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EXHIBIT 13.1

Portions of 2002
Annual Report to Stockholders

FINANCIAL HIGHLIGHTS





Selected Financial Information



|(IN THOUSANDS / EXCEPT PER-SHARE AMOUNTS)               |  | 1998    |           | 1999      |   | 2000      |  | 2001      |           | 2002      |  
|------------------------------------------------------- |  | ------- | --------- | --------- | - | --------- |  | --------- | --------- | --------- | -
|                                                        |  |         |           |           |   |           |  |           |           |           |  
|Income Statement Data (1) (2) (3) (4)                   |  |         |           |           |   |           |  |           |           |           |  
|Revenue                                                 |  | $       | 1,351,431 |           | $ | 1,486,997 |  | $         | 1,703,096 |           | $
|Income from operations                                  |  | 214,904 |           | 175,915   |   | 335,262   |  | 399,210   |           | 547,233   |  
|Net income before extraordinary items                   |  | 127,308 |           | 100,531   |   | 212,972   |  | 246,055   |           | 325,641   |  
|Net income                                              |  | 130,382 |           | 111,201   |   | 212,972   |  | 246,055   |           | 325,641   |  
|Basic net income per share before extraordinary items   |  | 0.53    |           | 0.40      |   | 0.81      |  | 0.89      |           | 1.15      |  
|Diluted net income per share before extraordinary items |  | 0.51    |           | 0.39      |   | 0.78      |  | 0.86      |           | 1.12      |  
|Basic net income per share                              |  | 0.54    |           | 0.44      |   | 0.81      |  | 0.89      |           | 1.15      |  
|Diluted net income per share                            |  | 0.52    |           | 0.43      |   | 0.78      |  | 0.86      |           | 1.12      |  
|                                                        |  |         |           |           |   |           |  |           |           |           |  
|Balance Sheet Data                                      |  |         |           |           |   |           |  |           |           |           |  
|Total assets                                            |  | $       | 1,214,192 |           | $ | 1,564,762 |  | $         | 1,845,185 |           | $
|Total short-term and long-term debt                     |  | 27,158  |           | 13,272    |   | 13,847    |  | 458,631   |           | 206,092   |  
|Stockholders equity                                    |  | 840,447 |           | 1,210,767 |   | 1,442,476 |  | 1,793,856 |           | 2,222,399 |  

(1)Includes a charge for pro forma income taxes for periods before the March 1999 acquisition of Automated Securities Clearance, Ltd. (ASC).
ASC was a Subchapter S corporation before the Company acquired it, and net income and all net income per share amounts before March 1999 are presented on a pro forma basis since generally accepted accounting principles require the presentation of
pro forma income tax expense for ASC as if ASC had been a Subchapter C corporation for all periods presented.

(2)All revenue amounts include reimbursed expenses (see Note 1 of Notes to Consolidated Financial Statements). All per-share amounts before
June 2001 are adjusted for the June 2001 two-for-one stock split.

(3)Includes amortization of goodwill, net of tax, of $10,048, $10,754, $13,877 and $17,853 in 1998, 1999, 2000 and 2001, respectively ($0.04, $0.04, $0.05 and $0.06 per diluted share, respectively
 see Note 1 of Notes to Consolidated Financial Statements).

(4)1998 includes merger and restructuring costs of $14,584 ($12,369 after tax; $0.05 per diluted share) and after-tax extraordinary gains resulting from the early retirement of debt of $3,074
($0.01 per diluted share). 1999 includes merger costs of $99,184 ($71,309 pro forma after tax; $0.27 per diluted share) and extraordinary gains of $16,766 ($10,670 after tax; $0.04 per diluted share) resulting from the sale of two wholly
owned healthcare information systems businesses and from the early retirement of debt. 2000 includes charges of $13,177 ($8,547 after tax; $0.03 per diluted share) for purchased in-process research and development and merger costs.
2001 includes charges of $17,670 ($12,736 after tax; $0.04 per diluted share) for the write-off of an investment, facility shut-down and severance costs related to the acquisition of the Comdisco, Inc. availability solutions business (CAS)
and merger costs, which were offset in part by a break-up fee and a realized gain on short-term investments sold in connection with the funding of the CAS acquisition. 2002 includes charges of $11,793 ($8,570 after tax; $0.03 per diluted
share) for facility shut-down and severance costs related to the acquisitions of Guardian iT plc (Guardian) and CAS, along with the Companys share of merger costs associated with its equity interests in Brut LLC and Guardian before the Company
acquired 100% of the equity of each company, net of other income of $2,993 related to a gain on foreign currency purchased to fund the Guardian acquisition. See Notes 1 and 2 of Notes to Consolidated Financial Statements.

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FINANCIAL SECTION



|Quarterly Financial Information                                                       | 3 
|------------------------------------------------------------------------------------- | --
|                                                                                      |   
|Stock Information                                                                     | 4 
|                                                                                      |   
|Managements Discussion and Analysis of Financial Condition and Results of Operations | 5 
|                                                                                      |   
|Consolidated Statements of Income                                                     | 15
|                                                                                      |   
|Consolidated Balance Sheets                                                           | 16
|                                                                                      |   
|Consolidated Statements of Cash Flows                                                 | 17
|                                                                                      |   
|Consolidated Statement of Stockholders Equity                                        | 19
|                                                                                      |   
|Notes to Consolidated Financial Statements                                            | 21
|                                                                                      |   
|Report of Independent Accountants                                                     | 38



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QUARTERLY FINANCIAL INFORMATION / UNAUDITED



|(IN THOUSANDS / EXCEPT PER-SHARE AMOUNTS) |  | FIRSTQUARTER |         | SECONDQUARTER |   | THIRDQUARTER |  | FOURTHQUARTER |        
|----------------------------------------- |  | ------------ | ------- | ------------- | - | ------------ |  | ------------- | -------
|                                          |  |              |         |               |   |              |  |               |        
|2002 (1)                                  |  |              |         |               |   |              |  |               |        
|                                          |  |              |         |               |   |              |  |               |        
|Revenues                                  |  | $            | 608,223 |               | $ | 623,328      |  | $             | 659,915
|Income before income taxes                |  | 114,789      |         | 137,464       |   | 129,983      |  | 161,061       |        
|Net income                                |  | 70,021       |         | 81,684        |   | 78,078       |  | 95,858        |        
|Diluted net income per common share       |  | 0.24         |         | 0.28          |   | 0.27         |  | 0.33          |        
|                                          |  |              |         |               |   |              |  |               |        
|2001 (2) (3)                              |  |              |         |               |   |              |  |               |        
|                                          |  |              |         |               |   |              |  |               |        
|Revenues                                  |  | $            | 454,399 |               | $ | 475,020      |  | $             | 476,636
|Income before income taxes                |  | 91,550       |         | 108,193       |   | 102,548      |  | 108,181       |        
|Net income                                |  | 53,954       |         | 64,280        |   | 62,247       |  | 65,574        |        
|Diluted net income per common share       |  | 0.19         |         | 0.22          |   | 0.22         |  | 0.23          |        

(1)Includes merger costs and other acquisition-related items of $1,677, $(590), $10,519 and $187 during the first, second, third and fourth
quarters, respectively ($1,023, $542, $6,926 and $79 after tax; or $0.01 and $0.02 per diluted share in the first and third quarters, respectively, and less than $0.01 per diluted share in the second and fourth quarters). See Note 2 of Notes to
Consolidated Financial Statements.

(2)Includes the write-off of an investment, merger costs and other acquisition-related items of $1,829 and $15,841 during the second and fourth quarters, respectively ($2,709 and $10,027 after tax; or $0.01 and $0.03 per diluted share,
respectively), and amortization of goodwill. See Notes 1 and 2 of Notes to Consolidated Financial Statements.

(3)All revenue amounts include reimbursed expenses (see Note 1 of Notes to Consolidated Financial Statements). All per-share amounts before
June 2001 are adjusted for the June 2001 two-for-one stock split.

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STOCK INFORMATION

The common stock of SunGard Data Systems Inc. (the Company) is listed on the New York Stock Exchange under the symbol SDS. At March
14, 2003, the Company had approximately 7,500 stockholders of record. No dividends have ever been paid on the Companys common stock. The Companys policy is to retain earnings for use in its business.

The accompanying table indicates high and low sales prices per share of the Companys common stock, as reported on the New York Stock Exchange. All prices before June 2001
reflect the Companys June 2001 two-for-one stock split.



|Calendar Year 2002 |  |       |       |       |  
|------------------ |  | ----- | ----- | ----- | -
|                   |  |       |       |       |  
|First Quarter      |  | $     | 35.10 |       | $
|Second Quarter     |  | 33.10 |       | 22.90 |  
|Third Quarter      |  | 26.48 |       | 18.60 |  
|Fourth Quarter     |  | 24.70 |       | 14.70 |  
|                   |  |       |       |       |  
|Calendar Year 2001 |  |       |       |       |  
|                   |  |       |       |       |  
|First Quarter      |  | $     | 30.07 |       | $
|Second Quarter     |  | 32.25 |       | 22.75 |  
|Third Quarter      |  | 32.49 |       | 21.61 |  
|Fourth Quarter     |  | 29.70 |       | 20.00 |  

The closing price of the Companys common
stock on March 14, 2003, as reported on the New York Stock Exchange, was $19.50 per share.

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

SunGard is an efficient operator of resilient IT solutions. This efficiency comes from the economies of scale achieved by providing products and services on shared platforms to thousands of customers throughout the
worlds financial, business and government markets. The Company has three segments. Investment Support Systems (ISS) primarily serves financial services institutions by processing their investment and trading transactions. ISS develops, markets
and maintains a broad range of complementary software applications, grouped into the following business areas: brokerage and trading systems; wealth management systems; investment management systems; treasury and risk management systems; and benefit
and investor management systems. ISS delivers its systems as an application service provider, using its data centers that customers access via the Internet or a private network, and on a license fee basis. Customers include banks, brokers, exchange
members, corporates, investment managers, mutual funds, investment advisers, insurance companies, depositories, custodians, trustees, benefit plan administrators, transfer agents, utilities, energy companies and governments. Availability Services
(AS) primarily serves IT-dependent enterprises by helping them ensure the continuity of their business. AS provides a comprehensive continuum of information-availability services for all major computing platforms, as well as information-availability
consulting services and planning software. AS also provides managed hosting services for application and data-center outsourcing. Other Businesses provide general ledger and administration software systems to the public sector, workflow management
systems to healthcare organizations and automated mailing services.

The following discussion includes historical and certain forward-looking information that
should be read together with the accompanying Consolidated Financial Statements and related footnotes and the discussion below of certain risks and uncertainties that could cause future operating results to differ materially from historical results
or the expected results indicated by forward-looking statements.

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make numerous estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses. Those estimates and judgments are based on historical experience, future expectations and other factors and assumptions believed to be reasonable under the circumstances. The
Company reevaluates its estimates and judgments on an ongoing basis and revises them when necessary or appropriate. Actual results may differ from the original or revised estimates. A summary of the Companys significant accounting policies is
contained in Note 1 of Notes to Consolidated Financial Statements. A description of the most critical policies follows. The Companys management has discussed the critical accounting policies discussed below with the Companys audit
committee.

Intangible Assets and Purchase Accounting

The Company seeks to grow through both
internal development and the acquisition of businesses that broaden or complement its product lines. During the past three years, the Company spent approximately $1.3 billion, net of cash acquired, to purchase 24 businesses (including $852.0 million
to acquire the Comdisco Inc. availability solutions business (CAS) in 2001). Purchase accounting requires all assets and liabilities to be recorded at fair value on the acquisition date, including identifiable intangible assets separate from
goodwill. For the Company, identifiable intangible assets generally include software, customer contracts and relationships (grouped together as customer base) and noncompetition agreements. Goodwill represents the excess of cost over the fair value
of net assets acquired. For significant acquisitions, the Company obtains independent appraisals and valuations of the intangible (and certain tangible) assets acquired.

The estimates of fair values and useful lives of identified intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business,
estimates of cost avoidance, the historical experience of the Company and the acquired business, the nature of the business acquired and the specific characteristics of the identified intangible assets. The fair values of these assets are amortized
on a straight-line basis over their estimated useful lives.

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Noncompetition agreements are amortized on a straight-line basis over their stated terms. All estimates used to determine the fair values and useful lives of
identified intangible assets could change due to numerous factors, including (among others) product demand, market conditions, technological developments, economic conditions and competitor activities. The carrying values and useful lives of
identified intangible assets are reviewed on an ongoing basis and any resulting changes in estimates could have a material effect on the Companys financial condition and results of operations.

The carrying value of goodwill of each reporting unit is reviewed at least annually, or more frequently if circumstances indicate possible impairment, by comparing the carrying values to the
estimated fair values. The estimates of fair values require various assumptions including the use of projections of future cash flows and discount rates that reflect the risks associated with achieving the future cash flows. Changes in the
underlying business could affect these estimates, which in turn could affect the recoverability of goodwill. If goodwill becomes impaired, some or all of the goodwill could be written off as a charge to operations, which could have a material effect
on the Companys financial condition and results of operations. At December 31, 2002, the Company had $939.1 million of goodwill and believes that no impairment of goodwill existed.

In connection with the acquisition of Guardian iT plc (Guardian) in July 2002, the Company accrued $42.9 million related to closing thirteen facilities (see Note 2 of Notes to Consolidated Financial Statements). Costs
for closing leased facilities are estimated based on the condition and remaining lease term of each facility, the expected closure date and an assessment of relevant market conditions including an estimate of any sub-lease rental income the Company
can reasonably expect to obtain given the market conditions at the time of the acquisition. Costs for closing owned facilities are based on the difference between the estimated net realizable value of the facility and its carrying value. These
estimates are based on an assessment of the condition of the facility, its location and relevant market conditions. Goodwill could change due to changes of the locations to be closed (which is based in part on customer input) and finalization of
lease valuations. A change in market conditions after the date of acquisition could change the estimated costs for closing certain leased facilities and could result in a material charge or credit to operations.

Revenue Recognition

The Companys services revenues are largely recurring in nature and come from availability
services, processing services, software support and rentals, professional services and hardware rentals. These revenues are recognized monthly as the services are provided. The amounts recognized are based upon contractually stated amounts, which
may be fixed, variable or a combination of both. Variable fees are based on actual usage, number of users, hours of service provided, number of trades or transactions, or some similar measure of activity.

The Companys license and resale fees come from agreements that permit the in-house use of the product and, generally, provide for professional services and ongoing software support. These
revenues are recognized upon the signing of a contract and delivery of the product if the fee is fixed or determinable and collection is probable. Revenue is recorded over the contract period when customer payments are extended, or when significant
acceptance, technology or service risks exist. Revenue is also recorded over the contract period when the software is bundled together with computer equipment and other post-delivery services and the fair value of the separate elements cannot be
determined. Revenues from fixed-fee contracts requiring a significant amount of program modification or customization, installation, systems integration and/or related services are recognized based upon the estimated percentage of completion.
Changes in estimated costs during the course of a contract are reflected in the period in which the facts become known.

The Company believes that its revenue
recognition practices comply with the complex and evolving rules governing revenue recognition. These rules include the following statements issued by the American Institute of Certified Public Accountants (AICPA): Statement of Position (SOP) 97-2,
Software Revenue Recognition; SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions; and SOP 81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts. The AICPA and its Software Revenue Recognition Task Force continue to issue

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interpretations and guidance for applying the relevant standards to a wide range of sales contract terms and business arrangements that are prevalent in the
software industry. Also, the Securities and Exchange Commission (SEC) has issued Staff Accounting Bulletin Number 101, Revenue Recognition in Financial Statements, which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC, and the Emerging Issues Task Force of the Financial Accounting Standards Board continues to issue additional guidance on revenue recognition in general. Future interpretations of existing accounting
standards or changes in the Companys business practices could result in changes in the Companys revenue recognition accounting policies that could have a material effect on the Companys results of operations and
business.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
amounts included in the Companys Consolidated Statements of Income, the relative percentage that those amounts represent to consolidated revenues (unless otherwise indicated) and the percentage change in those amounts from period to period.
All percentages are calculated using actual amounts rounded to the nearest thousand.



|                                                        |  | YEAR ENDED DECEMBER 31,(IN MILLIONS) |         | PERCENT OF REVENUESYEAR ENDEDDECEMBER
31, |   | PERCENTINCREASE(DECREASE) |  
|------------------------------------------------------- |  | ------------------------------------ | ------- | ----------------------------------------- | - | ------------------------- | -
|                                                        |  |                                      |         |                                           |   |                           |  
|                                                        |  | 2002                                 |         | 2001                                      |   | 2000                      |  
|                                                        |  |                                      |         |                                           |   |                           |  
|Revenues                                                |  |                                      |         |                                           |   |                           |  
|Investment support systems                              |  | $                                    | 1,385.9 |                                           | $ | 1,325.0                   |  
|Availability services                                   |  | 1,052.5                              |         | 522.4                                     |   | 411.9                     |  
|Other businesses                                        |  | 154.8                                |         | 134.4                                     |   | 114.2                     |  
|                                                        |  |                                      |         |                                           |   |                           |  
|                                                        |  | $                                    | 2,593.2 |                                           | $ | 1,981.8                   |  
|                                                        |  |                                      |         |                                           |   |                           |  
|Costs and Expenses                                      |  |                                      |         |                                           |   |                           |  
|Cost of sales and direct operating                      |  | $                                    | 1,101.8 |                                           | $ | 823.8                     |  
|Sales, marketing and administration                     |  | 504.7                                |         | 403.3                                     |   | 364.3                     |  
|Product development                                     |  | 158.9                                |         | 172.4                                     |   | 147.3                     |  
|Depreciation and amortization                           |  | 203.0                                |         | 109.0                                     |   | 88.7                      |  
|Amortization of acquisition - related intangible assets |  | 65.1                                 |         | 66.9                                      |   | 57.3                      |  
|Merger costs                                            |  | 12.5                                 |         | 7.2                                       |   | 13.2                      |  
|                                                        |  |                                      |         |                                           |   |                           |  
|                                                        |  | $                                    | 2,046.0 |                                           | $ | 1,582.6                   |  
|                                                        |  |                                      |         |                                           |   |                           |  
|Operating Income                                        |  |                                      |         |                                           |   |                           |  
|Investment support systems (1)                          |  | $                                    | 310.8   |                                           | $ | 272.6                     |  
|Availability services (1)                               |  | 257.8                                |         | 147.5                                     |   | 117.7                     |  
|Other businesses (1)                                    |  | 29.1                                 |         | 20.4                                      |   | 15.6                      |  
|Corporate administration                                |  | (38.0                                | )       | (34.1                                     | ) | (22.9                     | )
|Merger costs                                            |  | (12.5                                | )       | (7.2                                      | ) | (13.2                     | )
|                                                        |  |                                      |         |                                           |   |                           |  
|                                                        |  | $                                    | 547.2   |                                           | $ | 399.2                     |  
|                                                        |  |                                      |         |                                           |   |                           |  

(1)Percent of revenues is calculated as a percent of investment support systems revenues, availability services revenues and revenues from other businesses, respectively.



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The following table sets forth, for the periods indicated, certain supplemental revenue data, the relative percentage that those amounts
represent to consolidated revenues and the percentage change in those amounts from period to period. All percentages are calculated using actual amounts rounded to the nearest thousand.



|                            |  | YEAR ENDED DECEMBER 31,(IN MILLIONS) |         | PERCENT OF REVENUESYEAR ENDEDDECEMBER 31, |   | PERCENTINCREASE(DECREASE) | 
|--------------------------- |  | ------------------------------------ | ------- | ----------------------------------------- | - | ------------------------- | 
|                            |  |                                      |         |                                           |   |                           | 
|                            |  | 2002                                 |         | 2001                                      |   | 2000                      | 
|                            |  |                                      |         |                                           |   |                           | 
|Investment Support Systems  |  |                                      |         |                                           |   |                           | 
|Services                    |  | $                                    | 1,207.7 |                                           | $ | 1,121.0                   | 
|License and resale fees     |  | 149.0                                |         | 177.8                                     |   | 222.9                     | 
|                            |  |                                      |         |                                           |   |                           | 
|Total products and services |  | 1,356.7                              |         | 1,298.8                                   |   | 1,154.1                   | 
|Reimbursed expenses         |  | 29.2                                 |         | 26.2                                      |   | 22.9                      | 
|                            |  |                                      |         |                                           |   |                           | 
|                            |  | $                                    | 1,385.9 |                                           | $ | 1,325.0                   | 
|                            |  |                                      |         |                                           |   |                           | 
|Availability Services       |  |                                      |         |                                           |   |                           | 
|Services                    |  | $                                    | 1,034.8 |                                           | $ | 513.6                     | 
|License and resale fees     |  | 15.2                                 |         | 7.7                                       |   | 6.1                       | 
|                            |  |                                      |         |                                           |   |                           | 
|Total products and services |  | 1,050.0                              |         | 521.3                                     |   | 410.8                     | 
|Reimbursed expenses         |  | 2.5                                  |         | 1.1                                       |   | 1.1                       | 
|                            |  |                                      |         |                                           |   |                           | 
|                            |  | $                                    | 1,052.5 |                                           | $ | 522.4                     | 
|                            |  |                                      |         |                                           |   |                           | 
|Other Businesses            |  |                                      |         |                                           |   |                           | 
|Services                    |  | $                                    | 92.6    |                                           | $ | 79.9                      | 
|License and resale fees     |  | 31.0                                 |         | 28.6                                      |   | 30.6                      | 
|                            |  |                                      |         |                                           |   |                           | 
|Total products and services |  | 123.6                                |         | 108.5                                     |   | 95.8                      | 
|Reimbursed expenses         |  | 31.2                                 |         | 25.9                                      |   | 18.4                      | 
|                            |  |                                      |         |                                           |   |                           | 
|                            |  | $                                    | 154.8   |                                           | $ | 134.4                     | 
|                            |  |                                      |         |                                           |   |                           | 
|Total Revenues              |  |                                      |         |                                           |   |                           | 
|Services                    |  | $                                    | 2,335.1 |                                           | $ | 1,714.5                   | 
|License and resale fees     |  | 195.2                                |         | 214.1                                     |   | 259.6                     | 
|                            |  |                                      |         |                                           |   |                           | 
|Total products and services |  | 2,530.3                              |         | 1,928.6                                   |   | 1,660.7                   | 
|Reimbursed expenses         |  | 62.9                                 |         | 53.2                                      |   | 42.4                      | 
|                            |  |                                      |         |                                           |   |                           | 
|                            |  | $                                    | 2,593.2 |                                           | $ | 1,981.8                   | 
|                            |  |                                      |         |                                           |   |                           | 

INCOME FROM OPERATIONS

Overall results for 2002 were slightly above the Companys expectation. The integration of CAS into AS proceeded faster and better than expected and more than offset the lower than expected performance of ISS. The
primary reason for ISS performing below expectation was the impact on ISS revenue growth of the economic slowdown, especially in the financial services industry. During 2001, overall results did not meet the Companys expectation because of the
deterioration in the economy throughout the year and the disruption of normal business patterns caused by the events of September 11.

Assuming neither a
rebound nor a further deterioration in demand for the Companys products and services and assuming no change in merger costs and other acquisition-related items, the Company expects that the full-year 2003 operating margin will be somewhat
higher than the full-year 2002 operating margin of 21%. The primary reasons for this are the full-year benefit of cost controls implemented during 2002, the full-year impact of the integration of CAS into AS and, to a lesser extent, the integration
of Guardian into AS. In assessing its expected operating margin for 2003, the Company assumed no change in merger costs and other acquisition-related items because the timing and magnitude of those items are unpredictable.



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Investment Support Systems (ISS)

The ISS operating margin is 22% in 2002, compared with 21% and 20% in 2001 and 2000, respectively. Despite a $28.8 million, or 16%, decline in 2002 license and resale fees, the 2002 margin is higher
due to the full-year impact of 2001 cost reductions and additional 2002 cost controls implemented across ISS. Despite a $45.1 million, or 20%, decline in 2001 license and resale fees, the 2001 margin is higher than in 2000 due primarily to increases
in services revenues from wealth management systems and brokerage and trading systems with relatively low incremental costs, 2001 cost controls and the full-year impact of 2000 cost reductions.

The most important factors affecting the ISS operating margin are the impact of the economic slowdown on information technology spending levels, trading volumes and services revenues, the overall
condition of the financial services industry and the effect of any further consolidation among financial services firms, the timing and magnitude of software license sales, the operating margins of recently acquired businesses and the level of
product development spending. The impact of the economic slowdown has resulted in an increasing number of customers curtailing or, to a lesser extent, discontinuing their investment or trading activities, reducing professional services projects, or
pursuing contract renegotiations, all of which have an adverse effect on ISS margins.

Availability Services (AS)

The AS operating margin is 24% in 2002, compared with 28% in 2001 and 29% in 2000. The lower margin in 2002 is due primarily to the initial effect of the significantly lower margins of CAS and Guardian, and the
full-year effect of higher costs resulting from expansion of the Companys high availability and managed hosting resources in 2001. The lower margin in 2001 is due primarily to the initial effect of the significantly lower margin of CAS and
higher costs resulting from expansion of the Companys high availability and managed hosting resources, which are net of increases in revenues with relatively low incremental costs, approximately $6.0 million of nonrecurring disaster-related
fees resulting from the events of September 11, and the timing of equipment upgrades.

The combination of the CAS and Guardian acquisitions more than doubled
the size of the AS business, providing the Company with significant additional expertise, resources and geographic coverage throughout North America and Europe, including state-of-the-art facilities and a strong focus in the financial services
industry in the areas around New York City and London. The integration of the CAS operations is substantially complete, with a headcount reduction of approximately 350 positions, representing about 15% of the combined workforce, in 2001 and the
closing of fifteen facilities during 2002. The integration of the Guardian operations is well underway, with a headcount reduction of approximately 40 positions and the closing of four facilities in 2002, and an expected additional headcount
reduction of 45 positions over the next year as nine additional facilities are closed (see Note 2 of Notes to Consolidated Financial Statements). In both the CAS and Guardian integrations, generally all equipment located at closed facilities is
relocated to other facilities, thereby improving the operational resilience and scope of services available to customers.

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The most important factors affecting the AS operating margin are the rate and value of new contract signings and renewals, the rate of
integration of the Guardian operations, and the timing and magnitude of equipment and facilities expenditures. Furthermore, there is an emerging trend toward increasing sales of dedicated availability services, where equipment and/or facilities are
not shared by multiple customers but rather used exclusively by a single customer. As the Company sells more dedicated services, which yield lower margins than shared services, there will be a negative impact on AS operating margins, with a
corresponding positive impact on AS revenues.

REVENUES

Total revenues increased $611.4 million and
$278.7 million in 2002 and 2001, respectively. Revenues of businesses owned for at least 12 months (internal revenues) increased approximately 1% in 2002 and 7% in 2001. During 2002, internal revenue growth fluctuated from a high of 3% during the
second quarter to a low of negative 1 % during the fourth quarter. The lower rate of internal revenue growth was due primarily to the continued economic slowdown during 2002. During 2001, internal revenue growth declined from approximately 12%
during the first quarter to approximately 3% during the fourth quarter due primarily to the economic slowdown and the disruption of normal business patterns caused by the events of September 11.

Services revenues, which are largely recurring in nature, include revenues from availability services, processing services, software support and rentals, professional services and hardware rentals.
Services revenues increased 36%, 22% and 16% in 2002, 2001 and 2000, respectively, to $2.3 billion, $1.7 billion and $1.4 billion, respectively, representing approximately 90%, 86% and 82% of total revenues, respectively. The increase in 2002 is due
primarily to the full-year impact of the CAS acquisition and six months of revenue ($76.3 million) from the Guardian acquisition, offset in part by lower professional services revenues in ISS. The increase in 2001 is due primarily to revenues from
acquired businesses, including $60.4 million from the CAS acquisition, and increases in revenues from wealth management systems and brokerage and trading systems. Services revenues increased as a percentage of total revenues because software license
fees declined, largely due to the economic slowdown, and because the revenues from the CAS and Guardian acquisitions are almost all from services.

Professional services revenues are $358.1 million in 2002, compared to $339.2 million and $282.5 million in 2001 and 2000, respectively. The increases are due primarily to the addition of professional services revenues from acquired
businesses, offset in part by lower ISS professional services revenues in 2002, due primarily to lower customer spending for new and existing projects. The increase in 2001 is due primarily to acquired businesses, an increase in professional
services revenues from brokerage and trading systems, and the completion of a large benefit and investor management system conversion, and is net of the effect of lower professional services revenues in treasury and risk management
systems.

Revenues from license and resale fees are $195.2 million, $214.1 million and $259.6 million in 2002, 2001 and 2000, respectively, and include
software license revenues of $155.4 million, $182.5 million and $228.9 million, respectively. The lower software license revenues in 2002 and 2001 are due primarily to the economic slowdown resulting in lower customer spending for new software
systems and, in 2001, the disruption of normal business patterns caused by the events of September 11.

Investment Support Systems

ISS revenues increased $60.9 million, or 5%, and $148.0 million, or 13%, in 2002 and 2001, respectively. Internal ISS revenues decreased approximately 2% in 2002 and increased approximately 5% in 2001. The continued
decline in the rate of internal ISS revenue growth during 2002 is due primarily to the economic slowdown resulting in lower customer spending across ISS.

In
2002, ISS services revenues increased $86.7 million, or 8%, while ISS license and resale fees decreased $28.8 million, or 16%. The increase in services revenues is due primarily to acquired businesses. Internal ISS professional services revenues
declined $39.3 million across ISS. Total ISS processing and support revenues grew by about the same amount due to increases in wealth management systems and investment management systems, net of a decline in brokerage and trading systems. The
decrease in license and resale fees is due primarily to the economic slowdown causing a decline in spending for new systems and therefore lower software license revenues in most ISS businesses. The increase in reimbursed expenses is due to
reimbursed trading expenses incurred in the Companys Brut trading business, which was acquired during 2002.

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In 2001, ISS services revenues increased $189.8 million, or 20%, while ISS license and resale fees decreased $45.1 million, or 20%. The increase in services revenues is due primarily to acquired
businesses and growth in wealth management systems and brokerage and trading systems. These increases are partially offset by lower internal revenues from treasury and risk management systems. The 2001 decrease in license and resale fees was
widespread, affecting most ISS businesses.

Availability Services

AS revenues increased $530.1
million, or 101%, and $110.5 million, or 27%, in 2002 and 2001, respectively. Internal AS revenues increased approximately 7% and 12% in 2002 and 2001, respectively. The slowing rate of internal AS revenue growth is due primarily to ongoing efforts
to renew shorter-term CAS contracts at lower monthly fees in exchange for longer contractual commitments, and to the continuing development of more varied and affordable alternatives for dedicated high-availability services, including those which
may be used by larger customers to adopt internal solutions for part or all of their needs. In addition, the continued economic slowdown has resulted in lower capital spending by customers, which lessens demand and in turn intensifies competition
and pricing pressures. The 2001 increase is due to $60.4 million of CAS revenues, new contract signings and renewals, and continued growth in demand for midrange platforms, network services and work-group recovery. AS revenues in 2001 include
approximately $6.0 million of nonrecurring disaster-related fees resulting from the events of September 11.

Compared to the historical AS customer base, the
acquired CAS customer base had a greater concentration of revenue in a smaller number of accounts and a shorter average remaining contract term and, while the acquired Guardian customer base has average revenue per customer that is similar to the
historical AS customer base, the acquired Guardian customer base also has a shorter average remaining contract term. Consequently, the amount and percentage of annual AS revenues that are subject to renewal significantly increased compared to the
period before these acquisitions. These factors, coupled with the continued economic slowdown, result in increased competition, especially for the largest accounts, which intensifies pricing pressures (particularly when renewing or extending
customer contracts) and results in lower revenues and operating margins.

Other Businesses

Revenues
from Other Businesses increased $20.4 million, or 15%, in 2002, and $20.2 million, or 18%, in 2001. The increase in 2002 is due primarily to an increase in revenues from public sector systems. The increase in revenues in 2001 is due to an increase
in services revenues, offset in part by a $2.0 million decline in software license and resale fees.

COSTS AND EXPENSES

Total costs and expenses as a percentage of revenues are relatively consistent during 2002, 2001 and 2000, with a slight decline in 2002 due primarily to the full-year impact of cost controls implemented in 2001 and the
integration of CAS into the AS business.

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Sales, marketing and administrative costs declined as a percentage of total revenues to 19% during 2002 from 20% and 21% during 2001 and
2000, respectively. The declining percentage is due to cost controls and lower sales costs caused by slowing revenue growth.

Since AS product development
costs are insignificant, it is more meaningful to measure product development costs as a percentage of revenues from ISS and Other Businesses. In 2002, product development costs declined to 10% of revenues from ISS and Other Businesses, compared to
12% and 11% in 2001 and 2000, respectively. The decline in 2002 is due to lower spending across ISS and, to a lesser extent, $3.9 million of additional costs capitalized. Gross development costs capitalized are $15.4 million, $11.5 million and $10.2
million in 2002, 2001 and 2000, respectively. The increase in capitalized costs in 2002 is due to development projects related to the integration of certain ISS systems and straight-through processing initiatives. Amortization of previously
capitalized development costs, included in depreciation and amortization, is $6.9 million in 2002 and $6.3 million in both 2001 and 2000, resulting in net capitalized development costs of $8.5 million, $5.2 million and $3.9 million in 2002, 2001 and
2000, respectively.

Depreciation and amortization increased to 8% of total revenues, compared to 5% in both 2001 and 2000. The increase is due to the
full-year impact of the CAS acquisition and, to a lesser extent, six months of depreciation and amortization of the Guardian assets and additions of computer and telecommunications equipment, especially in AS.

Amortization of all acquisition-related intangible assets totaled $65.1 million, $66.9 million and $57.4 million in 2002, 2001 and 2000, respectively ($0.14, $0.16 and $0.14 per
diluted share, respectively). The slight decline in 2002 is due to the elimination of goodwill amortization required by Statement of Financial Accounting Standards Number 142, Goodwill and Other Intangible Assets (SFAS 142  see
Note 1 of Notes to Consolidated Financial Statements), offset in part by an increase in intangible amortization from current year acquisitions and the full-year impact of 2001 acquisitions. Amortization of goodwill totaled $21.5 million and $16.9
million in 2001 and 2000, respectively ($0.06 and $0.05 per diluted share, respectively). Under SFAS 142, all goodwill amortization for all acquisitions stopped on January 1, 2002, and there is no amortization of goodwill for acquisitions completed
between July 1, 2001 and December 31, 2001 (including the Companys acquisition of CAS). For acquisitions completed before July 1, 2001, goodwill amortization continued through December 31, 2001 using the straight-line method over periods
ranging from five to thirty years.

As explained in Note 2 of Notes to Consolidated Financial Statements, the Company recorded merger costs of $12.5 million,
$7.2 million and $13.2 million in 2002, 2001 and 2000, respectively ($0.03, $0.02 and $0.03 per diluted share, respectively). During 2001, the Company also recorded an $11.9 million write-off ($0.03 per diluted share) of a minority investment in a
consulting business due to a significant deterioration in the business and certain preferences granted to new investors of the business.

Interest income
decreased $18.4 million in 2002 due primarily to the use of cash in the fourth quarter of 2001 to complete the CAS acquisition and, to a lesser extent, lower interest rates earned on cash balances. Interest income increased $3.0 million in 2001 due
primarily to a $1.4 million gain on the sale of short-term investments, the proceeds of which were used to fund the CAS acquisition, a $0.9 million gain on the sale of a minority investment in common stock that was acquired in connection with a 1999
acquisition, and higher average cash and short-term investment balances, partially offset by lower interest rates.

Interest expense increased $9.4 million and
$1.4 million in 2002 and 2001, respectively, due primarily to debt incurred in connection with financing the CAS acquisition during the fourth quarter of 2001.

LIQUIDITY AND
CAPITAL RESOURCES

At December 31, 2002, cash and equivalents are $439.7 million, an increase of $43.4 million from December 31, 2001. Cash flow from operations increased 64%,
reaching $782.0 million or 2.4 times net income in 2002, a significant increase over 2001 and 2000 when cash flow from operations was 1.9 times and 1.5 times net income, respectively. The significant improvement in 2002 is the result of larger
depreciation and amortization charges and a significant one-time reduction in the initial working capital of the acquired CAS business. The Company expects that in 2003 the ratio of cash flow from operations to net income will return



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to pre-2002 levels. In 2002, the Company used its operating cash flow to repay $389.8 million of debt, to acquire nine businesses for $236.4 million (net of
cash acquired), and to obtain property, equipment and software totaling $158.0 million from capital spending. At December 31, 2002, the Company has $18.1 million of short-term debt and $188.0 million of long-term debt, while stockholders
equity exceeds $2.2 billion. Capital spending in 2003 could increase to approximately $200.0 million due primarily to the planned expansion of certain AS facilities.

At December 31, 2002, certain of the Companys contractual obligations for each of the years ended follow (in millions):



|                              |  | TOTAL |       | 2003  |   | 2004-2005 |  | 2006-2007 |       | 2008AND AFTER
|----------------------------- |  | ----- | ----- | ----- | - | --------- |  | --------- | ----- | -------------
|                              |  |       |       |       |   |           |  |           |       |              
|Short-term and long-term debt |  | $     | 206.1 |       | $ | 18.1      |  | $         | 184.5 |              
|Operating leases              |  | 671.9 |       | 125.2 |   | 193.8     |  | 127.4     |       | 225.5        
|Pending acquisition           |  | 75.0  |       | 75.0  |   |          |  |          |       |             
|                              |  |       |       |       |   |           |  |           |       |              
|                              |  | $     | 953.0 |       | $ | 218.3     |  | $         | 378.3 |              
|                              |  |       |       |       |   |           |  |           |       |              

In addition, the Company has contingent purchase price
obligations over the next three years for previously completed acquisitions that total approximately $126.0 million, subject to the operating performance of the acquired businesses. The maximum amount due within the next year is $99.0 million. The
Company also has outstanding letters of credit and bid bonds that total $24.4 million. After December 31, 2002, the Company signed certain acquisition agreements that will result in estimated cash payments of approximately $279.4 million upon
closing. The Company does not participate in, nor has it created, any off-balance sheet special purpose entities or other off-balance sheet arrangements, other than operating leases.

The Company expects that its existing cash resources and cash generated from operations for the foreseeable future will be sufficient to meet its operating requirements, debt repayments, contingent payments in
connection with business acquisitions and ordinary capital spending needs. At December 31, 2002, the Company has an unused $325.0 million revolving credit agreement and believes that it has the capacity to secure additional credit or issue equity to
finance additional capital needs. The Company anticipates that it may need to borrow some portion of the $325.0 million available under its revolving credit agreement to complete certain acquisitions during 2003. See Notes 2 and 6 of Notes to
Consolidated Financial Statements.

MARKET RISK

The Company has rarely used derivative financial
instruments to manage risk exposures and has never used derivative financial instruments for trading or speculative purposes. Available cash is invested in short-term, highly liquid financial instruments, with a substantial portion of such
investments having initial maturities of three months or less, and, in connection with the acquisitions of CAS and Guardian, the Company borrowed cash under the terms of its variable-rate credit facility. While changes in interest rates could
decrease interest income or increase interest expense, the Company does not believe that it has a material exposure to changes in interest rates. Based on borrowings under the credit facility of $175.0 million at December 31, 2002, a 1% change in
the borrowing rate would increase annual interest expense related to the credit facility by $1.75 million.

During 2002, approximately 20% of revenues are from
customers outside the United States. Of these revenues, approximately 71% is from Europe and 11% is from Canada. The Company generally matches local currency revenues with local currency costs for its foreign operations. The majority of this revenue
is denominated in the British pound or the Euro. The Company continues to monitor its exposure to foreign exchange rates as a result of its recent acquisitions and ongoing changes in its operations. The Company does not believe that it has a
material exposure to changes in foreign currency exchange rates.



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CERTAIN RISKS AND UNCERTAINTIES

Statements about the Companys expected
margins, revenues and spending and all other statements in this Annual Report other than historical facts are forward-looking statements. These statements are subject to risks and uncertainties that may change at any time, and, therefore, actual
results may differ materially from expected results. Forward-looking statements include information about possible or assumed future financial results of the Company and usually contain words such as believes, intends,
expects, anticipates, or similar expressions. The Company derives most of its forward-looking statements from its operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes
that its assumptions are reasonable, it cautions that there are inherent difficulties in predicting certain important factors, such as: the effect of general economic conditions on information technology spending levels, trading volumes and services
revenues; the overall condition of the financial services industry and the effect of any further consolidation among financial services firms; the effect of war, terrorism or catastrophic events; the timing and magnitude of software sales; the
timing and scope of technological advances, including those resulting in more alternatives for dedicated high-availability services; the integration and performance of acquired businesses, including the availability services business of Guardian,
acquired on July 1, 2002; the satisfaction of conditions to closing of pending acquisitions; the prospects for future acquisitions; the ability to attract and retain customers and key personnel; and the ability to obtain patent protection and avoid
patent-related liabilities in the context of a rapidly developing legal framework for software and business-method patents. The factors described in this paragraph and other factors that may affect SunGard, its business or future financial results,
as and when applicable, are discussed in the Companys filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2002, a copy of which may be obtained from SunGard without charge.



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CONSOLIDATED STATEMENTS OF INCOME

|                                                           |  | YEAR ENDED DECEMBER 31, |          
|---------------------------------------------------------- |  | ----------------------- | ---------
|                                                           |  |                         |          
|(IN THOUSANDS / EXCEPT PER-SHARE AMOUNTS)                  |  |                         | 2002     
|                                                           |  |                         |          
|                                                           |  |                         |          
|Revenues:                                                  |  |                         |          
|Services                                                   |  | $                       | 2,335,093
|License and resale fees                                    |  | 195,222                 |          
|                                                           |  |                         |          
|Total products and services                                |  | 2,530,315               |          
|Reimbursed expenses                                        |  | 62,922                  |          
|                                                           |  |                         |          
|                                                           |  | 2,593,237               |          
|                                                           |  |                         |          
|                                                           |  |                         |          
|Costs and expenses:                                        |  |                         |          
|Cost of sales and direct operating                         |  | 1,101,839               |          
|Sales, marketing and administration                        |  | 504,737                 |          
|Product development                                        |  | 158,844                 |          
|Depreciation and amortization                              |  | 202,963                 |          
|Amortization of acquisition-related intangible assets      |  | 65,098                  |          
|Merger costs                                               |  | 12,523                  |          
|                                                           |  |                         |          
|                                                           |  | 2,046,004               |          
|                                                           |  |                         |          
|Income from operations                                     |  | 547,233                 |          
|Interest income                                            |  | 8,408                   |          
|Interest expense                                           |  | (13,074                 | )        
|Other income                                               |  | 730                     |          
|Loss on write-off of investment                            |  |                        |          
|                                                           |  |                         |          
|Income before income taxes                                 |  | 543,297                 |          
|Income taxes                                               |  | 217,656                 |          
|                                                           |  |                         |          
|Net income                                                 |  | $                       | 325,641  
|                                                           |  |                         |          
|                                                           |  |                         |          
|Basic net income per common share                          |  | $                       | 1.15     
|                                                           |  |                         |          
|Shares used to compute basic net income per common share   |  | 282,420                 |          
|                                                           |  |                         |          
|                                                           |  |                         |          
|Diluted net income per common share                        |  | $                       | 1.12     
|                                                           |  |                         |          
|Shares used to compute diluted net income per common share |  | 289,654                 |          
|                                                           |  |                         |          

The accompanying notes are an integral part of these
financial statements.



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CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                  |  | DECEMBER 31, |          
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------
|                                                                                                                                                  |  |              |          
|(IN THOUSANDS / EXCEPT PER-SHARE AMOUNTS)                                                                                                         |  | 2002         |          
|                                                                                                                                                  |  |              |          
|                                                                                                                                                  |  |              |          
|Assets                                                                                                                                            |  |              |          
|Current:                                                                                                                                          |  |              |          
|Cash and equivalents                                                                                                                              |  | $            | 439,735  
|Trade receivables, less allowance for doubtful accounts of $42,999 and $36,951                                                                    |  | 518,390      |          
|Earned but unbilled receivables                                                                                                                   |  | 48,158       |          
|Prepaid expenses and other current assets                                                                                                         |  | 80,820       |          
|Deferred income taxes                                                                                                                             |  | 47,913       |          
|                                                                                                                                                  |  |              |          
|Total current assets                                                                                                                              |  | 1,135,016    |          
|                                                                                                                                                  |  |              |          
|Property and equipment, less accumulated depreciation of $621,994 and
$453,464                                                                    |  | 566,199      |          
|Software products, less accumulated amortization of $271,753 and $220,453                                                                         |  | 132,083      |          
|Customer base, less accumulated amortization of $110,031 and
$80,422                                                                              |  | 343,973      |          
|Other tangible and intangible assets, less accumulated amortization of $19,035 and
$20,625                                                        |  | 72,707       |          
|Deferred income taxes                                                                                                                             |  | 92,568       |          
|Goodwill                                                                                                                                          |  | 939,050      |          
|                                                                                                                                                  |  |              |          
|                                                                                                                                                  |  | $            | 3,281,596
|                                                                                                                                                  |  |              |          
|Liabilities and Stockholders Equity                                                                                                              |  |              |          
|Current:                                                                                                                                          |  |              |          
|Short-term and current portion of long-term debt                                                                                                  |  | $            | 18,128   
|Accounts payable                                                                                                                                  |  | 59,946       |          
|Accrued compensation and benefits                                                                                                                 |  | 137,362      |          
|Other accrued expenses                                                                                                                            |  | 203,696      |          
|Accrued income taxes                                                                                                                              |  | 25,290       |          
|Deferred revenues                                                                                                                                 |  | 426,811      |          
|                                                                                                                                                  |  |              |          
|Total current liabilities                                                                                                                         |  | 871,233      |          
|                                                                                                                                                  |  |              |          
|                                                                                                                                                  |  |              |          
|Long-term debt                                                                                                                                    |  | 187,964      |          
|                                                                                                                                                  |  |              |          
|                                                                                                                                                  |  |              |          
|Commitments and contingencies (see Note 13)                                                                                                       |  |              |          
|Stockholders equity:                                                                                                                             |  |              |          
|Preferred stock, par value $.01 per share; 5,000 shares authorized, of which 3,200 is
designated as Series A Junior Participating Preferred Stock |  |             |          
|Common stock, par value $.01 per share; 800,000 shares authorized; 283,796
and 281,422 shares issued                                              |  | 2,838        |          
|Capital in excess of par value                                                                                                                    |  | 801,936      |          
|Restricted stock plans                                                                                                                            |  | (2,324       | )        
|Retained earnings                                                                                                                                 |  | 1,396,680    |          
|Accumulated other comprehensive income (loss)                                                                                                     |  | 23,965       |          
|                                                                                                                                                  |  |              |          
|                                                                                                                                                  |  | 2,223,095    |          
|Treasury stock, at cost, 58 and 650 shares                                                                                                        |  | (696         | )        
|                                                                                                                                                  |  |              |          
|Total stockholders equity                                                                                                                        |  | 2,222,399    |          
|                                                                                                                                                  |  |              |          
|                                                                                                                                                  |  | $            | 3,281,596
|                                                                                                                                                  |  |              |          

The accompanying notes are an integral part of these
financial statements.

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##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                  |  | YEAR ENDED DECEMBER 31, |        
|----------------------------------------------------------------- |  | ----------------------- | -------
|                                                                  |  |                         |        
|(IN THOUSANDS)                                                    |  | 2002                    |        
|                                                                  |  |                         |        
|                                                                  |  |                         |        
|Cash Flow From Operations                                         |  |                         |        
|Net income                                                        |  | $                       | 325,641
|Reconciliation of net income to cash flow from operations:        |  |                         |        
|Depreciation and amortization                                     |  | 268,061                 |        
|Loss on write-off of investment                                   |  |                        |        
|Purchased in-process research and development                     |  |                        |        
|Other noncash credits                                             |  | (3,971                  | )      
|Deferred income tax provision (benefit)                           |  | 44,523                  |        
|Accounts receivable and other current assets                      |  | 146,233                 |        
|Accounts payable and accrued expenses                             |  | 5,904                   |        
|Deferred revenues                                                 |  | (4,420                  | )      
|                                                                  |  |                         |        
|Cash flow from operations                                         |  | 781,971                 |        
|                                                                  |  |                         |        
|                                                                  |  |                         |        
|Financing Activities                                              |  |                         |        
|Cash received from stock option and award plans                   |  | 45,669                  |        
|Cash received from borrowings, net of fees                        |  | 56,216                  |        
|Cash used to repay debt                                           |  | (445,974                | )      
|Cash paid for treasury stock                                      |  |                        |        
|                                                                  |  |                         |        
|Total financing activities                                        |  | (344,089                | )      
|                                                                  |  |                         |        
|                                                                  |  |                         |        
|Investment Activities                                             |  |                         |        
|Cash paid for acquired businesses, net of cash acquired           |  | (236,433                | )      
|Cash paid for property and equipment                              |  | (121,293                | )      
|Cash paid for software and other assets                           |  | (36,741                 | )      
|Cash paid to purchase short-term investments                      |  |                        |        
|Cash received from sale of investment in common stock             |  |                        |        
|Cash received from sales and maturities of short-term investments |  |                        |        
|                                                                  |  |                         |        
|Total investment activities                                       |  | (394,467                | )      
|                                                                  |  |                         |        
|Increase (decrease) in cash and equivalents                       |  | 43,415                  |        
|Beginning cash and equivalents                                    |  | 396,320                 |        
|                                                                  |  |                         |        
|Ending cash and equivalents                                       |  | $                       | 439,735
|                                                                  |  |                         |        

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##### Table of Contents



|                                                                                                                           |  | YEAR ENDED DECEMBER 31, |        
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | -------
|                                                                                                                           |  |                         |        
|(IN THOUSANDS)                                                                                                             |  | 2002                    |        
|                                                                                                                           |  |                         |        
|                                                                                                                           |  |                         |        
|Supplemental Information                                                                                                   |  |                         |        
|Interest paid                                                                                                              |  | $                       | 13,582 
|                                                                                                                           |  |                         |        
|                                                                                                                           |  |                         |        
|Income taxes paid                                                                                                          |  | $                       | 155,962
|                                                                                                                           |  |                         |        
|                                                                                                                           |  |                         |        
|Acquired businesses:                                                                                                       |  |                         |        
|Property and equipment                                                                                                     |  | $                       | 78,574 
|Software products                                                                                                          |  | 12,235                  |        
|Purchased in-process research and development                                                                              |  |                        |        
|Customer base                                                                                                              |  | 102,995                 |        
|Goodwill                                                                                                                   |  | 299,663                 |        
|Other tangible and intangible assets                                                                                       |  | 22,037                  |        
|Deferred income taxes                                                                                                      |  | (3,508                  | )      
|Purchase price obligations and debt assumed                                                                                |  | (134,972                | )      
|Net current liabilities assumed                                                                                            |  | (140,591                | )      
|Common stock issued and net equity acquired in poolings of interests                                                       |  |                        |        
|                                                                                                                           |  |                         |        
|Cash paid for acquired businesses, net of cash acquired of $48,483, $6,197 and
$1,055 in 2002, 2001 and 2000, respectively |  | $                       | 236,433
|                                                                                                                           |  |                         |        

The accompanying notes are an integral part of these
financial statements.

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##### Table of Contents

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY



|                                                                  |  | PREFERRED STOCK |   | COMMON STOCK |  
|----------------------------------------------------------------- |  | --------------- | - | ------------ | -
|                                                                  |  |                 |   |              |  
|(IN THOUSANDS)                                                    |  | NUMBEROF SHARES |   | PAR VALUE    |  
|                                                                  |  |                 |   |              |  
|Balances, December 31, 1999                                       |  |                |   | $            | 
|Pooling of interests                                              |  |                |   |             |  
|Comprehensive income:                                             |  |                 |   |              |  
|Net income                                                        |  |                |   |             |  
|Foreign currency translation                                      |  |                |   |             |  
|Unrealized losses on investments (net of income taxes of $14,040) |  |                |   |             |  
|Total comprehensive income                                        |  |                 |   |              |  
|Deferred income tax benefit resulting from the ASC acquisition    |  |                |   |             |  
|Purchase of common stock                                          |  |                |   |             |  
|Shares issued under stock plans                                   |  |                |   |             |  
|Compensation expense and note repayments related to stock plans   |  |                |   |             |  
|Options earned under long-term incentive plan                     |  |                |   |             |  
|Income tax benefit arising from employee stock options            |  |                |   |             |  
|                                                                  |  |                 |   |              |  
|Balances, December 31, 2000                                       |  |                |   |             |  
|Pooling of interests                                              |  |                |   |             |  
|Comprehensive income:                                             |  |                 |   |              |  
|Net income                                                        |  |                |   |             |  
|Foreign currency translation                                      |  |                |   |             |  
|Unrealized gain on investments (net of income taxes of $1,980)    |  |                |   |             |  
|Total comprehensive income                                        |  |                 |   |              |  
|Two-for-one common stock split                                    |  |                |   |             |  
|Pre-acquisition distributions                                     |  |                |   |             |  
|Deferred income tax benefit resulting from the ASC acquisition    |  |                |   |             |  
|Shares issued under stock plans                                   |  |                |   |             |  
|Compensation expense and note repayments related to stock plans   |  |                |   |             |  
|Income tax benefit arising from employee stock options            |  |                |   |             |  
|                                                                  |  |                 |   |              |  
|Balances, December 31, 2001                                       |  |                |   |             |  
|Comprehensive income:                                             |  |                 |   |              |  
|Net income                                                        |  |                |   |             |  
|Foreign currency translation                                      |  |                |   |             |  
|Total comprehensive income                                        |  |                 |   |              |  
|Shares issued under stock plans                                   |  |                |   |             |  
|Shares returned under restricted stock plan                       |  |                |   |             |  
|Compensation expense related to stock plans                       |  |                |   |             |  
|Income tax benefit arising from employee stock options            |  |                |   |             |  
|                                                                  |  |                 |   |              |  
|Balances, December 31, 2002                                       |  |                 |  |              | $
|                                                                  |  |                 |   |              |  

The accompanying notes are an integral part of these
financial statements.

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##### Table of Contents



| | CAPITAL INEXCESS OFPAR VALUE |         | RESTRICTEDSTOCK PLANSAND NOTESRECEIVABLEFROM COMMONSTOCK |                            | RETAINEDEARNINGS |                                                | ACCUMULATED OTHERCOMPREHENSIVE INCOME
(LOSS) |                 | TREASURY STOCK |      |         |      
| | ---------------------------- | ------- | -------------------------------------------------------- | -------------------------- | ---------------- | ---------------------------------------------- | -------------------------------------------- | --------------- | -------------- | ---- | ------- | -----
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |               
| |                              |         |                                                          | FOREIGNCURRENCYTRANSLATION |                  | UNREALIZEDGAINS(LOSSES)
ONMARKETABLESECURITIES |                                              | NUMBEROF SHARES |                | COST |         | TOTAL
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | $                            | 591,998 |                                                          | $                          | (1,768           | )                                              | $                                            | 608,519         |                | $    | (11,665 | )    
| | 4,376                        |         |                                                         |                            | (1,424           | )                                              | (427                                         | )               |               |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| |                             |         |                                                         |                            | 212,972          |                                                |                                             |                 |               |      |        |      
| |                             |         |                                                         |                            |                 |                                                | (6,912                                       | )               |               |      |        |      
| |                             |         |                                                         |                            |                 |                                                |                                             |                 | (26,074        | )    |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | 805                          |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| |                             |         |                                                         |                            |                 |                                                |                                             |                 |               |      | (325    | )    
| | 45,604                       |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| |                             |         | 827                                                      |                            |                 |                                                |                                             |                 |               |      |        |      
| | 4,472                        |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| | 12,149                       |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | 659,404                      |         | (941                                                     | )                          | 820,067          |                                                | (19,004                                      | )               | (3,676         | )    | (325    | )    
| | 9,315                        |         |                                                         |                            | 5,107            |                                                |                                             |                 |               |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| |                             |         |                                                         |                            | 246,055          |                                                |                                             |                 |               |      |        |      
| |                             |         |                                                         |                            |                 |                                                | (6,175                                       | )               |               |      |        |      
| |                             |         |                                                         |                            |                 |                                                |                                             |                 | 3,676          |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | (1,394                       | )       |                                                         |                            |                 |                                                |                                             |                 |               |      | (325    | )    
| |                             |         |                                                         |                            | (190             | )                                              |                                             |                 |               |      |        |      
| | 8,449                        |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| | 66,039                       |         | (3,445                                                   | )                          |                 |                                                |                                             |                 |               |      |        |      
| |                             |         | 872                                                      |                            |                 |                                                |                                             |                 |               |      |        |      
| | 21,594                       |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | 763,407                      |         | (3,514                                                   | )                          | 1,071,039        |                                                | (25,179                                      | )               |               |      | (650    | )    
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| |                             |         |                                                         |                            | 325,641          |                                                |                                             |                 |               |      |        |      
| |                             |         |                                                         |                            |                 |                                                | 49,144                                       |                 |               |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | 31,303                       |         | (473                                                     | )                          |                 |                                                |                                             |                 |               |      | 620     |      
| |                             |         | 800                                                      |                            |                 |                                                |                                             |                 |               |      | (28     | )    
| |                             |         | 863                                                      |                            |                 |                                                |                                             |                 |               |      |        |      
| | 7,226                        |         |                                                         |                            |                 |                                                |                                             |                 |               |      |        |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      
| | $                            | 801,936 |                                                          | $                          | (2,324           | )                                              | $                                            | 1,396,680       |                | $    | 23,965  |      
| |                              |         |                                                          |                            |                  |                                                |                                              |                 |                |      |         |      



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ONE / Summary of Significant Accounting Policies

Basis of Presentation

SunGard Data Systems Inc. (the Company) has three segments: Investment Support Systems (ISS), Availability Services
(AS) and Other Businesses. The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make numerous estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company evaluates its estimates and judgments on an ongoing basis and
revises them when necessary or appropriate. Actual results may differ from the original or revised estimates.

The Company amortizes identifiable intangible
assets, including software product costs, over periods that it believes approximate the related useful lives of those assets based upon estimated future operating results and cash flows of the underlying business operations. The Company closely
monitors estimates of those lives. Those estimates could change due to numerous factors, including product demand, market conditions, technological developments, economic conditions and competitor activities.

Revenue Recognition

The Company generates services revenues from availability services, processing services, software support and rentals,
professional services and hardware rentals. These revenues are recognized monthly as the services are provided. The amounts recognized are based upon contractually stated amounts, which may be fixed, variable or a combination of both. Variable fees
are based on actual usage, number of users, hours of service provided, number of trades or transactions, or some similar measure of activity.

The
Companys license and resale fees come from agreements that permit the in-house use of the product and, generally, provide for professional services and ongoing software support. These revenues are recognized upon the signing of a contract and
delivery of the product if the fee is fixed or determinable and collection is probable. Revenue is recorded over the contract period when customer payments are extended, or when significant acceptance, technology or service risks exist. Revenue is
also recorded over the contract period when the software is bundled together with computer equipment and other post-delivery services and the fair value of the separate elements cannot be determined. Revenues from fixed-fee contracts requiring a
significant amount of program modification or customization, installation, systems integration and/or related services are recognized based upon the estimated percentage of completion. Changes in estimated costs during the course of a contract are
reflected in the period in which the facts become known.

Effective January 1, 2002, the Company adopted Emerging Issues Task Force Number 01-14, Income
Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred (EITF 01-14), which requires that reimbursements received for out-of-pocket expenses be classified as revenues and not as cost reductions.
Before the effective date of EITF 01-14, the Company netted customer reimbursement of out-of-pocket expenses against the applicable costs that included postage, travel, meals and certain telecommunication costs. EITF 01-14 requires restatement of
previously reported amounts in order to reflect reimbursed expenses as both revenues and costs. These costs are generally included in cost of sales and direct operating expenses. While the adoption of EITF 01-14 has no impact on income from
operations or net income, it does reduce total operating margins since both revenues and costs increase by the same amount.

Cash and Equivalents

Cash equivalents consist of commercial paper and other investments that are readily convertible into cash and have original maturities of three months or less.



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Concentration of Credit Risk

Financial instruments that potentially subject
the Company to concentrations of credit risk consist of temporary cash and short-term investments and accounts receivable. By policy, the Company places its available cash and short-term investments with institutions of high credit-quality and
limits the amount of credit exposure to any one issuer. The Company sells a significant portion of its products and services to the financial services industry and could be affected directly by the overall condition of that industry. The Company
believes that any credit risk associated with accounts receivable is substantially mitigated by the relatively large number of customer accounts and reasonably short collection terms. Accounts receivable is stated at estimated net realizable value,
which approximates fair value.

Property and Equipment

Property and equipment are recorded at cost
and depreciation is provided on the straight-line method over the estimated useful lives of the related assets (two to eight years for equipment and ten to forty years for buildings and improvements). Leasehold improvements are amortized ratably
over their remaining lease term or useful life, if shorter.

Foreign Currency Translation

The
functional currency of each of the Companys foreign operations is the local currency of the country in which the operation is headquartered. All assets and liabilities are translated into U.S. dollars using exchange rates in effect at the
balance sheet date. Revenues and expenses are translated using average exchange rates during the period.

Increases and decreases in net assets resulting from
foreign currency translation are reflected in stockholders equity as a component of accumulated other comprehensive income (loss).

Software Products

Product development costs are expensed as incurred and consist primarily of design and development costs of new products and significant enhancements to existing products incurred before the
establishment of technological feasibility. Costs associated with purchased software, software obtained through business acquisitions, and new products and enhancements to existing products that meet technological feasibility and recoverability
tests are capitalized and amortized over the estimated useful lives of the related products, generally five to ten years, using the straight-line method or the ratio of current revenues to current and anticipated revenues from such software,
whichever provides the greater amortization.

Gross development costs capitalized for new products and enhancements to existing products totaled $15.4 million,
$11.5 million and $10.2 million in 2002, 2001 and 2000, respectively. Amortization of previously capitalized development costs, included in depreciation and amortization, are $6.9 million in 2002 and $6.3 million in both 2001 and 2000, resulting in
net capitalized development costs of $8.5 million, $5.2 million and $3.9 million in 2002, 2001 and 2000, respectively. Amortization of all software products aggregated $50.9 million, $42.5 million and $37.5 million in 2002, 2001 and 2000,
respectively. In 2002 and 2001, amortization of acquisition-related intangible assets includes expenses of $5.0 million and $1.6 million, respectively, for the impairment of certain acquired ISS software products.

Customer Base Intangible Assets

Customer base intangible assets represent customer contracts and relationships obtained
as part of acquired businesses and are amortized using the straight-line method over their estimated useful lives, ranging from four to nineteen years.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets acquired. The Company has reviewed the carrying value of goodwill of each reporting
unit by comparing the carrying values to the estimated fair values and determined that the carrying values of goodwill did not exceed the respective fair values. This comparison must be performed annually or more frequently if circumstances indicate
possible impairment. The estimate of fair value requires various assumptions including the use of projections of future cash flows and discount rates that reflect the risks associated with achieving the future cash flows. Changes

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in the underlying business could affect these estimates, which in turn could affect the recoverability of goodwill. If goodwill becomes impaired, some or all
of the goodwill could be written off as a charge to operations. At December 31, 2002, the Company had $939.1 million of goodwill and believes that no impairment of goodwill existed.

Statement of Financial Accounting Standards Number 142, Goodwill and Other Intangible Assets (SFAS 142) addresses, among other things, how goodwill and other identifiable intangible assets should be
accounted for after they have been initially recorded in the financial statements. Under SFAS 142, all goodwill amortization for all acquisitions stopped on January 1, 2002, and there is no amortization of goodwill for acquisitions completed between
July 1, 2001 and December 31, 2001 including the Companys acquisition of the Comdisco, Inc. availability solutions business (CAS). For acquisitions completed before July 1, 2001, goodwill amortization continued through December 31, 2001 using
the straight-line method over periods ranging from five to thirty years.

As described above, there is no goodwill amortization during 2002 and partial
goodwill amortization during 2001. Adjusted net income and the effect of goodwill amortization on diluted net income per common share as if SFAS 142 had been in effect from the beginning of each of the years ended December 31, 2001 and 2000 follows
(in thousands, except per-share amounts):



|                                          |  | 2001   |         | 2000   |  
|----------------------------------------- |  | ------ | ------- | ------ | -
|                                          |  |        |         |        |  
|Net income, as reported                   |  | $      | 246,055 |        | $
|                                          |  |        |         |        |  
|Goodwill amortization                     |  | 21,512 |         | 16,940 |  
|Income tax effect of deductible goodwill  |  | (3,659 | )       | (3,063 | )
|                                          |  |        |         |        |  
|Goodwill amortization, net of tax         |  | 17,853 |         | 13,877 |  
|                                          |  |        |         |        |  
|Adjusted net income                       |  | $      | 263,908 |        | $
|                                          |  |        |         |        |  
|                                          |  |        |         |        |  
|Basic net income per share, as reported   |  | $      | 0.89    |        | $
|Goodwill amortization, net of tax         |  | 0.07   |         | 0.05   |  
|                                          |  |        |         |        |  
|Adjusted basic net income per share       |  | $      | 0.96    |        | $
|                                          |  |        |         |        |  
|                                          |  |        |         |        |  
|Diluted net income per share, as reported |  | $      | 0.86    |        | $
|Goodwill amortization, net of tax         |  | 0.07   |         | 0.06   |  
|                                          |  |        |         |        |  
|Adjusted diluted net income per share     |  | $      | 0.93    |        | $
|                                          |  |        |         |        |  

Changes in goodwill by segment during the year ended
December 31, 2002 follow (in thousands):



|                                     |  | ISS    |         | AS      |   | OTHERBUSINESSES |  | TOTAL   |       
|------------------------------------ |  | ------ | ------- | ------- | - | --------------- |  | ------- | ------
|                                     |  |        |         |         |   |                 |  |         |       
|Balances at December 31, 2001        |  | $      | 258,324 |         | $ | 330,326         |  | $       | 32,815
|2002 acquisitions                    |  | 62,247 |         | 245,138 |   |                |  | 307,385 |       
|Adjustments to previous acquisitions |  | (304   | )       | (7,426  | ) | 8               |  | (7,722  | )     
|Foreign currency effect              |  | 975    |         | 16,947  |   |                |  | 17,922  |       
|                                     |  |        |         |         |   |                 |  |         |       
|Balances at December 31, 2002        |  | $      | 321,242 |         | $ | 584,985         |  | $       | 32,823
|                                     |  |        |         |         |   |                 |  |         |       

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Other Tangible and Intangible Assets

Other tangible and intangible assets
consist primarily of noncompetition agreements obtained in business acquisitions, long-term accounts receivable, prepayments and long-term investments. Noncompetition agreements are amortized using the straight-line method over their stated terms,
ranging from two to five years. Long-term investments consist of four seats on the New York Stock Exchange used in ISS and a $3.0 million ISS minority-interest investment. During the fourth quarter of 2001, the Company wrote off its $11.9 million AS
minority-interest investment in a consulting business because of significant deterioration in the business and certain preferences granted in the fourth quarter of 2001 to new third-party investors in the business.

Based on amounts recorded at December 31, 2002, total estimated amortization of all acquisition-related intangible assets during each of the years ended December 31 follows (in
thousands):



|2003 |  | $      | 62,600 | 
|---- |  | ------ | ------ | 
|2004 |  | 54,800 |       
|2005 |  | 43,300 |       
|2006 |  | 37,400 |       
|2007 |  |        | 28,600 | 

Stock-Based Compensation

The Company applies Accounting Principles Board Opinion Number 25, Accounting for Stock Issued to Employees, in accounting for its stock option and award plans. Accordingly,
compensation expense has been recorded for its restricted stock awards and no expense has been recorded for its other stock-based plans. Statement of Financial Accounting Standards Number 123, Accounting for Stock-Based Compensation
(SFAS 123), changes the method for recognition of cost of stock option and award plans. Adoption of the cost recognition requirements under SFAS 123 is optional; however, the following supplemental information is provided for each of the years ended
December 31 (in thousands, except per-share amounts):



|                                                                                                                             |  | 2002    |         | 2001    |   | 2000    |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ------- | ------- | ------- | - | ------- | -
|                                                                                                                             |  |         |         |         |   |         |  
|Net income, as reported (including stock-based employee compensation costs, net
of tax of $520, $478 and $361, respectively) |  | $       | 325,641 |         | $ | 246,055 |  
|Additional stock-based employee compensation costs under SFAS 123, net of tax                                                |  | (54,363 | )       | (35,431 | ) | (22,678 | )
|                                                                                                                             |  |         |         |         |   |         |  
|Pro forma net income                                                                                                         |  | $       | 271,278 |         | $ | 210,624 |  
|                                                                                                                             |  |         |         |         |   |         |  
|                                                                                                                             |  |         |         |         |   |         |  
|Pro forma net income per common share:                                                                                       |  |         |         |         |   |         |  
|Basic                                                                                                                        |  | $       | 0.96    |         | $ | 0.76    |  
|                                                                                                                             |  |         |         |         |   |         |  
|Diluted                                                                                                                      |  | $       | 0.94    |         | $ | 0.74    |  
|                                                                                                                             |  |         |         |         |   |         |  

The weighted-average fair value of the options
granted during 2002, 2001 and 2000 is estimated to be $17.26, $15.47 and $10.23 per share, respectively, on the date of grant, representing 57%, 56% and 59%, respectively, of the weighted-average market value of the Companys common stock on
the date of grant. The fair value of options granted is determined using the Black-Scholes pricing model with the following assumptions: volatility of 52%, 48% and 54% in 2002, 2001 and 2000, respectively; expected term of six years (nine and
one-half years for unvested performance accelerated stock options); risk-free interest rate of 3.1%, 4.7% and 5.0% in 2002, 2001 and 2000, respectively; and no dividend yield. The effects of applying SFAS 123 in this pro forma disclosure are not
necessarily indicative of the impact on future years since the Company anticipates that additional options will be granted in future years.



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Income Taxes

The Company recognizes deferred income tax assets and liabilities
based upon the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred income tax assets and liabilities are calculated based on the difference between the financial and tax bases of
assets and liabilities using the currently enacted income tax rates in effect during the years in which the differences are expected to reverse.

TWO / Acquisitions and
Dispositions

Purchase Transactions

The Company seeks to grow through both internal development
and the acquisition of businesses that broaden or complement its existing product lines. During 2002, the Company completed eight acquisitions in ISS and one acquisition in AS. Gross cash paid is $284.9 million, subject to certain adjustments.
Goodwill recorded in connection with these acquisitions is $307.4 million.

During 2001, the Company completed four acquisitions in ISS, one acquisition in AS
and one acquisition in Other Businesses. Gross cash paid is $885.8 million, subject to certain adjustments. Goodwill recorded in connection with these acquisitions is $347.5 million.

During 2000, the Company completed nine acquisitions in ISS. Gross cash paid is $172.7 million, subject to certain adjustments. Goodwill recorded in connection with these acquisitions is $102.1 million.

The results of operations of all of these acquired businesses have been included in the accompanying Consolidated Statements of Income from the date of acquisition. Pro
forma combined results of operations are not presented, other than in connection with the acquisitions of Guardian iT plc (Guardian) and CAS as shown below, since the results of operations as reported in the accompanying Consolidated Statements of
Income would not be materially different.

In connection with certain previously acquired businesses, a total of up to $126.0 million could be paid as
additional consideration over the next three years contingent upon the future operating performance of those businesses. The amount paid, if any, will be recorded as additional goodwill at the time the actual performance is known and the amounts
become due. During 2000, the Company paid $0.6 million as additional consideration based upon the operating performance of businesses previously acquired. No such amounts were earned or paid in 2002 or 2001.

Acquisitions of Guardian and CAS

At December 31, 2002, the purchase-price allocation to the Guardian assets acquired and liabilities assumed
is preliminary. The amounts allocated to property and equipment are based on preliminary conclusions resulting from independent inventories and appraisals, and the amounts allocated to contracts and customer base (to be amortized over 12.5 years)
are based on preliminary conclusions from independent appraisals, which include an analysis of the business and expected cash flows. The purchase-price allocation will be completed upon finalization of facility closure plans, which are based in part
on customer input, along with finalization of the customer base valuation, property lease valuations and fixed asset inventories and appraisals. The preliminary purchase-price allocation of the Guardian acquisition follows (in thousands):



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|Cash paid (net of cash acquired of $36,893) |  | $       | 139,397 | 
|------------------------------------------- |  | ------- | ------- | 
|Liabilities assumed:                        |  |         |        
|Debt, primarily capital lease obligations   |  | 121,349 |        
|Accounts payable                            |  | 39,953  |        
|Accrued compensation and benefits           |  | 7,228   |        
|Accrued expenses                            |  | 72,322  |        
|Deferred revenues                           |  | 69,444  |        
|Deferred income taxes                       |  | 7,053   |        
|                                            |  |         |        
|Cash paid plus liabilities assumed          |  | $       | 456,746 | 
|                                            |  |         |         | 
|Assets acquired:                            |  |         |        
|Accounts receivable                         |  | $       | 35,237  | 
|Prepaid expenses and other current assets   |  | 18,566  |        
|Property and equipment                      |  | 80,057  |        
|Customer base                               |  | 73,000  |        
|Other assets                                |  | 4,748   |        
|Goodwill                                    |  | 245,138 |        
|                                            |  |         |        
|Total assets acquired                       |  | $       | 456,746 | 
|                                            |  |         |         | 

In connection with the integration of the Guardian
business into AS, the Company accrued as a cost of the acquisition and as part of goodwill approximately $34.2 million and $4.0 million for the estimated costs of closing Guardian facilities and reducing Guardian headcount, respectively. The
estimated costs for headcount reductions related to the Companys existing employees and closing certain of the Companys existing facilities, totaling $9.5 million, are included in merger costs for the year ended December 31, 2002. The
Company has reduced headcount by approximately 40 and closed four facilities in 2002, and expects an additional headcount reduction of 45 over the next year as nine additional facilities are closed. The facility closure accrual relates primarily to
the remaining lease obligations for the thirteen facilities, and will be paid over their remaining lease terms, which extend through March 2017, or until a facility is sublet.

In connection with the integration of the CAS business into AS, the Company accrued as a cost of the acquisition and as part of goodwill approximately $17.3 million for the estimated costs of closing CAS facilities and
reducing CAS headcount. The estimated costs for headcount reductions related to the Companys existing employees and closing certain of the Companys existing facilities, totaling $5.9 million, are included in merger costs for the year
ended December 31, 2001. The Company reduced headcount by approximately 350 in late December 2001 and closed fifteen facilities during 2002. The remaining facility closure accrual relates primarily to the remaining lease obligations for the closed
facilities and will be paid over their remaining lease terms, which extend through 2005, or until a facility is sublet.

In both the CAS and Guardian
integrations, generally all equipment located at closed facilities is relocated to other facilities, thereby improving the operational resilience and scope of services available to customers.



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##### Table of Contents

The activity relating to severance and facility closure accruals in connection with the CAS and Guardian acquisitions follows (in thousands):

|                                                        | SEVERANCE |        | FACILITIES |   | TOTAL  
|------------------------------------------------------- | --------- | ------ | ---------- | - | -------
|                                                        |           |        |            |   |        
|Accrued at November 15, 2001 related to CAS acquisition | $         | 12,878 |            | $ | 10,305 
|Payments                                                | (741      | )      |           |   | (741   
|                                                        |           |        |            |   |        
|Accrued at December 31, 2001                            | 12,137    |        | 10,305     |   | 22,442 
|Changes in estimates                                    | 1,434     |        | (2,042     | ) | (608   
|Payments                                                | (13,571   | )      | (2,593     | ) | (16,164
|                                                        |           |        |            |   |        
|                                                        |          |        | 5,670      |   | 5,670  
|Accrued at July 1, 2002 related to Guardian acquisition | 4,268     |        | 44,474     |   | 48,742 
|Changes in estimates                                    | 549       |        | (1,624     | ) | (1,075 
|Effect of foreign currency translation                  | 121       |        | 1,763      |   | 1,884  
|Payments                                                | (2,643    | )      | (100       | ) | (2,743 
|                                                        |           |        |            |   |        
|Accrued at December 31, 2002                            | $         | 2,295  |            | $ | 50,183 
|                                                        |           |        |            |   |        

Pro Forma Financial Information

On July 1, 2002, the Company completed the acquisition of substantially all of the
outstanding shares of Guardian. The purchase price values Guardian at approximately $272.8 million, consisting of $85.5 million for the shares of Guardian, plus $187.3 million of Guardian bank debt and finance lease obligations. The Company repaid
Guardians previously existing bank debt upon consummation of the acquisition and repaid most of Guardians remaining finance lease obligations after the acquisition. On November 15, 2001, the Company acquired CAS for a cash payment of
$852.3 million. The following unaudited pro forma combined results of operations is provided for illustrative purposes only and assumes that these two acquisitions occurred on January 1, 2001. This unaudited pro forma information (in thousands,
except per-share amounts) should not be relied upon as necessarily being indicative of the historical results that would have been obtained if these acquisitions had actually occurred on that date, nor of the results that may be obtained in the
future.

|                                                 |  | 2000    |           | 2001   |  
|------------------------------------------------ |  | ------- | --------- | ------ | -
|                                                 |  |         |           |        |  
|Revenues                                         |  | $       | 2,668,810 |        | $
|Net income                                       |  | 305,244 |           | 98,125 |  
|Diluted net income per common share, as reported |  | 1.12    |           | 0.86   |  
|Pro forma diluted net income per common share    |  | 1.05    |           | 0.34   |  

Merger Costs

During 2002, the Company recorded $12.5 million ($8.3 million after tax; $0.03 per
diluted share) for merger costs. These costs include $9.5 million in connection with closing facilities and severance costs incurred in the Guardian acquisition, and $4.2 million related to the Companys share of merger costs associated with
its equity interests in Brut LLC (Brut) and Guardian before the Company acquired 100% of the equity of each company, and are net of a $1.2 million reduction in expenses accrued in 2001 in connection with closing facilities and severance costs
incurred in the CAS acquisition. Also during 2002, the Company recorded other income of $0.7 million (less than $0.01 per diluted share) related to a $3.0 million gain on foreign currency purchased to fund the Guardian acquisition, offset in part by
a $2.3 million loss representing the Companys share of equity interests in Guardian before the Company acquired 100% of the equity of Guardian.

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During 2001, the Company recorded $7.2 million ($5.9 million after tax; $0.02 per diluted share) for merger costs. These costs include
$4.0 million primarily for nondeductible investment banking, legal and accounting fees incurred in connection with a pooling-of-interests transaction and $5.9 million in connection with closing facilities and severance costs incurred in the CAS
acquisition, and are offset in part by a $2.7 million break-up fee received by the Company, net of costs incurred, in connection with the Companys attempted acquisition of Bridge Information Systems Inc.

During 2000, the Company recorded $13.2 million ($8.5 million after tax; $0.03 per diluted share) for merger costs. These costs include $10.4 million ($6.3 million after tax; $0.02
per diluted share) for purchased in-process research and development in connection with the acquisitions of the Risk and Exposure Management business of GE Information Services, Inc. and of Global Information Solutions Ltd. This charge equals
approximately 8% of the total cash paid and represents, as of the respective dates of acquisition, the value of software products still in development, but not considered to have reached technological feasibility or to have any alternative future
use. The amounts allocated to purchased in-process research and development are based on independent appraisals, which include an analysis of the businesses and expected cash flows, along with the risks associated with completing the development
projects and attaining the expected cash flows. The remaining merger costs, which generally are not tax deductible, consist principally of investment banking, legal, accounting and printing fees in connection with poolings of interests.

Pooling-of-Interests Transactions

In 2001, the Company completed one acquisition in ISS accounted for as a
pooling of interests. A total of 8.3 million shares of common stock were issued in connection with this acquisition, and outstanding options to buy shares of the acquired company were converted into options to buy 1.3 million shares of the
Companys common stock. Historical financial information has not been restated due to immateriality.

In 2000, the Company completed one acquisition in
ISS accounted for as a pooling of interests. A total of 4.4 million shares of common stock were issued in connection with this acquisition, and outstanding options to buy shares of the acquired company were converted into options to buy 0.6 million
shares of the Companys common stock. Historical financial information has not been restated due to immateriality.

Subsequent Events

On January 21, 2003, the Company announced a definitive agreement to acquire all of the shares of Caminus Corporation for approximately $158.4 million in cash. Caminus is a publicly-held global leader
of integrated software solutions for the energy industry with expertise in integrated transaction processing and physical asset scheduling solutions.

On
February 4, 2003, the Company announced a definitive agreement to acquire all of the shares of H.T.E. Inc. for approximately $121.0 million in cash. H.T.E. is a publicly-held leader in government information technologies, providing a broad range of
software solutions for financial management, land development management, and public safety and justice.

THREE / Net Income per Common Share

The computation of the number of shares used in calculating basic and diluted net income per common share for each of the years ended December 31 follows (in thousands):



|                                                                         |  | 2002    |  | 2001    |  | 2000    | 
|------------------------------------------------------------------------ |  | ------- |  | ------- |  | ------- | 
|                                                                         |  |         |  |         |  |         | 
|Weighted-average common shares outstanding                               |  | 282,420 |  | 276,057 |  | 264,160 | 
|Contingent shares                                                        |  |        |  |        |  | 104     | 
|                                                                         |  |         |  |         |  |         | 
|Total shares used for calculation of basic net income per common share   |  | 282,420 |  | 276,057 |  | 264,264 | 
|Employee stock options                                                   |  | 7,234   |  | 9,055   |  | 7,140   | 
|                                                                         |  |         |  |         |  |         | 
|Total shares used for calculation of diluted net income per common
share |  | 289,654 |  | 285,112 |  | 271,404 | 
|                                                                         |  |         |  |         |  |         | 



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During the year ended December 31, 2002, the Company had approximately 14.0 million outstanding employee stock options that are
out-of-the-money and therefore excluded from the calculation of the dilutive effect of employee stock options. These stock options are considered to be out-of-the-money because the option exercise prices exceed the average share price during 2002.
The dilutive effect of employee stock options is measured by the amount, if any, that individual stock option exercise prices are less than the average share price during the period.

FOUR / Short-term investment

The Company has no short-term investments at December 31, 2002 and 2001. During the fourth quarter of 2001, the
Company realized a $1.4 million gain on the sale of short-term investments, the proceeds of which were used to fund the acquisition of CAS.

FIVE / Property and
Equipment

Property and equipment consist of the following at December 31 (in thousands):



|                                          |  | 2002      |         | 2001     |  
|----------------------------------------- |  | --------- | ------- | -------- | -
|                                          |  |           |         |          |  
|Computer and telecommunications equipment |  | $         | 708,886 |          | $
|Leasehold improvements                    |  | 219,972   |         | 171,374  |  
|Office furniture and equipment            |  | 137,149   |         | 124,395  |  
|Buildings and improvements                |  | 85,626    |         | 84,680   |  
|Land                                      |  | 23,319    |         | 24,738   |  
|Construction in progress                  |  | 13,241    |         | 3,830    |  
|                                          |  |           |         |          |  
|                                          |  | 1,188,193 |         | 998,002  |  
|Accumulated depreciation and amortization |  | (621,994  | )       | (453,464 | )
|                                          |  |           |         |          |  
|                                          |  | $         | 566,199 |          | $
|                                          |  |           |         |          |  

At December 31, 2002, total cost and accumulated
depreciation of assets under capital leases is $31.4 million and $9.4 million, respectively.

SIX / Debt

Debt consists of the following at December 31 (in thousands):



|                                                                                |  | 2002    |         | 2001     |  
|------------------------------------------------------------------------------- |  | ------- | ------- | -------- | -
|                                                                                |  |         |         |          |  
|Bank Credit Agreement (effective interest rate of 3.7% and 3.1%)                |  | $       | 175,000 |          | $
|Purchase price obligations due former owners of acquired businesses             |  | 8,158   |         | 2,620    |  
|Other, primarily capital lease obligations for computer equipment and
buildings |  | 22,934  |         | 6,011    |  
|                                                                                |  |         |         |          |  
|                                                                                |  | 206,092 |         | 458,631  |  
|Short-term borrowings and current portion of long-term debt                     |  | (18,128 | )       | (103,157 | )
|                                                                                |  |         |         |          |  
|Long-term debt                                                                  |  | $       | 187,964 |          | $
|                                                                                |  |         |         |          |  



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In connection with the acquisition of CAS, the Company borrowed $450.0 million under an unsecured interim credit facility and on January
25, 2002, the Company replaced the interim facility with an unsecured credit agreement (Credit Agreement) that provides for up to $500.0 million of unsecured borrowings. The Credit Agreement consists of a $150.0 million short-term facility that
expires in January 2004, and a $175.0 million revolving facility combined with a $175.0 million term loan that both expire in January 2005. Up to $75.0 million can be borrowed in either British pounds or the Euro. The Company can periodically
designate borrowings as base-rate borrowings or LIBOR borrowings. Base-rate borrowings bear interest generally at the prime rate plus a margin (currently prime), while LIBOR borrowings bear interest at a rate equal to LIBOR plus a margin (currently
LIBOR plus 1%), depending upon the Companys corporate credit rating at the time of the borrowing. Interest rates on base-rate borrowings reset daily, while LIBOR borrowings can be fixed for one-, two-, three- or six-month periods at the
Companys option. In order to remain eligible to borrow under the Credit Agreement, the Company must, among other requirements, maintain a minimum net worth of $850.0 million plus 50% of net income after March 31, 2002 ($977.8 million at
December 31, 2002), an interest coverage ratio of at least four to one, and maximum total debt of two and one-half times the Companys earnings before interest, taxes, depreciation and amortization. At December 31, 2002, there were outstanding
term loan borrowings of $175.0 million.

Annual maturities of long-term debt during the next five years are as follows (in thousands):



|2003       |  | $       | 18,128 | 
|---------- |  | ------- | ------ | 
|2004       |  | 6,269   |       
|2005       |  | 178,200 |       
|2006       |  | 1,723   |       
|2007       |  | 836     |       
|Thereafter |  |         | 936    | 

SEVEN / Stock Option and Award Plans

Employee Stock Purchase Plan

Under the Companys Employee Stock Purchase Plan, a maximum of 8.0 million shares of
common stock may be issued to employees to purchase a limited number of shares of common stock each quarter through payroll deductions. The purchase price is 85% of the lower of the closing price of the Companys common stock on the first
business day or the last business day of each calendar quarter. During 2002, 2001 and 2000, employees purchased 1.2 million, 1.0 million and 1.2 million shares, respectively, at average purchase prices of $20.08, $19.27 and $13.13 per share,
respectively. At December 31, 2002, 6.1 million shares of common stock were reserved for issuance under this plan.

Equity Incentive Plans

Under the Companys Equity Incentive Plans, awards or options to purchase shares of common stock may be granted to key employees. Options may be either incentive stock options or nonqualified
stock options, and the option price generally must be at least equal to the fair value of the Companys common stock on the date of grant. Generally, options are granted for a ten-year term and are subject to a four- or five-year vesting
schedule. The number of shares available under the 1998 Equity Incentive Plan will increase each year by the number of option shares exercised during the previous year under all of the Companys equity plans, subject to a maximum increase of 2%
of outstanding shares as of the end of the previous year. In 2003, 1.8 million additional shares became available for grant based on this provision.

During
2002, 2001 and 2000, performance accelerated stock options (PASOs) were awarded for an aggregate of 2.8 million, 3.5 million and 3.2 million shares, respectively. PASOs are nonqualified options that are granted annually near the beginning of a
performance period at an exercise price equal to the fair value of the Companys common stock on the date of grant, with a term of ten years beginning on the date of grant. Shares generally vest nine and one-half years after the date of grant,
except that

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vesting may be fully or partially accelerated at the end of the third year if certain financial performance goals are met during the performance period.
During 2002 and 2001, vesting for approximately 0.8 million PASO awards in each year (out of a total of approximately 2.5 million and 1.4 million PASO awards, respectively) was accelerated based on meeting performance goals.

Before 1998, long-term incentive plan awards (LTIP awards) were granted for future options. The actual number of shares and the exercise price per share were contingent upon
achieving certain operating results over a three-year period. There have been no LTIP awards granted since 1997.

The table below summarizes transactions under
these equity incentive plans. All amounts before June 2001 are adjusted for the June 2001 two-for-one common stock split:



|                              |  | SHARES (IN THOUSANDS) |        |              |  
|----------------------------- |  | --------------------- | ------ | ------------ | -
|                              |  |                       |        |              |  
|                              |  | AVAILABLE             |        | UNDER OPTION |  
|                              |  |                       |        |              |  
|Balances at December 31, 1999 |  | 126                   |        | 22,940       |  
|Pooling of interests          |  |                      |        | 578          |  
|Authorized                    |  | 18,140                |        |             |  
|LTIP maturity                 |  | 202                   |        | 630          |  
|Expired                       |  | (392                  | )      |             |  
|Canceled                      |  | 4,096                 |        | (4,096       | )
|Granted                       |  | (14,152               | )      | 14,152       |  
|Exercised                     |  |                      |        | (4,624       | )
|                              |  |                       |        |              |  
|Balances at December 31, 2000 |  | 8,020                 |        | 29,580       |  
|Pooling of interests          |  |                      |        | 1,268        |  
|Authorized                    |  | 4,624                 |        |             |  
|Expired                       |  | (97                   | )      |             |  
|Canceled                      |  | 2,188                 |        | (2,188       | )
|Granted                       |  | (10,810               | )      | 10,810       |  
|Exercised                     |  |                      |        | (4,659       | )
|                              |  |                       |        |              |  
|Balances at December 31, 2001 |  | 3,925                 |        | 34,811       |  
|Authorized                    |  | 14,752                |        |             |  
|Expired                       |  | (19                   | )      |             |  
|Canceled                      |  | 1,621                 |        | (1,621       | )
|Granted                       |  | (8,687                | )      | 8,687        |  
|Exercised                     |  |                      |        | (1,823       | )
|                              |  |                       |        |              |  
|Balances at December 31, 2002 |  |                       | 11,592 |              |  
|                              |  |                       |        |              |  

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The following table summarizes information concerning outstanding and exercisable options at December 31, 2002:



|                         |  | OPTIONS OUTSTANDING           |       | OPTIONS EXERCISABLE  | 
|------------------------ |  | ----------------------------- | ----- | -------------------- | 
|                         |  |                               |       |                      | 
|                         |  |                               |       | WEIGHTED-AVERAGE     | 
|                         |  |                               |       |                      | 
|RANGE OF EXERCISE PRICES |  | NUMBEROFOPTIONS(IN THOUSANDS) |       | REMAININGLIFE(YEARS) | 
|                         |  |                               |       |                      | 
|$0.50 to $15.00          |  |                               | 6,645 |                      | 
|$15.01 to $20.00         |  | 13,873                        |       | 6.8                  | 
|$20.01 to $25.00         |  | 3,776                         |       | 8.6                  | 
|$25.01 to $30.00         |  | 9,839                         |       | 8.5                  | 
|over $30.00              |  |                               | 5,921 |                      | 

At December 31, 2002, 57.8
million shares of common stock were reserved for issuance under all of the Companys equity incentive and stock purchase plans, including 0.1 million shares under the restricted stock award plan for outside directors.

Restricted Stock Award Plan

The Companys Restricted Stock Award Plan for Outside Directors (RSAP) provides for
awards of restricted shares of the Companys common stock to the Companys outside directors. Beginning in 2001, shares awarded to each outside director are equal to the number of shares with a fair market value of $0.5 million at the date
of grant as of the beginning of each five-year period. Shares awarded under the RSAP are subject to certain transfer and forfeiture restrictions that lapse over a five-year vesting period. RSAP awards for 18,685 and 125,700 shares were granted
during 2002 and 2001, at fair values of $25.32 and $27.42 per share, respectively. There were no awards granted during 2000.

Unearned compensation expense
related to the RSAP is reported as a reduction of stockholders equity in the accompanying consolidated financial statements, and compensation expense is recorded ratably over the five-year period during which the shares are subject to transfer
and forfeiture restrictions based on the market value on the award date less the par value of the shares awarded. Compensation expense related to this plan aggregated $0.9 million, $0.8 million and $0.6 million in 2002, 2001 and 2000,
respectively.

EIGHT / Savings Plans

The Company and its subsidiaries maintain savings plans that
cover substantially all employees. These plans generally provide that employee contributions are matched with cash contributions by the Company subject to certain limitations including a limitation on the Companys contributions to 4% of the
employees compensation. Total expense under these plans aggregated $23.1 million, $17.6 million and $15.3 million for the years ended December 31, 2002, 2001 and 2000, respectively.

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NINE/Income Taxes

The provision for income taxes for each of the years ended December 31 consists of the following (in thousands):



|          |  | 2002    |         | 2001    |   | 2000    | 
|--------- |  | ------- | ------- | ------- | - | ------- | 
|          |  |         |         |         |   |         | 
|Current:  |  |         |         |         |   |         | 
|Federal   |  | $       | 130,747 |         | $ | 130,192 | 
|State     |  | 33,660  |         | 33,045  |   | 26,267  | 
|Foreign   |  | 8,726   |         | 12,725  |   | 11,156  | 
|          |  |         |         |         |   |         | 
|          |  | 173,133 |         | 175,962 |   | 133,502 | 
|          |  |         |         |         |   |         | 
|Deferred: |  |         |         |         |   |         | 
|Federal   |  | 34,355  |         | (7,308  | ) | 9,002   | 
|State     |  | 4,774   |         | (1,467  | ) | 1,230   | 
|Foreign   |  | 5,394   |         | (2,770  | ) | 60      | 
|          |  |         |         |         |   |         | 
|          |  | 44,523  |         | (11,545 | ) | 10,292  | 
|          |  |         |         |         |   |         | 
|          |  | $       | 217,656 |         | $ | 164,417 | 
|          |  |         |         |         |   |         | 

Differences between income tax expense at the U.S.
federal statutory income tax rate and the Companys effective income tax rate for each of the years ended December 31 are as follows (in thousands):



|                                           |  | 2002   |         | 2001   |   | 2000    |  
|------------------------------------------ |  | ------ | ------- | ------ | - | ------- | -
|                                           |  |        |         |        |   |         |  
|Tax at federal statutory rate              |  | $      | 190,154 |        | $ | 143,665 |  
|State income taxes, net of federal benefit |  | 27,019 |         | 21,819 |   | 17,665  |  
|Nondeductible merger costs                 |  | 1,108  |         | 1,410  |   | 560     |  
|Nondeductible intangible amortization      |  |       |         | 4,287  |   | 3,181   |  
|Nondeductible meals and entertainment      |  | 2,293  |         | 1,801  |   | 1,670   |  
|Tax-exempt interest income                 |  | (418   | )       | (1,448 | ) | (856    | )
|Foreign taxes                              |  | (5,018 | )       | (4,233 | ) | (5,709  | )
|Net operating losses                       |  | 2,452  |         | (1,624 | ) | 3,525   |  
|Other, net                                 |  | 66     |         | (1,260 | ) | (1,110  | )
|                                           |  |        |         |        |   |         |  
|                                           |  | $      | 217,656 |        | $ | 164,417 |  
|                                           |  |        |         |        |   |         |  
|                                           |  |        |         |        |   |         |  
|Effective income tax rate                  |  | 40.0   | %       | 40.1   | % | 40.3    | %
|                                           |  |        |         |        |   |         |  



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Deferred income taxes are recorded based upon differences between financial statement and tax bases of assets and liabilities. The
following deferred income taxes were recorded at December 31 (in thousands):



|                                              |  | 2002    |        | 2001    |  
|--------------------------------------------- |  | ------- | ------ | ------- | -
|                                              |  |         |        |         |  
|Current:                                      |  |         |        |         |  
|Trade receivables                             |  | $       | 14,715 |         | $
|Accrued compensation and benefits             |  | 9,635   |        | 10,261  |  
|Unrealized loss on investment                 |  |        |        | 4,162   |  
|Other accrued expenses                        |  | 22,858  |        | 17,202  |  
|Deferred revenues                             |  | 705     |        | 1,651   |  
|                                              |  |         |        |         |  
|Total current deferred income tax asset       |  | $       | 47,913 |         | $
|                                              |  |         |        |         |  
|                                              |  |         |        |         |  
|Long-term:                                    |  |         |        |         |  
|Property and equipment                        |  | $       | 10,701 |         | $
|Intangible assets                             |  | 63,719  |        | 106,018 |  
|Net operating loss carry-forwards             |  | 16,680  |        | 7,571   |  
|Long-term incentive plan                      |  | 2,098   |        | 2,217   |  
|Purchased in-process research and development |  | 14,612  |        | 16,380  |  
|                                              |  |         |        |         |  
|Total long-term deferred income tax asset     |  | 107,810 |        | 149,989 |  
|Valuation allowance                           |  | (15,242 | )      | (7,571  | )
|                                              |  |         |        |         |  
|Net long-term deferred income tax asset       |  | $       | 92,568 |         | $
|                                              |  |         |        |         |  

A valuation allowance for deferred income tax assets
associated with certain net operating loss carry-forwards has been established since the Company currently believes it is more likely than not that the deferred income tax assets will not be realized. Tax loss carry-forwards of North American
subsidiaries, totaling $13.2 million, expire between 2010 and 2022. Tax loss carry-forwards of Israeli subsidiaries, totaling $18.7 million, are unlimited in duration and are linked to the Israeli consumer price index. The remaining tax loss
carry-forwards of certain European and Asian subsidiaries total $38.5 million (including $29.5 million at acquired Guardian subsidiaries) and have various expiration dates beginning in 2007.

TEN/Stockholder Rights Plan

Under
the Companys Stockholder Rights Plan, all stockholders received rights to purchase shares of Series A Junior Participating Preferred Stock (Preferred Stock). Each right will detach from the common stock and trade separately should any person
or group acquire beneficial ownership of 15% or more of the Companys common stock or announce a tender offer for 15% or more of the Companys common stock. If a person or group acquires beneficial ownership of 15% or more of the
Companys common stock (Acquiring Person), all rights except for those held by the Acquiring Person become rights to purchase a fraction of one share of Preferred Stock for $175, or a specified number of shares of the Companys common
stock at a 50% market discount, subject to adjustment by the Companys board of directors. If the Company merges, consolidates or engages in a similar transaction with an Acquiring Person, each holder has a flip over right to buy
discounted stock in the acquiring entity.



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Until the occurrence of certain events, the rights are represented by and traded in tandem with common stock and cannot be separately
traded. Under certain circumstances, each right is redeemable at a nominal price. Further, upon the occurrence of certain events, the Companys board of directors has the option to exchange shares of common stock for the rights. The rights,
which are non-voting, expire on July 20, 2010.

The Companys board of directors may amend or terminate the Stockholder Rights Plan at any time or redeem
the rights before the time a person acquires more than 15% of the Companys common stock.

ELEVEN/Common Stock Split

On May 11, 2001, the Companys board of directors authorized a two-for-one stock split of the Companys
common stock. Stockholders of record as of the close of business on May 25, 2001 received one additional share of SunGard stock for every share held on that date. The number of shares used for purposes of calculating net income per common share and
all per-share data before June 18, 2001 (the effective date) have been adjusted to reflect the stock split.

TWELVE/Segment and Geographic Information

The Company is an efficient operator of resilient IT solutions. This
efficiency comes from the economies of scale achieved by providing products and services on shared platforms to thousands of customers throughout the worlds financial, business and government markets. The Company has three segments. ISS
primarily serves financial services institutions by processing their investment and trading transactions. ISS develops, markets and maintains a broad range of complementary software applications, grouped into the following business areas: brokerage
and trading systems; wealth management systems; investment management systems; treasury and risk management systems; and benefit and investor management systems. ISS delivers its systems as an application service provider, using its data centers
that customers access via the Internet or a private network, and on a license fee basis. Customers include banks, brokers, exchange members, corporates, investment managers, mutual funds, investment advisers, insurance companies, depositories,
custodians, trustees, benefit plan administrators, transfer agents, utilities, energy companies and governments. AS primarily serves IT-dependent enterprises by helping them ensure the continuity of their business. AS provides a comprehensive
continuum of information-availability services for all major computing platforms, as well as information-availability consulting services and planning software. AS also provides managed hosting services for application and data-center outsourcing.
Other Businesses provide general ledger and administration software systems to the public sector, workflow management systems to healthcare organizations and automated mailing services.



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Operating results and certain asset information for each segment for each of the years ended December 31 follow (in
thousands):



|                                     |  | ISS       |           | AS        |   | OTHERBUSINESSES |  | TOTALOPERATINGSEGMENTS |         | CORPORATEANDOTHER ITEMS |      | CONSOLIDATEDTOTAL | 
|------------------------------------ |  | --------- | --------- | --------- | - | --------------- |  | ---------------------- | ------- | ----------------------- | ---- | ----------------- | 
|                                     |  |           |           |           |   |                 |  |                        |         |                         |      |                   | 
|2002                                 |  |           |           |           |   |                 |  |                        |         |                         |      |                   | 
|Revenues                             |  | $         | 1,385,948 |           | $ | 1,052,500       |  | $                      | 154,789 |                         | $    | 2,593,237         | 
|Depreciation and amortization        |  | 93,272    |           | 166,375   |   | 7,703           |  | 267,350                |         | 711                     |      | 268,061           | 
|Operating income                     |  | 310,862   |           | 257,809   |   | 29,109          |  | 597,780                |         | (50,547                 | )(1) | 547,233           | 
|Goodwill                             |  | 321,242   |           | 584,985   |   | 32,823          |  | 939,050                |         |                        |      | 939,050           | 
|Total assets                         |  | 1,458,743 |           | 1,686,200 |   | 91,252          |  | 3,236,195              |         | 45,401                  | (2)  | 3,281,596         | 
|Cash paid for property and equipment |  | 30,682    |           | 84,839    |   | 1,718           |  | 117,239                |         | 4,054                   |      | 121,293           | 
|                                     |  |           |           |           |   |                 |  |                        |         |                         |      |                   | 
|2001                                 |  |           |           |           |   |                 |  |                        |         |                         |      |                   | 
|Revenues                             |  | $         | 1,324,964 |           | $ | 522,434         |  | $                      | 134,439 |                         | $    | 1,981,837         | 
|Depreciation and amortization        |  | 100,507   |           | 65,027    |   | 9,609           |  | 175,143                |         | 689                     |      | 175,832           | 
|Operating income                     |  | 272,654   |           | 147,533   |   | 20,377          |  | 440,564                |         | (41,354                 | )(1) | 399,210           | 
|Goodwill                             |  | 258,324   |           | 330,326   |   | 32,815          |  | 621,465                |         |                        |      | 621,465           | 
|Total assets(3)                      |  | 1,176,690 |           | 1,373,411 |   | 75,919          |  | 2,626,020              |         | 272,138                 | (2)  | 2,898,158         | 
|Cash paid for property and equipment |  | 37,351    |           | 62,833    |   | 1,633           |  | 101,817                |         | 286                     |      | 102,103           | 
|                                     |  |           |           |           |   |                 |  |                        |         |                         |      |                   | 
|2000                                 |  |           |           |           |   |                 |  |                        |         |                         |      |                   | 
|Revenues                             |  | $         | 1,176,998 |           | $ | 411,949         |  | $                      | 114,149 |                         | $    | 1,703,096         | 
|Depreciation and amortization        |  | 84,380    |           | 51,337    |   | 9,702           |  | 145,419                |         | 643                     |      | 146,062           | 
|Operating income                     |  | 238,035   |           | 117,744   |   | 15,618          |  | 371,397                |         | (36,135                 | )(1) | 335,262           | 
|Goodwill                             |  | 256,777   |           | 8,569     |   | 31,518          |  | 296,864                |         |                        |      | 296,864           | 
|Total assets                         |  | 1,042,330 |           | 248,887   |   | 62,385          |  | 1,353,602              |         | 491,583                 | (2)  | 1,845,185         | 
|Cash paid for property and equipment |  | 37,284    |           | 59,789    |   | 1,449           |  | 98,522                 |         | 359                     |      | 98,881            | 

(1)Includes corporate administrative expenses and merger costs.

(2)The Company does not allocate a deferred income taxes. Amount is net of investments in
subsidiaries and other items that are eliminated in consolidation.

(3)Includes reclassification for comparative purposes.

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##### Table of Contents

The Companys revenues by customer location for each of the years ended December 31 follow (in thousands):



|               |  | 2002    |           | 2001    |   | 2000      | 
|-------------- |  | ------- | --------- | ------- | - | --------- | 
|               |  |         |           |         |   |           | 
|United States  |  | $       | 2,085,133 |         | $ | 1,595,580 | 
|               |  |         |           |         |   |           | 
|               |  |         |           |         |   |           | 
|International: |  |         |           |         |   |           | 
|Europe         |  | 361,287 |           | 269,825 |   | 231,302   | 
|Canada         |  | 58,303  |           | 34,840  |   | 31,517    | 
|Asia/Pacific   |  | 56,285  |           | 60,977  |   | 71,986    | 
|Other          |  | 32,229  |           | 20,615  |   | 16,822    | 
|               |  |         |           |         |   |           | 
|               |  | 508,104 |           | 386,257 |   | 351,627   | 
|               |  |         |           |         |   |           | 
|               |  | $       | 2,593,237 |         | $ | 1,981,837 | 
|               |  |         |           |         |   |           | 

THIRTEEN / Commitments and Contingencies

Commitments

The Company leases a substantial portion of its computer equipment and facilities under operating leases.
Future minimum rentals under operating leases with initial or remaining noncancelable lease terms in excess of one year at December 31, 2002 follow (in thousands):



|2003       |  | $       | 125,220 | 
|---------- |  | ------- | ------- | 
|2004       |  | 106,409 |        
|2005       |  | 87,362  |        
|2006       |  | 68,197  |        
|2007       |  | 59,173  |        
|Thereafter |  | 225,507 |        
|           |  |         |        
|           |  | $       | 671,868 | 
|           |  |         |         | 

Rent expense aggregated $125.3 million, $104.0
million and $88.7 million for the years ended December 31, 2002, 2001 and 2000, respectively.

At December 31, 2002, the Company has outstanding letters of
credit and bid bonds of $24.4 million, issued primarily as security for performance under certain customer contracts.

Contingencies

The Company is presently a party to certain lawsuits arising in the ordinary course of its business. In the opinion of management, none of its current legal proceedings will be material to the
Companys business, financial condition or results of operations.

In connection with certain previously acquired businesses, a total of up to $126.0
million could be paid as additional consideration over the next three years, contingent upon the future operating performance of those businesses (see Note 2).

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##### Table of Contents

REPORT OF INDEPENDENT ACCOUNTANTS

To The Board of Directors and Stockholders of SunGard Data Systems Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders equity and cash flows present fairly, in all material respects, the
financial position of SunGard Data Systems Inc. and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Companys management; our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



|PricewaterhouseCoopers LLP                  |  |  | 
|------------------------------------------- |  |  | 
|                                            |  |  | 
|/s/ PricewaterhouseCoopers LLP              |  |  | 
|                                            |  |  | 
|Philadelphia, PennsylvaniaFebruary 11, 2003 |  |  | 



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