2001
|                                         |  |                         |         |      |  |     
|Balance at beginning of year             |  | $                       | 54,615  |      |  | $    | 26,302 |   |  | $ | 22,022 | 
|Additions charged to valuation allowance |  |                         | 7,573   |      |  |      | 31,139 |   |  |   | 4,280  | 
|Reductions from valuation allowance      |  |                         | (12,923 | )    |  |      | (2,826 | ) |  |   |       | 
|                                         |  |                         |         |      |  |      |        |   |  |   |        | 
|Balance                                  |  | $                       | 49,265  |      |  | $    | 54,615 |   |  | $ | 26,302 | 
|                                         |  |                         |         |      |  |      |        |   |  |   |        | 

Schedules not listed above have been omitted
because the information required to be set forth therein is not
applicable or is shown in the consolidated financial statements
or notes thereto.

(a)(3)     Exhibits.

The following exhibits are filed as part of this
Form 10-K:

|        |  |                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                   
|No.     |  | Description                                                                                                       
|        |  |                                                                                                                   
|10.25.1 |  | Business Objects S.A. 2001 Stock Option Plan, as
    amended December 11, 2003.                                   
|10.35   |  | Agreement between Société
    Générale and Business Objects S.A. for a line of
    credit dated November 25, 2003.
|14.1    |  | Business Objects S.A. Code of Ethics for
    Principal Executive and Senior Financial Officers.                   

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|        |      |             |  |                                                                                                                                                                                                     
|------- | ---- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 21.1 |             |  | List of Subsidiaries of the Company.                                                                                                                                                                
|        | 23.1 |             |  | Consent of Independent Auditors, Ernst &
    Young LLP.                                                                                                                                             
|        | 24.1 |             |  | Power of Attorney is herein referenced to the
    signature page of this Annual Report on Form 10-K.                                                                                                
|        | 31.1 |             |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             
|        | 31.2 |             |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             
|        | 32.1 |             |  | Certification of Chief Executive Officer
    furnished pursuant to Rule 13a-14(b) of the Exchange Act
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).
|        | 32.2 |             |  | Certification of Chief Financial Officer
    furnished pursuant to Rule 13a-14(b) of the Exchange Act
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).

(b)     Reports on
Form 8-K.

The company filed or furnished eight reports on
Form 8-K during its fourth quarter ended December 31,
2003.

|                  |  |                                                                                                                                                                                                                 
|----------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date Filed or     |  |                                                                                                                                                                                                                 
|Furnished         |  | Description of Form 8-K Report                                                                                                                                                                                  
|                  |  |                                                                                                                                                                                                                 
|October 17, 2003  |  | The Company announced the amendment of the
    Stockholders Agreement and Support Agreement.                                                                                                                    
|October 23, 2003  |  | The Company announced its earnings results for
    the quarter ended September 30, 2003.                                                                                                                        
|November 3, 2003  |  | The Company filed a report for the issuance of
    two press releases.                                                                                                                                          
|December 9, 2003  |  | The Company announced the final per share merger
    consideration to be paid to stockholders of Crystal Decisions,
    Inc. in connection with Business Objects proposed
    acquisition of Crystal Decisions.
|December 10, 2003 |  | The Company announced the board of directors
    approved text to be presented at the December 11, 2003
    Business Objects shareholders meeting.                                                             
|December 11, 2003 |  | The Company announced the completion of its
    acquisition of Crystal Decisions, Inc.                                                                                                                          
|December 12, 2003 |  | The Company furnished under Item 9 the
    slides presented at its extraordinary general meeting of
    shareholders held in Paris, France on December 11, 2003.                                                
|December 23, 2003 |  | The Company filed a Current Report under
    Items 2 and 7 related to the presentation of the pro forma
    information requirements related to the acquisition of Crystal
    Decisions, Inc.                  

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(c)     Exhibits
Incorporated by Reference

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.0*    |  | Status or Charter of the Company, as amended on
    July 15, 2002 (English translation), is incorporated herein
    by reference to Exhibit 3(ii) filed with the Companys
    Form 10-Q filed with the SEC on August 14, 2002 (File
    No. 000-24720).                                                                                                                                                                                                                     
|3.1*    |  | Bylaws of the Company, as amended on
    July 15, 2002 (English translation) is incorporated herein
    by reference to Exhibit 3(ii) filed with the Companys
    Form 10-Q filed with the SEC on August 14, 2002 (File
    No. 000-24720).                                                                                                                                                                                                                                 
|4.0*    |  | Form of Deposit Agreement, as amended and
    restated on December 30, 1998, among Business Objects S.A.,
    the Bank of New York as Depositary and holder from time to time
    of American Depositary Shares issued thereunder and
    Exhibit A to Deposit Agreement, is incorporated herein by
    reference to Exhibit 4.0 filed with the Companys 1998
    Form 10-K filed with the SEC.                                                                             
|4.1*    |  | Form of Deposit Agreement, as amended and
    restated on October 15, 2003, by and among Business Objects
    S.A. and The Bank of New York (as Depositary and holder from
    time to time of ADSs issued thereunder) and Exhibit A to
    the Deposit Agreement (this exhibit is incorporated by reference
    to the Registrants registration statement on Form F-6
    filed with the Securities and Exchange Commission on
    October 15, 2003 (File No. 333-109712)).
|4.2*    |  | Amended and Restated Stockholders Agreement,
    dated as of October 15, 2003, by and among Business Objects
    S.A., New SAC, CB Cayman and certain shareholders of New SAC
    (this exhibit is incorporated by reference to the
    Registrants Form 8-K filed with the Securities and
    Exchange Commission on October 17, 2003 (File
    No. 000-24720)).                                                                                                           
|10.0*   |  | Lincoln Park Lease Agreement by and between
    Metropolitan Life Insurance Company and the Company dated
    January 18, 1996, as amended and assignment of interest to
    Speiker Properties, L.P., is incorporated herein by reference to
    Exhibit 10.0 filed with the Companys 1997
    Form 10-K filed with the SEC.                                                                                                                                               
|10.1*   |  | Office Building Lease by and between Nabarro
    Nathanson, D.J. Downing, J.M. Jones Properties Limited and the
    Company dated March 6, 1996 is incorporated herein by
    reference to Exhibit 10.1 filed with the Companys
    1997 Form 10-K filed with the SEC.                                                                                                                                                                                                      
|10.2*   |  | Commercial Lease by and between Foncierne Chaptal
    and the Company dated June 4, 1996 is incorporated herein
    by reference to Exhibit 10.2 filed with the Companys
    1997 Form 10-K filed with the SEC.                                                                                                                                                                                                                                                             
|10.3*+  |  | 1991 Stock Option Plan is incorporated herein by
    reference to Exhibit 10.2 filed with the Companys
    Registration Statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 33-83052).                                                                                                                                                                                                                                                             
|10.4*+  |  | 1993 Stock Option Plan is incorporated herein by
    reference to Exhibit 10.3 filed with the Companys
    Registration Statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 33-83052).                                                                                                                                                                                                                                                             
|10.5*+  |  | 1994 Stock Option Plan is incorporated herein by
    reference to Exhibit 4.2 filed with the Companys
    Registration Statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 33-83052).                                                                                                                                                                                                                                                              
|10.6*   |  | Summary: in English of 1992 Grant by the French
    Ministry of the Economy, Finance and the Budget is incorporated
    herein by reference to Exhibit 10.4 filed with the
    Companys Registration Statement on Form F-1 filed
    with the SEC on September 20, 1994 (File No. 33-83052).                                                                                                                                                                                

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|        |  |                                                                                                                                                                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                  
|Number  |  | Description                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                  
|10.7*+  |  | Stock subscription warrant for Albert Eisenstat
    is incorporated herein by reference to Exhibit 4.2 filed
    with the Companys Registration Statement on Form S-8
    filed with the SEC on September 5, 1995 (File
    No. 333-96598).                     
|10.8*+  |  | Stock subscription warrant for Arnold Silverman
    is incorporated herein by reference to Exhibit 4.3 filed
    with the Companys Registration Statement on Form S-8
    filed with the SEC on September 5, 1995 (File
    No. 333-96598).                     
|10.9*+  |  | Stock subscription warrant for Philippe Claude
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1997 (File No. 333-42059). 
|10.10*+ |  | Stock subscription warrant for Albert Eisenstat
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.3 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1995 (File No. 333-42059).
|10.11*+ |  | Stock subscription warrant for Arnold Silverman
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1995 (File No. 333-42059).
|10.12*+ |  | Stock subscription warrant for Vincent Worms
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.5 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1995 (File No. 333-42059).   
|10.13*  |  | Value Added Reseller Agreement for Visigenics
    Products with Reseller Rights dated March 27, 1997, by and
    between the Company is incorporated herein by reference to
    Exhibit 10.1 with the Companys 1997 Form 10-K
    filed with the SEC.           
|10.14*+ |  | Stock subscription warrant for Bernard Charles
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).   
|10.15*+ |  | Stock subscription warrant for Philippe Claude
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.3 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).   
|10.16*+ |  | Stock subscription warrant for Albert Eisenstat
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).  
|10.17*+ |  | Stock subscription warrant for Arnold Silverman
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).  
|10.18*+ |  | Stock subscription warrant for Vincent Worms
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.5 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).     
|10.19*  |  | License, Distribution and Marketing Agreement by
    and between the Company and Microsoft Corporation, dated
    June 23, 1998, is incorporated herein by reference to
    Exhibit 10.21 filed with the Companys 1998
    Form 10-K filed with the SEC.        

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|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number    |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.20*+   |  | Stock subscription warrant for Vincent Worms
    dated May 4, 1999, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on August 3,
    1999 (File No. 333-84331).                                                                                                                                                                                                     
|10.21*    |  | Commercial Lease by and between SCI De
    LIlot 4.3 and SCI Du Pont De Levallois (lessors) and
    the Company (lessee) dated December 22, 1999 (English
    translation)                                                                                                                                                                                                                                                                                   
|10.22*    |  | Lease agreement by and between 475 Java Drive
    Associates, L.P. and Business Objects Americas dated
    August 3, 2000 is incorporated herein by reference to
    Exhibit 10 filed with the Companys June 30, 2000
    10-Q filed with the SEC.                                                                                                                                                                                                           
|10.23*+   |  | 1999 Stock Option Plan, as amended, is
    incorporated herein by reference to Exhibit (d)(1) of the
    Companys Schedule TO-I filed with the SEC on
    October 11, 2002 (File No. 005-47622).                                                                                                                                                                                                                                                             
|10.24*+   |  | French Employee Savings Plan and 1995
    International Employee Stock Purchase Plan as amended, is
    incorporated herein by reference to the Addendum to the
    Registrants Definitive Proxy Statement on
    Schedule 14A filed with the Commission on April 22,
    2002 (File No. 000-24720).                                                                                                                                                         
|10.24.1*+ |  | French Employee Savings Plan and 1995
    International Employee Stock Purchase Plan as amended, is
    incorporated herein by reference to the Companys
    Registrant Statement on Form S-8 filed with the SEC on
    December 11, 2003 (File No. 333-111089).                                                                                                                                                                                             
|10.25*+   |  | 2001 Stock Option Plan, as amended, is
    incorporated herein by reference to the Companys to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    September 14, 2001 (File No. 333-69376).                                                                                                                                                                                                            
|10.25.1+  |  | 2001 Stock Option Plan, as amended
    December 11, 2003                                                                                                                                                                                                                                                                                                                                                                                                      
|10.26*+   |  | Stock subscription warrant for John Olsen dated
    February 7, 2001, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    September 14, 2001.                                                                                                                                                                                                                    
|10.27*+   |  | Stock subscription warrant for Bernard Charles
    dated October 30, 2001, is incorporated herein by reference
    to Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    November 8, 2002 (File No. 333-101104).                                                                                                                                                                                           
|10.28*+   |  | Stock subscription warrant for Albert Eisenstat
    dated October 30, 2001, is incorporated herein by reference
    to Exhibit 4.3 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    November 8, 2002 (File No. 333-101104).                                                                                                                                                                                          
|10.29*+   |  | Stock subscription warrant for Arnold Silverman
    dated October 30, 2001, is incorporated herein by reference
    to Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    November 8, 2002 (File No. 333-101104).                                                                                                                                                                                          
|10.30*+   |  | Agreement with each of the Companys
    directors and senior management pursuant to which the Company
    agreed to contract for and maintain liability insurance against
    liabilities which may be incurred by such persons in their
    respective capacities is incorporated herein by reference to
    Exhibit 10.5 filed with the Companys registration
    statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 333-83052).
|10.31*    |  | Lease agreement by and between Commercial Union
    Life Assurance Company Limited, Business Objects UK Limited and
    Business Objects SA dated April 3, 2001 is incorporated
    herein by reference to Exhibit 99-3.2 filed with the
    Companys September 30, 2001 10-Q filed with the SEC.                                                                                                                                                            

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|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Number    |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.32*+   |  | Stock subscription warrant for Gerald Held dated
    September 16, 2003, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    September 30, 2003 (File No. 333-109278).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.33*+   |  | Stock subscription warrant for Jean-Francois
    Heitz dated September 16, 2003, is incorporated herein by
    reference to Exhibit 4.3 filed with the Companys
    Registration Statement on Form S-8 filed with the SEC on
    September 30, 2003 (File No. 333-109278).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.34*+   |  | Stock subscription warrant for David Peterschmidt
    dated September 16, 2003, is incorporated herein by
    reference to Exhibit 4.4 filed with the Companys
    Registration Statement on Form S-8 filed with the SEC on
    September 30, 2003 (File No. 333-109278).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.35     |  | Agreement between Société
    Générale and Business Objects S.A. for a line of
    credit dated November 25, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.36*+   |  | Crystal Decisions, Inc. 1999 Stock Option Plan,
    as amended August 13, 2003, is incorporated herein by
    reference to Exhibit 4.2 filed with the Companys
    Registration Statement on Form S-8 filed with the SEC on
    December 11, 2003 (File No. 333-111090).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.36.1*+ |  | 1999 Stock Option Plan  Canadian Stock
    Option Agreement incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10 filed
    with the SEC on October 27, 2000 (File No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.36.2*+ |  | 1999 Stock Option Plan  French
    Sub-Plan incorporated herein by reference to the Crystal
    Decisions Annual Report on Form 10 filed with the SEC
    on June 28, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.37*    |  | Shareholders Agreement, dated as of
    November 22, 2000, by and among New SAC, Silver Lake
    Technology Investors Cayman, L.P., Silver Lake Investors Cayman,
    L.P., Silver Lake Partners Cayman, L.P., SAC Investments, L.P.,
    August Capital III, L.P., Chase Equity Associates, L.P., GS
    Capital Partners III, L.P., GS Capital Partners III
    Offshore, L.P., Goldman, Sachs & Co. Verwaltungs GmbH,
    Stone Street Fund 2000 L.P., Bridge Street Special Opportunities
    Fund 2000, L.P. Staenberg Venture Partners II, L.P.,
    Staenberg Seagate Partners, LLC, Integral Capital
    Partners V, L.P., Integral Capital Partners V Side
    Fund, L.P. and the individuals listed therein, is incorporated
    by reference to Exhibit 10.16 filed with Seagate Technology
    International LLCs Registration Statement on Form S-4
    filed with the SEC on April 20, 2001 (File
    No. 333-59328).
|10.38*    |  | Management Shareholders Agreement, dated as of
    November 22, 2000, by and among New SAC and the Management
    Shareholders listed therein is incorporated by reference to
    Exhibit  10.17 filed with Seagate Technology International
    LLCs Registration Statement on Form S-4 filed with
    the SEC on April 20, 2001 (File No. 333-59328).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10.39*+   |  | Lease Agreement dated November 1, 1997
    between No. 163 Cathedral Ventures Limited, Seagate
    Software Information Management Group, Inc. and Seagate
    Technology Inc., as a Guarantor incorporated herein by reference
    to the Crystal Decisions Registration Statement on
    Form 10 filed with the SEC on October 27, 2000 (File
    No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.39.1*  |  | Amendment to Lease agreement dated
    January 27, 1999 incorporated herein by reference to the
    Crystal Decisions Registration Statement on Form 10
    filed with the SEC on October 27, 2000 (File
    No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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|         |  |                                                                                                                                                                                                                                                                                                                                                       
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                       
|Number   |  | Description                                                                                                                                                                                                                                                                                                                                           
|         |  |                                                                                                                                                                                                                                                                                                                                                       
|10.40*   |  | Lease Agreement dated September 27, 1999
    between Laurelton Investments Ltd., Seagate Software Information
    Management Group (Canada) Ltd. and Seagate Software, Inc.
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).     
|10.40.1* |  | Amendment to Lease agreement dated June 22,
    2000 between Laurelton Investments Ltd., Seagate Software
    Information Management Group (Canada) Ltd. and Seagate Software,
    Inc.                                                                                                                                                               
|10.40.2* |  | Amended and Restated Lease Agreement dated
    February 28, 2002 between Laurelton Investments Ltd.,
    Crystal Decision, Corp. and Crystal Decisions, Inc. incorporated
    herein by reference to the Crystal Decisions Annual Report
    on Form 10-K filed with the SEC on June 29, 2001.                                                       
|10.41*   |  | Lease agreement dated October 18, 1996
    between Raven Properties Limited and Holistic Systems Limited
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                        
|10.41.1* |  | License to Underlet dated May 16, 2000
    between Ravenseft Properties Limited Blackwell Healthcare
    Communications Limited and Seagate Information Management Group
    Limited incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10 filed
    with the SEC on October 27, 2000 (File No. 000-31859).
|10.41.2* |  | Under lease agreement dated May 23, 2000
    between Seagate Information Management Group Limited and
    Blackwell Healthcare Communications Limited incorporated herein
    by reference to exhibit 10.11.2 to the Crystal Decisions
    Registration Statement on Form S-1 filed with the SEC on
    May 23, 2003 (File No. 333-105559).          
|10.42*   |  | Lease agreement dated June 22, 1998 between
    Allstate Insurance Company and Seagate Software, Inc.
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                           
|10.43*   |  | Sublease agreement dated June 18, 1999
    between Bellsouth Mobility Inc. and Seagate Software Inc.
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                            
|10.44*   |  | Offer Letter dated as of September 25, 2002
    between Crystal Decisions Inc. and Jonathan Judge incorporated
    herein by reference to the Crystal Decisions Quarterly
    Report on Form 10-Q filed with the SEC on
    September 27, 2002 (File No. 000-31859).                                                                                 
|10.44.1* |  | Amendment No. 1 to Employment Agreement
    dated as of August 28, 2003 between Crystal Decisions,
    Inc., Seagate Software (Cayman) Holdings Corporation and
    Jonathan J. Judge incorporated herein by reference to
    Exhibit 10.17.1 filed with Crystal Decisions S-1
    filed with the SEC on September 3, 2003 (File
    No. 333-108479).
|10.45*   |  | Tenancy dated July 2, 2002 between Crystal
    Decisions (UK) Limited and Ealing Broadway (No. 1)
    Limited and Ealing Broadway (No. 2) Limited incorporated
    herein by reference to the Crystal Decisions Registration
    Statement on Form 10-K for the fiscal year ended
    June 27, 2003 filed with the SEC on August 18, 2003.           

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|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.45.1* |  | Deed dated July 2, 2002 between Crystal
    Decision (UK) Limited and Ealing Broadway (No. 1)
    Limited and Ealing Broadway (No. 2) Limited incorporated
    herein by reference to the Crystal Decisions Registration
    Statement on Form 10-K for the fiscal year ended
    June 27, 2003 filed with the SEC on August 18, 2003.                                                                                                 
|10.46*   |  | Lease Agreement dated December 27, 1994 and
    lease agreement for additional premises dated December 13,
    1995 between Clover Investments, Inc., Crystal Computer
    Services, Inc and Seagate Technology, Inc. incorporated herein
    by reference to Exhibit 10.3 to the Crystal Decisions
    Registration Statement on Form 10 (File No. 000-23169)
    of Seagate Software, Inc. filed with the SEC on October 3,
    1997.
|10.46.1* |  | Amendment to Lease Agreement dated
    December 30, 1999 between Manufacturer Life Insurance
    Company and Seagate Software Information Management Group
    (Canada) Inc. incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10-K for the
    fiscal year ended June 27, 2003 filed with the SEC on
    August 18, 2003.                                                                  
|10.46.2* |  | Amendment to Lease agreement dated July 17,
    2000 between the Manufacturer Life Insurance Company and Seagate
    Information Management Group (Canada) Inc. incorporated herein
    by reference to the Crystal Decisions Registration
    Statement on Form 10-K for the fiscal year ended
    June 27, 2003 filed with the SEC on August 18, 2003.                                                                               
|10.46.3* |  | Amendment to Lease Agreement dated April 2,
    2002 between the Manufacturer Life Insurance Company and Crystal
    Decisions, Corp. incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10-K for the
    fiscal year ended June 27, 2003 filed with the SEC on
    August 18, 2003.                                                                                                         
|10.47*+  |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and Anthony L. Wind
    incorporated herein by reference to Exhibit 10.25 filed
    with Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).                                                                                              
|10.48*+  |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and William G. Gibson
    incorporated herein by reference to Exhibit 10.26 filed with
    Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).                                                                                            
|10.49*+  |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and Andrew L. Handford
    incorporated herein by reference to Exhibit 10.27 filed with
    Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).                                                                                           
|10.50*+  |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and Eric Patel
    incorporated herein by reference to Exhibit 10.28 filed with
    Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).                                                                                                   
|14.1     |  | Business Objects S.A. Code of Ethics for
    Principal Executive and Senior Financial Officers.                                                                                                                                                                                                                                                                                                                                         
|21.1     |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                                                                    
|23.1     |  | Consent of Ernst & Young, LLP,
    Independent Auditors.                                                                                                                                                                                                                                                                                                                                                                                
|24.1     |  | Power of Attorney is herein referenced to the
    signature page of this Annual Report on Form 10-K.                                                                                                                                                                                                                                                                                                                                    

-115-



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##### Table of Contents



|        |  |                                                                                                                                                                                                     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                     
|Number  |  | Description                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                     
|31.1    |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             
|31.2    |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                             
|32.1    |  | Certification of Chief Executive Officer
    furnished pursuant to Rule 13a-14(b) of the Exchange Act
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).
|32.2    |  | Certification of Chief Financial Officer
    furnished pursuant to Rule 13a-14(b) of the Exchange Act
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).



---

|  |  |                                            
|- |  | -------------------------------------------
|* |  | Previously filed.                          
|+ |  | Management contracts or compensatory plans.

-116-



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##### Table of Contents



SIGNATURES

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



| |                      
| | ---------------------
| | BUSINESS OBJECTS S.A.



| |     |                     
| | --- | --------------------
| | By: | /s/ BERNARD LIAUTAUD

| |                          
| | -------------------------
| |                          
| | Bernard Liautaud         
| | Chairman of the Board and
| | Chief Executive Officer  

Date: March 12, 2004

Know all Person by These Presents, that each
person whose signature appears below constitutes and appoints
Bernard Liautaud and James R. Tolonen, jointly and severally,
his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this
Form 10-K and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying the confirming all that
each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, this Report has been signed by
the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

|                                             |  |                                                                                                                  |  |                |  | 
|-------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                             |  |                                                                                                                  |  |               
|Signature                                    |  | Title                                                                                                            |  | Date          
|                                             |  |                                                                                                                  |  |               
|/s/ BERNARD LIAUTAUD(Bernard Liautaud)       |  | Chairman of the Board, Chief Executive Officer
    and Director
    (Principal Executive Officer)                |  | March 12, 2004
|                                            
|/s/ JAMES R. TOLONEN(James R. Tolonen)       |  | Chief Financial Officer and Senior Group Vice
    President
    (Principal Financial and
    Accounting Officer) |  | March 12, 2004
|                                            
|/s/ JOHN OLSEN(John Olson)                   |  | Director, President and Chief Operating Officer                                                                  |  | March 12, 2004
|                                            
|/s/ ALBERT EISENSTAT(Albert Eisenstat)       |  | Director                                                                                                         |  | March 12, 2004
|                                            
|/s/ ARNOLD SILVERMAN(Arnold Silverman)       |  | Director                                                                                                         |  | March 12, 2004
|                                            
|/s/ BERNARD CHARLÈS(Bernard Charlès)         |  | Director                                                                                                         |  | March 12, 2004
|                                            
|/s/ GERALD HELD(Gerald Held)                 |  | Director                                                                                                         |  | March 12, 2004
|                                            
|/s/ DAVID PETERSCHMIDT(David Peterschmidt)   |  | Director                                                                                                         |  | March 12, 2004
|                                            
|/s/ JEAN-FRANÇOIS HEITZ(Jean-François Heitz) |  | Director                                                                                                         |  | March 12, 2004
|                                            
|/s/ DAVID ROUX(David Roux)                   |  | Director                                                                                                         |  | March 12, 2004

-117-



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##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|3.0*    |  | Status or Charter of the Company, as amended on
    July 15, 2002 (English translation), is incorporated herein
    by reference to Exhibit 3(ii) filed with the Companys
    Form 10-Q filed with the SEC on August 14, 2002 (File
    No. 000-24720).                                                                                                                                                                                                                     
|3.1*    |  | Bylaws of the Company, as amended on
    July 15, 2002 (English translation) is incorporated herein
    by reference to Exhibit 3(ii) filed with the Companys
    Form 10-Q filed with the SEC on August 14, 2002 (File
    No. 000-24720).                                                                                                                                                                                                                                 
|4.0*    |  | Form of Deposit Agreement, as amended and
    restated on December 30, 1998, among Business Objects S.A.,
    the Bank of New York as Depositary and holder from time to time
    of American Depositary Shares issued thereunder and
    Exhibit A to Deposit Agreement, is incorporated herein by
    reference to Exhibit 4.0 filed with the Companys 1998
    Form 10-K filed with the SEC.                                                                             
|4.1*    |  | Form of Deposit Agreement, as amended and
    restated on October 15, 2003, by and among Business Objects
    S.A. and The Bank of New York (as Depositary and holder from
    time to time of ADSs issued thereunder) and Exhibit A to
    the Deposit Agreement (this exhibit is incorporated by reference
    to the Registrants registration statement on Form F-6
    filed with the Securities and Exchange Commission on
    October 15, 2003 (File No. 333-109712)).
|4.2*    |  | Amended and Restated Stockholders Agreement,
    dated as of October 15, 2003, by and among Business Objects
    S.A., New SAC, CB Cayman and certain shareholders of New SAC
    (this exhibit is incorporated by reference to the
    Registrants Form 8-K filed with the Securities and
    Exchange Commission on October 17, 2003 (File
    No. 000-24720)).                                                                                                           
|10.0*   |  | Lincoln Park Lease Agreement by and between
    Metropolitan Life Insurance Company and the Company dated
    January 18, 1996, as amended and assignment of interest to
    Speiker Properties, L.P., is incorporated herein by reference to
    Exhibit 10.0 filed with the Companys 1997
    Form 10-K filed with the SEC.                                                                                                                                               
|10.1*   |  | Office Building Lease by and between Nabarro
    Nathanson, D.J. Downing, J.M. Jones Properties Limited and the
    Company dated March 6, 1996 is incorporated herein by
    reference to Exhibit 10.1 filed with the Companys
    1997 Form 10-K filed with the SEC.                                                                                                                                                                                                      
|10.2*   |  | Commercial Lease by and between Foncierne Chaptal
    and the Company dated June 4, 1996 is incorporated herein
    by reference to Exhibit 10.2 filed with the Companys
    1997 Form 10-K filed with the SEC.                                                                                                                                                                                                                                                             
|10.3*+  |  | 1991 Stock Option Plan is incorporated herein by
    reference to Exhibit 10.2 filed with the Companys
    Registration Statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 33-83052).                                                                                                                                                                                                                                                             
|10.4*+  |  | 1993 Stock Option Plan is incorporated herein by
    reference to Exhibit 10.3 filed with the Companys
    Registration Statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 33-83052).                                                                                                                                                                                                                                                             
|10.5*+  |  | 1994 Stock Option Plan is incorporated herein by
    reference to Exhibit 4.2 filed with the Companys
    Registration Statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 33-83052).                                                                                                                                                                                                                                                              
|10.6*   |  | Summary: in English of 1992 Grant by the French
    Ministry of the Economy, Finance and the Budget is incorporated
    herein by reference to Exhibit 10.4 filed with the
    Companys Registration Statement on Form F-1 filed
    with the SEC on September 20, 1994 (File No. 33-83052).                                                                                                                                                                                
|10.7*+  |  | Stock subscription warrant for Albert Eisenstat
    is incorporated herein by reference to Exhibit 4.2 filed
    with the Companys Registration Statement on Form S-8
    filed with the SEC on September 5, 1995 (File
    No. 333-96598).                                                                                                                                                                                                                                 



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                      
|Number  |  | Description                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                      
|10.8*+  |  | Stock subscription warrant for Arnold Silverman
    is incorporated herein by reference to Exhibit 4.3 filed
    with the Companys Registration Statement on Form S-8
    filed with the SEC on September 5, 1995 (File
    No. 333-96598).                                                         
|10.9*+  |  | Stock subscription warrant for Philippe Claude
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1997 (File No. 333-42059).                                     
|10.10*+ |  | Stock subscription warrant for Albert Eisenstat
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.3 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on December 11,
    1995 (File No. 333-42059).                                    
|10.11*+ |  | Stock subscription warrant for Arnold Silverman
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1995 (File No. 333-42059).                                    
|10.12*+ |  | Stock subscription warrant for Vincent Worms
    dated June 19, 1997, is incorporated herein by reference to
    Exhibit 4.5 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    December 11, 1995 (File No. 333-42059).                                       
|10.13*  |  | Value Added Reseller Agreement for Visigenics
    Products with Reseller Rights dated March 27, 1997, by and
    between the Company is incorporated herein by reference to
    Exhibit 10.16 with the Companys 1997 Form 10-K
    filed with the SEC.                                              
|10.14*+ |  | Stock subscription warrant for Bernard Charles
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).                                       
|10.15*+ |  | Stock subscription warrant for Philippe Claude
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.3 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).                                       
|10.16*+ |  | Stock subscription warrant for Albert Eisenstat
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).                                      
|10.17*+ |  | Stock subscription warrant for Arnold Silverman
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).                                      
|10.18*+ |  | Stock subscription warrant for Vincent Worms
    dated June 18, 1998, is incorporated herein by reference to
    Exhibit 4.5 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on October 9,
    1998 (File No. 333-65549).                                         
|10.19*  |  | License, Distribution and Marketing Agreement by
    and between the Company and Microsoft Corporation, dated
    June 23, 1998, is incorporated herein by reference to
    Exhibit 10.21 filed with the Companys 1998
    Form 10-K filed with the SEC.                                            
|10.20*+ |  | Stock subscription warrant for Vincent Worms
    dated May 4, 1999, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on August 3,
    1999 (File No. 333-84331).                                            
|10.21*  |  | Commercial Lease by and between SCI De
    LIlot 4.3 and SCI Du Pont De Levallois (lessors) and
    the Company (lessee) dated December 22, 1999 (English
    translation)                                                                                                                          
|10.22*  |  | Lease agreement by and between 475 Java Drive
    Associates, L.P. and Business Objects Americas dated
    August 3, 2000 is incorporated herein by reference to
    Exhibit 10 filed with the Companys June 30, 2000
    10-Q filed with the SEC.                                                  
|10.23*+ |  | 1999 Stock Option Plan, as amended, is
    incorporated herein by reference to Exhibit (d)(1) of the
    Companys Schedule TO-I filed with the SEC on
    October 11, 2002 (File No. 005-47622).                                                                                                    
|10.24*+ |  | French Employee Savings Plan and 1995
    International Employee Stock Purchase Plan as amended, is
    incorporated herein by reference to the Addendum to the
    Registrants Definitive Proxy Statement on
    Schedule 14A filed with the Commission on April 22,
    2002 (File No. 000-24720).



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##### Table of Contents



|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number    |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.24.1*+ |  | French Employee Savings Plan and 1995
    International Employee Stock Purchase Plan as amended, is
    incorporated herein by reference to the Companys
    Registrant Statement on Form S-8 filed with the SEC on
    December 11, 2003 (File No. 333-111089).                                                                                                                                                                                             
|10.25*+   |  | 2001 Stock Option Plan, as amended, is
    incorporated herein by reference to the Companys to
    Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    September 14, 2001 (File No. 333-69376).                                                                                                                                                                                                            
|10.25.1+  |  | 2001 Stock Option Plan, as amended
    December 11, 2003                                                                                                                                                                                                                                                                                                                                                                                                      
|10.26*+   |  | Stock subscription warrant for John Olsen dated
    February 7, 2001, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    September 14, 2001.                                                                                                                                                                                                                    
|10.27*+   |  | Stock subscription warrant for Bernard Charles
    dated October 30, 2001, is incorporated herein by reference
    to Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    November 8, 2002 (File No. 333-101104).                                                                                                                                                                                           
|10.28*+   |  | Stock subscription warrant for Albert Eisenstat
    dated October 30, 2001, is incorporated herein by reference
    to Exhibit 4.3 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    November 8, 2002 (File No. 333-101104).                                                                                                                                                                                          
|10.29*+   |  | Stock subscription warrant for Arnold Silverman
    dated October 30, 2001, is incorporated herein by reference
    to Exhibit 4.4 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    November 8, 2002 (File No. 333-101104).                                                                                                                                                                                          
|10.30*+   |  | Agreement with each of the Companys
    directors and senior management pursuant to which the Company
    agreed to contract for and maintain liability insurance against
    liabilities which may be incurred by such persons in their
    respective capacities is incorporated herein by reference to
    Exhibit 10.5 filed with the Companys registration
    statement on Form F-1 filed with the SEC on
    September 20, 1994 (File No. 333-83052).
|10.31*    |  | Lease agreement by and between Commercial Union
    Life Assurance Company Limited, Business Objects UK Limited and
    Business Objects SA dated April 3, 2001 is incorporated
    herein by reference to Exhibit 99-3.2 filed with the
    Companys September 30, 2001 10-Q filed with the SEC.                                                                                                                                                            
|10.32*+   |  | Stock subscription warrant for Gerald Held dated
    September 16, 2003, is incorporated herein by reference to
    Exhibit 4.2 filed with the Companys Registration
    Statement on Form S-8 filed with the SEC on
    September 30, 2003 (File No. 333-109278).                                                                                                                                                                                           
|10.33*+   |  | Stock subscription warrant for Jean-Francois
    Heitz dated September 16, 2003, is incorporated herein by
    reference to Exhibit 4.3 filed with the Companys
    Registration Statement on Form S-8 filed with the SEC on
    September 30, 2003 (File No. 333-109278).                                                                                                                                                                                   
|10.34*+   |  | Stock subscription warrant for David Peterschmidt
    dated September 16, 2003, is incorporated herein by
    reference to Exhibit 4.4 filed with the Companys
    Registration Statement on Form S-8 filed with the SEC on
    September 30, 2003 (File No. 333-109278).                                                                                                                                                                                    
|10.35     |  | Agreement between Société
    Générale and Business Objects S.A. for a line of
    credit dated November 25, 2003.                                                                                                                                                                                                                                                                                                                                            
|10.36*+   |  | Crystal Decisions, Inc. 1999 Stock Option Plan,
    as amended August 13, 2003, is incorporated herein by
    reference to Exhibit 4.2 filed with the Companys
    Registration Statement on Form S-8 filed with the SEC on
    December 11, 2003 (File No. 333-111090).                                                                                                                                                                                     



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##### Table of Contents



|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Number    |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.36.1*+ |  | 1999 Stock Option PlanCanadian Stock Option
    Agreement incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10 filed
    with the SEC on October 27, 2000 (File No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.36.2*+ |  | 1999 Stock Option Plan  French
    Sub-Plan incorporated herein by reference to the Crystal
    Decisions Annual Report on Form 10 filed with the SEC
    on June 28, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.37*    |  | Shareholders Agreement, dated as of
    November 22, 2000, by and among New SAC, Silver Lake
    Technology Investors Cayman, L.P., Silver Lake Investors Cayman,
    L.P., Silver Lake Partners Cayman, L.P., SAC Investments, L.P.,
    August Capital III, L.P., Chase Equity Associates, L.P., GS
    Capital Partners III, L.P., GS Capital Partners III
    Offshore, L.P., Goldman, Sachs & Co. Verwaltungs GmbH,
    Stone Street Fund 2000 L.P., Bridge Street Special Opportunities
    Fund 2000, L.P. Staenberg Venture Partners II, L.P.,
    Staenberg Seagate Partners, LLC, Integral Capital
    Partners V, L.P., Integral Capital Partners V Side
    Fund, L.P. and the individuals listed therein, is incorporated
    by reference to Exhibit 10.16 filed with Seagate Technology
    International LLCs Registration Statement on Form S-4
    filed with the SEC on April 20, 2001 (File
    No. 333-59328).
|10.38*    |  | Management Shareholders Agreement, dated as of
    November 22, 2000, by and among New SAC and the Management
    Shareholders listed therein is incorporated by reference to
    Exhibit 10.17 filed with Seagate Technology International
    LLCs Registration Statement on Form S-4 filed with
    the SEC on April 20, 2001 (File No. 333-59328).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.39*+   |  | Lease Agreement dated November 1, 1997
    between No. 163 Cathedral Ventures Limited, Seagate
    Software Information Management Group, Inc. and Seagate
    Technology Inc., as a Guarantor incorporated herein by reference
    to the Crystal Decisions Registration Statement on
    Form 10 filed with the SEC on October 27, 2000 (File
    No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.39.1*  |  | Amendment to Lease agreement dated
    January 27, 1999 incorporated herein by reference to the
    Crystal Decisions Registration Statement on Form 10
    filed with the SEC on October 27, 2000 (File
    No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.40*    |  | Lease Agreement dated September 27, 1999
    between Laurelton Investments Ltd., Seagate Software Information
    Management Group (Canada) Ltd. and Seagate Software, Inc.
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.40.1*  |  | Amendment to Lease agreement dated June 22,
    2000 between Laurelton Investments Ltd., Seagate Software
    Information Management Group (Canada) Ltd. and Seagate Software,
    Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.40.2*  |  | Amended and Restated Lease Agreement dated
    February 28, 2002 between Laurelton Investments Ltd.,
    Crystal Decision, Corp. and Crystal Decisions, Inc. incorporated
    herein by reference to the Crystal Decisions Annual Report
    on Form 10-K filed with the SEC on June 29, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.41*    |  | Lease agreement dated October 18, 1996
    between Raven Properties Limited and Holistic Systems Limited
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.41.1*  |  | License to Underlet dated May 16, 2000
    between Ravenseft Properties Limited Blackwell Healthcare
    Communications Limited and Seagate Information Management Group
    Limited incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10 filed
    with the SEC on October 27, 2000 (File No. 000-31859).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



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##### Table of Contents



|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Number   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                             
|         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.41.2* |  | Under lease agreement dated May 23, 2000
    between Seagate Information Management Group Limited and
    Blackwell Healthcare Communications Limited incorporated herein
    by reference to exhibit 10.11.2 to the Crystal
    Decisions Registration Statement on Form S-1 filed
    with the SEC on May 23, 2003 (File No. 333-105559).                                                                                            
|10.42*   |  | Lease agreement dated June 22, 1998 between
    Allstate Insurance Company and Seagate Software, Inc.
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                                                                                                             
|10.43*   |  | Sublease agreement dated June 18, 1999
    between Bellsouth Mobility Inc. and Seagate Software Inc.
    incorporated herein by reference to the Crystal Decisions
    Registration Statement on Form 10 filed with the SEC on
    October 27, 2000 (File No. 000-31859).                                                                                                                                                              
|10.44*   |  | Offer Letter dated as of September 25, 2002
    between Crystal Decisions Inc. and Jonathan Judge incorporated
    herein by reference to the Crystal Decisions Quarterly
    Report on Form 10-Q filed with the SEC on
    September 27, 2002 (File No. 000-31859).                                                                                                                                                                   
|10.44.1* |  | Amendment No. 1 to Employment Agreement
    dated as of August 28, 2003 between Crystal Decisions,
    Inc., Seagate Software (Cayman) Holdings Corporation and
    Jonathan J. Judge incorporated herein by reference to Exhibit
    10.17.1 filed with Crystal Decisions S-1 filed with the
    SEC on September 3, 2003 (File No. 333-108479).                                                                                      
|10.45*   |  | Tenancy dated July 2, 2002 between Crystal
    Decisions (UK) Limited and Ealing Broadway (No. 1)
    Limited and Ealing Broadway (No. 2) Limited incorporated
    herein by reference to the Crystal Decisions Registration
    Statement on Form 10-K for the fiscal year ended
    June 27, 2003 filed with the SEC on August 18, 2003.                                                                                             
|10.45.1* |  | Deed dated July 2, 2002 between Crystal
    Decision (UK) Limited and Ealing Broadway (No. 1)
    Limited and Ealing Broadway (No. 2) Limited incorporated
    herein by reference to the Crystal Decisions Registration
    Statement on Form 10-K for the fiscal year ended
    June 27, 2003 filed with the SEC on August 18, 2003.                                                                                                 
|10.46*   |  | Lease Agreement dated December 27, 1994 and
    lease agreement for additional premises dated December 13,
    1995 between Clover Investments, Inc., Crystal Computer
    Services, Inc and Seagate Technology, Inc. incorporated herein
    by reference to Exhibit 10.3 to the Crystal Decisions
    Registration Statement on Form 10 (File No. 000-23169) of
    Seagate Software, Inc. filed with the SEC on October 3,
    1997.
|10.46.1* |  | Amendment to Lease Agreement dated
    December 30, 1999 between Manufacturer Life Insurance
    Company and Seagate Software Information Management Group
    (Canada) Inc. incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10-K for the
    fiscal year ended June 27, 2003 filed with the SEC on
    August 18, 2003.                                                                  
|10.46.2* |  | Amendment to Lease agreement dated July 17,
    2000 between the Manufacturer Life Insurance Company and Seagate
    Information Management Group (Canada) Inc. incorporated herein
    by reference to the Crystal Decisions Registration
    Statement on Form 10-K for the fiscal year ended
    June 27, 2003 filed with the SEC on August 18, 2003.                                                                               
|10.46.3* |  | Amendment to Lease Agreement dated April 2,
    2002 between the Manufacturer Life Insurance Company and Crystal
    Decisions, Corp. incorporated herein by reference to the Crystal
    Decisions Registration Statement on Form 10-K for the
    fiscal year ended June 27, 2003 filed with the SEC on
    August 18, 2003.                                                                                                         



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                              
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.47*+ |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and Anthony L. Wind
    incorporated herein by reference to Exhibit 10.25 filed with
    Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).   
|10.48*+ |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and William G. Gibson
    incorporated herein by reference to Exhibit 10.26 filed with
    Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479). 
|10.49*+ |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and Andrew L. Handford
    incorporated herein by reference to Exhibit 10.27 filed
    with Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).
|10.50*+ |  | Management Retention Agreement dated as of
    September 16, 2003 between Crystal Decisions, Inc., Seagate
    Software (Cayman) Holdings Corporation and Eric Patel
    incorporated herein by reference to Exhibit 10.28 filed with
    Crystal Decisions S-1/ A filed with the SEC on
    October 15, 2003 (File No. 333-108479).        
|14.1    |  | Business Objects S.A. Code of Ethics for
    Principal Executive and Senior Financial Officers.                                                                                                                                                                                                                                              
|21.1    |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                         
|23.1    |  | Consent of Ernst & Young, LLP,
    Independent Auditors.                                                                                                                                                                                                                                                                                     
|24.1    |  | Power of Attorney is herein referenced to the
    signature page of this Annual Report on Form 10-K.                                                                                                                                                                                                                                         
|31.1    |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                      
|31.2    |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                      
|32.1    |  | Certification of Chief Executive Officer
    furnished pursuant to Rule 13a-14(b) of the Exchange Act
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).                                                                                                                                         
|32.2    |  | Certification of Chief Financial Officer
    furnished pursuant to Rule 13a-14(b) of the Exchange Act
    and Section 1350 of Chapter 63 of Title 18 of the
    United States Code (18 U.S.C. 1350).                                                                                                                                         



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|  |  |                                            
|- |  | -------------------------------------------
|* |  | Previously filed.                          
|+ |  | Management contracts or compensatory plans.