SKILLSOFT PUBLIC LIMITED CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE: 0-25674

SKILLSOFT PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)

REPUBLIC OF IRELAND NONE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
107 NORTHEASTERN BOULEVARD 03062
NASHUA, NEW HAMPSHIRE (Zip Code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(603) 324-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

TITLE OF CLASS
Ordinary Shares, E0.11
Subscription Rights

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]

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. [ ]

Indicate by check mark whether registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The approximate aggregate market value of voting shares held by
non-affiliates of the registrant as of June 28, 2002 was $173,566,073.

On April 11, 2003 the registrant had outstanding 99,608,695 Ordinary Shares
(issued or issuable in exchange for the registrant's outstanding American
Depository Shares ("ADSs")).

Pursuant to Rule 12b-25, this Form 10-K does not include disclosures for
Items 6, 7, 7a, 8 and 14. These items and the complete certifications by the
chief executive officer and chief financial officer pursuant to Rule 13a-14 will
be filed by amendment.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file with the Securities and Exchange Commission
a definitive proxy statement with respect to the Annual General Meeting of
Shareholders to be held on July 17, 2003. Portions of such proxy statement are
incorporated by reference into Part III of this Form 10-K.
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SKILLSOFT PUBLIC LIMITED COMPANY

FORM 10-K

TABLE OF CONTENTS

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PART I

Any statements in this Form 10-K about future expectations, plans and
prospects for SkillSoft, including statements containing the words "believes,"
"anticipates," "plans," "expects," "will" and similar expressions, constitute
forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. Actual results may differ materially from those
indicated by such forward-looking statements as a result of various important
factors, including those set forth in Item 7 under the heading "Future Operating
Results".

As used in this Form 10-K, "we", "us", "our", "SkillSoft" and "the Company"
refer to SkillSoft Public Limited Company and its subsidiaries.

ITEM 1. BUSINESS

GENERAL

On September 6, 2002, we completed a merger with SkillSoft Corporation, a
Delaware corporation, and, on November 19, 2002, changed our corporate name from
SmartForce PLC to SkillSoft PLC.

We are a leading global provider of comprehensive, multi-modal e-Learning
content and software products for business and information technology (IT)
professionals. Multi-modal learning (MML) solutions offer powerful tools to
support and enhance the speed and effectiveness of both formal and informal
learning processes. MML solutions integrate our in-depth courseware, learning
management platform technology and support services to meet our customers'
learning needs.

We focus on a variety of IT, professional effectiveness and business topics
that we believe represent the critical skills required of employees in
increasingly dynamic and complex work environments. We partner with some of the
world's technology leaders to co-develop sound, standardized content that
delivers rich, comprehensive learning and performance support experiences. Our
IT skills courses give learners the ability to gain the technical knowledge they
need to perform their jobs. Our business skills (also known as soft skills)
courses concentrate on the skills and knowledge that are relevant to the various
areas of functional responsibility in today's business organizations. These
skills are important to a business professional's ability to work better with
business associates and customers, make better business decisions, and more
effectively achieve his most important work-related and career oriented
objectives. Our products and services are designed to accelerate the ability of
today's workforce to master the business and technology skills required for
competitive success, enable our customers to address training and performance
support issues that support their business objectives and provide a system of
continuous support to working employees. Our solutions are based on open
standards Web technologies and flexible, low bandwidth architecture, enabling
users to access the material they need via computer, with the specificity or
breadth that they require, anytime or anywhere that they may need it.

We currently have thousands of customers worldwide spanning business,
government and education, and more than 4.5 million licensed users. We focus on
meeting the comprehensive business skills and IT learning needs of professionals
in Global 5000 organizations through a comprehensive range of content-centered,
e-Learning solutions. The integration of our e-Learning offerings delivers a
comprehensive MML solution that includes the following major content modalities:

Business Skills Library: This includes more than 1,875 courseware
titles and simulations encompassing professional effectiveness,
management/leadership, project management, sales and customer-facing
skills, business strategy/operations, finance, human resources,
safety/health and financial services. Our courses feature strong visual
design; a focus on instructional objectives at the application and analysis
levels; and learner interactivity and reinforcement through RolePlays,
SkillSimulations, and case studies.

IT Skills and Certification Library: This includes more than 1,900
courseware titles encompassing software development, operating systems and
server technologies, Internet and network technologies,

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enterprise database systems, Web design, and desktop computer skills. Our
IT skills library also supports more than 70 current industry certification
exams.

Online Mentoring: This service is offered for over 70 current major
certification exams for IT professionals, end user technologies and project
management skills. Our approximately 50 on-staff mentors, averaging over 20
certifications each, are available 24 hours a day, 7 days a week. Through
online chats and e-mail, learners can ask questions, receive clarification,
and request additional information to help them get the answers and
understanding they need.

Books24x7 Referenceware(SM): This includes more than 4,000 unabridged
IT and business books and reports that are available to online subscribers
through our subsidiary, Books24x7. A unique, patent-pending search engine
gives subscribers the ability to perform multi-level searches to pinpoint
information needed for on-the-job performance support and problem-solving.

We were incorporated in Ireland on August 8, 1989. Our registered office is
located at Belfield Office Park, Clonskeagh, Dublin 4, Ireland, and our
telephone number at that address from the United States is (011) 353-1-2181000.
Our principal office in the United States is located at 107 Northeastern
Boulevard, Nashua, New Hampshire 03062, USA, and our telephone number at that
address is (603) 324-3000.

We maintain a Web site with the address www.skillsoft.com. We are not
including the information contained in our Web site as part of, or incorporating
it by reference into, this annual report on Form 10-K. We make available free of
charge through our Web site our annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K, and amendments to these reports,
as soon as reasonably practicable after we electronically file these materials
with, or otherwise furnish them to, the Securities and Exchange Commission.

INDUSTRY BACKGROUND

The corporate training market is large. We believe that a substantial
majority of the corporate training market is comprised of soft skills and IT
skills training. We believe that the growth in corporate training in general and
soft skills training in particular is being driven by:

- the evolution of our economy to a service-based and knowledge-based
economy, in which the skills of the workforce often represent the most
important corporate assets;

- the increasing recognition by businesses that it is imperative to
continually improve the skills of their employees in order to remain
competitive;

- the rapidly evolving business environment, which necessitates continual
training and education of the employee base; and

- the increased competition in today's economy for skilled employees and
the recognition that effective training can be used to recruit and retain
employees.

Although corporate training has historically been dominated by traditional
classroom instruction, e-Learning solutions are changing the manner in which
business enterprises improve the skills of their workforce. By providing
real-time accessibility and user-focused specificity, we believe that e-Learning
is changing the training and education process from a distinct event -- often
off-site and limited in scope -- to a process of continuous learning for
employees. With the rising needs for training in increasingly complex working
environments, we believe that properly designed and deployed e-Learning
solutions can effectively address the needs of companies seeking to provide
comprehensive, enterprise-wide learning resources to their employees. These
solutions can support both the planned formal learning priorities and the
day-to-day informal learning activities that comprise the primary means by which
business professionals learn the skills needed to do their job and grow their
careers.

We believe that e-Learning solutions present a significant opportunity for
corporations to effectively train and support the productivity of their
workforce. Like traditional technology-based training solutions, such as CD-ROMs
and client/server applications, e-Learning solutions alleviate the
inefficiencies associated with

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classroom training, including travel costs, scheduling difficulties and the
opportunity costs of employees' time. In addition, e-Learning provides benefits
beyond other technology-based training methods that make it more flexible,
effective and cost-efficient. For example, e-Learning solutions provide more
timely and simplified deployment, the flexibility of self-directed and
personalized learning, improved ease of use, and enhanced product/user support
and administrative functionality. Furthermore, through the use of
object-oriented database technologies, e-Learning solutions provide access via
computer to content anytime, anywhere over the Internet and in the exact amount
required.

PRODUCTS

PRODUCT LIBRARY OVERVIEW

With over 3,700 courses spanning IT, cross-functional soft skills,
functional area expertise and workplace compliance subjects, we are an industry
leader in e-Learning content solutions for today's critical business and IT
skills. Through our focus on these critical skills and our track record in fast
and effective execution, we strive to deliver e-Learning content that excels in
terms of depth, breadth, up-to-date relevance, interactive learning design and
Web deployment flexibility. Also, through our Books24x7 professional
Referenceware offering, we offer users over 4,000 unabridged IT and business
titles from 80 of the world's best-known publishing companies. Together, these
multi-modal e-Learning components offer organizations an array of both formal
and informal learning based on user needs -- whether students need to immerse
themselves in the subject matter or need to quickly reference content for five
to ten minutes of on-the-job performance support.

We regularly add new courses to cover new technologies and new subjects
requested by our customers or that we believe our customers will want. We also
regularly retire courses from our active library as certain technologies become
outdated or used less frequently by our customers, and as we replace older
courses with newer and higher quality versions. This combination of adding and
retiring courses, which is part of our continuous effort to ensure the currency
and highest quality of our active library, will cause the overall active library
size to fluctuate.

IT SKILLS COURSEWARE

Our comprehensive IT skills library of e-Learning courses and learning
objects (a topic within a course) encompasses a wide array of the technologies
used by IT professionals and business end users. As of January 31, 2003, our IT
skills library included over 1,900 courseware offerings that are divided into
six major Solution Areas:

Software Development Operating Systems & Server Technologies
Internet & Network Technologies Enterprise Database Systems
Web Design Desktop Computer Skills

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The courseware in these Solution Areas address over 70 of the current
technical certification programs sought by technical professionals and
enterprises providing technical products and services to their customers,
including:

MICROSOFT COMPTIA LOTUS NOTES ORACLE
MOS A+ R5 CLS Admin OCA 8i
MCP Net+ R5 CLS Developer OCA 9i
MCSA 2000 INet+ R5 CLP Admin. OCP 8i
MCSE 2000 IT Project+ R5 CLP Developer OCP 9i
MCSD VB 6.0 Linux+
MCSD .NET (VB) Sever+
MCDBA

JCERT CICSO SECURITY CIW
Jcert Web Programmer CCNA Sans Geac CIW Associate
Jcert Web Developer CCDA CompTIA Security+ Master Enterprise Developer
CCNP CISSUP (ICS2) CIW Site Designer

MACROMEDIA ECDL
Coldfusion MX Developer ECDL
Dreamweaver MX Developer ICDL
Flash MX Developer

In addition to our more than 900 current English language IT skills
courses, over 1,000 of our IT skills course titles have been localized into a
number of languages including German, French, Spanish, Italian, Japanese, Dutch,
Greek, Portuguese and Korean to support other geographic markets.

CRITICAL BUSINESS SKILLS COURSEWARE AND SIMULATIONS

Our comprehensive business skills library of e-Learning courses,
simulations and learning objects encompasses a wide array of professional
effectiveness skills and business topics. As of January 31, 2003, our library
included over 1,875 business skills course and simulation offerings. Our
business skills courses and simulations are divided into the following major
Solution Areas:

Professional Effectiveness Business Strategy & Operations
Management & Leadership Safety & Health
Project Effectiveness Workplace Compliance
Sales & Customer-Facing Skills Financial Services Industry
Finance, HR & Administration

In addition to the more than 750 business skills courses in our North
American English library, over 1,130 have been localized into a number of
languages including UK English, Italian, German, French, Castilian Spanish,
Japanese, Mandarin Chinese, Traditional Chinese, Simplified Chinese and Latin
American Spanish to support other geographic markets.

BOOKS24X7.COM GROUP

Books24x7, a SkillSoft company, offers a suite of core, unabridged and
topically organized Referenceware collections that provide online subscribers
the ability to perform multi-level searches to pinpoint information needed for
on-the-job performance support and problem-solving. Referenceware products draw
upon leading professional reference books, journals, research reports and
documentation. Books24x7 delivers Referenceware

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via a Web-based platform that enables paying subscribers to browse, read,
search, and collaborate anytime, anywhere with a simple Web connection. The
Referenceware collections include:

ITPRO COLLECTION is geared toward technology professionals including
developers, network administrators, technology executives, information
services managers and technical support representatives. This collection
consists of content from dozens of IT publishers including industry leaders
such as Apress, Microsoft Press, MIT Press, Osborne/McGraw-Hill, Sybex and
Wiley.

BUSINESSPRO COLLECTION is geared toward professionals whose role
requires exercising strong business judgment. This collection contains over
30 business skills and professional development publishers including
industry leaders such as AMACOM, ASTD, Berrett-Koehler, Harvard Business
School Press, Jossey-Bass, Oxford University Press, and Wiley.

OFFICEESSENTIALS COLLECTION is a specialty collection geared toward
non-technical users who require occasional real-time assistance with common
office applications. This collection contains award winning content,
including the "for Dummies(TM)" series, is written in a comfortable,
easy-to-understand tone and can be deployed to desktops to relieve Help
Desk congestion, or provided as an end-user "safety-net" during migration
to new platforms such as Windows 2K or XP.

FINANCEPRO COLLECTION is a collection that offers professionals access
to relevant information on a variety of financial and accounting topics.
FinancePro delivers fully searchable, online content from popular
publishers such as AMACOM, John Wiley & Sons, McGraw-Hill and Oxford
University Press, and is an essential tool for anyone needing immediate
access to financial reference materials including such topics as GAAP,
International Accounting Standards, operations management, planning and
taxation.

THE SKILLSOFT INSTRUCTIONAL DESIGN MODEL

Our instructional design model, which we have used in designing our
business skills courses and will use for the development of our new IT skills
courses, is based primarily on the concepts of performance-oriented instruction,
mastery and the sequencing of instructional activities and strategies. The model
draws heavily from adult learning principles that emphasize learner initiative,
self-management and experiential learning. The design of each of our courses
starts with the definition of user-focused performance objectives and then
proceeds to the selection and implementation of instructional strategies and
learning activities appropriate for those objectives. Frequent practice
questions or exercises along with assessments measure users' achievement of
those objectives. This robust, yet flexible, design methodology creates an
instructionally sound framework for the design and development of highly
interactive, engaging and instructionally effective courses -- regardless of the
content focus or level of learning.

Our instructional design model is intended to meet the challenge of
creating effective and engaging instruction that is easily deployed on our
corporate customers' global computer networks or over the Internet. Our design,
development and quality assurance standards and processes are all geared toward
insuring each course meets our expectations for the best instruction possible.

Our post-merger instructional design initiatives are focused on producing
courses in all content areas with:

- learning outcomes specified by performance goals and objectives;

- content and learning activities based on specified objectives;

- assessment based on the knowledge and skills specified in the objectives;

- options to take assessments in either pre- or post-test mode;

- instructional strategies and multimedia elements tailored to the specific
course content;

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- instructional strategies appropriate for the content and learning level,
such as examples, behavior modeling, guided practice, and simulations;
and

- levels of learning appropriate for the content and the target audience.

The theories and principles embedded within our instructional design model
are actualized via:

- friendly, intuitive graphical user interface;

- course structure and interface that supports self-paced, user-controlled
instruction;

- unlimited access to instruction and mastery assessments;

- standardized templates to create unified and predictable functionality;

- a variety of presentation, practice, and assessment templates supporting
high levels of user interactivity and engagement; and

- standardized, yet flexible, flow of instruction.

Starting from this set of common elements and attributes, our courses then
include the instructional strategies most suitable for the content and specified
objectives. For instance, the approach to teaching communication skills is
different from the approach to teaching finance or accounting skills and the
strategies used to teach these two business content areas differ from those used
to teach computer and software skills.

LEARNING DESIGN FOR BUSINESS SKILLS

Our business skills courses cover a broad range of business and
professional effectiveness curriculum areas. Some are very straightforward, such
as finance; others are "softer", or more behavioral, such as communication
skills, calling for a different set of instructional presentation and practice
strategies. In addition, we have a strong commitment to reach the highest
possible levels of learning in each course -- including as much application and
analysis level as possible supported by strong foundational learning at the
knowledge and comprehension levels.

The key instructional features and strategies in our business skills
courses are:

ROLEPLAY(TM) EXERCISES -- RolePlay exercises present users with
opportunities for realistic practice of varying aspects of course content within
everyday workplace scenarios. RolePlay exercises have multiple possible outcomes
based on users' responses to the simulation's interactions. When integrated into
course topics, RolePlay exercises allow users to freely explore the impact of
handling realistic work situations in different ways. SkillSoft's RolePlay
design allows users to experience the exercise in "score" mode or "explore"
mode. Using score mode lets learners assess their level of skill within the
targeted content area. Using explore mode allows the learner to dynamically
explore alternative responses to see the impact of those choices. This
user-driven exploration is key to real learning. People learn as much, or more,
from their mistakes as from the things they do correctly. RolePlay brings this
principle home to e-Learning. With over 1,300 RolePlay simulations integrated
into our courseware library, we are an industry leader in delivering
simulation-enriched e-Learning solutions.

AUDIO-ENABLED LEARNING -- Another key feature in our business skills
instruction is audio-enabled learning. This feature, which can easily be turned
on or off based on user preference, greatly enhances engagement and retention
for many users. Audio can be especially key to the instructional effectiveness
of behavior modeling, RolePlay exercises and SkillSimulations.

SIMULATED DIALOGS -- The ability to observe behaviors and their outcomes
(positive and negative) is a key strategy for teaching professional and
behavioral skills. The simulated dialog strategy gives users an opportunity to
observe and listen to the conversations of two or more people. The inclusion of
"character" audio enhances the emotional and tonal qualities of the
conversation, while the varying facial expressions and body language offer
another layer of interpretation. These features, combined with the spoken words
of the characters, provide realistic vignettes or scenarios in which varying
aspects of a behavioral skill can be presented.
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CASE STUDIES -- A case study strategy describes a complex situation, often
in the form of a story or scenario, and then asks the user to explore its
characteristics and possible resolutions. Complexity is the primary difference
between case studies and examples that can be easily presented and practiced
through other types of strategies, such as multiple choice and matching. Case
studies are used to achieve learning at the application and analysis levels and
to present examples of content within appropriate business contexts.

ANIMATIONS -- Animations are an important extension of our leading visual
design. We use animations when movement is an important part of the teaching
point and when the content requires that the user's eye be drawn to a specific
area of the screen. Examples of content areas where animations can enhance
learning effectiveness include instruction on process and dataflow diagrams,
hierarchical and dependency relationships and changes in state or perspective.
Our animations, as is true with all our courses and simulation products, require
no plug-in technologies or special servers to deliver.

ONLINE JOB AIDS -- All of our business skills courses include online job
aids that help transfer newly learned skills back to the job or serve as a
"refresher" course on a previously learned skill. Job aids are courseware
"take-aways" that can be used as-is, or tailored to meet a user's needs. Each
job aid can easily be edited to reflect a user's organization-specific
information, and users can add organization-specific job aids that they have
independently developed.

LEARNING AIDS -- Learning aids are tools or documents used in support of
course content presentation and practice. They are designed to support specific
course context or content, and, therefore, are not available for use outside of
the course. Learning aids could appear as worksheets (interactive or passive),
reference documents too large to include in a standard template, complex charts
or graphs or a variety of other formats. Only the content and the chosen
instructional strategies limit the variations.

ACCELERATED PATH(TM) -- This feature uses assessment results to help
learners eliminate instruction on topics for which they've already demonstrated
mastery. Based on a user's assessment results, our courses provide guidance to
the user to help him bypass content that he already knows. With employee time
away from the job widely recognized as the dominant expense in any business
training effort, the savings offered by Accelerated Path can be very compelling.

SKILLSIMULATIONS -- SkillSimulations are instructional strategies that
extend the learning advantages of RolePlay into larger, more complex e-Learning
experiences. SkillSimulations are designed to give users an opportunity to
practice new skills in realistic work situations. Each SkillSimulation,
typically 20-to-40 minutes in duration, provides users with an opportunity to
practice application level skills based on content drawn from multiple courses
within one of our learning paths or series (a collection of related courses).
Users practice these skills by navigating through different scenarios in which
they encounter a variety of business problems. As in real life, users have the
opportunity to select different courses of action, and the scenario unfolds
according to the users' choice of actions. Events such as telephone calls,
meetings and interruptions add to the reality of each scenario.

SkillSimulations, with integrated links to their corresponding SkillSoft
course series, provide a powerful learning experience that allows the user to
immediately apply newly gained knowledge to challenging business situations.
This results in engaging learning experiences and real skill transfer.

BLENDED LEARNING TOOLKIT -- Blended Learning Toolkits are our latest
product offering in the business skills curriculum. Like SkillSimulations, the
Blended Learning Toolkits are based on content drawn from multiple courses
within a single learning path or series. However, this product is designed to
provide our customers with tools for blending e-Learning into the workplace as
well as the classroom. Each Blended Learning Toolkit consists of a Users Guide,
approximately 30 activities or tools, PowerPoint presentations that summarize
the key teaching points from each lesson in all the courses within the learning
path, and short text-based summaries (SkillBriefs) of all the topic content.
Blended Learning Toolkits are delivered electronically and can be used "as is"
or customized to meet individual customer requirements. Customers have the
freedom to "blend" the tools into traditional classroom settings, instructional
events delivered via e-Learning platforms like WEBEX or Centra, or to hand them
over to managers, supervisors, facilitators, and anyone else interested in
transferring learning into the workplace. The Blended Learning

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Toolkit provides multi-layered content with many options for use and
implementation. It is adaptable and flexible to support a variety of audiences,
content areas, and implementation environments and platforms. The goal of the
Blended Learning Toolkit is to effectively reinforce the application of
knowledge and skills from our courses. Most of all, it provides our customers
with another opportunity to enhance and leverage their investment in e-Learning.

LEARNING DESIGN FOR IT SKILLS

Like our business skills courses, the instructional strategies chosen for
use in an IT skills course are largely dependent on the course content and
objectives. Learning the use or function of buttons, menu items and other
familiar software elements is largely a knowledge and comprehension task.
Learning the steps to complete a specific task is very procedural and best
achieved via observation, followed by practice, with varying degrees of
guidance, feedback and support. In support of these and other IT skills-related
learning goals, our IT skills courses include static and interactive
explanations, step-by-step demonstrations of how to perform specific procedures,
guided practice activities, and sample coding solutions. Most importantly, our
IT skills courses also include reinforcing optional practice activities designed
to be used by the course user in the "real" or "live" software application
environment. Topic-level review questions and the inclusion of mastery
assessments at the end of each course are designed to further reinforce the
learning.

The key instructional features and strategies in the IT skills courses are:

INTERACTIVE TEXT AND GRAPHICS -- Our IT skills courses use a variety of
interactive lists and graphics to present and explain software features and
functions, such as buttons, menu items, coding or tagging parameters, and
syntax. This strategy is also an effective method to break down complex concepts
into smaller, graphically represented parts, or to separate lines of code into
smaller sections. Clicking or selecting graphically portrayed "parts" produces
additional information or explanation about that specific part. Another feature,
"drill-downs", allow learners to navigate vertically in a topic by clicking
meaningful graphics and icons, are a useful departure from the "page turning"
linear approach to representation that characterizes much e-Learning. All these
features allow learners to review information as often as they want and to
ignore something if they choose to.

INTERACTIVE DEMOS -- "Demos" in our IT skills courses are demonstrations of
software procedures and tasks. Most typically, the demonstration will divide the
procedure or task into specific steps and then sequentially "show" those steps
to the user. As the Demo moves from one step to the next, a simulated
representation of the software shows what happens next and additional text
provides commentary. In addition, learners are given the option of performing
the salient steps of the procedure. The user is prompted to perform specific
steps, or enter code that achieves a specified end result.

PROMPTED ANIMATIONS -- The purpose of these is to help the learner
visualize processes - to draw his attention to an area on an interface or
conceptual graphic. Because these animations are prompted (that is, after the
learner is told about a process, he is prompted to launch an animation of it),
they help to avoid split attention, which occurs when text displays and an
animation initiates at the same time, with the result that the learner doesn't
know what to concentrate on.

INTERACTIVE EXERCISES -- There are many types of interactive exercises used
in our IT skills courses.

Interface Questions invite learners to recall a step from a procedure that
has already been outlined, on a simulated interface. If the learner performs the
step correctly, the interface responds as it would in the real application. In
this way, it offers a simulated experience of an application. If learners decide
not to perform the question, they can click forward or click a "Show-me" button,
both of which launch an animated sequence of the correct step.

User-input questions enable learners to complete a statement or segment of
code by typing the answer into a blank area in the code or statement.

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Multiple-choice, matching, and ranking questions are interactive
problem-solving activities that give learners the opportunity to evaluate and/or
apply their knowledge before taking a test. Learners are "debriefed" on their
progress via detailed reinforcement, regardless of whether they got the question
right or wrong. Additional functionality includes hints that the learner can
access, and additional presentation and reinforcement information.

SIMULATIONS -- Our IT skills courses contain standalone topics that give
learners the opportunity to independently practice or consolidate the most
critical procedures and learning taught in the preceding instruction. There are
four types of simulations, each focused on developing different skills:

- Software simulations, which consist of a series of tasks that learners
perform in a simulated version of the application being discussed in the
course.

- Coding simulations, which give learners the opportunity to analyze and
write code or commands.

- Hardware simulations, which simulate hardware setup problems.

- Case-Studies, which consist of an interactive review of concepts and
information, presented in a "real-world" scenario.

All of these exercises provide the learner with opportunity to practice his
skills at higher learning levels. All types of exercises typically build on
skills practiced previously in the course and are designed to cover multiple
learning objectives.

MENTORED EXERCISES AND SELF-ASSESSMENT EXERCISES. These exercises are
designed to provide the user with an opportunity to apply new knowledge and
skills within a live software application. Mentored exercises are designed to
allow learners to carry out complex tasks and exercises and submit them to a
mentor for review. Self-assessment exercises allow learners the opportunity to
carry out similar tasks and exercises, on which they can then assess themselves
from a provided solution. Both of these exercises involve the presentation of a
real-world scenario requiring the learner to provide a solution or complete a
series of tasks. After completing a series of these activities, users will have
a set of documents or products demonstrating proficiency with the skills taught
by the course.

WEB-BASED ARCHITECTURE AND DEPLOYMENT

Our Web-based architecture and deployment strategy enables us to provide a
number of features to support users in their learning. Examples include:

- Learning Management Platforms that permit users to access a wide variety
of e-Learning resources over the Web, including courseware, simulations,
Referenceware, online mentoring, SkillBrief articles, job aids and
TestPrep certification practice exams. We currently support two major
learning management platforms that each supports several hundred of our
Global 5000 customers: SkillPort and MySmartForce. We are developing a
future unified Learning Management Platform with the intention of
combining certain of the key features of these two existing platforms.

- Search-and-Learn(TM) technology, a key component of SkillPort, which
adapts search engine technologies to the object-oriented nature of our
content architecture. Using Search-and-Learn technology, users can
perform keyword-based, intelligent searches covering their company's
entire library of licensed SkillSoft courses. Our search technology
presents users with a list of the specific courses, topics, online job
aids and SkillBrief articles that match their identified training needs,
enabling them to directly access that information -- when and where they
need it.

- Online Mentoring, a service that is available for over 70 current major
certification exams for IT professionals, end user technologies and
project management skills. We have approximately 50 on-staff mentors,
averaging over 20 certifications apiece, that are available 24 hours a
day, 7 days a week. Through on-line chats and e-mail, learners can ask
questions, receive clarification, and request additional information to
help them get the answers and understanding they need.

10

- TestPrep Certification Practice Exams, addressing over 45 of the most
popular current certification exams from Microsoft, Cisco, Oracle and
CompTIA. TestPrep practice exams allow learners to test their knowledge
in a simulated certification-testing environment. Tests can be taken in
two modes -- study and certification. The un-timed study mode is designed
to maximize learning by providing feedback and mapping back to
appropriate SkillSoft courses for further study, while the against-the-
clock certification mode is designed to mimic a certification exam.

- SkillBrief Articles, which are one-page summaries of over 5,500 topics
and offer on-the-job performance support. They can be used while taking a
course, as a 5-minute learning event or anytime a student needs a
refresher.

- Course Customization Toolkit, which offers a simple and comprehensive
method of individually customizing our business skills courses by
organizing specific content and examples, or combining topics or learning
objects from different courses using a user-friendly template.

- Assistive Technology Support, which is designed to address the
requirements of Section 508 of the Rehabilitation Act of 1973, which
provides that as of June 2001, computer software applications purchased
or developed by federal agencies must be designed for accessibility by
people who are blind, deaf or have poor motor skills. We have
aggressively worked to adapt our online business skills courseware to
meet the requirements established by Section 508. This development work
is consistent with our general corporate philosophy to help organizations
"democratize" training and give all employees accessibility to training
and development opportunities anywhere, anytime through computers. Our
North American English business skills courseware now provides any user
in a government or commercial organization with sight, hearing and/or
mobility limitations, equal access to our courses through the use of
assistive technologies such as screen readers. We are currently working
to bring this same level of Assistive Technology Support to our
English-language IT skills courseware library, and anticipate completing
that work during the current fiscal year.

Our products incorporate high performing Web technologies that we believe
substantially improve our product performance. Our courses and support tools are
developed using cross-platform technologies such as HTML, XML, Java, JavaScript,
Flash and ColdFusion. Our products employ advanced compression and database
management techniques, which allow our products to deliver high-quality
performance within our customers' bandwidth constraints. This enables us to
provide our e-Learning solutions to most users, not just those with the most
powerful computers, quickest modems and highest resolution monitors.

We also offer a fully hosted model as a deployment option for companies
that prefer to have users access courses from SkillSoft-managed servers via the
Internet rather than host the courses on the customer's own intranet. For many
customers, this option can significantly simplify and shorten the implementation
process.

PRODUCT PRICING

The pricing for our courses varies based upon the number of course titles
or the courseware bundle licensed by a customer, the number of users and the
length of the license agreement (generally one, two or three years). Our license
agreements permit customers to exchange course titles, generally on the contract
anniversary date. Some product features, such as SkillPort, the Course
Customizing Toolkit, and course hosting, are separately licensed for an
additional fee.

The pricing for our MML license varies based on the content offering
selected by the customer, the number of users within the customer's organization
and the length of the license agreement. Our MML license provides customers
access to a full range of learning products including courseware, Referenceware,
simulations, mentoring and prescriptive assessment.

A Referenceware license gives users access to the full library within one
or more collections (ITPro, BusinessPro, FinancePro and OfficeEssentials) from
our Books24x7.com Group. The pricing for our Referenceware licenses varies based
on the collections specified by a customer, the number of users within the
customer's organization and the length of the license agreement.

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SALES AND MARKETING

In the fiscal year ended January 31, 2003, our products were sold in over
45 countries. We use a multi-prong sales strategy, consisting of

- a direct sales force for larger accounts;

- a telesales force to support the field sales organization and a telesales
organization for selling directly to consumers; and

- resellers for small and mid-sized accounts and some international
markets.

We believe this strategy enables us to focus our resources on the largest
sales opportunities, while simultaneously leveraging the contacts and employees
of our resellers to address opportunities that may not be cost-effective for us
to pursue directly.

As of January 31, 2003, we employed 265 sales professionals, sales
operations, telesales (not including SmartCertify), and sales management
personnel. Each account executive reports to either a regional sales director or
a regional sales vice president who is responsible for revenue growth and
expense control for his or her area. Our sales professionals have significant
sales experience, as well as extensive contacts at the corporate customers that
we target. The sales process for an initial sale to a large customer typically
ranges from three to twelve months and often involves a coordinated effort among
a number of groups within our organization.

In addition to the telesales personnel located in Nashua and the United
Kingdom, we also engage in selling efforts through our telesales organization
located in Clearwater, Florida, SmartCertify Direct, Inc. As of January 31,
2003, SmartCertify Direct employed 199 people in telesales, sales management and
marketing.

Our direct sales force uses sophisticated salesforce automation software to
track each prospect and customer through a sales cycle covering the following
seven stages: prospect, qualify, discovery, evaluation, proposal, negotiate and
close. Each step of the sales cycle has certain exit criteria that must be
satisfied before the prospect can progress to the next stage. Our senior sales
executives hold review meetings throughout each quarter with our regional sales
vice presidents and in some cases their account executives to assess their
90-day forecast, 120-day pipeline development and longer term territory
strategy. Our regional sales vice presidents, regional sales directors and their
account executives typically confer regularly throughout the quarter to review
progress toward quarterly goals and longer term business objectives and for
coaching sessions.

Our products are resold by a number of leading education technology
vendors.

We have an office in the United Kingdom that serves as the hub of our
Europe and the Middle East operations. We also have an office in Sydney,
Australia that serves as the hub for our Asia-Pacific operations. In order to
accelerate our worldwide market penetration, our sales strategy includes
developing relationships to access indirect sales channels such as reseller and
distributor partners. Our indirect sales channels give us access to a more
diverse client base, which we otherwise would not be able to reach in a
cost-effective manner through our direct sales force. At January 31, 2003, we
employed 21 indirect sales channel employees. Our development and marketing
partners also generally have the right to resell products developed under their
alliances with us.

Our marketing organization utilizes a variety of programs to support our
global sales team. As of January 31, 2003, our marketing organization consisted
of 23 employees. Our marketing programs include:

- telemarketing;

- product and strategy updates with industry analysts;

- articles in the trade press;

- public relations activities and speaking engagements;

- printed promotional materials;

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- promotional materials on our Web site;

- "roadshow" tours, seminars and trade shows; and

- quarterly online discussions, using "chat room" technology, on subjects
such as the successful implementation of Web-based training programs.

No customer accounted for more than 10% of our revenue for the fiscal year
ended January 31, 2003.

CUSTOMER SERVICE AND SUPPORT

We offer a broad range of support and services to our customers through our
professional services organization. We believe that providing a high level of
customer service and technical support is necessary to achieve rapid product
implementation, customer satisfaction and continued revenue growth.

Installation support -- We have application engineers available to assist
customers with the technical aspects of installing and deploying our products.
These engineers test the software and courses within the customer's network to
ensure that they run successfully both on the network and at employees'
computers.

Account consulting -- We employ account consultants to assist customers in
planning and implementing best practices for e-Learning program success. These
individuals offer expertise in establishing training success criteria, planning
internal marketing programs and communicating with e-Learning end users. Our
account consultants work in close coordination with our application engineers
and sales representatives and are an important component of our efforts to
monitor and ensure customer satisfaction and success.

Customer support. We also provide telephone, e-mail and chat support to
our customers through our customer support organization. They are available to
assist customers 7 days per week, 24 hours per day.

As of January 31, 2003, our customer service and support organizations
consisted of 231 people globally.

STRATEGIC ALLIANCES

We have entered into, and will continue to expand, our relationships with
leading content partners, vendors of software products and learning partners in
the markets of e-Business, business, interpersonal and professional skills,
vertical education, training and IT.

We have entered into alliances with, Cisco, PeopleSoft, Oracle, and the
jCert consortium which is a collaboration between BEA Software, Hewlett-Packard,
IBM, Oracle, Sun Microsystems, Sybase and iPlanet E-Commerce solution, Qwest and
Akamai. These alliances encompass content co-development arrangements, platform
integration programs and distribution partnerships through complimentary
channels. We formed the Internet Security Training Consortium to develop and
market training content which addresses the Internet security training needs of
enterprises worldwide with leading technology companies including Check Point,
Cisco, IBM, Intel, the Javasoft business unit of Sun Microsystems, Lotus,
Netscape, Network Associates, RSA Security, Security Dynamics, Hewlett-Packard
and VeriSign.

We believe our development alliances offer a number of advantages, which
may include early access to business and IT content and partners pre-released
products as well as software engineers and technical advisors for assistance in
developing our learning solutions. With the approval of the development partner,
products developed under the relationship can be identified as authorized by
that content partner, which we believe may improve the marketability of such
courses. In addition, these alliances may result in additional distribution
channels for us by allowing each party to distribute courses to its respective
customer base. In some of these alliances, the software vendor has contributed
financial resources toward the development of specified courses. We believe that
these alliances also provide significant benefits to the content partner by
allowing them to achieve additional market penetration generated by increasing
the base of trained users. We also have partnered with major system integration
and consulting companies, including Deloitte Consulting and IBM BCS (formerly
PricewaterhouseCoopers Consulting) as well as important business process
outsourcing organizations such as Exult, Inc. We believe these relationships may
be important contributors to our distribution channel because these partners are
investing resources in developing e-Learning practices.

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COMPETITION

The market for corporate education and training products is fragmented and
highly competitive. We expect that competition in this market will increase
substantially in the future for the following reasons:

- The expected growth of this market.

- The low barriers to entry. In particular, we do not believe that
proprietary technology is an important competitive factor in this market.

- Our course content providers are often not prohibited from developing
courses on similar topics for other companies, provided that they do not
use our toolkit or templates.

- The fragmented nature of the competitive landscape, including many small
competitors in the technology-based segment of the market.

One source of competition for our products is the internal educational and
technological personnel of our potential customers. If an organization decides
to use external providers to supply some or all of its training, our principal
sources of competition in the corporate education and training market are:

- Providers of traditional classroom instruction. Many of the companies in
this category are attempting to adapt their courses to e-Learning formats
suitable for access via Web browsers.

- Providers of CD-ROM training courses.

- Suppliers of online corporate education and training courses, including
Thomson Learning (through subsidiaries such as NETg and Course
Technologies), Element K, KnowledgeNet and MindLeaders. Our Books24x7.com
Group competes with companies such as Safari, a joint venture between
Pearson Technology Group and O'Reilly & Associates, which offers
aggregated content primarily restricted to its own titles on a
subscription basis.

We believe that the principal competitive factors in the corporate
education and training market include:

- the breadth, depth and currency of the course content;

- performance support and other features of the training solution;

- adaptability, flexibility and scalability of the training products
offered;

- the deployment options offered to customers, in particular, low bandwidth
access;

- customer service and support;

- price/value relationship;

- relationships with the customer; and

- corporate reputation.

Although we believe that we currently compete favorably with respect to
those factors, we may not be able to maintain or improve our competitive
position. Some of our current and potential competitors have greater financial
resources than we do. Increased competition may result in lost sales and may
force us to lower prices, which may adversely affect our business and financial
performance.

PRODUCT DEVELOPMENT

We believe that the development of an effective training product requires
the convergence of source material, instructional design and computer
technology. When developing a new learning path or product, we first obtain
content from our content partners and other subject matter experts, existing
courses and product reference materials. Our design and development teams then
define the user-focused performance objectives and select the content,
instructional strategies, learning activities, and assessments appropriate for
the intended learning outcomes. This process includes the creation of design
documents, scripts, and in some cases storyboards to document the planned
content sequence, instructional flow, and interactive presentation and

14

practice strategies. The design and development team includes subject matter
experts, learning designers, technical writers and developers, graphic
designers, animators, and content editors and quality assurance reviewers. After
final assembly or integration of all course components into a completed course,
we test to ensure all functional capabilities work as designed and deliver the
desired learning experience and result.

The core element of our learning solution development process is our design
and development process and the tools we use to support that process. Our
design, development and production tools are comprised of our own proprietary
software and off-the-shelf tools. Our combination of development toolsets allows
us to quickly and efficiently create and continually update modular learning
events and enhance, on an ongoing basis, the multimedia content of such learning
events. Our research and development goal is to further enhance our product
development process and tools to facilitate the continual evolution of our
offerings and ensure that our instructional products incorporate a wide variety
of meaningful and effective instructional elements. We use internal developers
as well as external content development partners to produce content for our
business and IT skills curriculums. The six current external content development
partners use the same methods, processes, and tools to develop content as our
internal developers, and are held to the same set of instructional design and
content quality standards. Course content is supplied by us, by other companies
from which we have licensed content, or by the developer, based on an outline
jointly defined by us and the developer.

Our research and development efforts also include a focus on the design,
development and integration of other key product elements, including Online IT
Mentoring by certified content experts 24 hours a day, 7 days a week, task-based
IT simulations and labs, business skills focused SkillSimulations, Certification
TestPrep for IT, and Online Referenceware (Books24x7) for Business and IT
skills.

Our approach to technology begins with the understanding that the ability
of our customers to deploy our e-Learning applications and content is a critical
factor in their success with our products. To meet our customers' varied needs,
we strive to enable our courses to be able to be delivered on-line, using
standard Web browsers downloaded for off-line usage, or distributed via CDROM.

Through careful technology selection, product design, and exhaustive
compatibility testing, we ensure our products can be deployed on the vast
majority of corporate desktop computers and without requiring the installation
of specialized plug-ins whenever possible, and can be delivered over the varied
and complex network infrastructures in existence today. As technologies and
standards evolve, we continuously review those changes and consider adapting our
products when possible to ensure compatibility.

We employ compression technologies for our media components and design our
products to operate effectively over low bandwidth network environments. In this
way, we reach a broader number of users with our products and minimize the load
on our customers' networks.

Deployment flexibility is also achieved by adhering to industry standards
such as AICC and SCORM. Our e-Learning course content is designed for
integration with third party learning management systems as well as with our
e-Learning platform products.

The majority of the content for our Referenceware is licensed from third
party publishers.

Most of our research and development activities are conducted by internal
teams located in our main product development centers in Dublin, Ireland,
Nashua, New Hampshire, Belfast, Northern Ireland, and Fredericton, New
Brunswick, Canada.

As of January 31, 2003, the number of employees in our product development
organization totaled 454. We intend to continue to make substantial investments
in research and development.

PROPRIETARY RIGHTS

We do not believe that proprietary technology forms an important or
valuable part of most of our business skills and IT skills courseware offerings.
We believe that the creative skills of our personnel in developing new products
and technologies, our ability to develop and introduce new products rapidly and
our responsiveness to customer demands are more important than the availability
of legal protections for proprietary rights. We nonetheless protect our
technology by various means, including entering into agreements with employees
to
15

protect against disclosure of sensitive business information. We have one United
States patent and 22 foreign patents with respect to computer-based training
technologies and methods and 19 United States and foreign patent applications
pending with respect to computer-based training technologies and methods. In
addition, we currently have one patent application pending with respect to our
Books24x7.com product offerings.

We attempt to avoid infringing upon intellectual property and proprietary
rights of third parties in our product development efforts. However, we do not
conduct comprehensive patent searches to determine whether the technology used
in our products infringes patents held by third parties. In addition, product
development is inherently uncertain in a rapidly evolving technological
environment in which there may be numerous patent applications pending, some of
which are confidential when filed, with regard to similar technologies. If our
products violate third-party proprietary rights, we could be liable for
substantial damages. In addition, we may be required to reengineer our products
or seek to obtain licenses to continue offering the products, and those efforts
may not be successful.

We currently license from Agere Systems, Inc., Macromedia, Inc. (formerly
Allaire Corporation) and other third parties some technology -- including data
compression technologies and tools for developing Web applications -- and some
course content that we incorporate into our products. We also license content
for our Referenceware from third party publishers. This technology and content
may not continue to be available to us on commercially reasonable terms. The
loss of this technology or content could result in delays in development and
introduction of new products or product enhancements, which could have a
material adverse effect on our business and financial performance. Moreover, we
may face claims from others that the third-party technology or content
incorporated in our products violates proprietary rights held by those
claimants. We may also face claims for indemnification from our customers
resulting from infringement claims against them based on the incorporation of
third-party technology or content in our products. Although we are generally
indemnified against such claims, in some cases the scope of that indemnification
is limited. Even if we receive broad indemnification, third party indemnitors
are not always well capitalized and may not be able to indemnify us in the event
of infringement. In addition, such claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources in addition
to potential product redevelopment costs and delays, all of which could
materially adversely affect our business.

SkillSoft, SkillPort, RolePlay, Search-and-Learn, e-Learning for the
Knowledge Economy, NetUniversity and Accelerated Path are registered trademarks
or servicemarks of SkillSoft.

EMPLOYEES

As of January 31, 2003, we employed 1,364 people. Of these employees, 487
were engaged in sales, sales operations, sales management, alliances and
marketing, 179 in management, MIS, administration and finance, 244 in customer
service and support and 454 in product development and fulfillment. As of
January 31, 2003, 741 employees were located in the United States and 623 in our
international locations. None of our employees are subject to a collective
bargaining agreement and we have not experienced any work stoppages. We believe
that our employee relations are good.

Our future success will depend in large part on the continued service of
our key management, sales, product development and operational personnel and on
our ability to attract, motivate and retain highly qualified employees. We also
depend on writers, programmers and graphic artists. We expect to continue to
hire additional product development, sales and marketing, information services,
accounting staff and other resources as we deem appropriate to meet our business
objectives.

ITEM 2. PROPERTIES

Our United States headquarters are located in an aggregate of 49,183 square
feet of office space in Nashua, New Hampshire, of which 23,783 square feet of
space is subject to a lease that currently runs on a month-to-month basis and
25,400 square feet of space is subject to a lease that expires in June 2006. In
addition, we conduct our operations primarily out of facilities located in
Dublin, Ireland, Norwood, Massachusetts; Fredericton, New Brunswick, Canada; and
Clearwater, Florida.

16

In Ireland, we currently lease and occupy a 68,034 square foot facility in
Dublin, which primarily houses our main product development center. Our
SmartCertify direct sales group also leases a sales office in Dublin. In
addition, we currently lease three other facilities in Dublin, Ireland totaling
32,326 square feet. These spaces have been vacated and the operations previously
performed in these facilities have been consolidated into the 68,034 square foot
facility.

In Norwood and Clearwater, we currently lease and occupy 10,137 square feet
and 22,129 square feet, respectively. The Clearwater facility houses our
SmartCertify direct telesales operation and the lease expires in June 2004. The
operations of our Books24x7.com subsidiary are located in Norwood under a lease
that expires in December 2005. In addition, we currently lease 41,000 square
feet in Redwood City, California that we are in the process of closing.
Operations previously performed in this location have been consolidated with our
Nashua operations.

In Canada, we currently lease 47,906 square feet in Fredericton, New
Brunswick. The Fredericton facility primarily houses our mentoring operations
and certain customer service and support personnel and expires in August 2008.

We also lease sales offices in a number of other countries including the
United Kingdom, Australia, the Benelux and Scandinavian countries, and Germany.
We believe that our existing facilities are adequate to meet our current needs
and that suitable additional or substitute space will be available on
commercially reasonable terms when needed.

ITEM 3. LEGAL PROCEEDINGS

SEC INVESTIGATION

On or about February 4, 2003, the Securities Exchange Commission (SEC)
informed us that we are the subject of a formal order of private investigation
relating to our November 19, 2002 announcement that we would restate the
financial statements of SmartForce PLC for the period 1999 through June 2002. We
understand that the SEC's investigation concerns SmartForce's financial
disclosure and accounting during that period, other related matters, compliance
with rules governing reports required to be filed with the SEC, and the conduct
of those responsible for such matters. We continue to cooperate with the SEC in
this matter.

CLASS ACTION LAWSUITS

Six class action lawsuits have been filed against us and certain of our
current and former officers and directors captioned: (1) Gianni Angeloni v.
SmartForce PLC d/b/a SkillSoft, William McCabe and Greg Priest; (2) Ari R.
Schloss v. SkillSoft PLC f/k/a SmartForce PLC, Gregory M. Priest, Patrick E.
Murphy, David C. Drummond and William G. McCabe; (3) Joseph J. Bish v.
SmartForce PLC d/b/a SkillSoft, Gregory M. Priest, William G. McCabe, David C.
Drummond, John M. Grillos, John P. Hayes and Patrick E. Murphy; (4) Stacey Cohen
v. SmartForce PLC d/b/a SkillSoft, William G. McCabe and Greg Priest; (5) Daniel
Schmelz v. SmartForce PLC d/b/a SkillSoft, William G. McCabe and Greg Priest;
and (6) John O'Donoghue v. SmartForce PLC d/b/a SkillSoft, William G. McCabe and
Greg Priest. Each lawsuit was filed in the United States District Court for the
District of New Hampshire; the first action was filed on November 22, 2002, the
second action was filed on December 4, 2002 and the third and fourth actions
were filed on December 11, 2002, the fifth action was filed on December 23,
2002, and the sixth action was filed on January 16, 2003. These lawsuits allege
that we misrepresented or omitted to state material facts in our SEC filings and
press releases regarding our revenues and earnings and failed to correct such
false and misleading SEC filings and press releases, which are alleged to have
artificially inflated the price of our ADSs. These lawsuits seek unspecified
monetary damages, including punitive damages together with interest, costs, fees
and expenses. These lawsuits have all been assigned to Chief Judge Paul J.
Barbadoro. On March 26, 2003, Judge Barbadoro consolidated the lawsuits under
the caption "In re SmartForce Securities Litigation," Civil Action No. 02-544-B,
appointed as lead plaintiffs the Teacher's Retirement System of Louisiana and
the Louisiana Sheriff's Pension & Relief Fund, and approved the lead plaintiffs'
choice of lead counsel and local counsel. We are awaiting plaintiffs'
consolidated amended complaint. We believe that we have meritorious defenses to
these actions and intend to defend ourselves vigorously.
17

At the end of our fiscal third quarter of 1998, several purported class
action lawsuits were filed in the United States District Court for the Northern
District of California against us, one of our subsidiaries and certain of our
former and current officers and directors alleging violations of the federal
securities laws. It has been alleged in these lawsuits that we misrepresented or
omitted to state material facts regarding our business and financial condition
and prospects in order to artificially inflate and maintain the price of our
ADSs, and misrepresented or omitted to state material facts in our registration
statement and prospectus issued in connection with our merger with ForeFront,
which also is alleged to have artificially inflated the price of our ADSs. The
court has set a trial date of September 2003. We believe that we have
meritorious defenses to these actions and intend to vigorously defend ourselves
against them. Although we cannot presently determine the outcome of these
actions, an adverse resolution of these matters could significantly negatively
impact our financial position and results of operations.

NETG LITIGATION

Our subsidiary, SkillSoft Corporation, several of its executive officers
and key employees, and a former major investor of SkillSoft Corporation are
named as defendants in a lawsuit pending in the Circuit Court of Cook County,
Illinois filed by National Education Training Group, Inc. ("NETg"), the former
employer of several of those individuals.

NETg's most recent complaint alleges in substance that:

- Charles E. Moran, as the former President of NETg, breached his fiduciary
duty to NETg by usurping NETg's corporate opportunities, by commencing a
rival business while still employed by NETg and by soliciting NETg
personnel to join his rival business while still employed by NETg;

- Jerald A. Nine, as the former Vice President of Sales and Marketing of
NETg, breached his fiduciary duty to NETg by assisting Mr. Moran in the
creation, commencement and operation of the rival concern prior to Mr.
Nine's resignation from NETg, by assisting Mr. Moran in the usurpation of
corporate opportunities, by failing to inform his superiors at NETg of
Mr. Moran's plans to form a rival business and by otherwise failing to
use his best efforts on behalf of NETg while still employed there;

- SkillSoft Corporation, Mr. Moran, Mr. Nine, Mark A. Townsend, Dennis E.
Brown, Lee A. Ritze and Sally Hovis misappropriated trade secrets of
NETg, and SkillSoft Corporation and Mr. Moran tortiously interfered with
NETg's "prospective economic advantage;"

- Mr. Moran, Mr. Townsend, Mr. Nine, Mr. Ritze, Mr. Brown and Ms. Hovis
breached certain confidentiality and proprietary matters policies of NETg
by misappropriating trade secrets and disclosing confidential and
proprietary information during and after their employment with NETg;

- Mr. Moran, Mr. Townsend, Mr. Nine, Mr. Ritze and Mr. Brown breached the
conflict of interest policy of NETg's former corporate parent, National
Education Corporation, by failing to disclose that Mr. Moran formed and
solicited funding for SkillSoft Corporation, that Messrs. Townsend, Nine,
Ritze and Brown had employment-related discussions with SkillSoft
Corporation, and that Mr. Nine participated in forming and soliciting
funding for SkillSoft Corporation, during their employment with NETg;

- SkillSoft Corporation and Mr. Moran tortiously interfered with NETg's
contractual relations with Mr. Townsend, Mr. Nine, Mr. Brown, Mr. Ritze
and Ms. Hovis by offering them employment and inducing them to breach
their confidentiality and trade secret obligations to NETg;

- SkillSoft Corporation breached provisions of a license agreement with
NETg relating to the use of NETg's software; and

- Warburg Pincus Ventures, L.P., a former major investor in SkillSoft
Corporation, tortiously interfered with Mr. Moran's and Mr. Nine's
fiduciary duties to NETg.

18

NETg maintains that the trade secrets allegedly misappropriated by the
other defendants and SkillSoft Corporation include, among other things:

- various aspects of the design and functionality of its education and
training software and products;

- customer lists and information;

- relationships with service providers; and

- NETg's soft skills product line business plan.

The claims seek injunctive relief against SkillSoft Corporation and Messrs.
Moran, Nine, Townsend, Brown and Ritze and Ms. Hovis and demand the return, and
no future use by SkillSoft Corporation and these defendants, of the alleged
trade secrets. The claims also seek compensatory damages of $400 million,
exemplary damages in the additional amount of $400 million, additional
compensatory, incidental and consequential damages in an unspecified amount and
punitive damages of $50 million or such other amount as the court deems just or
appropriate. In answers to interrogatories served on NETg, an expert witness
retained by NETg opined that NETg may, based on certain assumptions provided to
the expert by NETg's counsel, be entitled to two categories of damages,
including damages for lost profits of up to $386.8 million and damages for
unjust enrichment of up to $616.3 million. On April 30, 2001, the court denied
SkillSoft Corporation's motion to dismiss all of NETg's claims against SkillSoft
Corporation and its executive officers and key employees and granted Warburg,
Pincus Ventures, L.P.'s motion to dismiss claims related to its alleged tortious
interference with NETg's prospective economic advantage and unfair competition.
The case is currently in discovery and a trial has been scheduled for February
2004.

In addition, on July 26, 2000, NETg filed suit against SkillSoft
Corporation in the United States District Court for the Northern District of
Illinois alleging that SkillSoft Corporation's educational and training software
products infringe United States Patent No. 6,039,575, which was issued on March
21, 2000 and is allegedly owned by NETg. The complaint seeks both monetary
damages and injunctive relief. SkillSoft Corporation filed its answer and a
counterclaim for a declaration of invalidity of the NETg patent on August 17,
2000. NETg filed its reply and affirmative defenses to SkillSoft Corporation's
counterclaim on February 2, 2001.

On April 17, 2001, SkillSoft Corporation filed a request for reexamination
of the patent in suit with the United States Patent and Trademark Office (the
"PTO"). On May 11, 2001, the United States District Court for the Northern
District of Illinois entered an order staying the proceedings in NETg's patent
infringement action, with certain exceptions, pending resolution of SkillSoft
Corporation's request to the PTO to reexamine the patentability of the claims of
the patent on which NETg bases the lawsuit and any resulting reexamination
proceedings. After a series of interim actions by the PTO and filings by the
patent owner, on April 10, 2002 the PTO issued an Office Action rejecting all of
the claims of the patent. On September 6, 2002, an order was issued dismissing
the Federal Court litigation "without prejudice with leave to reinstate upon
full and final resolution of the reexamination proceedings." NETg's appeal of
the PTO's Office Action rejecting all of the claims of the patent remains
pending and, on or about September 10, 2002, the patent owner filed with the PTO
its brief in support of its appeal.

SkillSoft Corporation and the other defendants are vigorously defending
themselves against NETg's allegations, and we believe that both SkillSoft
Corporation and the other defendants have meritorious defenses to the claims
made in the lawsuits. While there have been certain settlement discussions
between the parties in the lawsuits, no settlement has yet been reached and we
intend to continue to vigorously contest NETg's claims. The current progress and
state of the proceedings do not permit an evaluation of the likelihood of an
unfavorable outcome or a fair estimate of the amount or range of potential loss,
if any. None of the defendants in the first lawsuit were bound by written
non-competition or non-solicitation agreements with NETg. We are not yet able to
assess our potential liability or the potential liability of the other
defendants. Nonetheless,

19

SkillSoft Corporation's failure to prevail in this litigation could have any or
all of the following significant adverse effects on our business and financial
performance:

- injunctive relief issued against SkillSoft Corporation and its officers
and employees, which could significantly restrict our ability to conduct
our business;

- an adverse judgment against SkillSoft Corporation for monetary damages;

- a settlement on unfavorable terms;

- obligations SkillSoft Corporation has to indemnify its employees for
liabilities and expenses they incur in connection with the lawsuits;

- obligations to customers for breach of SkillSoft Corporation's warranty
of noninfringement; or

- a requirement to reengineer SkillSoft Corporation's products to avoid
patent infringement, which would likely result in additional expense and
delay.

In addition, this litigation, regardless of its outcome, will continue to
result in significant expenses in defending the lawsuit and may divert the
efforts and attention of our management team from normal business operations.

IP LEARN

On April 23, 2002, IP Learn, LLC ("IP Learn") filed a complaint in the
United States District Court for the Northern District of California against us.
The complaint alleges that we infringed on five United States patents assigned
to IP Learn. The complaint was subsequently amended to add an additional patent.
The IP Learn patents in question are U.S. Patent Nos. 6,126,448; 6,118,973;
5,934,909; 5,779,486, 5,743,746; and 6,398,556. We believe that these patents
are related primarily to computer-aided learning methods and systems. In the
complaint, IP Learn asked the court for a preliminary and permanent injunction
as well as unspecified damages. On June 27, 2002, we filed our answer to IP
Learn's amended complaint, denying infringement and asserting counterclaims
seeking declaratory relief that the patents-in-suit are invalid and that we have
not infringed the patents-in-suit.

On July 1, 2002, IP Learn served our subsidiary SkillSoft Corporation with
an amended complaint alleging that SkillSoft Corporation infringed U.S. Patent
Nos. 6,126,448; 6,118,973; 5,934,909; 5,779,486 and 6,398,556. The complaint
seeks both monetary damages and injunctive relief. In response to the amended
complaint, SkillSoft Corporation filed a motion to dismiss or, in the
alternative, for a more definite statement. The United States District Court for
the Northern District of California granted SkillSoft Corporation's motion to
dismiss on October 15, 2002, and on October 25, 2002, IP Learn filed its Second
Amended Complaint alleging again that SkillSoft Corporation is infringing the
five IP United States patents assigned to IP Learn listed above. The Second
Amended Complaint seeks both monetary damages in an unspecified amount and
injunctive relief. On November 8, 2002, SkillSoft Corporation filed its Answer
to the Second Amended Complaint, in which it denied liability and asserted
counterclaims seeking declaratory relief that the specified patents are invalid
and that SkillSoft Corporation has not infringed the specified patents.

On December 6, 2002, the court ordered that the IP Learn cases against us
and SkillSoft Corporation be consolidated. On February 5, 2003, the court
conducted a new case management conference for the consolidated case. As a
result of that case management conference, the court scheduled the claim
construction hearing in the consolidated case for November 12, 2003 and
scheduled trial in the matter for August 30, 2004.

KPMG

In May 2002, KPMG International Investments B.V. ("KPMG") filed suit
against us for breach of contract in the Superior Court of the State of
California, County of San Mateo. KPMG alleged that we failed to deliver a
customized e-Learning platform and sought damages in the amount of approximately
$5 million. We filed a counterclaim against KPMG for its material breach of the
same contract and we sought damages in the amount of approximately $2.8 million,
which represented the balance due under the contract. On

20

September 26, 2002, we settled the lawsuit and the counterclaim. Neither party
made a monetary payment in connection with the settlement, and both parties
dismissed their claims against the other with prejudice.

LIONET

On June 13, 2002, Lionet Limited, a limited liability company incorporated
and doing business in Ireland, filed a claim against us in Ireland, alleging,
among other things, that we breached the terms of our software license agreement
with Lionet Limited in that we permitted or failed to prevent the decompilation
of the provided software products and that we have failed to cooperate in audits
to determine the nature of such alleged copying or de-compilation. Lionet
Limited is seeking damages for lost license fees of $6.8 million and seeks other
damages. We intend to vigorously defend ourselves in this matter.

We are not a party to any other material legal proceedings.

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

We previously disclosed in our Quarterly Report on Form 10-Q for the fiscal
quarter ended October 31, 2002, the information relating to the Extraordinary
General Meeting of our shareholders held on November 19, 2002.

EXECUTIVE OFFICERS OF SKILLSOFT

Our executive officers are as follows:

Charles E. Moran has served as our President and Chief Executive Officer
since our merger with SkillSoft Corporation in September 2002. Mr. Moran is a
founder of SkillSoft Corporation and served as its Chairman of the Board,
President and Chief Executive Officer from January 1998 until September 2002.
Before founding SkillSoft Corporation, Mr. Moran served as President and Chief
Executive Officer of National Education Training Group, Inc. (NETg), a
computer-based information technology training company, from May 1995 until
November 1997.

Gregory M. Priest was appointed Chairman of the Board of Directors on
November 13, 2000. Mr. Priest has served as our Chief Strategy Officer since our
merger with SkillSoft Corporation in September 2002. Mr. Priest served as our
President and Chief Executive Officer from December 1998 to September 2002. From
February 1998 until December 1998, Mr. Priest was President and Chief Executive
Officer of Knowledge Well Group Limited and of Knowledge Well Limited. Mr.
Priest served as SmartForce's Vice President, Finance and Chief Financial
Officer from December 1995 to January 1998. Mr. Priest has been a director since
June 1996. Prior to joining SmartForce, Mr. Priest was an attorney with Wilson
Sonsini Goodrich & Rosati, Professional Corporation, a private law firm
representing technology companies, where he was elected to the partnership in
1995. From June 1989 to July 1990, Mr. Priest served as a law clerk to Justice
Thurgood Marshall of the United States Supreme Court.

Thomas J. McDonald has served as our Chief Financial Officer and Executive
Vice President, Operations, Assistant Secretary and Treasurer since our merger
with SkillSoft Corporation in September

21

2002. Mr. McDonald is a founder of SkillSoft Corporation and served as its Chief
Financial Officer, Vice President, Operations, Treasurer and Secretary since
February 1998. From September 1994 to November 1997, Mr. McDonald served as
Chief Financial Officer and Vice President of Operations at NETg.

Jerald A. Nine, Jr. has served as our Executive Vice President, Global
Sales & Marketing and General Manager, Content Solutions Division since our
merger with SkillSoft Corporation in September 2002. Mr. Nine is a founder of
SkillSoft Corporation and served as its Executive Vice President, Sales and
Marketing and General Manager, Books Division since December 2001. From April
1998 to December 2001, Mr. Nine served as Vice President, Worldwide Sales and
Marketing. From July 1995 to February 1998, Mr. Nine served as the Vice
President of Sales and Marketing at NETg.

Mark A. Townsend has served as our Executive Vice President, Technology
since our merger with SkillSoft Corporation in September 2002. Mr. Townsend is a
founder of SkillSoft Corporations and served as its Vice President, Product
Development since January 1998. From February 1996 to December 1997, Mr.
Townsend served as Vice President of Advanced Technology at NETg.

Colm M. Darcy has served as our Executive Vice President, Content
Development since our merger with SkillSoft Corporation in September 2002. From
April 8, 2002 to September 6, 2002, Mr. Darcy served as our Executive Vice
President, Research and Development. From January 2002 to April 7, 2002, Mr.
Darcy served as Vice President of Solutions Management. From January 2001 to
December 2001, Mr. Darcy served as Vice President, Strategic Alliances. From
January 1999 to December 2000, he served as our Vice President, Content
Solutions and from January 1997 to December 1998, he served as Director,
Curriculum Development. Prior to joining us, Mr. Darcy held positions in
Finance, Human Resources, Training and Information Technology in the Irish
Government's Department of Health and Child Welfare.

There are no family relationships among any of the executive officers.

PART II

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

Our ADSs are listed on the NASDAQ National Market under the symbol "SKIL".
The following table sets forth, for the periods indicated, the high and low
intraday sale prices per share of our ADSs as reported on the NASDAQ National
Market between February 1, 2001 and January 31, 2003.

- ---------------

* As of the closing of our merger with SkillSoft Corporation, we changed our
fiscal year end from December 31 to January 31.

As of April 11, 2003, there were 12 holders of ordinary shares of record.

We have not paid any cash dividends on our ordinary shares and do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to fund the growth of our business.
Dividends may only be declared and paid out of profits available for
distribution determined in accordance with accounting principles generally
accepted in Ireland and applicable Irish Company Law. There are no additional
material restrictions on the distribution of income or retained earnings by our

22

consolidated group companies. Any dividends, if and when declared, will be
declared and paid in United States dollars.

IRISH STAMP DUTY

Stamp duty, which is a tax on certain documents, is payable on all
transfers of ordinary shares in companies registered in Ireland wherever the
instrument of transfer may be executed. In the case of a transfer on sale, stamp
duty will be charged at the rate of E1 for every E100 (or part thereof) of the
amount or value of the purchase price. Where the consideration for the sale is
expressed in a currency other than Euro, the duty will be charged on the Euro
equivalent calculated at the rate of exchange prevailing on the date of the
transfer. In the case of a transfer by way of gift, subject to certain
exceptions, or for considerations less than the market value of the shares
transferred, stamp duty will be charged at the above rate on such market value.

A transfer or issue of ordinary shares for deposit under the deposit
agreements among us, The Bank of New York, as Depositary, and the registered
holders and the owners of a beneficial interest in book-entry American
Depositary Receipts, or ADRs, in return for ADRs will be similarly chargeable
with stamp duty as will a transfer of ordinary shares from the Depositary or the
custodian under the deposit agreements upon surrender of an ADR for the purpose
of the withdrawal of the underlying ordinary shares in accordance with the terms
of the Deposit Agreement.

We received a ruling from the Irish Revenue Commissioners that transfers of
ADRs issued in respect of our shares will not be chargeable with Irish stamp
duty for so long as the ADRs are dealt in and quoted on the NASDAQ National
Market. It has been confirmed in Section 207, Finance Act 1992 that transfers of
ADRs will be exempt from stamp duty where the ADRs are dealt with in a
recognized stock exchange. The NASDAQ National Market is regarded by the Irish
authorities as a recognized stock exchange for these purposes.

The person accountable for payment of stamp duty is the transferee or, in
the case of a transfer by way of gift or for a consideration less than the
market value, both parties to the transfer. Stamp duty is normally payable
within 30 days after the date of execution of the transfer. Late payment of
Stamp duty will result in liability to interest, penalties and fines.

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information under the sections entitled "Election of Directors," and
"Section 16(a) Beneficial Ownership Reporting Compliance" from our definitive
proxy statement for the annual meeting of shareholders to be held on July 17,
2003, which is to be filed with the Securities and Exchange Commission not later
than 120 days after the close of our fiscal year ended January 31, 2003 (the
"2003 Proxy Statement"), is hereby incorporated by reference. Additional
information in response to this Item is included under the caption "Executive
Officers of SkillSoft" at the end of Part I of this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information under the section entitled "Executive Compensation and
Other Matters" from the 2003 Proxy Statement is hereby incorporated by
reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information under the sections entitled "Security Ownership of Certain
Beneficial Owners and Management" and "Equity Compensation Plan Information"
from the 2003 Proxy Statement is hereby incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the sections entitled "Certain Relationships and
Related Transactions" from the 2003 Proxy Statement is hereby incorporated by
reference.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Exhibits

1. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of and incorporated by reference
to this Form 10-K.

(b) Reports on Form 8-K.

We previously disclosed the following Current Reports on Form 8-K in our
Quarterly Report on Form 10-Q for the quarter ended October 31, 2002:

On November 14, 2002, we filed a Current Report on Form 8-K dated September
4, 2002 that reported under Item 5 the amendment of certain deposit agreements
with The Bank of New York.

On November 18, 2002, we filed a Current Report on Form 8-K dated June 10,
2002 that reported under Item 5 amendments to our Declaration of Subscription
Rights.

On November 20, 2002, we filed a Current Report on Form 8-K dated November
19, 2002 that reported under Item 5 our intent to restate certain historical
financial statements of SmartForce PLC.

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SIGNATURES

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

SKILLSOFT PUBLIC LIMITED COMPANY
(Registrant)

By: /s/ CHARLES E. MORAN
----------------------------------------
Charles E. Moran
President and Chief Executive
Officer

Date: April 29, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of
SkillSoft and in the capacities and on the date set forth below.

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CERTIFICATIONS

I, Charles E. Moran, certify that:

1. I have reviewed this annual report on Form 10-K of SkillSoft Public
Limited Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Omitted;

4. Omitted;

5. Omitted; and

6. Omitted.

/s/ CHARLES E. MORAN
--------------------------------------
Charles E. Moran
President and Chief Executive Officer

Dated: April 29, 2003

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CERTIFICATIONS

I, Thomas J. McDonald, certify that:

1. I have reviewed this annual report on Form 10-K of SkillSoft Public
Limited Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;

3. Omitted;

4. Omitted;

5. Omitted; and

6. Omitted.

/s/ THOMAS J. MCDONALD
--------------------------------------
Thomas J. McDonald
Chief Financial Officer

Dated: April 29, 2003

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EXHIBIT INDEX

- ---------------

* Filed herewith.

** Denotes management or compensatory plan or arrangement required to be filed
by Registrant pursuant to Item 15(c) of this report on Form 10-K.

*** Denotes management or compensatory plan or arrangement required to be filed
by Registrant pursuant to Item 15(c) of this report on Form 10-K and is
filed herewith.

**** To be filed by amendment.