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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the Fiscal year ended November 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Transaction Period From To

Commission file number 0-19417

PROGRESS SOFTWARE CORPORATION
(Exact name of registrant as specified in its charter)

MASSACHUSETTS 04-2746201
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
14 OAK PARK
BEDFORD, MASSACHUSETTS 01730
(Address of principal executive offices)
TELEPHONE NUMBER: (781)280-4000

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

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

Common Stock, $.01 par value
TITLE OF EACH CLASS

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and, (2) has been subject to such
filing requirements for the past 90 days:

Yes X No ____

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

As of February 6, 1998, there were 11,427,480 shares outstanding of the
registrant's common stock, $.01 par value. As of that date, the aggregate market
value of voting stock held by non-affiliates of the registrant was approximately
$174,742,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the fiscal year ended
November 30, 1997 are incorporated by reference into Parts I and II.

Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 1998 are incorporated by reference into
Part III.
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PART I

CAUTIONARY STATEMENTS

The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. From time to time, information
provided by the Company or statements made by its directors, officers or
employees may contain "forward-looking" information which involves risks and
uncertainties. Actual future results may differ materially. Statements
indicating that the Company "expects," "estimates," "believes," "is planning" or
"plans to" are forward-looking, as are other statements concerning future
financial results, product offerings or other events that have not yet occurred.
There are several important factors which could cause actual results or events
to differ materially from those anticipated by the forward-looking statements.
Such factors, some of which are described in greater detail in the 1997 Annual
Report to Shareholders under the heading "Factors That May Affect Future
Results," include, but are not limited to, the receipt and shipment of new
orders, the timely release of enhancements to the Company's products, which
could be subject to software release delays, the growth rates of certain market
segments, the positioning of the Company's products in those market segments,
variations in the demand for customer service and technical support, pricing
pressures and the competitive environment in the software industry, consumer use
of the Internet, and the Company's ability to penetrate international markets
and manage its international operations. Although the Company has sought to
identify the most significant risks to its business, the Company cannot predict
whether, or to what extent, any of such risks may be realized nor can there be
any assurance that the Company has identified all possible issues which the
Company might face.

ITEM 1. BUSINESS

Progress Software Corporation ("PSC" or the "Company") is a supplier of
application development and deployment technology and support services to
business, industry and government worldwide. Application development is the
creation, deployment and ongoing enhancement of computer software to support
business strategy and operations. The Company's products and services are
designed to improve application quality and development productivity by
simplifying and accelerating the creation, deployment and enhancement of
applications. The Company's principal product line, marketed as PROGRESS!!REG
MARK!!, consists of the PROGRESS Application Development Environment ("ADE"),
PROGRESS AppServer, PROGRESS DataServers and the PROGRESS Relational Database
Management System ("RDBMS"). PROGRESS is an integrated, component-based visual
development environment for building and deploying multi-tier, enterprise-class
business applications. Additionally, PSC supplies Apptivity(TM), for developing
distributed, multi-tier Java-based business applications; ProtoSpeed(TM), an
error detecting and debugging tool; and WebSpeed(TM), a product for creating
Internet Transaction Processing ("ITP") applications. The Company also develops
and markets add-on application development tools for Microsoft's Visual Basic
and Visual J++ through its Crescent Division. The Company's products provide
capabilities for accelerating the development of high-functionality business
applications that are portable, scalable and reconfigurable across a range of
Internet, intranet, client/server and host-terminal computing environments.

In order to better serve the Company's installed customer base and
facilitate marketing to new customers, the Company has created three product
units. These product units will consist of integrated teams of development,
product management and product marketing groups and will utilize the resources
of the functional organizations of worldwide sales, corporate marketing,
professional services, technical support and finance and administration. The
Core Products unit includes the PROGRESS and Webspeed product lines. The
Apptivity Product Unit is focused on the development of Java-based business
applications and includes the Apptivity product line. The Internet Software
Quality Products ("ISQP") unit includes the ProtoSpeed product line and the
Crescent Division.

BUSINESS STRATEGY

The Company was founded in 1981 to develop and market application
development software. Its business strategy has been developed in response to
user needs for application development tools that enable the rapid development
and deployment of business-critical applications regardless of the computing
environment. The

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Company's mission today is to deliver superior software products and services
that empower its partners and customers to dramatically improve their
development and deployment of quality applications worldwide. This mission
encompasses the following strategic points:

- Rapid Application Development. The Company's development tools and
technologies are designed to be easy-to-use, intuitive, highly visual
and component-based. This allows the Company's products and services
to improve the productivity of developers in creating and maintaining
complex applications.

- Portability for Developers and End-Users. The Company designs its
products to operate across a broad range of midrange systems,
workstations and PCs. The Company believes that application developers
need the flexibility to deploy their applications across hardware,
operating system platforms, databases and user interfaces that may be
different from those on which their applications are originally
developed. In addition, end-users need the flexibility to continue to
use applications with minimal re-programming, even as they modify or
upgrade their computing environments.

- Application Deployment Flexibility. As business requirements evolve,
the Company is planning its future product development direction in
order that customers can take advantage of emerging technologies and
standards. This means that customers can migrate their existing
applications and adapt to new trends in business computing, such as
ITP and Java. The Company's products allow deployment across all major
computing configurations: host-terminal, client/server and Internet.
The PROGRESS AppServer and Apptivity provide "n-tier" computing
support in order to improve application performance. The Company's
products operate across heterogeneous networks using a variety of
communication protocols, and PROGRESS-based applications can access
data stored in both PROGRESS and non-PROGRESS databases.

- Balanced Distribution. PSC chose at an early stage to implement both
direct and indirect channels of distribution to broaden its geographic
reach, accelerate its sales expansion and leverage its sales force.
The Company sells to value-added resellers (which the Company refers
to as Application Partners) and to the Information Technology ("IT")
departments of corporations and government agencies. Application
Partners develop end-user applications for resale, and both IT
customers and Application Partners generally license additional
deployment copies of the Company's products to run applications. In
addition, the Company launched the Apptivity Partner Program in
October 1997 in order to promote sales of its Apptivity line of
Java-based business application development tools. The Apptivity
Partner Program represents the first time that PSC has created a
program to market its products through the pure reseller channel. To
minimize channel conflict, PSC neither develops application software
for distribution nor plans to do so in the future.

- Recurring Revenue. The Company's distribution and pricing strategies
are intended to generate recurring revenue. The sale of a development
system can lead to follow-on sales as Application Partners license
additional copies of the Company's development and deployment products
upon successful distribution of their applications, or as end-users
deploy such applications or upgrade their systems.

- Worldwide Market. PSC has emphasized international sales through its
subsidiaries and a network of independent distributors. Approximately
59% of the Company's revenue was derived from customers outside of
North America in fiscal 1997.

- Customer Service. PSC has made a strategic commitment to customer
service. The Company believes that rapid changes in technology require
not only continuous product enhancement but also a strong customer
service effort to encourage product usage and maintain customer
satisfaction. The Company provides a variety of technical support and
service options under its annual maintenance agreements, including an
option for 24 hour, 7 day a week service. The Company also offers an
extensive selection of training courses and on-site consulting
services.

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- "Buy, Build, Both". A major challenge for the software industry is to
unite the economical price, reliability and immediate benefit of
packaged software applications with the tailored fit of custom
solutions. Purchasing a packaged application provides standard
functionality that can be used quickly and economically with little or
no development time. Building an in-house application results in a
solution that offers a competitive business advantage, but typically
involves long development cycles. By combining both packaged and
customized solutions, IT departments can deliver flexible,
business-driven applications more quickly and productively. The
Company's products and services, in conjunction with solutions from
its Application Partners, are designed to give IT departments that
flexibility and competitive advantage.

PROGRESS PRODUCT LINE

The Company's core product line consists of the PROGRESS ADE, the PROGRESS
RDBMS, the PROGRESS AppServer and the PROGRESS DataServer Architecture.
Applications developed in PROGRESS are reconfigurable between character-based
and graphical interfaces, as well as between client/server and host-based
computing systems. PROGRESS provides a high degree of portability across a wide
range of computing environments while affording developers the flexibility to
build applications on a range of database management products.

In June, 1997 the Company began shipping PROGRESS Version 8.2, the latest
release of the Company's flagship application development and deployment
environment. Version 8.2 is designed to let developers build and deploy highly
scalable transaction processing applications cost-effectively, by enabling them
to exploit the full range and power of the 32-bit Windows platform for
additional deployment options and faster compile times; to leverage a wide range
of ActiveX controls, greatly increasing user-interface flexibility; to integrate
with other ActiveX-based applications using Object Linking and Embedding ("OLE")
Automation for application interoperability and; to take advantage of enhanced
PROGRESS database functionality for added performance and maintainability.

Customers may license bundled packages or stand-alone products. The
Company's pricing structure is generally based on the number of concurrent
users, regardless of the platform and operating system. Prices for the Company's
principal ADE package, which is marketed as ProVision, range from $2,600 to
$3,600 per user depending on the total number of users. Prices for similar user
counts for the PROGRESS RDBMS and for DataServers enabling access to
non-PROGRESS data managers range from $155 to $1,200 per user.

PROGRESS ADE

The PROGRESS ADE is a programming environment that provides developers with
a "visual road map" for developing and deploying complex enterprise applications
that are scalable, portable and re-configurable across heterogeneous
client/server and host-based environments. Within the PROGRESS ADE is a set of
integrated, graphical development tools that support a range of development
approaches, including structured, procedural, event-driven and object
approaches. High-performance applications can be visually assembled using
reusable application components known as PROGRESS SmartObjects. The principal
components of the PROGRESS ADE are as follows:

PROGRESS SmartObjects are a collection of reusable business components that
enable developers to fabricate and assemble application components into fully
functional applications. Working within a graphical programming environment,
developers can build scalable and portable enterprise-class applications by
using the PROGRESS SmartObjects templates included in the PROGRESS starter set
and/or by customizing their own reusable code. The PROGRESS starter set includes
the SmartView, SmartBrowse, SmartQuery, SmartFrame, SmartWindow, SmartPanel,
SmartDialog and SmartFolder templates, representing the most common visual,
interactive and data management functions of complex transaction-based
client/server applications.

The PROGRESS ADE is based on the PROGRESS 4GL and an extensive Data
Dictionary, which enables developers to address mission-critical application
requirements. In addition, the PROGRESS ADE gives developers the flexibility to
control application interfaces, processing logic and data management

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components required to complete mission-critical systems. The principal
components of the PROGRESS ADE are as follows:

- User Interface Builder--The PROGRESS User Interface Builder ("UIB") is
the central tool for rapidly creating and maintaining complex
applications. The UIB provides point-and-click functionality, a fully
customizable object palette, automatic linking of components, and
complete control of application interaction with end users. Within the
PROGRESS UIB, developers are able to create and customize their own
SmartObjects.

- PROGRESS 4GL--The PROGRESS 4GL is a high-level application development
language that runs throughout the entire toolset in the PROGRESS ADE.
It is an efficient and robust development language for prototyping,
developing and modifying solutions.

- Data Dictionary--The PROGRESS Data Dictionary is a central repository
for all information (regardless of where it is stored) that describes
the application data, including database definitions, application
defaults and business rules. When building, updating and distributing
new application components, the Data Dictionary defaults and
definition inheritances are automatically and transparently applied.

- Integration of Third-party Development Tools--The PROGRESS ADE
promotes the integration of value-added solutions from third-party
tool providers who offer capabilities that complement, enhance and
extend PROGRESS as part of an overall application development
strategy. Products from these tool vendors range from application
design, analysis, modeling, repository and testing systems to
prototyping, methodology, process management and project management.

- On-Line Help--The PROGRESS On-Line Help system allows developers to
build their own Help interface using popular word processors or
desktop publishing systems to document their system, and run it
without modification across all PROGRESS-supported environments.

- Procedure Editor--The Procedure Editor is a full-function code editing
tool that allows developers to write, edit, compile and run PROGRESS
4GL application components. The Procedure Editor provides a full range
of editing features including cut-and-paste and search-and-replace,
which allow developers to make large-scale changes to several
different programs.

- Application Debugger--The Application Debugger is an interactive
utility that allows developers to control and monitor the execution of
PROGRESS procedures. The Debugger enables developers to find and fix
data and logic errors, modify any procedure code, and display or
update information about the procedure running without having to
modify procedure code.

- Translation Manager--Translation Manager is a GUI tool set for
creating and delivering multilingual versions of a PROGRESS
application without having to modify the original source code. This
tool enables a project manager to define and provide consistent
business context translations of the application interface into
multiple languages. The tool provides the translator with a visual
context for translating the user-interface components of the
application.

PROGRESS RDBMS

PROGRESS RDBMS is a fully-featured relational SQL-compliant database
management system that runs on most UNIX, PC and PC LAN operating systems. The
PROGRESS RDBMS offers the advantage of scalability through the use of a
multi-threaded, multiple server architecture that runs efficiently on small and
large single-processor computers, multiple-processor computers and distributed
networks of server and client computers. The PROGRESS RDBMS permits
simultaneous, distributed multi-user access by providing flexible record-level
locking control, query optimization strategies, two-phase database commits,
on-line backup, automatic crash recovery and other features intended to protect
data integrity. These features make the PROGRESS RDBMS well-suited for
high-volume transaction processing applications. The PROGRESS RDBMS is designed
to be easy to install, maintain and administer. The PROGRESS database products
include Personal Database for stand alone users, Workgroup Database Server for
workgroups or departments

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of up to 49 concurrent users, and Enterprise Database Server for large numbers
of users and symmetric multi-processing (SMP) environments.

PROGRESS APPSERVER

The PROGRESS AppServer delivers application partitioning or "n-tier"
computing support to provide improved application performance in networked
environments. In traditional client/server applications, the user interface and
business logic execute on the client machine. As business logic is executed,
database records are accessed on the server and individually sent over the
network back to the client for processing. The network can quickly become a
bottleneck when processing complex queries involving the transmission of large
record sets, or as networked users are added. The PROGRESS AppServer is intended
to deliver a range of benefits in the deployment of distributed applications.
Such applications execute significantly faster with the PROGRESS AppServer, as
the business logic is typically deployed and executed on a UNIX, OpenVMS or
Windows NT server. Network traffic between client and server is reduced as only
result sets from server-based processing are returned to the client. PROGRESS
AppServers can be re-used unmodified across any number of servers and can
connect other PROGRESS AppServers in a peer-to-peer relationship. PROGRESS
AppServers also introduce a level of separation between users and the database
for enhanced security and data integrity.

PROGRESS DATASERVERS

PROGRESS-based applications have access to a wide range of data sources
through the PROGRESS DataServer Architecture. The DataServer Architecture
consists of a set of data integration services and interfaces that allow
developers to use the PROGRESS ADE tools to write database-independent
applications. The architecture is designed to make any supported database appear
to be completely integrated into the PROGRESS ADE. This allows PROGRESS
applications to efficiently read from and write to a variety of databases and
file systems, including the PROGRESS RDBMS. Whether the data manager is
relational, indexed flat-file or object-oriented, the DataServer generates
native calls to the data manager.

PROGRESS DataServers provide for database independence, data integration
and data migration. The Company currently offers DataServers for the following
database and file managers: Oracle, RMS, Microsoft SQL Server, C-ISAM, DB2/400
and ODBC.

PROGRESS/400

PROGRESS/400 is a version of the Company's application development
environment for the IBM AS/400 product line. PROGRESS/400 is an integrated
client/server solution for commercial transaction processing applications on the
AS/400. PROGRESS/400 also permits developers to program and test code
independent of an AS/400. The PROGRESS/400 DataServer supports native access to
the DB2/400 database and optimized communication to local and remote clients.
The PROGRESS/400 DataServer allows PROGRESS-based applications to access and
update any DB2/400-based data, while coexisting with non-PROGRESS applications.

WEBSPEED PRODUCT LINE

WebSpeed is a comprehensive environment for developing and deploying
database-independent, high-volume transaction processing applications over the
Internet, extranets and corporate intranets. WebSpeed enables companies to
create a direct link between customers and suppliers, resulting in more
efficient and timely access to corporate databases for transaction-intensive
applications like order entry, customer service, claims processing and inventory
control. The current products in the WebSpeed product line are WebSpeed Workshop
and WebSpeed Transaction Server.

WEBSPEED WORKSHOP

WebSpeed Workshop delivers a powerful toolset for building WebSpeed's
scalable, transaction-based applications. Featuring an open architecture, it
supports most popular Web authoring tools (HTML 3.2, Java

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and JavaScript) for building an application's user interface. The Workshop's 4GL
is then used to create the business logic and data access portions of the
application. WebSpeed Workshop includes easy-to-use Web-centric development
tools that let developers write code, check syntax, compile and run applications
through an intuitive browser interface. WebSpeed Workshop includes SpeedScript,
a high-level, server-side scripting language that enables developers to
prototype, develop and maintain re-usable application business logic. Scripting
Lab enables developers to test code fragments before adding them to the
application.

WEBSPEED TRANSACTION SERVER

The WebSpeed Transaction Server delivers a robust transaction-processing
environment over the Internet and on corporate intranets. The Transaction Server
supports access to and updating of multiple databases and also protects the data
integrity of transactions - even if Internet connections are interrupted. The
WebSpeed Transaction Server lets developers integrate leading Web servers,
security solutions and databases. The WebSpeed Transaction Server is compatible
with any ISAPI, NSAPI or CGI-compliant Web server. The Transaction Server
includes a Transaction Broker component that manages a pool of Transaction
Agents and maintains status information for efficient dispatch of Web requests.
It eliminates the overhead of starting a new agent for each user request and
increases the agent pool size as required. The Transaction Agent executes Web
objects, performs database transactions and dynamically merges data into HTML
format to deliver real-time data access over the Web. Transaction Agents provide
full support for multi-page Web transactions by executing stateless, state-aware
and state-persistent Web objects.

APPTIVITY PRODUCT LINE

Apptivity visual tools include a component-based form designer, multiple
productivity Wizards and a distributed debugger to concurrently build both the
client and server tiers of a distributed Java database application. The
Apptivity architecture is designed to facilitate deploying and maintaining
multi-tier applications. Load balancing is supported across multi-threaded,
scalable Apptivity Servers - enabling the high availability of middle-tier
resources to handle large numbers of users. Business logic is partitioned
between client and server such that it can be updated centrally. Apptivity
generates 100% Java code. Apptivity's standards-based architecture enables
developers to deliver interactive applications to virtually any user connected
to a Web platform (Internet, intranet, extranet). Apptivity features a class
library that provides extensive functionality and flexibility and ensures a
uniform look and feel regardless of the platform or browser on which the
application is running. The initial products in the Apptivity product line are
as follows:

APPTIVITY DEVELOPER

Apptivity Developer provides tools needed to develop, test and maintain
Java-based business applications. Apptivity Developer is comprised of visual,
component-based tools that generate 100% Java business logic. Apptivity
Developer includes Common Object Request Broker Architecture ("CORBA")
productivity tools to allow integration of CORBA-compliant components in a
distributed Apptivity application. Flexible deployment options allow
applications to run stand-alone or from a Web browser supporting both 1.02 and
1.1 versions of the Java development kit. The visual SQL query editor eliminates
the need to know SQL to build queries against a database.

APPTIVITY SERVER

Apptivity Server manages sessions, executes Java application logic and
handles database access to leading corporate databases from Oracle, Sybase,
Informix, IBM, Microsoft as well as PSC. The load balancing option of Apptivity
Server manages connections across multiple servers, increasing application
scalability. Apptivity Server includes Apptivity Manager which provides a visual
environment to specify runtime settings related to load balancing, license
management and concurrent usage as well as to monitor real-time information as
applications are running.

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PROTOSPEED

ProtoSpeed is an Internet protocol debugger. ProtoSpeed goes beyond
traditional debugging capabilities by providing the ability to examine
distributed objects from any location on the network. This simplifies
distributed debugging by enabling developers to debug multiple objects: local
and remote, running in the browser, outside the browser, or on the server.
ProtoSpeed also provides Internet protocol debugging capabilities, giving
developers the ability to set breakpoints and modify and record multiple
protocol streams in real-time.

ProtoSpeed offers developers the flexibility to keep pace with changing
Internet technology. Using a standard publish/subscribe mechanism, ProtoSpeed's
network event manager allows developers to build customized features such as
providing event triggers for specific conditions or allowing other applications
to access the data stream. ProtoSpeed gives developers control over the
application by offering either passive or active debugging modes. Passive mode
allows streaming and capturing data over a port, while active mode offers
setting watch, breakpoint and filtering.

CRESCENT DIVISION PRODUCTS

The Crescent Division of the Company provides advanced client/server tools
and components to Visual Basic and Visual J++ development teams. The Crescent
Division's strategy in the workgroup/departmental tools market complements
Visual Basic and Visual J++ by offering an integrated suite of add-on tools and
components that enable professional developers to make client/server business
application development easy and intuitive. The major products offered by the
Crescent Division are as follows:

CRESCENT INTERNET TOOLPAK

Internet ToolPak provides event-driven, Internet-enabled tools to meet the
needs of Visual Basic developers building applications in both 16- and 32-bit
environments. The Crescent Internet ToolPak suite, including a set of sixteen
ActiveX controls, a Telnet form and an Internet mail "Wizard", manages Visual
Basic developers' Internet protocol needs and enables them to create
sophisticated Internet-enabled applications with a minimum of coding.

QUICKPAK VB/J++

QuickPak VB/J++ utilizes the power of the latest advances in ActiveX
component techniques to improve user productivity. QuickPak VB/J++ consists of
libraries of ActiveX components designed to simplify some of the most demanding
programming tasks. These libraries contain hundreds of commonly used functions,
including string and array handling, keyboard routines and system configuration.
QuickPak VB/J++ also includes routines developed specifically for the Internet,
such as Internet Information Server and Internet Core Messaging Protocol.

PDQCOMM

PDQComm provides tools to develop robust serial communications applications
in the Visual Basic environment. PDQComm provides simplified file transfers and
advanced terminal emulation as well as support for TAPI.

PRODUCT DEVELOPMENT

To date, most of the Company's products have been developed by its internal
product development staff. Although the Company believes that the features and
performance of its products are generally competitive with those of other
available application development tools, and that none of its current product
versions is approaching obsolescence, the Company believes that continuing
enhancements of its products will be required to enable the Company to maintain
its competitive position.

The Company intends to focus its principal future product development
efforts on developing new products and updating existing products in order to
realize the Company's vision of the expected direction of application
development technology - which the Company describes as Universal Application
Architecture

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("UAA"). UAA is a standards-based approach to application development and
deployment technology that relies on server-centric performance and
maintainability, component-based modularity and standards-based interoperability
and integration.

In the server-centric UAA model, the business logic of an application
resides primarily on the server, accessed by users with thin clients or Web
browsers. Application code that is more suitable for client side execution, such
as user interface logic, data entry validation, and the like, is distributed as
needed to the client but managed by the server. Component-based modularity is an
application development technique derived from object-oriented programming in
which applications are built as encapsulated blocks of logic. This enables
client/server applications to be rewritten into other languages, such as Java,
in incremental steps, easing the transition to next-generation architectures.
Standards-based interoperability facilitates communication between business
application logic and a variety of clients and a variety of data sources.
Business applications developed within this framework will include the messaging
standards of CORBA, a standard that enables software programs written in any
programming language to communicate with each other and execute on any platform.

The Company is planning on releasing the next generation of its core
application development and deployment products (PROGRESS and WebSpeed) with an
application server engine to be called Open AppServer. This product is evolving
from the PROGRESS AppServer and WebSpeed Transaction Server and will provide a
Universal External Interface that allows 4GL application logic executing within
the Open AppServer to operate with any client and with any data source.
Subsequent releases of Open AppServer are expected to fully support CORBA. The
Company plans for the next release of the PROGRESS RDBMS to support the latest
SQL, ODBC and JDBC standards, Java stored procedures and Java triggers.

The Company plans for the next release of Apptivity to support UAA by
providing a complete CORBA-based AppServer for integrating with any client,
application or service, and any data source accessible within a CORBA messaging
infrastructure. The Company plans to enhance its Apptivity development tools to
include HTML capabilities and compatibility with Open AppServer.

The ISQP unit plans to focus future enhancements and new products on
database or data source error detection and performance. The Company is also
seeking to strengthen its product mix through strategic alliances with other
application development tools vendors and similar companies.

The Company's product development staff consisted of 199 employees as of
November 30, 1997. Product development is primarily conducted at the Company's
offices in Bedford, Massachusetts, Newark, California and Nashua, New Hampshire.
Limited work related to product localization may also be performed at the
Company's international subsidiaries.

In fiscal years 1997, 1996 and 1995, the Company spent $28,855,000,
$26,413,000 and $26,872,000, respectively, on product development, of which
$1,864,000, $2,462,000 and $2,697,000, respectively, were capitalized in those
years. The Company believes that the experience and depth of its product
development staff are important factors in the Company's success.

CUSTOMERS

The Company markets its products worldwide to Application Partners and IT
departments of corporations and government agencies. No single customer has
accounted for more than 10% of the Company's total revenue in any of its last
three fiscal years.

Application Partners. PSC's Application Partners provide the Company with
broad market coverage, offer an extensive library of commercial applications and
are a source of follow-on revenue. PSC publishes Application Catalogs and
includes Application Partners in trade shows and other marketing programs. PSC
also has kept entry costs for Application Partners low to encourage a wide
variety of Application Partners to build applications. An Application Partner
typically takes 6 to 24 months to develop an application. Although many of the
Company's Application Partners have developed successful applications and have
large installed customer bases, others are engaged in earlier stages of product
development and marketing and may not contribute follow-on revenue to PSC for
some time, if at all. However, if an Application Partner succeeds in

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marketing its applications, the Company obtains follow-on revenue as the
Application Partner licenses copies of the Company's deployment products to
permit its application to be installed and used by customers.

IT Departments. PSC licenses its products to IT departments of
corporations, government agencies and other organizations to build complex
applications. Large IT departments that purchase Application Partner
applications typically also purchase the Company's development tools to
supplement their internal application development. Like Application Partners, IT
customers may also license deployment products to install applications at
additional user sites.

Apptivity Resellers. In October 1997, the Company initiated the Apptivity
Partner Program, a new reseller program designed to promote sales of its
Apptivity line of Java business application development tools. While the Company
has a long-standing Application Partner Program for its core products, the
Apptivity Partner Program represents the first time that PSC has marketed its
products through the pure reseller channel. The Apptivity Partner Program offers
various levels of participation, with graded levels of competitive discounts.
Resellers will purchase directly from PSC in order to eliminate potential
channel conflicts. The Company provides technical and marketing assistance and
is seeking to partner with a limited number of resellers in each major market.

SALES AND MARKETING

The Company sells PROGRESS, WebSpeed and related products through its
direct sales force in the United States and in over 20 other countries and
through independent distributors in over 30 countries outside North America. The
sales organization is organized into the following regions: North America;
Europe, Middle East and Africa ("EMEA"); Asia Pacific; Latin America; and Japan.
The Company believes that its network of subsidiaries allows it to maintain
direct contact with and better support its customers and to control its
international distribution. The Company's international subsidiaries provide
focused local marketing efforts and are better able to directly respond to
changes in local conditions. Financial information relating to business segment
and international operations is detailed in Note 10 of Notes to Consolidated
Financial Statements on page 41 in the 1997 Annual Report to Shareholders and is
incorporated herein by reference.

Sales personnel are responsible for developing new Application Partner and
IT accounts, assisting Application Partners in closing major accounts and
servicing existing customers. The Company actively seeks to avoid conflict
between the sales efforts of its Application Partners and the Company's own
sales efforts. In addition, the Company has dedicated sales personnel focused on
developing the Apptivity Partner Program.

PSC uses its telephone sales and sales administration groups to enhance its
direct sales efforts and to generate new business and follow-on business from
existing customers. These groups may provide evaluation copies to Application
Partners or IT organizations to help qualify them as prospective customers, and
may also sell additional development and deployment products to existing
customers.

The Company's marketing department conducts extensive marketing programs
designed to ensure a stream of market-ready products, raise general awareness of
PSC, generate leads for the PSC sales organization and promote the Company's
various product lines. These programs include public relations, direct mail,
participation in trade shows, advertising and production of collateral
literature. The Company utilizes the "Powered by Progress" branding program in
order to raise awareness of its products and their capabilities in the
enterprise application development market. The Company sponsored a single
worldwide user conference in the United States in 1997 and is planning to hold
user conferences in the United States, Europe and Australia in 1998.

CUSTOMER SUPPORT

The Company's technical support staff provides telephone support to
application developers and end-users using a computerized call tracking and
problem reporting system. PSC also provides custom software development,
consulting services and training throughout the world. The Company's software
licenses generally are perpetual licenses. Customers may also purchase an annual
maintenance service entitling them to software updates, technical support and
technical bulletins. The annual fee for maintenance is generally 15% to 20% of
the current list price of the product to be maintained; first year maintenance
is not included

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with the Company's products and is purchased separately. The Company provides
technical support to customers primarily through its technical support centers
in Bedford, Massachusetts, Rotterdam, The Netherlands and Melbourne, Australia.
Some local support is also provided by international subsidiaries in their own
countries.

The Company's professional services organization (education and consulting)
deliver a total business solution for customers through a combination of
products, consulting and education. The Company's worldwide consulting
organization is well-positioned to meet customers' needs by helping to implement
PROGRESS-, WebSpeed- or Apptivity-based applications. The Company's consulting
organization also provides services to Web-enable existing applications or take
advantage of the capabilities of new product releases. The Company's consulting
organization also provides assistance with project management, custom
development, programming, application implementation, Internet services,
migration services and other services.

Consulting and training services for customers outside North America are
provided by personnel at the Company's international subsidiaries and
distributors. Revenue from maintenance and services was 49%, 47% and 38% of
total revenue for fiscal years 1997, 1996 and 1995, respectively.

COMPETITION

The computer software industry is intensely competitive. The Company
experiences significant competition from a variety of sources with respect to
all its products. The Company believes that the breadth and integration of its
product offerings have become increasingly important competitive advantages.
Other factors affecting competition in the markets served by the Company include
product performance in complex applications, application portability, vendor
experience, ease of integration, price, training and support. The Company
believes that it competes favorably with respect to these factors.

The Company competes with a number of entities, principally application
development tools vendors such as Borland International Inc., Forte Software
Inc., Powersoft Corporation, a subsidiary of Sybase, Inc., and Uniface, a
division of Compuware Corporation, and relational database vendors offering
tools in conjunction with their database systems such as CA Ingres, a subsidiary
of Computer Associates International, Inc., Informix Corporation, Microsoft
Corporation, Oracle Corporation and Sybase, Inc. The Company believes that the
database market is currently dominated by Oracle, Informix and Sybase, and that
there is no dominant application development tools vendor. Some of these
competitors have greater financial, marketing or technical resources than the
Company and may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements or to devote greater resources to the
promotion and sale of their products than can the Company. Increased competition
could make it more difficult for the Company to maintain its market presence.

COPYRIGHTS, TRADEMARKS, PATENTS AND LICENSES

In accordance with industry practice, the Company relies upon a combination
of contractual provisions and copyright, trademark and trade secret laws to
protect its proprietary rights in its products. The Company distributes its
products under software license agreements which grant customers a perpetual
non-exclusive license to use the Company's products and contain terms and
conditions prohibiting the unauthorized reproduction or transfer of the
Company's products. In addition, the Company attempts to protect its trade
secrets and other proprietary information through agreements with employees and
consultants. Although the Company intends to protect its rights vigorously,
there can be no assurance that these measures will be successful.

The Company seeks to protect the source code of its products as a trade
secret and as an unpublished copyrighted work. The Company does not believe that
patent laws are a significant source of protection for the Company's products.
Where possible, the Company seeks to obtain protection of the names "PROGRESS",
"WebSpeed", "Apptivity" and "ProtoSpeed" through trademark registration and
other similar procedures.

The Company believes that, due to the rapid pace of innovation within its
industry, factors such as the technological and creative skills of its personnel
are more important in establishing and maintaining a

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leadership position within the industry than are the various legal protections
of its technology. In addition, the Company believes that the nature of its
customers, the importance of the Company's products to them and their need for
continuing product support reduce the risk of unauthorized reproduction.

BACKLOG

The Company generally ships its products within 30 days after acceptance of
a customer purchase order and execution of a license agreement. Accordingly, the
Company does not believe that its backlog at any particular point in time is
indicative of future sales levels.

EMPLOYEES

As of November 30, 1997, the Company had 1,090 employees worldwide,
including 454 in sales and marketing, 257 in customer support (including
manufacturing and distribution), 199 in product development and 180 in
administration. The competition in recruiting skilled technical personnel in the
computer software industry is intense. The Company believes that its ability to
attract and retain qualified employees is an important factor in its growth and
development, and that its future success will depend, in large measure, on its
ability to continue to attract and retain qualified employees. To date, the
Company has been successful in recruiting and retaining sufficient numbers of
qualified personnel to effectively conduct its business. None of the Company's
employees is represented by a labor union. The Company has experienced no work
stoppages and believes its relations with employees are good.

The Company has adopted policies with regard to issuance of stock options
and payment of cash bonuses and contributions to retirement plans in years in
which the Company has met or exceeded its financial plan. These policies are
designed to minimize employee turnover, although there can be no assurance that
such policies will be successful.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding the executive
officers of the Company.

NAME AGE POSITION
- ---- --- --------

Joseph W. Alsop............... 52 President, Treasurer and Director
Jennifer J. Bergantino........ 38 Vice President, Marketing and Strategic
Planning
David G. Ireland.............. 51 Vice President, Core Products and Services
Richard D. Reidy.............. 38 Vice President, Product Development
Norman R. Robertson........... 49 Vice President, Finance and Administration
and Chief Financial Officer
David P. Vesty................ 45 Vice President, Worldwide Sales

Mr. Alsop, a founder of the Company, has been a director and President of
the Company since its inception in 1981.

Ms. Bergantino joined the Company in January 1994 as Manager, Technology
Marketing. In January 1995, she was appointed Director, Crescent Business
Operations, was elected Vice President, Product Marketing and Planning in
February 1996 and was elected Vice President, Marketing and Strategic Planning
in July 1996. From 1991 to 1993, she was employed by Component Software
Corporation, a computer software company, as Vice President, Marketing.

Mr. Ireland joined the Company in September 1997 as Vice President, Core
Products and Services. From 1994 to 1997, Mr. Ireland was employed by Marcam
Corporation, a computer software company, as a Vice President and General
Manager. From 1992 to 1994, Mr. Ireland was employed by Cognos Inc., a computer
software company, as Senior Vice President, Powerhouse Products.

Mr. Reidy was elected Vice President, Development Tools in July 1996 and
was elected Vice President, Product Development in July 1997. From 1993 to 1996,
Mr. Reidy held various management positions within the product development
organization of the Company. Mr. Reidy joined the Company in June 1985.

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Mr. Robertson joined the Company in May 1996 as Vice President, Finance and
Chief Financial Officer and was elected Vice President, Finance and
Administration and Chief Financial Officer in December 1997. From 1993 to 1996
he was employed by M/A-COM, Inc., a telecommunications company, as Director of
Finance and Administration. From 1990 to 1993 he was employed by Progressive
Technologies, Inc., a semiconductor company, as Chief Financial Officer.

Mr. Vesty was elected Vice President, International Operations in June 1989
and was elected Vice President, Worldwide Sales in December 1996. Mr. Vesty
joined the Company in June 1986.

ITEM 2. PROPERTIES

The Company's principal administrative, sales, support, marketing and
product development facility is located in a single leased building of
approximately 165,000 square feet in Bedford, Massachusetts. The Company leases
approximately 58,000 square feet in Wilmington, Massachusetts and maintains its
manufacturing and distribution operations at this location. The Company leases
approximately 33,000 square feet in Nashua, New Hampshire and maintains a
product development facility at this location. In addition, the Company
maintains offices in 16 other locations in North America and 29 offices outside
North America. The Bedford lease expires in August 1999 and has a three-year
renewal option. The terms of all other leases generally range from one to seven
years. The Company believes that its present and proposed facilities are
adequate for its current needs and that suitable additional space will be
available as needed.

ITEM 3. LEGAL PROCEEDINGS

Naf Naf S.A. commenced an expert proceeding in the Paris Trade Court,
Paris, France against Progress Software S.A., Timeless S.A. and Digital
Equipment France in May 1996. In June 1997, Naf Naf petitioned the court to add
Progress Software Corporation as a party to the expert proceeding, which
petition has been granted. The basis of the proceeding is alleged late
availability of products from Progress Software and alleged product deficiencies
after delivery by Timeless to Naf Naf of such products. At this time, no
specific damage claim has been formally filed under French legal proceeding
rules with the Paris Trade Court. The Company is vigorously defending itself in
this proceeding and the costs of such defense are being reimbursed to the
Company by the Company's insurer. The Company's insurer has agreed to reimburse
such costs under a reservation of rights as to coverage. While the outcome of
this claim cannot be predicted with certainty, management does not believe that
the outcome will have a material adverse effect on the Company's consolidated
financial position or results of operations.

The Company is also subject to various other legal proceedings and claims,
either asserted or unasserted, which arise in the ordinary course of business.
While the outcome of these claims cannot be predicted with certainty, management
does not believe that the outcome of any of these legal matters will have a
material adverse effect on the Company's consolidated financial position or
results of operations.

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

No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended November 30, 1997.

PART II

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

The information appearing under the caption "Market for Registrant's Common
Equity and Related Shareholder Matters" on page 43 of the 1997 Annual Report to
Shareholders is incorporated herein by reference.

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ITEM 6. SELECTED FINANCIAL DATA

The information appearing under the caption "Selected Consolidated
Financial Data" on page 22 of the 1997 Annual Report to Shareholders is
incorporated herein by reference.

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

The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 23 to 29 of
the 1997 Annual Report to Shareholders is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements, related notes and independent
auditors' report appearing on pages 30 to 42 of the 1997 Annual Report to
Shareholders and the information appearing under the caption "Selected Quarterly
Financial Data" on page 43 of the 1997 Annual Report to Shareholders are
incorporated herein by reference.

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

There were no changes in or disagreements with accountants on any matter of
accounting principles, financial statement disclosure, or auditing scope or
procedures required to be reported under this item.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information regarding executive officers set forth under the caption
"Executive Officers of the Registrant" in Item 1 of this Annual Report is
incorporated herein by reference.

The information regarding directors set forth under the caption "Election
of Directors" appearing in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on April 24, 1998, which will be filed
with the Securities and Exchange Commission not later than 120 days after
November 30, 1997, is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information set forth under the caption "Executive Compensation"
appearing in the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 1998, which will be filed with the
Securities and Exchange Commission not later than 120 days after November 30,
1997, is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the caption "Security Ownership of Certain
Holders and Management" appearing in the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on April 24, 1998, which will
be filed with the Securities and Exchange Commission not later than 120 days
after November 30, 1997, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption "Certain Relationships and
Related Transactions" appearing in the Company's definitive Proxy Statement for
the Annual Meeting of Shareholders to be held on April 24, 1998, which will be
filed with the Securities and Exchange Commission not later than 120 days after
November 30, 1997, is incorporated herein by reference.

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PART IV

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

(a) FINANCIAL STATEMENTS

The following financial statements are included in the Company's 1997
Annual Report to Shareholders and are incorporated herein by reference:

Consolidated Balance Sheets as of November 30, 1997 and 1996

Consolidated Statements of Operations for the years ended November 30,
1997, 1996, and 1995

Consolidated Statements of Shareholders' Equity for the years ended
November 30, 1997, 1996, and 1995

Consolidated Statements of Cash Flows for the years ended November 30,
1997, 1996, and 1995

Notes to Consolidated Financial Statements

Independent Auditors' Report

Supplemental Financial Data not covered by the Independent Auditors'
Report:

Selected Quarterly Financial Data

(b) REPORTS ON FORM 8-K:

No reports on Form 8-K were filed by the Company during the fourth quarter
of the fiscal year ended November 30, 1997.

Documents listed below, except for documents identified by parenthetical
numbers, are being filed as exhibits herewith. Documents identified by
parenthetical numbers are not being filed herewith and, pursuant to Rule 12b-32
of the General Rules and Regulations promulgated by the Commission under the
Securities Exchange Act of 1934 (the "Act"), reference is made to such documents
as previously filed as exhibits with the Commission. The Company's file number
under the Act is 0-19417.

3.1 Restated Articles of Organization of the Company
3.1.1 Articles of Amendment to Restated Articles of Organization of the Company(1)
3.1.2 Articles of Amendment to Restated Articles of Organization of the Company
3.2 By-Laws of the Company, as amended and restated(2)
4.1 Specimen certificate for the Common Stock of the Company(3)
10.2 Form of User Agreement, as amended(4)
10.3 Form of Application Partner Agreement(5)
10.4 Form of End User Product License Agreement(6)
10.5 Form of Authorized International Distributor Agreement(7)
10.6 1984 Incentive Stock Option Plan, with amendments(8)
10.7 Amended and Restated 1984 Incentive Stock Option Plan(9)
10.8 1991 Employee Stock Purchase Plan, as amended(10)
10.9 Progress Software Corporation 401(k) Plan and Trust(11)
10.11 Progress Software Corporation 401(k) Plan with Fidelity Institutional Retirement
Services Company(12)
10.12 1992 Incentive and Nonqualified Stock Option Plan(13)

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10.15 First Amended and Restated Lease dated August 11, 1994 between the
Company and the Equitable Life Assurance Company of the United
States(14)

10.16 1994 Stock Incentive Plan(15)

10.17 1993 Directors' Stock Option Plan(16)

10.18 1997 Stock Incentive Plan(17)

11.1 Statement re computation of per share earnings

13.1 1997 Annual Report to Shareholders (which is not deemed to be "filed"
except to the extent that portions thereof are expressly incorporated
by reference in this Annual Report on Form 10-K)

21.1 List of Subsidiaries of the Registrant

23.1 Consent of Deloitte & Touche LLP

27.1 Financial Data Schedule (EDGAR version only)

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

(1) Incorporated by reference to Exhibit 3.1.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended November 30, 1994.

(2) Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 31, 1991.

(3) Incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1, File No. 33-41223, as amended.

(4) Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1993.

(5) Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1993.

(6) Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1993.

(7) Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1993.

(8) Incorporated by reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-1, File No. 33-41223, as amended.

(9) Incorporated by reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-1, File No. 33-41223, as amended.

(10) Incorporated by reference to Exhibit 28.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended August 31, 1991.

(11) Incorporated by reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1, File No. 33-41223, as amended.

(12) Incorporated by reference to Exhibit 10.11 to the Company's Annual Report
on Form 10-K for the fiscal year ended November 30, 1991.

(13) Incorporated by reference to Exhibit 10.12 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1992.

(14) Incorporated by reference to Exhibit 10.15 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1994.

(15) Incorporated by reference to Exhibit 10.16 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1994.

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17

(16) Incorporated by reference to Exhibit 10.17 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1994.

(17) Incorporated by reference to Exhibit 10.18 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1997

(D) FINANCIAL STATEMENT SCHEDULES

Schedule II -- Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable or the
required information is shown on the financial statements or notes thereto.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Town of
Bedford, Commonwealth of Massachusetts on the 19th day of February, 1998.

PROGRESS SOFTWARE CORPORATION

By: /s/ JOSEPH W. ALSOP
------------------------------------
Joseph W. Alsop,
President and Treasurer

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

SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------

/s/ JOSEPH W. ALSOP President, Treasurer and February 19, 1998
- ------------------------------------------ Director (Principal
Joseph W. Alsop Executive Officer)

/s/ NORMAN R. ROBERTSON Vice President, Finance and February 19, 1998
- ------------------------------------------ Administration and Chief
Norman R. Robertson Financial Officer (Principal
Financial Officer)

/s/ DAVID H. BENTON, JR. Corporate Controller February 19, 1998
- ------------------------------------------ (Principal Accounting
David H. Benton, Jr. Officer)

/s/ LARRY R. HARRIS Director February 19, 1998
- ------------------------------------------
Larry R. Harris

/s/ ROBERT J. LEPKOWSKI Director February 19, 1998
- ------------------------------------------
Robert J. Lepkowski

/s/ MICHAEL L. MARK Director February 19, 1998
- ------------------------------------------
Michael L. Mark

/s/ ARTHUR J. MARKS Director February 19, 1998
- ------------------------------------------
Arthur J. Marks

/s/ AMRAM RASIEL Director February 19, 1998
- ------------------------------------------
Amram Rasiel

/s/ JAMES W. STOREY Director February 19, 1998
- ------------------------------------------
James W. Storey

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders of
Progress Software Corporation:

We have audited the consolidated financial statements of Progress Software
Corporation and its subsidiaries as of November 30, 1997 and 1996, and for each
of the three years in the period ended November 30, 1997, and have issued our
report thereon dated December 19, 1997; such consolidated financial statements
and report are included in your 1997 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of Progress Software Corporation and its subsidiaries, listed
in the Index accompanying Item 14(d). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.

/S/ DELOITTE & TOUCHE LLP

Boston, Massachusetts
December 19, 1997

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SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND FROM END OF
DESCRIPTION OF PERIOD EXPENSES RESERVES PERIOD
- ----------- ---------- ---------- ---------- ----------

Reserves deducted from assets to which
they apply--for doubtful accounts receivable:
1997....................................... $5,112 $1,807 $(1,991) $4,928
====== ====== ======= ======
1996....................................... $4,611 $1,818 $(1,317) $5,112
====== ====== ======= ======
1995....................................... $4,268 $1,936 $(1,593) $4,611
====== ====== ======= ======