SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K

For the fiscal year ended March 31, 2001

OR

Commission file number 0-6355

Group 1 Software, Inc.
(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (301) 918-0400

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock $0.50 par value

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 the 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. (x)

The aggregate market value of the voting stock held by non-affiliates of the Registrant on June 19, 2001 was $108,042,098

The number of shares of the Registrant’s Common Stock outstanding on June 19, 2001 was 6,688,478

DOCUMENTS INCORPORATED BY REFERENCE:

Definitive proxy statement to be filed with the Securities and Exchange Commission relating to Company’s 2001 Annual Meeting of Shareholders (Part III of Form 10-K).

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Part I

Item 1. Business

The Company

Group 1 Software, Inc., including its wholly owned subsidiaries (“Group 1” or the “Company”), is a leading provider of software solutions for data quality, marketing automation, customer relationship communications and direct marketing applications. Group 1 supports IBM mainframe, Unix (including Linux), MVS, VSE, Windows NT, Windows 2000 and other operating systems and various computers. Group 1 has offices throughout the United States and in Canada, the United Kingdom, continental Europe, and Latin America. The Company is also represented in Asia and Australia. Group 1 provides software solutions that enable approximately 2,500 businesses to market smarter by helping them find, reach, and keep their customers. Increasingly, Group 1’s products are used to help companies realize the benefits from, or increase the return from their investments in Customer Relationship Management (CRM) systems.

The Company’s data quality products enable businesses to ensure the integrity of customer and prospect data. Businesses can verify as well as enhance that data with valuable geographic and demographic information. Through the Company’s DataQuality.net Web service, this functionality can be delivered in real-time. With the May 2001 acquisition of assets of HotData, Inc., the Company is also able to offer hosted, automated batch processing over the Internet. Our enterprise data quality solutions can deliver this essential functionality to all of the touch points within a company.

Group 1’s marketing automation solutions help businesses better utilize customer data to increase marketing effectiveness. These solutions enable companies to predict responses to marketing campaigns, identify and understand their best customers and take advantage of cross-selling opportunities.

The Company’s direct marketing applications help businesses to ensure accurate, on-time delivery of mailings, goods and services, thereby increasing response rates and customer satisfaction. These solutions enable businesses to reduce costs by standardizing addresses, eliminating duplicate addresses, validating postal codes and coding and presorting mailings to maximize postal discounts.

Group 1’s customer relationship communications solutions allow businesses to create high-impact customer-focused communications for delivery via a customer’s preferred channel – paper documentation, email, the web, fax and wireless. This product suite permits companies to personalize communications such as bills and statements using a rules-based engine for highly targeted messaging. Integration with the PaySense Electronic Bill Presentment and Payment (EBPP) system obtained through the April 2001 acquisition of assets of TriSense Software, Ltd. will create the first integrated solution providing digital and paper generation and delivery of customer-focused business documents.

The Company provides software solutions to leading organizations in the financial services, banking, retail, e-business, telecommunications, hospitality, publishing, utilities, and insurance industries.

Group 1 markets all of its products in North America and certain of its products throughout the world. Group 1 is a leading worldwide vendor of Customer Relationship Communications software and a leading vendor in North America of Data Quality, Direct Marketing and Marketing Automation software products.

Many of Group 1’s customers utilize its software in a real-time environment. The Company offers a number of its industry leading software solutions via ASP-based hosted services for the e-commerce arena.

Group 1 markets its Data Quality, Marketing Automation and Direct Marketing applications through a direct sales force in the United States and Canada. Customer Relationship Communications solutions are marketed directly to clients in the Americas and throughout Europe. Where appropriate worldwide, distributors are used to supplement direct sales channels.

The Company believes that the increasing need for personalized customer communications, coupled with the mission-critical requirement for enterprise-wide data quality solutions can expand the market potential for Group 1’s existing and future products.

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Markets Served

Group 1 markets its products within a broad span of industries to meet the needs of organizations in the areas of Customer Relationship Communications, Direct Marketing, Data Quality and Marketing Automation. Group 1 addresses the Marketing Automation, Data Quality and Direct Marketing markets through a single operating segment, its Enterprise Solutions Division. Group 1 addresses the Customer Relationship Communications market through a separate operating segment, its Customer Relationship Communications Division.

Customer Relationship Communications

Group 1’s Customer Relationship Communications solutions enable businesses to create high-impact, customer-focused documents including statements and invoices for delivery via print, Web, e-mail, fax and wireless devices. These innovative software applications help companies differentiate themselves to their customers by creating attractive, easy-to-read personalized customer communications. Aside from building brand awareness and increasing customer satisfaction and loyalty, these solutions help companies facilitate the cross selling of additional products and services.

The Company believes that there is substantial demand for automated solutions that combine customer data with today’s advanced printing and Web-based delivery technologies to quickly and easily produce content-rich, highly personalized business documents. Among the 450 businesses worldwide using Group 1 to develop and deliver millions of customer relationship communications each month are telecommunications companies, insurance companies, brokerages, credit card processors, public utilities, health care providers and banks.

DOC1, Group 1’s core Customer Relationship Communications solution, produces personalized business documents for print and on-line delivery. Designed for seamless, one-to-one customer communication, DOC1 also facilitates deployment of Electronic Bill Presentment and Payment (EBPP) and Electronic Statement Presentation (ESP) solutions by generating XML, HTML, and enhanced PDF files. When integrated with the PaySense EBPP offering obtained through the April 2001 acquisition of the assets of TriSense Software, Ltd., Group 1 will offer the first-ever complete solution for both digital and print communication. The integrated offering will feature electronic payment of invoices and design and delivery of Web-based documents.

DOC1 for Workgroups streamlines time-to-market by allowing multiple developers to create and share resources while managing dynamic document applications as they move from development to production. Using DOC1 for Workgroups, multiple developers access an integrated development environment, through which they can create and share content across the enterprise, providing increased productivity and reduced application development time.

Message1, one of the suite of DOC1 products, enables marketers to create highly targeted messages that drive response and generate revenue. With Message1, marketers have unprecedented flexibility to develop, manage, and deliver personalized, highly targeted messaging campaigns for both print and digital delivery. By inserting cross-selling messages on bills, statements, and invoices, routine customer communications can become strategic selling tools.

The software supports all major printing architectures and can operate in centralized, distributed or desktop environments under NT, OS/400, MVS, Open VMS, and UNIX operating systems. When integrated with Group 1’s MailStream Plus and CODE-1 Plus, DOC1 produces documents in a sequence that qualifies for United States Postal Service (USPS) presorting discounts.

Direct Marketing

Group 1’s direct marketing solutions increase direct marketing effectiveness and customer satisfaction by helping provide on-time delivery of mailings, goods and services. This is accomplished by assuring the integrity of name and address information and by coding the mail for speediest and most certain handling. Duplicate mailings are also identified and eliminated. By using these Group 1 applications, businesses can also take advantage of substantial discounts on postage available from the USPS and Canada Post Corporation (CPC) by standardizing addresses, validating postal codes and presorting mailings. Group 1’s Direct Marketing applications are among the most accurate and comprehensive software solutions currently available for international direct marketing. Using data obtained from postal administrations worldwide, these solutions validate, correct, and/or format customer and prospect addresses for over 220 countries and dependencies worldwide.

Group 1’s Direct Marketing applications include CODE-1 Plus, CODE-1 Plus International, Canadian CODE-1 Plus, MailStream Plus, Mail Canada, and MOVEforward, along with many additional solutions that provide significant operational benefits. Group 1’s CODE-1 Plus and MailStream Plus products are, respectively, Coding Accuracy Support System (CASS)-certified and Presort Accuracy Validation and Evaluation (PAVE)-certified by the USPS. To ensure accuracy, CODE-1 cleans, codes, and standardizes every address element. MailStream Plus gives mailers the most powerful software solution available to presort mail for the highest postal discounts offered by the USPS in all classes of mail.

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US mailers currently save nearly 28% of the cost of first-class mail and up to 32% of the cost of standard mail by using MailStream Plus and CODE-1 Plus. Significant savings can also be achieved with other classes of mail. Similar benefits are provided to Canadian mailers using Group 1’s products accepted under the Software Evaluation and Recognition Program (SERP) of CPC. Canadian clients can avoid the $0.05 per piece surcharge by demonstrating an address accuracy level of at least 95%.

CODE-1 International uses postal address files obtained directly from postal administrations worldwide to validate and correct addresses for 70 countries. The system also formats addresses for over 220 countries and dependencies. Many U.S. businesses have been reluctant to conduct international direct marketing campaigns due to the historically poor quality of international address data and the complexity of dealing with such data. With CODE-1 Plus International, multinational direct marketing is much easier to implement.

Group 1’s list management products, Merge/Purge Plus, Business Merge/Purge, Generalized Selection, and List Conversion Plus allow clients to convert name and address information into desired formats, identify and/or eliminate duplicates on business and consumer mailings, add gender codes, and make targeted demographic selections.

Data Quality

Group 1’s Data Quality solutions enable businesses to ensure the integrity of customer and prospect data and are the cornerstone of successful CRM initiatives. Businesses can also enhance this data with geographic and demographic intelligence. Group 1 provides both hosted services and real-time customer data quality and data enrichment solutions for enterprise-wide applications. These industry-leading solutions provide substantial operational savings as well as increased sales and customer retention by facilitating the most accurate target marketing. Group 1’s data quality software solutions, which encompass many of the company’s Direct Marketing Applications, are the most widely used applications for verifying customer information.

In October 2000, Group 1 launched DataQuality.net, a real-time, transactional Web service that offers e-businesses significant operational savings by verifying address information and providing geographic and demographic information. DataQuality.net uses an XML-based interface to provide a broad variety of real-time, customer data quality and enrichment solutions for e-commerce and enterprise-wide applications. With the May 2001 acquisition of assets of HotData, Inc., Group 1 now offers this same functionality via hosted services providing automated batch processing over the Internet.

Group 1 also offers the DataVerse product suite for companies that want software solutions within the enterprise that offer the same real-time functionality provided by DataQuality.net. The DataVerse solutions allow e-businesses to integrate Group 1’s industry leading data quality solutions directly into their Web environments using readily available technologies.

Group 1’s GeoTAX system provides businesses with the most accurate tax jurisdiction assignment solution available. GeoTAX permits organizations to deal with the thousands of U.S. tax jurisdictions assessing a broad variety of telecommunications, utility, property, sales, income and payroll taxes. The large number of taxing jurisdictions, the variety of taxes and the frequent changes in each and the potential liability from inaccurate tax assignment all combine to pose a tremendous problem for many business operating over broad geographic areas. Alone among tax application providers, only GeoTAX users have access to GDT’s innovative Dynamap/Municipal Boundary database, which provides the most current and precise nationwide municipal boundary information available.

Geographic Coding Plus helps companies turn simple customer address data into practical and powerful information. By adding highly accurate census geography data, demographic data and lifestyle data to customer addresses, Geographic Coding Plus offers businesses a gateway to increased customer and prospect understanding.

Companies have great difficulty measuring customer value, particularly when they are unaware of the full range of products and services customers are utilizing across the enterprise. Through Group 1’s Enterprise Data Quality (EDQ) solution, even the largest enterprises can identify individual customers across operating divisions and lines of business. This intelligence enables companies to leverage their sizable CRM investments by making intelligent marketing and cross-selling decisions.

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An organization’s most valuable asset is its customer data. DQ Plus helps businesses ensure the quality of this data across the enterprise, consolidating data and improving its accuracy to ensure the best customers information possible.

Marketing Automation

Group 1’s Marketing Automation solutions enable businesses to utilize customer data to increase marketing effectiveness by achieving greater return on investment from marketing initiatives. Companies use Group 1’s marketing automation offerings to predict responses to marketing campaigns, identify and understand best customers, and create cross-selling and up-selling opportunities. DM1 is an enterprise marketing automation solution that offers marketers essential data hygiene and enhancement capabilities through Group 1’s leading data quality solutions. DM1 also offers data analysis, data visualization, modeling, reporting and campaign management by incorporating third party technologies from industry leaders such as Oracle, Cognos, Dimensional Insight and MapInfo. Designed for marketers, DM1 can be implemented in an organization’s enterprise or accessed via ASP.

A powerful and reliable marketing tool, Model 1 is a series of award-winning modeling solutions that help companies to maximize their marketing dollars by getting the most out of their customer data. The Model 1 predictive modeling system utilizes all traditional predictive techniques to deliver the best models. Speed, ease-of-use, breadth of predictive techniques, and reliability are characteristics enabling users, from marketers to statisticians, to make accurate, actionable market predictions.

Products, Services and Support

Products

As of March 31, 2001, Group 1 offered over 50 software products which run on more than 20 different operating systems and hardware platforms. Group 1’s products can each operate on a stand-alone basis or in conjunction with other Group 1 products to create an integrated system that can be tailored to a client’s requirements.

The DOC1 production engine can run under MVS, Windows NT, Windows 2000, UNIX (Sun Solaris, HP/UX, IBM AIX, and TRU64), Open VMS, OS/400 or PC DOS. DOC1 is printer-independent and produces AFP, Metacode, HP/PCL, PostScript, HTML, XML, PDF and line data output.

Most products of the Enterprise Solutions Division are offered in an open systems format that enables the specific application to operate on all major platforms. This approach provides consistent performance across the enterprise, regardless of computer platform and allows users to migrate from one platform to another without lost productivity or added training.

Hosted Services

For those customers that do not wish to acquire, implement and maintain the software themselves, Group 1 offers many of its Data Quality products and its DM1 product as a complete hosted solution. DataQuality.net is a transactional Web service that offers real-time address standardization and verification for the U.S., Canada, and more than 220 countries and dependencies worldwide. DataQuality.net also provides geographic information, taxing jurisdiction, and summary-level demographic information for United States addresses. With the May 2001 acquisition of assets of HotData, Inc., Group 1 also offers automated batch processing over the Internet. In the area of customer relationship communications, the April 2001 acquisition of assets of TriSense Software, Ltd. permits Group 1 to offer bill presentment and payment solutions via hosted services for the EBPP industry.

Professional Services

Group 1’s broad range of professional services include data analysis, data migration, integration with other systems, document analysis, consultation and design, installation and training, file conversion and operational review. These services are designed to assist clients in obtaining maximum utilization from their Group 1 products and in improving other operational areas. Professional services, including operations support, business analysis, programming services, technical education and training, and operational reviews, are provided at the client’s location and at Group 1 training facilities throughout the U.S. and in Canada and the United Kingdom.

Group 1’s Enterprise Data Quality (EDQ) initiatives provide turnkey solutions for complex data quality engagements. These services include comprehensive analysis and enterprise-wide integration.

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Support

Effective support of our customers and products has been a substantial factor in Group 1’s success to date and will continue to be in the foreseeable future. Customer support for software products is provided by telephone for assistance in product installation and problem resolution. Automated call tracking, client-specific call routing, electronic newscast, e-mail messages and on-line discussion bulletin board services via the technical support Web site are also provided for customers utilizing Group 1’s maintenance and enhancement program. On-site visits by qualified company personnel are also available, if necessary. Other offerings include e-mail support, integration support, and premium support plans.

Group 1 customers are afforded educational opportunities through our Annual User’s Conference and the over 20 local User Groups. In addition, two National User Groups advise Group 1 on a variety of issues, including those related to customer support. The thirty-member Enterprise Solutions Division National User Group represents a cross-section of customers selected based on platforms, products, and industries. The Customer Relationship Communications Division also has an active User’s Group that meets twice a year.

For DM1 customers, Group 1 maintains systems in our Las Vegas, Nevada facility that duplicate the customer’s environment. Group 1 Software Europe also has modem links with many of its customers to provide high levels of mission-critical support.

Group 1 offers with its product licenses an annual service agreement that provides telephone support and continuing updates and enhancements, if and when available, to its products and documentation. The education department offers educational and training seminars specific to Group 1 products.

In the fiscal years ended March 31, 2001, 2000, 1999, maintenance and enhancement fees represented approximately 42%, 40%, and 38% respectively, of Group 1’s revenue.

Customers

Group 1’s customer base includes approximately 2,500 clients who have licensed one or more of its products. Group 1 provides software solutions to corporate leaders in a variety of industry segments, as indicated by the following brief list of customers:

Insurance and Financial Services

Retailers

Telecommunications

Utilities

Direct Marketers

Government and Non-profit

E-Business

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Group 1’s operations are in two business segments defined as Enterprise Solutions Software and Customer Relationship Communications software (see Note 14 to the Consolidated Financial Statements). No customer accounts for more than 10% of the Company’s revenue.

Licensing

Most of Group 1’s products are licensed on a perpetual “right to use” basis pursuant to non-exclusive license agreements. Those products that incorporate third-party databases are licensed on an annual basis. Group 1 does not sell or transfer title to its software products to clients. A client is generally entitled to use a product only for internal purposes on a single computer at a single location. Multi-site, multi-computer, and remote access corporate license agreements are available as well. Certain postal products are required under USPS and CPC regulations (Coding Accuracy Support System (CASS) and Software Evaluation and Recognition Program (SERP) respectively) to have defined expiration dates (quarterly or monthly) and must be under subscription or re-licensing arrangements with Group 1 to qualify for postal discounts.

Group 1 generally warrants that its products will perform substantially in accordance with their standard documentation for the defined warranty period. The software is generally licensed in conjunction with a first year maintenance agreement to provide service and support for twelve months from the date of the license agreement. The hosted on-line services are offered under annual, renewable service agreements.

Sales and Marketing

Group 1 markets all of its software products in North America and Europe through a direct sales and sales support organization of over 125 employees located in the U.S., Canada, Latin America, Scandinavia, Italy, Germany, the Netherlands, Austria and the United Kingdom. To serve existing clients and to attract new customers, Group 1 has two sales and support offices in the Washington, DC area and ten other regional offices in the New York City, Chicago, Los Angeles, Las Vegas, Atlanta, Dallas, Minneapolis, Miami and Austin, Texas. Group 1’s international offices are located in the Toronto, Sao Paulo, London, Frankfurt, Milan, Copenhagen, Amsterdam and Vienna metropolitan areas.

The Group 1 sales organization is supported by a comprehensive marketing program administered from Group 1’s Lanham, Maryland headquarters. Marketing is conducted through direct mail, print advertising, an active Web site, trade show exhibitions, speaking engagements, product training seminars, telemarketing and a broad variety of public relations activities including media relations, industry analyst briefings, the Group 1 Report and the annual Group 1 Software User’s Conference.

Through its Group 1 Software Europe subsidiary, Group 1 has entered into software distribution and support agreements for the DOC 1 product suite with partner distribution companies throughout Europe. These agreements provide for a royalty payment to Group 1, with the distributor performing sales and marketing, customer service and support activities. Group 1 continues to pursue additional international sales and marketing opportunities for its products.

Group 1 has entered into agreements with a number of leading software and hardware vendors. Group 1 distributes products manufactured by Dun & Bradstreet, Claritas, GDT, R. L. Polk, Equifax, UNICA Technologies, Business Document, Data General, COMPAQ, Window Book and others. Group 1’s domestic distributors and partners include PeopleSoft, Siebel, Lucent, Accenture, SPL Worldgroup, Ernst and Young, IBM, Xerox, Portal, CSC, Daleen, USHA, SCT, Cayenta, McKesson HBOC, Convergys, and ProQuest. International distributors of Group 1’s products include Xerox, IBM, SAP, OBIMD, Mastersoft International, Business Document, Accenture and L&K.

Product Development

The industry is characterized by rapid change in hardware and software technology and in user needs, requiring a continual expenditure for product development. Group 1 and other software developers are currently responding to the market demand for products and services that can operate in real-time. Businesses are also placing emphasis on products and services that can operate across the enterprise. It is likely that these operational requirements will continue in the foreseeable future.

Group 1 must be able to provide new products and to modify and enhance existing products on a continuing basis to meet the requirements of its customers and of regulatory agencies, particularly the USPS and CPC. Group 1 may also have to further adapt its products to accommodate future changes in hardware and operating systems. To date, Group 1 has been able to adapt its products to such changes and believes that it will be able to do so in the future. Most of the Company’s products are developed internally. The Company also purchases technology, licenses intellectual property rights and oversees third party development of certain products.

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Quality assurance testing of Group 1’s new or enhanced products is conducted by teams of experienced individuals from all segments of Group 1’s organization under the direction of testing specialists. Whether the product or technology is developed internally or acquired from another company, Group 1 considers it important to control the marketing, distribution, enhancement and future direction of each of its products and technologies.

Significant investment was made during the year in new software development, which focused on improving the integration, export, and output technologies to take advantage of e-commerce opportunities that Group 1 believes existing for its functionality. In this arena, Group 1 successfully developed and released its DataQuality.net Web service and DataVerse product suite. The HotData and Trisense asset acquisitions in April and May of 2001 significantly expanded our e-business capabilities in the areas of hosted solutions, digital delivery and electronic payment. Other areas of product enhancement were improved user interfaces and enterprise data quality.

During FY 2001, substantial investments were made in all Customer Relationship Communications products, most notably a major release of DOC1 that supports Web-based documents. In the Enterprise Solutions Division, Group 1 updated all of its core Direct Marketing and Data Quality solutions. In the Marketing Automation area, Group 1 released both a Web-accessible version of DM1 as well as DM1 Corporate Hospitality, the first of its vertically focused solution modules.

During FY 2001, Group 1 released product updates for all its regulatory products that enabled the Company’s direct marketing customers in the U.S. and Canada to meet the requirements of the USPS and CPC to qualify for postal discounts.

Competition

The software and service industry is highly competitive, and little published data is available regarding Group 1’s relative position in the markets in which it operates. Although no major competitor currently competes against Group 1 across its entire product line, competitive products are available from a number of different vendors offering features similar to those of Group 1’s products. Group 1’s existing and potential competitors include companies having greater financial, marketing and technical resources than Group 1. There can be no assurance that one or more of these competitors will not develop products that are equal or superior to the products Group 1 expects to market. In addition, many potential clients for Group 1’s products have in-house capabilities to develop computer software programs that can provide some or all of the functionality of Group 1’s products.

Group 1 believes that the principal, distinguishing competitive factors in the selection of its software products are price/performance characteristics, marketing and sales expertise, ease of use, product features and functions, reliability and quality of technical support, ease of integration of the product line and the Company’s financial strength. Group 1 believes that it competes favorably with regard to these factors, including pricing. A major competitive asset is that Group 1 offers a comprehensive array of complementary products which work together to facilitate more effective and efficient target marketing and customer relationship management. Group 1’s primary strengths are the technical capabilities of its personnel and products, marketing and sales expertise, service and support, and industry product leadership.

Product Protection

Group 1 regards its software, in source and object code, as proprietary and relies upon a combination of contract, trade secret and copyright laws to protect its products and related manuals and documentation. In addition, Group 1 owns U.S. Patent No. 6,078,907 covering security technology and has a patent application pending in Australia regarding the same technology and a patent pending in the U.S. covering other unrelated technology. The license agreements under which clients use Group 1’s products generally restrict the client’s use to its own operations and always prohibit unauthorized disclosure to third persons. Notwithstanding these, it may be possible for other persons to obtain copies of Group 1’s products. Group 1 believes that because of the rapid pace of technological change in the technology industry and changes in postal regulations that affect several core products, copyright and trade secret protection are less significant than factors such as the knowledge and experience of Group 1’s management and other personnel and their ability to develop, enhance, market and acquire new products.

Trademarks

Group 1 has U.S. federal registrations on over 20 trademarks, including CODE-1 Plus, DM1, DOC1, GROUP 1 SOFTWARE, GEOTAX, HotData, Model1 and TriSense. The Company also has registrations in Australia, Canada, the European Union, Japan and South Korea for several key trademarks. In addition, Group 1 maintains over 35 U.S. common law trademarks.

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Employees

As of March 31, 2001, the Company employed 485 persons on a full-time basis, of whom 394 were based in the United States and 91 were based internationally. Of the total, 128 were engaged in sales and marketing, 183 in product development and support, 65 in professional services and 109 in finance, administration and corporate operations. None of the Company’s employees is represented by a labor union. The Company has not experienced any work stoppages and believes its employee relations to be good.

Item 2.   Properties

The Company’s executive and administrative offices are located in Lanham, Maryland, a Washington, DC suburb, where the Company leases 54,600 square feet under a lease that expires in 2015. These facilities also include Group 1’s headquarters and principal operations base. Group 1 has options to lease additional space at specified periods during the term and to extend its lease. In North America, Group 1 leases additional sales and support offices in the Chicago, Dallas, Austin, Los Angeles, Las Vegas, Atlanta, New York City, Minneapolis, Miami, Toronto, and the Herndon, Virginia metropolitan areas. Outside North America, the company leases a sales and support office in the London metropolitan area.

Item 3.  Legal Proceedings

The Company is not a party to any legal proceedings, which in its belief, after review by legal counsel, could have a material adverse effect on the consolidated financial position, cash flows or results of operations of the Company.

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

     None

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PART II

Item 5.  Market for Registrant’s Common Stock and Related Stockholder Matters

The trading of the common stock of the Company is reported on the NASDAQ National Market System under the symbol GSOF. The table below sets forth the highest and lowest closing prices between dealers for the quarters indicated and reflects the 3 for 2 stock split effected by the Company in February, 2000. These prices, as reported by NASDAQ, do not include retail markup, markdown or commissions and may not necessarily represent actual transactions.

Closing Common Stock Prices

No cash dividends have been paid on the Company’s common stock. The Company pays dividends on the 6% Cumulative Convertible Preferred Stock. The Board of Directors intends to retain, for the foreseeable future, the Company’s remaining earnings for use in the development of the business.

At June 15, 2001, there were approximately 2,430 holders of record of the Company’s common stock, including persons who wish to be identified as having an interest in shares held or recorded in “street name” with broker-dealers.

Item 6.   Selected Financial Data

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

     Any statements in this Annual Report on Form 10-K concerning the Company’s business outlook or future economic performance; anticipated profitability, revenues, expenses or other financial items; together with other statements that are not historical facts, are “forward-looking statements” as that term is defined under the Federal Securities Laws. Forward looking statements may include words such as “believes”, “is developing”, “will continue to be in the future”, “anticipates” and “expects”. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those stated in such statements. Such risks, uncertainties and factors include, but are not limited to, changes in currency exchange rates, changes and delays in new product introduction, customer acceptance of new products, changes in government regulations, changes in pricing or other actions by competitors and general economic conditions, as well as other risks detailed in the Company’s filings with the Securities and Exchange Commission.

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Fiscal 2001 as Compared with Fiscal 2000

     For the year ended March 31, 2001, Group 1’s revenue was $93.3 million compared with $81.8 million for the prior year. Group 1 had net income available to common stockholders for the year of $8.8 million compared with $6.2 million for fiscal 2000. The increase in profitability is attributed to increased revenues and operating income in both the Enterprise Solutions and Customer Relationship Communications segments as well as increased interest income resulting from the company’s higher cash and equivalents balance.

     All of Group 1’s operations are in the two business segments defined as the Enterprise Solutions Division and Customer Relationship Communications Division. Enterprise Solutions revenue accounted for 64% and 65% of Group 1’s total revenue in fiscal 2001 and fiscal 2000, respectively. Customer Relationship Communications revenue was 36% and 35% of total revenue for fiscal 2001 and fiscal 2000. International revenues accounted for 16% of Group 1’s total revenue in fiscal 2001 and 13% in fiscal 2000. The increase in international revenue as a percent of total revenue is due to increased sales of the DOC1 product in Europe and Latin America.

     Software license fees and related revenue of $40.0 million represented an increase of 3% over the prior year. As a percentage of total revenue, software license and related revenues were 43% and 48% for fiscal years 2001 and 2000, respectively.

     The Enterprise Solutions segment’s data quality/direct marketing software license fees were flat for fiscal year 2001 compared with fiscal year 2000. Included in data quality/direct marketing license fees were an increase in GeoTax licenses along with an increase in Code 1 Plus licenses. These increases were offset by lower license sales of the Company’s international coding products.

     License fees from the Enterprise Solutions segment’s Database Marketing systems decreased $0.8 million for fiscal year 2001. The decrease resulted from lower sales of the Model 1 product.

     Licensing of Customer Relationship Communications software increased by 1% in fiscal 2001 over the prior fiscal year. The increase is due primarily to increased European and Latin American sales offset by slightly lower U.S. sales in fiscal 2001 as compared with fiscal 2000.

     Maintenance and services revenue of $53.3 million for the year increased 24% over the prior year. Maintenance and service revenue accounted for 57% and 52% of total revenue in fiscal 2001 and fiscal 2000, respectively. Recognized maintenance fees were $39.0 million in fiscal 2001 and $32.6 million in fiscal 2000, an increase of 20%. Professional service and educational training revenues were $14.3 million in fiscal 2001 and $10.3 million in fiscal 2000, an increase of 38%.

     Enterprise Solutions recognized maintenance increased 16% over the prior year to $31.0 million. Customer Relationship Communications recognized maintenance increased 35% to $8.0 million in fiscal 2001 from fiscal 2000. The increase in maintenance revenue is due to the recognition of a higher level of maintenance deferrals based on higher aggregate sales from prior periods and increased maintenance renewals based on an increase in the installed customer base in both business segments. The Company expects continued growth in recognized maintenance in both of its business segments.

     Professional services revenue from the Enterprise Solutions segment increased to $4.2 million in fiscal 2001 from $2.8 million in fiscal 2000, an increase of 50%. Customer Relationship Communications services revenue increased 35% in fiscal 2001 to $10.1 million. As the Company foresees a growing need for integrating complex solutions, it anticipates increased revenue from these services.

     Total costs of revenue for fiscal 2001 were $30.4 million versus $27.3 million for fiscal 2001, representing 33% of total revenue in both years. Costs of revenue include software license expense and maintenance and service expense. Software license expense consists of the amortization of software development costs, royalty payments to third party vendors, and the costs of documentation and quality assurance. Maintenance and service expense consist primarily of consulting, education and support personnel salaries and related costs as well as the costs to distribute the product, including the costs of the media on which it is delivered, shipping and handling costs. Research and development costs are excluded from the cost of revenue.

     Software license expense decreased to $11.2 million in fiscal 2001 representing 28% of software license and related revenue compared with $12.3 million in fiscal 2000 representing 32% of software license and related revenue. The decrease as a percent of revenue is primarily due to higher license revenue, lower software amortization expense and lower royalty expense on sales of third party products.

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     Maintenance and service expense increased to $19.2 million in fiscal 2001 from $15.0 million in fiscal 2000, 36% and 35% of maintenance and service revenue, respectively. The increase in expense as a percent of revenue is due to the higher percentage of service revenue relative to maintenance revenue.

     Included in maintenance and service expense above are professional service and educational training costs of $11.6 million which were 82% of professional services revenue during 2001 and $8.0 million and 78% of professional services revenue for the prior year. The increase in expense as a percentage of services revenue is due to increased staffing and contracting costs.

     Costs of maintenance were $7.5 million for fiscal 2001 representing 19% of maintenance revenue compared with costs of $7.0 million and 21% of maintenance revenue in fiscal 2000. The decreased costs as a percentage of maintenance revenue were primarily due to increased maintenance revenue partially offset by higher information technology costs associated with supporting internal systems. The Company anticipates these costs to remain relatively close to their current levels.

     Total operating costs of $50.9 million amounted to 55% of revenue in fiscal 2001 compared with $44.7 million or 55% of revenue during fiscal 2000. The various components of operating costs are discussed below.

     Software development costs incurred subsequent to establishment of the software’s technological feasibility are capitalized. Capitalization ceases when the software is available for general release to customers. All costs not meeting the requirements for capitalization are expensed in the period incurred. Software development costs include direct labor cost and overhead. Capitalized software development costs are amortized by the greater of (a) the ratio that current gross revenues for the product bear to the total of current and anticipated future gross revenues for that product or (b) the straight-line method over the remaining estimated economic life of the product including the period being reported on. At the balance sheet date, the Company evaluates the net realizable value of the capitalized costs and adjusts the current period amortization for any impairment of the capitalized asset value. Amortization of capitalized software is included in the cost of license fees.

     Research and development expenses (after capitalization of certain software development costs) totaled $6.4 million in fiscal 2001 and $4.2 million in 2000, representing 7% and 5% of total revenue, respectively. Costs for research and development, before capitalization, incurred in fiscal 2001and 2000, were $13.1 million, $11.1 million, respectively. The increase in costs is due to increased investment in new product initiatives in all of the Company’s major product groups. The Company expects these costs, as a percentage of revenue, to increase as a result of the acquisitions made subsequent to year end (see Note 1).

     Sales and marketing expenses totaled $31.0 million or 33% of revenue in fiscal 2001 and $26.1 million or 32% of revenue in fiscal 2000. The increase in costs as a percentage of revenue is primarily due to higher sales incentive costs for both Enterprise Solutions and Customer Relationship Communications products. The Company expects these costs to remain relatively close to current levels as a percentage of revenue. Sales and marketing costs for the Enterprise Solutions products were 33% of total Enterprise Solutions revenue for fiscal 2001 and 32% for fiscal 2000. Customer Relationship Communications selling and marketing costs were 34% of total Customer Relationship Communications revenue for fiscal 2001 and 32% for fiscal 2000.

     General and administrative expenses were $13.5 million or 14% of total revenue in fiscal 2001 compared with $14.4 million or 18% for fiscal 2000. The decrease is attributable to lower bonus compensation and lower bad debt expense due to cash collections. The Company expects these costs to remain relatively close to current levels as a percentage of revenue.

     Net non-operating income was $2.9 million in fiscal 2001 compared with net non-operating income of $1.1 million in fiscal 2000. This increase represents higher interest income generated from higher cash and short-term investment balances as well as gains arising from foreign currency translation. The Company expects non-operating income to decrease as interest income on cash and investments decreases. This is due to a decrease in interest rates and a decrease in cash reserves to fund acquisitions subsequent to March 31, 2001. The Company does not expect to continue to benefit from gains on foreign currency transactions. No short-term borrowing requirements are expected; this expectation could be affected substantially by newly-identified investment opportunities including acquisitions.

     The Company’s effective tax rate was 40.6% in fiscal 2001 and 42.5% in fiscal 2000. The current year’s rate is the net effect of a 45% domestic tax rate combined with a 33% foreign tax rate on taxable net income. The decreased effective rate is primarily due to higher foreign taxable income in fiscal 2001.

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Fiscal 2000 as Compared with Fiscal 1999

     For the year ended March 31, 2000, Group 1’s revenue was $81.8 million compared with $65.3 million for the prior year. Group 1 had net income available to common stockholders for the year of $6.2 million compared with $3.0 million for fiscal 1999. The increase in profitability is attributed to increased revenues and operating income in both the Enterprise Solutions and Customer Relationship Communications segments as well as increased interest income.

     All of Group 1’s operations are in the two business segments defined as Enterprise Solutions software and Customer Relationship Communications software. Enterprise Solutions revenue accounted for 65% and 68% of Group 1’s total revenue in fiscal 2000 and fiscal 1999, respectively. Customer Relationship Communications revenue was 35% and 32% of total revenue for fiscal 2000 and fiscal 1999. The change in mix is due to more rapid growth in sales in the Customer Relationship Communications segment. International revenues accounted for 13% of Group 1’s total revenue in fiscal 2000 and 17% in fiscal 1999. The decrease in international revenue as a percent of total revenue is due to lower European revenues along with higher sales in the U.S.

     Software license fees and related revenue of $38.9 million represented an increase of 23% over the prior year which was attributable to increased sales across all of Group 1’s product lines. As a percent of total revenue, software license and related revenues were 48% for fiscal years 2000 and 1999.

     The Company’s data quality/mailing efficiency software license fees increased 10% for fiscal 2000 over the prior year. The increase is primarily due to higher sales of the Company’s international coding products, list products and the DQ Plus product suite.

     License fees from Database Marketing systems increased 10% for fiscal year 2000. The increase resulted from higher recognizable revenue on DM1 solutions which are recognized on a percentage of completion basis.

     Licensing of Customer Relationship Communications systems increased by 50% in fiscal 2000 over the prior fiscal year. The increase is due to higher sales in North America, South America and the Caribbean, offset slightly by lower sales in Europe.

     Maintenance and services revenue of $42.9 million for the year increased 27% over the prior year. Maintenance and service revenue accounted for 52% of total revenue in both fiscal 2000 and fiscal 1999. Recognized maintenance fees were $32.6 million in fiscal 2000 and $24.7 million in fiscal 1999, an increase of 32%. Professional service and educational training revenues of $10.3 million in fiscal 2000 and $9.0 million in fiscal 1999 represented an increase of 14%.

     Enterprise Solutions recognized maintenance increased 27% over the prior year to $26.7 million. Customer Relationship Communications recognized maintenance increased 59% to $5.9 million in fiscal 2000 from fiscal 1999. The Company expects continued growth in recognized maintenance in both of its business segments.

     Professional services revenue from the Enterprise Solutions segment increased to $2.8 million in fiscal 2000 from $2.0 million in fiscal 1999, an increase of 40%. Customer Relationship Communications services revenue increased 7% in fiscal 2000 to $7.5 million. As the Company foresees a growing need for integrating complex solutions, it anticipates increased revenue from these services.

     Total costs of revenue for fiscal 2000 were $27.3 million versus $23.7 million for fiscal 1999, representing 33% and 36% of total revenue, respectively. The separate components of cost of revenue are discussed below.

     Software license expense increased to $12.3 million in fiscal 2000 representing 32% of software license and related revenue compared to $10.7 million in fiscal 1999 representing 34% of software license and related revenue. The decrease as a percentage of revenue is primarily due to higher license revenue partially offset by higher software amortization expense.

     Maintenance and service expense increased to $15.0 million in fiscal 2000 from $13.0 million in fiscal 1999, 35% and 39% of maintenance and service revenue, respectively. The decrease in expense as a percentage of revenue is due to higher revenues partially offset by higher costs of outside consultants used to help deliver these services.

     Included in maintenance and service expense above are professional service and educational training costs of $8.0 million which were 78% of professional services revenue during 2000 and $6.6 million and 73% of professional services revenue for the prior year. The increase in cost as a percentage of services revenue is due to lower margins in the Company’s Enterprise Solutions services attributable to a specific contract in which the duration extended original estimates and substantial outside resources were needed for completion. The Company does not expect any significant costs for this contract going forward.

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     Costs of maintenance were $7.0 million for fiscal 2000 representing 21% of maintenance revenue compared with costs of $6.4 million and 26% of revenue in fiscal 1999. The decreased costs as a percentage of maintenance revenue were primarily due to increased maintenance revenue partially offset by higher Information Technology costs associated with supporting internal systems. The Company anticipates these costs to remain relatively close to their current levels. Total operating costs of $44.7 million amounted to 55% of revenue in fiscal 2000 compared with $36.6 million or 56% of revenue during fiscal 1999. The various components of operating costs are discussed below.

     Research and development expenses (after capitalization of certain development costs) totaled $4.2 million in fiscal 2000 and $2.7 million in 1999, representing 5% and 4% of total revenue. The increase in costs is due to increased investment in new product initiatives in all of the Company’s major product groups. The Company expects these costs, as a percentage of revenue, to remain relatively close to their current levels.

     Sales and marketing expenses totaled $26.1 million or 32% of revenue in fiscal 2000 and $21.7 million or 33% of revenue in fiscal 1999. The decrease in costs as a percentage of revenue is primarily due to higher revenue partially offset by higher costs for sales and marketing of Enterprise Solutions and Customer Relationship Communications products. The Company expects these costs to remain relatively close to current levels as a percentage of revenue. Sales and marketing costs for the Enterprise Solutions products were 32% of total Enterprise Solutions revenue for fiscal 2000 and 36% for fiscal 1999. Customer Relationship Communications selling and marketing costs were 32% of total Customer Relationship Communications revenue for fiscal 2000 and 28% for fiscal 1999.

     General and administrative expenses were $14.4 million or 18% of total revenue in fiscal 2000 compared with $12.2 million or 19% for fiscal 1999. The increase is attributable to higher performance bonus compensation offset partially by lower bad debt expense. The Company expects these costs to remain relatively close to current levels as a percentage of revenue.

     Net non-operating income was $1.1 million in fiscal 2000 compared with net non-operating income of $0.2 million in fiscal 1999. This increase represents higher interest income generated from higher cash and short-term investment balances compared to fiscal 1999. The Company expects non-operating income to increase as interest income on cash and investments increases and short-term borrowing requirements remain minimal; these expectations could be affected substantially by newly-identified investment opportunities including acquisitions.

     The Company’s effective tax rate was 42.5% in fiscal 2000 and 39.3% in fiscal 1999. The current year’s rate is the net effect of a 46% domestic tax rate combined with a 32% foreign tax rate on taxable net income. The increased effective rate is primarily due to proportionately higher domestic income in fiscal 2000.

Seasonality and Inflation

     Group 1 in the past has experienced greater sales and earnings in the January-March quarter, the fourth quarter of its fiscal year; there can be no assurance, however, that this will occur in the future. This seasonal factor is believed to be attributable to buying patterns of major accounts and also to fiscal year incentives for Group 1’s sales representatives. Group 1’s revenue and resultant earnings have shown substantial variation on a quarter-to-quarter basis. The Company’s license agreements represent the culmination of a sales cycle averaging three to six months. Any significant lengthening in the sales cycle can have the effect of moving revenue from one quarter into the next, contributing to quarter-to-quarter variations.

     Prices remain stable for Group 1’s products. Inflation directly affects Group 1’s cost structure principally in the areas of employee compensation and benefits, occupancy and support services and supplies.

Liquidity and Capital Resources

     The Company’s working capital was $29.7 million at March 31, 2001 as compared with $17.1 million a year earlier. The current ratio was 1.7 to 1 at March 31, 2001 and 1.4 to 1 at March 31, 2000. Note that the current portion of deferred revenue related to maintenance contracts is included in current liabilities. Accordingly, working capital and current ratios may not be directly comparable to such data for companies in other industries where similar revenue deferrals are not typical.

     The Company provides for its funding requirements through cash generated from operations. Additionally, the Company maintains a $10 million line of credit arrangement with a commercial bank, expiring October 31, 2001. The line of credit bears interest at the bank’s prime rate or Libor plus 150 basis points, at Group 1’s option. The line of credit is not collateralized but requires Group 1 to maintain certain operating ratios. At March 31, 2001 and at March 31, 2000, there were no borrowings outstanding under the line of credit.