Costs. The total cost associated with required modifications to become Year 2000 compliant is not expected to be material to our financial position. The estimated total cost of the Year 2000 project is approximately $3.0 million. The total amount expended on the project through December 31, 1999 was approximately $2.5 million. The estimated future cost of completing the Year 2000 project is estimated to be approximately $0.5 million.

Our Year 2000 Project is expected to significantly reduce our level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of our material third-party suppliers. We believe that the possibility of significant interruptions of normal operations has been reduced with the implementation of new business systems and the completion of the project as scheduled. However, although the rollover from 1999 to 2000 has passed, many software industry experts believe that there is still reason to expect the occurrence of the Year 2000-related incidents of some kind or other.

To date, we have not experienced any disruption of our business or key systems as a result of Year 2000 problems. Similarly, we have not been informed of any Year 2000 problems encountered by our customers relating to their use of our software products. It is possible, however, that Informix or its customers may encounter Year 2000 problems at a later time. If such problems were to arise, we could incur substantial costs or the interruption in or a failure of certain normal business activities or operations, which could hurt our business. If our customers experience Year 2000 related problems as a result of their use of our software products, then those customers could assert claims for damages which, if successful, could result in significant costs, damage our operations or adversely affect our ability to sell our products.

European Monetary Conversion

On January 1, 1999, eleven of the fifteen member countries of the European Economic Community entered into a three-year transition phase during which a common currency, the “Euro,” was introduced. Between January 1, 1999 and January 1, 2002, governments, companies and individuals may conduct business in these countries in both the Euro and existing national currencies. On January 1, 2002, the Euro will become the sole currency in these countries.

During the transition phase, we will continue to evaluate the impact of conversion to the Euro on our business. In particular, we are reviewing:

	Whether our internal software systems can process transactions denominated either in current national currencies or in the Euro, including converting currencies using computation methods specified by the European Economic Community
	The cost to us if we must modify or replace any of our internal software systems
	Whether we will have to change the terms of any financial instruments in connection with our hedging activities

Based on current information and our initial evaluation, we do not expect the cost of any necessary corrective action to have a material adverse effect on our business. We have reviewed the effect of the conversion to the Euro on the prices of our products in the affected countries. As a result, we have made some adjustments to our prices to attempt to eliminate differentials that were identified. However, we will continue to evaluate the impact of these and other possible effects of the conversion to the Euro on our business. We cannot guarantee that the costs associated with conversion to the Euro or price adjustments will not in the future have a material adverse effect on our business.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement No. 133 (SFAS 133), “Accounting for Derivative Instruments and Hedging Activities,” which establishes standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS 133 is effective for fiscal years beginning after June 15, 2000. Earlier application of SFAS 133 is encouraged but should not be applied retroactively to financial statements of prior periods. The adoption of this statement is not expected to have a material impact on our operating results, financial position or cash flows.