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When attempting to convert labels to geodatabase annotation in ArcMap, or create a new annotation feature class in ArcCatalog, the following error is produced:
"Failed to create feature class. The edit that you have made is not supported in earlier versions of the Geodatabase. You must upgrade your Geodatabase to the current version in order to edit it."
Changes that took place at the ArcGIS 9.0 release require that the geodatabase being edited be upgraded to a newer version.