<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549
    
                               FORM 10-K/A NO. 1
     
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
                             EXCHANGE ACT OF 1934

  For the fiscal year ended September 30, 1997     Commission File No. 0-11521

                   SYSTEMS & COMPUTER TECHNOLOGY CORPORATION
             (Exact name of registrant as specified in its charter)
<TABLE> 
<CAPTION> 

<S>                                                             <C>  
                   Delaware                                            23-1701520
(State or other jurisdiction of incorporation or organization)  (IRS Employer Identification No.)
</TABLE> 
                              4 Country View Road
                          Malvern, Pennsylvania  19355
                    (Address of principal executive offices)

      Registrant's telephone number, including area code:  (610) 647-5930

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

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

                     Common Stock, par value $.01 per share
                5% Convertible Subordinated Debentures Due 2004

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

                                      Yes     X       No 
                                          ----------     ---------

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

State the aggregate market value of the voting stock held by non-affiliates of
the registrant.  The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.

                                      $768,388,771 at December 12, 1997

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

                                      16,618,011 shares at December 12, 1997

                      DOCUMENTS INCORPORATED BY REFERENCE

Registrant's Definitive Proxy Statement to be delivered to shareholders in
connection with the Annual Meeting of Shareholders scheduled to be held on
February 26, 1998 is incorporated by reference to the extent provided in Part
III, Items 10-13.
<PAGE>
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
------   ------------------------------------------- 
    
Item 8 is being amended to correct typographical errors in the dates of the 
column headers of both the Consolidated Balance Sheets and Note J -- Quarterly 
Results of Operations (unaudited).

                                                     CONSOLIDATED BALANCE SHEETS
 
<TABLE> 
<CAPTION> 

(in thousands except per share amounts) September 30                         1997                       1996
------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                        <C> 
Assets 
Current Assets
  Cash and cash equivalents                                             $  29,809                  $  12,303
  Receivables, including $59,311 and $55,146 of
    earned revenues in excess of billings, net of
    allowance for doubtful accounts of $4,098 and $1,590                  100,543                     77,161
  Prepaid expenses and other receivables                                    8,473                     10,208
                                                                    -------------              -------------

Total Current Assets                                                      138,825                     99,672

Property and Equipment - at cost, net of accumulated depreciation          40,710                     35,222
Capitalized Computer Software Costs, net of accumulated
  amortization of $10,413 and $7,563                                       15,167                     10,510
Cost in Excess of Fair Value of Net Assets Acquired, net of
  accumulated amortization of $2,957 and $2,337                             8,121                      8,740
Other Assets and Deferred Charges                                           6,881                      9,115
                                                                    -------------              -------------

Total Assets                                                             $209,704                   $163,259
                                                                    =============              =============

Liabilities and Stockholders' Equity
Current Liabilities
  Accounts payable                                                       $ 10,023                   $  6,674
  Current portion of long-term debt                                         1,225                        200
  Income taxes payable                                                      5,000                        398
  Accrued expenses                                                         22,649                     12,358
  Deferred revenue                                                         16,711                     12,653
                                                                    -------------              -------------

Total Current Liabilities                                                  55,608                     32,283
                                                                    -------------              -------------

Long-Term Debt, net of current portion                                      2,549                     31,590
Deferred Taxes and Other Long-Term Liabilities                              1,122                      2,590
                                                                    -------------              -------------

Total Liabilities                                                          59,279                     66,463
                                                                    -------------              -------------

Stockholders' Equity
  Preferred stock, par value $.10 per share - authorized
    3,000 shares, none issued
  Common stock, par value $.01 per share - authorized
    24,000 shares, issued 17,573 and 15,245 shares                            176                        152
  Capital in excess of par value                                           91,240                     60,526
  Retained earnings                                                        62,578                     39,687
                                                                    -------------              -------------

                                                                          153,994                    100,365

Less:
  Held in treasury, 1,151 common shares - at cost                          (2,959)                    (2,959)
  Notes receivable from stockholders                                         (610)                      (610)
                                                                    -------------              -------------

                                                                          150,425                     96,796
                                                                    -------------              -------------

Total Liabilities and Stockholders' Equity                               $209,704                   $163,259
                                                                    =============              =============

</TABLE>      

See notes to consolidated financial statements.


<PAGE>
 
 
                                           CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE> 
<CAPTION> 

(in thousands except per share amounts) Year Ended September 30                    1997               1996               1995
--------------------------------------------------------------------------------------       ------------     --------------
<S>                                                                       <C>                <C>              <C> 
Revenues                                                                   
 OnSite services                                                             $  97,677          $  84,183          $  66,904 
 Software sales                                                                 76,948             46,821             40,376 
 Maintenance and enhancements                                                   52,109             42,013             35,145  
 Software services                                                              62,694             41,552             31,631
 Interest and other revenue                                                        618                689              2,092
                                                                          ------------       ------------       ------------
                                                                               290,046            215,258            176,148
                                                                          ------------       ------------       ------------


Expenses
 Cost of OnSite services                                                        79,650             67,852             51,927
 Cost of software sales and maintenance and enhancements                        46,879             38,546             31,681
 Cost of software services                                                      51,627             36,586             27,082
 Selling, general and administrative                                            72,053             53,921             43,746
 Charge for purchased research and development                                       -                  -              8,700
 Interest expense                                                                1,220              2,350              2,696
                                                                          ------------       ------------       ------------
                                                                               251,429            199,255            165,832
                                                                          ------------       ------------       ------------
Income before income taxes                                                      38,617             16,003             10,316
Provision for income taxes                                                      15,726              6,884              7,258
                                                                          ------------       ------------       ------------
Net income                                                                   $  22,891          $   9,119          $   3,058
                                                                          ============       ============       ============

Per common share:
 Net income
   Primary                                                                   $    1.43          $    0.62          $    0.22       
   Fully diluted                                                             $    1.31          $    0.61          $    0.21
Common shares and equivalents outstanding:
   Primary                                                                      15,990             14,696             14,030
   Fully diluted                                                                17,904             16,781             14,399
                                                                          ============       ============       ============
</TABLE> 

See notes to consolidated financial statements.   

 

<PAGE>

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE> 
<CAPTION> 

(in thousands except per share amount) Year Ended September 30,          1997          1996          1995
------------------------------------------------------------------------------    ----------     ---------
<S>                                                                 <C>           <C>            <C> 
Operating Activities
Net Income                                                           $  22,891     $  9,119       $ 3,058
Adjustments to reconcile net income to net cash
  provided by operating activities:
     Charge for purchased research and development                           -            -         8,700
     Depreciation and amortization                                      12,808       10,961         8,942
     Provision for doubtful accounts                                     4,136        1,212           508
     Deferred tax provision                                             (1,051)         740         1,073
     Changes in operating assets and liabilities:
       (Increase) in receivables                                       (27,518)      (8,103)      (17,887)
       Decrease (increase) in other current assets
         principally prepaid expenses                                    1,735        1,557        (4,409)
       Increase in accounts payable                                      3,349        1,440         1,407
       Increase (decrease) in income taxes payable                       4,809          231          (820)  
       Increase in accrued expenses                                     10,291          470         1,750
       Increase (decrease) in deferred revenue                           3,711       (1,560)         (129)
     Changes in other operating assets and deferred charges             (1,690)      (1,454)         (130)
                                                                     ---------     --------       -------

Net Cash Provided by Operating Activities                               33,471       14,613         2,063
                                                                     ---------     --------       -------

Investing Activities
Purchase of property and equipment                                     (11,837)     (10,404)      (13,683)
Capitalized computer software costs                                     (7,507)      (6,436)       (3,384)
Proceeds from the sale or maturity of investments available-for-sale         -       13,504        20,829
Purchase of investments available-for-sale                                   -            -       (11,687)
(Increase) in notes receivable form stockholders                             -            -          (610)
Purchase of subsidiary, net of cash acquired                                 -         (789)       (1,374)
                                                                     ---------     --------       -------
Net Cash (Used in) Investing Activities                                (19,344)      (4,125)       (9,909)
                                                                     ---------     --------       -------
Financing Activities
Principal payments on long-term debt                                    (7,955)     (12,700)         (305)
Proceeds from long-term debt                                             9,659       12,600             -
Repurchase and retirement of Company stock                              (1,367)           -             -
Proceeds from exercise of stock options                                  3,042          313         2,068
                                                                     ---------     --------       -------
Net Cash Provided by Financing Activities                                3,379          213         1,763
                                                                     ---------     --------       -------
Increase (Decrease) in Cash and Cash Equivalents                        17,506       10,701        (6,083)
                                                                     ---------     --------       -------
Cash and Cash Equivalents at Beginning of Year                          12,303        1,602         7,685
                                                                     ---------     --------       -------
Cash and Cash Equivalents at End of Year                             $  29,809     $ 12,303       $ 1,602
                                                                     =========     ========       =======
Supplemental Information
Noncash investing and financing activities:
  Conversion of subordinated debentures into common stock            $  31,220     $      -       $ 3,225
  Purchase of subsidiary - noncash portion                           $       -     $      -       $11,949
</TABLE> 
See notes to consolidated financial statements. 



<PAGE>
 
                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE> 
<CAPTION> 
                                                                                                           Unearned
                                                                                                       Compensation
                                                                                                          and Notes
                                                   Common         Capital                                Receivable           Total
                                                    Stock    in Excess of      Retained     Treasury           from   Stockholders'
(in thousands except per share amounts)         Par Value       Par Value      Earnings        Stock   Stockholders          Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>              <C>          <C>        <C>            <C> 
Balance at September 30, 1994                        $136         $40,869       $27,510     $(2,959)         $ (75)        $ 65,481
Stock issued under stock option plans,
  including tax benefits, 364 shares                    4           3,482                                                     3,486
Earned restricted stock compensation                                                                            47               47
Issuance of stock for acquisition, 1,000 shares        10          10,868                                                    10,878
Conversion of 6 1/4% convertible subordinated
  debentures, 215 shares                                2           3,223                                                     3,225
Notes receivable from stockholders                                                                            (610)            (610)
Net income, year ended September 30, 1995                                         3,058                                       3,058
Balance at September 30, 1995                         152          58,442        30,568      (2,959)          (638)          85,565
                                                ===================================================================================

Stock issued under stock option plans,
  including tax benefits, 65 shares                                 1,960                                                     1,960
Issuance of stock due to warrants exercised,
  28 shares                                                           124                                                       124
Earned restricted stock compensation                                                                            28               28
Net income, year ended September 30, 1996                                         9,119                                       9,119
Balance at September 30, 1996                         152          60,526        39,687      (2,959)          (610)          96,796
                                                ===================================================================================

Stock issued under stock option plans,
  including tax benefits, 435 shares                    5           3,244                                                     3,249
Stock repurchase and retirement, 184 shares            (2)         (2,865)                                                   (2,867)
Conversion of 6 1/4% convertible subordinated
  debentures, 2,081 shares                             21          30,335                                                    30,356
Net income, year ended September 30, 1997                                        22,891                                      22,891
Balance at September 30, 1997                        $176         $91,240       $62,578     $(2,959)         $(610)        $150,425
                                                ===================================================================================
</TABLE> 

See notes to consolidated financial statements.

 

<PAGE>
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      (in thousands except per share amounts)



NOTE A - SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy: The accompanying consolidated financial statements include
the accounts of Systems & Computer Technology Corporation and its subsidiaries.
Intercompany items have been eliminated in consolidation.

Nature of Operations: The Company provides computing management services and
administrative client/server application software in the higher education, local
government, utilities, and manufacturing & distribution markets. In fiscal year
1997, approximately 45% of the Company's revenues was derived from the higher
education market, approximately 22% was derived from the local government
market, approximately 21% from the utility market, and approximately 12% was
derived from the manufacturing & distribution market. The principal markets for
the Company's offerings are in the U.S. In fiscal year 1997, the Company's
foreign operations represented approximately 7% of revenues and the Company's
export sales represented 4% of revenues.

Risks and Uncertainties: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Changes in the status of certain facts or
circumstances could result in material changes to the estimates used in
preparation of the financial statements and actual results could differ from the
estimates and assumptions used. 

     Credit risk with respect to trade accounts receivable is generally
diversified due to the large number of entities comprising the Company's
customer base. The Company establishes an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends, and other information.

Revenue Recognition: During the first several years of a typical OnSite services
contract, services are performed and expenses are incurred by the Company at a
greater rate than in the later years of the contract. Since billings usually
remain constant during the term of the contract, and revenue is recognized as
work is performed, revenues usually exceed billings in the early years of the
contract. The resulting excess is reflected on the Company's Consolidated
Balance Sheets as unbilled accounts receivable. As a contract proceeds, services
are performed and expenses are incurred at a diminishing rate, resulting in
billings exceeding revenue recognized, which causes a decrease in the unbilled
accounts receivable balance. Ninety-nine percent of the unbilled receivables at
September 30, 1997 resulting from OnSite services contracts will be billed
within the normal twelve-month business cycle, although additional unbilled
receivables will continue to build based on the terms of the contracts. These
contracts require estimates of periodic revenue earned and costs to be incurred
to deliver products or services and are subject to revision as work progresses.
Revisions in the estimates are reflected in operations in the period in which
facts requiring those revisions become known. 

     Certain contracts provide for reimbursement of expenses, which are
classified as a reduction of operating expenses in the accompanying financial
statements. 

     Certain of the Company's OnSite services contracts are subject to "fiscal
funding" clauses, which provide that, in the event of budgetary constraints, the
client is entitled to reduce the level of services to be provided by the Company
with a corresponding reduction in the fee to be paid by the client or, in
certain circumstances, to terminate the services altogether. Revenues are
recognized under such contracts only when the likelihood of cancellation is
considered by the Company to be remote.

     The Company recognizes revenue upon delivery of software, receipt of a
signed contractual obligation, and substantial payment due from the customer
within normal trade terms, if no significant vendor obligations remain.
Maintenance and enhancement agreements provide for telephone support and error
correction for current versions of licensed systems, as well as additions or
modifications to licensed systems if and when they become generally available.
Fees for maintenance and enhancements agreements are recognized ratably over the
term of the agreement. The Company's policy is to charge interest on or discount
unbilled software and services receivables not expected to be billed within one
year, which were approximately $1,375 and $1,000 at September 30, 1997 and 1996,
respectively. The Company classifies such receivables as current assets
consistent with its business cycle. The Company does not separately present the
cost of maintenance and enhancements revenues because it is impracticable to
separate such cost from the cost of software sales.

     The Company has "bundled" contracts, which include both OnSite management
services and software licenses. Because licensing of the software is not
dependent on continuation of the OnSite management services portion of the
contract, the software revenue is recognized upon delivery. The remainder of the
contract revenue is recorded consistent with other OnSite management services
contracts. 

     The Company provides software-related services, including systems
implementation and integration services. Services are generally provided under
time and materials contracts and revenue is recognized as the services are
provided. In some circumstances, services are provided under fixed-price
arrangements in which revenue is recognized on the percentage of completion
method. Revisions in estimates of costs to complete are reflected in operations
in the period in which facts requiring those revisions become known.

Cash Equivalents: Cash equivalents are defined as short-term, highly liquid
investments with a maturity of three months or less at the date of purchase.

Short-Term Investments: Effective October 1, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115). In accordance
with the provisions of SFAS 115, the Company classifies marketable equity
securities and debt securities as available-for-sale. At September 30, 1997 and
1996, the Company had no short-term investments.
<PAGE>
 
Long-Lived Assets: In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121). The statement, which was adopted by the Company on October 1, 1996,
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be sold or discarded. As the Company's accounting policies
prior to the adoption of SFAS 121 have provided for similar accounting
treatment, the effect of adoption was not material to the Company's financial
condition or results of operations.

     Equipment is depreciated over its estimated useful life, for periods
ranging from three to 10 years, using the straight-line method. Buildings and
related improvements are depreciated using the straight-line method, for periods
not to exceed 30 years.

     Cost in excess of fair value of net assets acquired is associated with
companies acquired. It is amortized over periods ranging between 15 and 20 years
using the straight-line method. In accordance with SFAS 121, the Company
periodically reviews the cost in excess of fair value of net assets acquired to
assess recoverability by comparing the carrying value to the undiscounted future
cash flows of the related assets. An impairment would be recognized in operating
results if a permanent diminution in value were to occur.

Capitalized Computer Software Costs: The Company capitalizes direct costs
associated with development of software for resale. Amortization of such
capitalized costs is the greater of the amount computed using (a) the ratio that
current gross revenues for a product bear to the total of current and
anticipated future gross revenues of that product or (b) the straight-line
method over the remaining estimated economic life of the product including the
period being reported on. Amortization begins when the product is available for
general release to customers.

Income per Share: Primary income per share is computed using the weighted
average number of common shares outstanding, plus, to the extent dilutive,
common stock equivalents. Fully diluted income per share is based on an
increased number of shares that would be outstanding assuming the exercise of
stock options when the Company's stock price at the end of the period is higher
than the average stock price within the respective period, plus to the extent
dilutive, the increased number of shares that would be outstanding, assuming
conversion of the 6 1/4% convertible subordinated debentures at the beginning of
the period presented. Net income used in the calculation of fully diluted income
per share in each period presented is adjusted for interest expense (net of tax)
on the convertible subordinated debentures. On May 9, 1997, the Company called
its 6 1/4% convertible subordinated debentures and all but $55 of the debentures
were converted into common stock. Subsequent to May 9, 1997, the weighted
average effect of the converted shares are included in primary income per share.
The fully diluted income per share calculation for the year ended September 30,
1995 did not include the anti-dilutive effect of the convertible subordinated
debentures.

Covenants-Not-To-Compete: These amounts are amortized using the straight-line
method over 60 months, their contractual lives, from their respective
acquisition dates.

Foreign Currency Translation: The functional currency is the local currency of
the Company's foreign subsidiary. Assets and liabilities of a foreign subsidiary
are translated into U.S. dollars at current exchange rates and resulting
translation adjustments are included as a separate component of stockholders'
equity. Revenue and expense accounts of these operations are translated at
average exchange rates prevailing during the year. Transaction gains and losses,
which were not material, are included in the results of operations of the period
in which they occur. As of September 30, 1997, the currency translation
adjustment was immaterial to the Company's consolidated financial statements.

New Accounting Standards: In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings Per Share" (SFAS 128), which is
effective for periods ending after December 15, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements primary
earnings per share will exclude the dilutive effect of stock options and fully
diluted earnings per share must include the dilutive effect of stock options
even if the dilutive effect is immaterial. The impact is expected to result in
an increase in primary earnings per share for the years ended September 30,
1997, 1996 and 1995 of $.10, $.03 and $.01 per share, respectively. The impact
of SFAS 128 on the calculation of fully diluted earnings per share for the year
ended September 30, 1997 is expected to result in an increase of $.06 and for
the years ended September 30, 1996 and 1995 is not expected to be material.

     In November 1997, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 97-2, "Software Revenue Recognition," which is
effective for fiscal years beginning after December 15, 1997. SOP 97-2
introduces a new framework whereby revenue would be recognized for each element
in a software licensing arrangement when certain criteria are met. The SOP
requires license fees to be allocated to the separate elements of multiple
element arrangements based on "vendor-specific objective evidence of fair value"
and provides guidance on postcontract customer support arrangements. The
adoption of SOP 97-2 is not expected to have a material impact on the Company's
results of operations or financial condition.


<PAGE>
 
Reclassifications: Certain prior year information has been reclassified to
conform with current year presentation.

NOTE B - ACQUISITIONS

In June 1995, the Company acquired Adage Systems International, Inc. (Adage), 
including all existing Adage software, technology and operations for 
consideration of 1,000 shares of common stock valued at approximately $10,900. 
At the time of the acquisition, these shares were not registered and could not 
be sold immediately; as a result, the valuation reflected a discount from the 
fair market value of the underlying shares.

     Under the terms of the purchase agreement, the Company may be required to 
pay additional consideration in either additional shares (up to 1,500 shares) of
common stock or a combination of additional shares of common stock and cash, in
the event that the market price of the common stock approximately five years
after the closing is lower than the base price. The base price may not be lower
than $15 or higher than $50, and will be determined pursuant to a formula tied
to the pretax profits of Adage during the five-year period commencing October 1,
1995. Certain future payments would result in an adjustment to the purchase
price. On October 17, 1996, the Company repurchased and subsequently retired 184
shares issued in the transaction for $2,867. As a result, the number of shares
subject to the terms of the additional consideration calculation has been
reduced. In conjunction with the acquisition, which was accounted for as a
purchase, the Company recorded a charge to operations of $8,700 for in-process
research and development at the time of the acquisition. In addition, the
Company charged approximately $2,000 to the cost of the acquisition for
incremental costs including professional fees and other costs directly related
to the acquisition. The cost in excess of fair value of net assets acquired is
being amortized over 15 years. The purchase price was allocated as follows:

<TABLE> 

<S>                                                          <C> 
Purchased software                                           $  2,800
Purchased research and development (a)                          8,700
Cost in excess of fair value of assets acquired                 3,018
Deferred taxes                                                 (1,039)
Net liabilities assumed                                          (596)
                                                             --------

Total purchase price                                         $ 12,883
                                                             ========
</TABLE> 

(a) Purchased research and development charged to expense at date of purchase,
represents the estimated fair value of specifically identified projects under 
development that did not meet the applicable accounting criteria for 
capitalization.


In December 1994, the Company acquired the IntelliSource Software Group, a 
division of the privately held Management Analysis Company. IntelliSource 
Software Group products serve the utility market. The Company will pay a 
purchase price of $1,200 in increments over a four-year period. Under the terms
of the purchase agreement, the Company may be required to make additional
payments contingent upon the performance of the IntelliSource Software Group
over a five-year period. At September 30, 1997, management does not anticipate
additional payments will be required.
   
The pro forma effect of these acquisitions on operations is immaterial.

NOTE C - PROPERTY AND EQUIPMENT

<TABLE> 
<CAPTION> 

September 30                                          1997             1996
----------------------------------------------------------         --------

<S>                                               <C>              <C> 
Land                                              $  1,377         $  1,316
Building                                            20,092           14,968
Computer equipment and
   software                                         27,209           20,030
Other equipment, furniture, 
   fixtures and building 
   improvements                                     20,099           20,896
                                                  --------         --------

                                                    68,777           57,210


Less accumulated depreciation                       28,067           21,988
                                                  --------         --------

                                                  $ 40,710         $ 35,222
                                                  ========         ========
</TABLE> 


Depreciation expense for the years ended September 30, 1997, 1996 and 1995 was 
$6,349, $5,317 and $3,832, respectively.


NOTE D - OTHER ASSETS AND DEFERRED CHARGES

<TABLE> 
<CAPTION> 

September 30                                          1997             1996
----------------------------------------------------------         --------

<S>                                               <C>              <C> 
Deferred costs and sales
   commissions related to
   OnSite services contracts
   in progress (a) (b)                            $  3,528         $  2,788
Purchased software (b) (c)                           1,725            2,918
Deferred debt issuance expenses (b) (d)                  -            1,011
Covenants-not-to-compete (b)                           157              779
Other                                                1,471            1,619
                                                  --------         --------

                                                  $  6,881         $  9,115
                                                  ========         ========
</TABLE> 


(a)  Amortized over the remaining term of the OnSite services contract.
(b)  Shown net of accumulated amortization.
(c)  Includes software received as part of business acquisitions.
(d)  Amortized over the term of the related debt. During fiscal year 1997, the
6 1/4% subordinated debentures were called by the Company and all but $55 were 
converted into common stock (Note E). Accordingly, the remaining unmortized debt
issuance costs were reflected as a reduction of capital in excess of par value.



<PAGE>
 

NOTE E - LONG-TERM DEBT

<TABLE> 
<CAPTION> 
September 30                                       1997             1996
-------------------------------------------------------        ---------
<S>                                           <C>              <C> 

Financing agreement                              $1,799          $     -
Promissory note issued in connection
   with the repurchase of Company stock           1,500                -
Promissory note issued in connection
   with the IntelliSource Software
   acquisition                                      475              515
6 1/4% convertible subordinated
   debentures, due 2003                               -           31,275
                                             ----------        ---------

Total long-term debt                              3,774           31,790
Less current portion                              1,225              200
                                             ----------        ---------

Long-term debt, net of current portion           $2,549          $31,590
                                             ==========        =========
</TABLE> 

Aggregate annual maturities of long-term debt, including interest, are as
follows: 1998 - $1,225, 1999 - $1,020, 2000 - $360, 2001 - $360, and thereafter
- $809.

     In April 1997, the Company increased its senior revolving credit agreement
from $20,000 to $30,000. The credit agreement terminates in June 1999 with
optional annual renewals. There were no borrowings outstanding at September 30,
1997 or 1996. During the fiscal year ended September 30, 1997, the Company made
$7,700 in borrowings. The interest rate under the agreement is based on one of
three formulae - one tied to the prime rate of the lender, one at a rate offered
by the bank and another tied to the London Interbank Offered Rate (LIBOR). The
weighted average interest rate on borrowings outstanding during 1997 was 6.17%.
The commitment fee on the unused funds available for borrowing under the
agreement is 5/16%. The Company has the right to permanently terminate the
unused portion of the revolving commitment. As long as there are borrowings
outstanding, and as a condition precedent to new borrowings, the Company must
comply with certain covenants. Under the covenants, the Company is required to
maintain certain financial ratios and other financial conditions. The covenants
were amended in 1997 to allow the Company to pay non-stock dividends, repurchase
capital stock, and make distributions of assets to shareholders as long as the
aggregate amount does not exceed $5,000 in any fiscal year.

     In August 1997, the Company entered into a $4,000 financing agreement in
connection with an OnSite services contract. At September 30, 1997, the Company
had $1,799 drawn on the agreement. The agreement provides for the Company to use
the balance in pre-determined increments by December 1998, at which time the
outstanding amount will be paid down in 60 equal monthly installments.

     In October 1996, the Company signed a promissory note for $1,500 in
connection with the repurchase and retirement of shares originally issued in
connection with the acquisition of Adage (Note B). The note will be paid in two
installments commencing on the first anniversary date.

     The Company signed a promissory note on December 7, 1994 in connection with
the acquisition of the IntelliSource Software Group, with an original face
amount of $800. The note payments commenced on the first anniversary date and
continue on each of the following three anniversaries until the note is paid in
full. Interest is accreted over the life of the note.

     In September 1993, the Company issued $34,500 of convertible subordinated
debentures bearing interest at 6 1/4% and maturing on September 1, 2003. The
debentures were convertible into common stock of the Company at any time prior
to redemption or maturity at a conversion price of $15 per share. During the
fiscal year ended September 30, 1995, $3,225 of the convertible subordinated
debentures were converted into 215 shares of common stock of the Company. On
April 9, 1997, the Company announced that it called for redemption all of its
outstanding 6 1/4% convertible subordinated debentures. The redemption date was
May 9, 1997. During fiscal year 1997, 2,081 shares were issued related to the
conversion of all but $55 of the remaining convertible subordinated debentures,
of which 1,816 shares were issued on the redemption date. Had the 2,081
converted shares been outstanding for the full year ended September 30, 1997,
primary earnings per share would have decreased by $.09 to $1.34. The Company
redeemed bonds not converted with a principal, accrued interest, and premium
amount of $58.
<PAGE>

     On October 22, 1997, the Company issued $65,000 of convertible subordinated
debentures bearing interest at 5% and maturing on October 15, 2004. On November
6, 1997, pursuant to an underwriters' option, the Company issued an additional
$9,750 of convertible debentures. The debentures are convertible into common
stock of the Company at any time prior to redemption or maturity at a conversion
price of $52.75 per share, subject to change as defined in the Trust Indenture.
The debentures are redeemable at any time after October 15, 2000 at prices
decreasing from 102.5% of the principal amount to par on October 15, 2003.

     Interest paid on the convertible subordinated debentures and the revolving
credit agreement during the years ended September 30, 1997, 1996, and 1995 was
$904, $2,183, and $2,093, respectively.
 
NOTE F - BENEFIT PLANS

Stock Option Plans: The Company has stock option plans for the benefit of its
key employees and non-employee directors that provide for the grant of options
to purchase the Company's common stock at not less than the fair market value on
the date of the grant.

     The Company's 1994 Long-Term Incentive Plan provides for the issuance of
stock options, stock appreciation rights, restricted stock, and other long-term
performance awards. At September 30, 1997, only stock options have been issued
pursuant to the plan.

     There were 585 shares of common stock reserved for future grants under the
stock option plans at September 30, 1997. The outstanding stock options expire
on various dates through 2007. Options granted to employees have 10-year terms
and vest and become fully exercisable at the end of three years of continued
employment. There are 885 options granted to senior management which have six-
year terms and vest and become exercisable when certain performance conditions
are met. At September 30, 1997 none of these options were exercisable. In
addition, 90 options granted to non-employee directors, of which 36 are
exercisable at September 30, 1997, have six-year terms and vest and become fully
exercisable in five years.

     In October 1995, the Financial Accounting Standards Board issued FASB
Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). This
statement requires that companies with stock-based compensation plans either
recognize compensation expense based on new fair value accounting methods or
continue to apply the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and disclose pro forma net
income and earnings per share assuming the fair value method had been applied.

     The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options and make the pro forma disclosures
required by SFAS 123. The following pro forma amounts were determined as if the
Company had accounted for its stock options using the fair value method as
described in that statement:

<TABLE> 
<CAPTION> 
Year Ended September 30                            1997             1996
------------------------------------------------------- 
<S>                                           <C>              <C> 
As Reported:
Net income                                      $22,891           $9,119
Primary income per share                           1.43             0.62
Fully Diluted income per share                     1.31             0.61

Pro Forma:
Net income                                      $22,462           $8,950
Primary income per share                           1.41             0.61
Fully Diluted income per share                     1.29             0.61
</TABLE> 


Because the method of accounting under SFAS 123 has not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

     The fair value of stock options granted was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996, respectively: risk-free interest rates of 6.0%
and 5.6%; dividend yields of 0%; volatility factors of the expected market price
of the Company's common stock of 47.1% and 45.1%; and a weighted-average
expected life of an option of four years.


<PAGE>
 
A summary of the Company's stock option activity, and related information for
the years ended September 30, follows:

<TABLE> 
<CAPTION> 
                                   -----------------------------
                                                            1997                              1996                              1995
                                   -----------------------------     -----------------------------     -----------------------------

                                                       Weighted-                         Weighted-                         Weighted-
                                                         Average                           Average                           Average
                                           Shares Exercise Price             Shares Exercise Price             Shares Exercise Price
------------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>      <C>                      <C>      <C>                      <C>      <C> 

Outstanding at beginning of year          2,600           $13.81            2,596           $13.47            2,599           $11.15
Granted                                     274            14.64              160            17.12              530            20.77
Exercised                                  (435)            7.01              (65)            4.60             (364)            5.69
Canceled                                   (148)           15.98              (91)           18.14             (169)           18.06
                                   -----------------------------     -----------------------------     -----------------------------

                                       
Outstanding at end of year                2,291           $15.14            2,600           $13.81            2,596           $13.47
                                   =============================     =============================     =============================


Options exercisable at year end             968           $10.35            1,220           $ 7.91            1,047           $ 6.01


Weighted-average fair value of options
   granted during the year               $ 6.40                            $ 7.19
</TABLE> 

The following table summarizes information about stock options outstanding and
exercisable at September 30, 1997:

<TABLE> 
<CAPTION> 
                                         Outstanding           Exercisable      
                                --------------------     -----------------      
                                Weighted-                                       
                                  Average  Weighted-             Weighted-      
                                Remaining    Average               Average      
Range of                      Contractual   Exercise              Exercise      
Exercise Prices       Shares  Life (yrs.)      Price     Shares      Price 
--------------------------------------------------------------------------
<S>                   <C>     <C>          <C>           <C>     <C> 
$  2.63 - $ 13.50        822       4.58     $ 7.71          594     $ 5.48   
  14.00 -   19.38      1,046       3.94      18.50          281      16.99   
  19.75 -   33.19        423       5.72      21.30           93      21.37    
--------------------------------------------------      ------------------
$  2.63 -   33.19      2,291       4.50     $15.14          968     $10.35
</TABLE> 

Employee Stock Ownership Plan: The Company has a noncontributory Employee Stock
Ownership Plan (ESOP) covering eligible employees. The ESOP provides for the
Employee Stock Ownership Trust (ESOT) to distribute shares of the Company's
common stock as retirement and/or other benefits to the participants. The
Company discontinued its contributions to the ESOT subsequent to the 1986 plan
year. In accordance with the terms of the ESOP, the total amounts then allocated
to the accounts of the participants immediately vested. As of September 30, 1997
there were 1,030 shares held by the ESOT.

Restricted Stock Plans: The Company had an Employees' Restricted Stock Purchase
Plan, which has been terminated, pursuant to which shares of the Company's
common stock were sold to key employees at 40% of the fair market value of
unrestricted shares on the date of sale. The shares are restricted, and may not
be sold, transferred, or assigned other than by an exchange with the Company for
a number of shares of common stock not so restricted, to be determined by a
formula. The formula reduces the number of unrestricted shares to be exchanged
to give effect to the 60% reduction from fair market value of shares not so
restricted. Certain of the shares sold are subject to the Company's option to
repurchase a fixed percentage of the shares during a specified period at the
employee's purchase price plus 10% a year from the date of purchase in the event
of certain terminations of employment. As of September 30, 1997, there were 81
restricted shares sold but not exchanged for unrestricted shares.

     The Company has a 1985 Restricted Stock Incentive Plan, which expired on
June 30, 1995. Under the plan, shares were awarded to key persons and are
restricted with the effect that, for the term of the restrictions, the recipient
may not sell, assign, transfer or otherwise hypothecate any of the shares.
Restricted stock awards under the 1985 plan vested to the recipients over a
number of years, in equal annual installments as determined by the Compensation
Committee of the Board of Directors, and were recorded at the fair market value
of the shares on the date of the award as unearned compensation. The unearned
compensation was charged to operations ratably over the vesting period. Under
the plan, 605 shares were issued. At September 30, 1997 all shares were vested.

Savings Plan: The Company also provides a defined contribution 401(k) plan to
substantially all its U.S. employees whereby the Company may make matching
contributions equal to a percentage of the contribution made by participants.
One half of the Company's contributions are used to buy shares of the Company's
common stock. Expenses under this plan for the years ended September 30, 1997,
1996, and 1995 were $2,253, $1,835, and $1,432, respectively.
<PAGE>
 
NOTE G - INCOME TAXES

The components of the provision for income taxes are as follows:

<TABLE> 
<CAPTION> 
Year ended September 30                     1997            1996            1995
------------------------------------------------     -----------     -----------
<S>                                     <C>          <C>             <C>    
Current:

Federal                                  $13,090          $4,592          $4,059

State                                      3,687           1,957           1,974

Foreign                                        -            (405)            152
                                        --------        --------        --------
Total Current                             16,777           6,144           6,185

Deferred                                  (1,051)            740           1,073
                                        --------        --------        --------

                                         $15,726          $6,884          $7,258
                                        ========        ========        ========
</TABLE> 

A reconciliation of the provision for income taxes to the federal statutory rate
follows:

<TABLE> 
<CAPTION> 
Year ended September 30                     1997            1996            1995
------------------------------------------------     -----------     -----------
<S>                                     <C>          <C>             <C>    
Expected federal tax rate                  35.0%           35.0%           35.0%
Adjustments due to:
  Effect of state income tax                7.4%            6.1%           12.4%
  Purchased research
    and development                           --              --           29.5%
  Foreign net operating
    loss not benefited                        --            2.2%              --
  Research and
    development tax credit                 (3.1)%         (2.3%)          (7.3)%
  Other                                      1.4%           2.0%            0.8%
                                        ---------      ---------       ---------

                                            40.7%          43.0%           70.4%
                                        =========      =========       =========
</TABLE> 

The fiscal year 1995 provision for income taxes does not reflect the customary
relationship between income and tax expense principally due to the write-off of
purchased research and development, which is not deductible for income tax
purposes. The effective tax rate would have been 38% without the write-off of
purchased research and development. The rate was further affected by the
expiration of the research and development tax credit as of June 30, 1995. The
purchased research and development write-off has an impact on both the state
effective tax rate and the relationship between income and the effect of the
research and development tax credit.

     At September 30, 1997, the Company has $29.3 million of tax loss
carryforwards in various state and foreign jurisdictions. The state tax loss
carryforwards expire in various periods ending September 30, 2011. The foreign
tax losses have indefinite carryforwards. At September 30, 1997 and 1996, the
Company has a valuation allowance of $1,258 and $1,048, respectively, with
respect to the deferred tax assets related to the state and foreign
carryforwards.


<PAGE>
 
     Income taxes paid during fiscal years ended September 30, 1997, 1996 and
1995 were $6,500, $6,029 and $9,921, respectively.

     The tax effects of the temporary differences that give rise to the
significant portions of the deferred tax assets and liabilities as of September
30, 1997 and 1996 are as follows:

<TABLE> 
<CAPTION> 

September 30                                                   1997        1996
-------------------------------------------------------------------     -------
<S>                                                          <C>        <C> 
Deferred Tax Assets:
Purchased research and development
    (1992 acquisition)                                      $ 1,960     $ 2,163
Accrued expenses and reserves                                 2,941       1,573
Tax loss carryforwards, net of
   valuation allowance                                        1,826         417
Purchased software                                              393           4
                                                            -------     ------- 
Total Deferred Tax Assets                                     7,120       4,157

Deferred Tax Liabilities:
Depreciation and amortization                                (1,820)       (948)
Software capitalization                                      (5,983)     (4,146)
Prepaids and other accelerated expenses                        (629)     (1,400)
Purchased software                                               --         (10)
                                                            -------     ------- 

Total Deferred Tax Liabilities                               (8,432)     (6,504)
                                                            -------     ------- 

Net Deferred Tax Liability                                  $(1,312)    $(2,347)
                                                            =======     =======
</TABLE> 

NOTE H - PRODUCT DEVELOPMENT, COMMITMENTS,
AND OTHER ITEMS

Product development expenditures, including software maintenance expenditures,
for the years ended September 30, 1997, 1996, and 1995, were approximately
$25,941, $21,247, and $12,856, respectively. After capitalization (Note A) these
amounts were approximately $18,434, $14,811, and $9,472, respectively, and were
charged to operations as incurred. For the same years, amortization of
capitalized software costs amounted to $2,850, $1,458, and $871, respectively.

     Rent expense for the years ended September 30, 1997, 1996, and 1995 was
$3,425, $2,909, and $2,043, respectively. Aggregate rentals payable under
significant non-cancelable lease agreements with initial terms of one year or
more at September 30, 1997, are as follows:

<TABLE> 
<CAPTION> 

Fiscal year                                      Amount
-------------------------------------------------------
<S>                                             <C> 
1998                                            $ 3,339
1999                                              3,331
2000                                              2,920
2001                                              2,339
2002                                              1,679
thereafter                                        8,425
                                                -------

                                                 22,033
                                                =======
</TABLE> 


<PAGE>
 
NOTE I - LEGAL MATTERS

On October 4, 1995, John J. Wallace filed a purported class action lawsuit in
the United States District Court for the Eastern District of Pennsylvania
against the Company; Michael J. Emmi, Chairman of the Board, President and Chief
Executive Officer of the Company; Michael D. Chamberlain, Senior Vice President
and a director of the Company; and Eric Haskell, Senior Vice President, Finance
and Administration, Treasurer and Chief Financial Officer of the Company. The
plaintiff filed an amended complaint on November 28, 1995 and a second amended
complaint on February 3, 1997. The class period alleged is from June 5, 1995
through October 2, 1995. The second amended complaint sought damages in
unspecified amounts as well as equitable relief.

     In September 1997, the Company's Motion to Dismiss the second amended
complaint was granted in part and denied in part, and plaintiff was permitted to
pursue a claim that defendants violated section 10(b) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder to the extent that it alleges
a failure to make certain disclosures in the Company's Form 10-Q for the third
quarter of fiscal 1995. On December 3, 1997, the Court approved a Stipulation of
Dismissal and Entry of Final Judgment filed by the parties pursuant to which all
remaining claims were dismissed with prejudice and the Court entered a final
judgment as to all claims in the action. The Company anticipates that the
plaintiff will file an appeal with respect to those claims which were dismissed
pursuant to the Company's Motions to Dismiss. Management believes any appeal
would be without merit and intends to vigorously contest an appeal. While
management, based on its investigation to date, believes that resolution of this
action will not have a materially adverse effect on the Company's consolidated
financial position, the ultimate outcome of this matter cannot presently be
determined.

NOTE J - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for the years
ended September 30, 1997 and 1996:

<TABLE>     
<CAPTION> 
                                                December 31,              March 31,                June 30,           September 30,
                                      ----------------------   --------------------    --------------------      ------------------
Three Months Ended                         1996         1995       1997       *1996        1997        1996          1997    **1996
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>        <C>         <C>         <C>         <C>           <C>       <C> 
Revenues                              $  60,532     $ 47,819   $ 67,385    $ 52,756    $ 75,094    $ 56,316      $ 87,035  $ 58,367
Gross Profits                            22,293       16,580     24,787      15,713      29,122      18,849        35,070    20,443
Income before income taxes                6,003        3,873      7,743       1,366      10,675       5,109        14,196     5,655
Provision for income taxes                2,461        1,610      3,175         600       4,270       2,197         5,820     2,477
Net income                            $   3,542     $  2,263   $  4,568    $    766    $  6,405    $  2,912      $  8,376  $  3,178
Primary net income per share          $    0.24     $   0.15   $   0.31    $   0.05    $   0.39    $   0.19      $   0.47  $   0.22
Fully diluted net income per share    $    0.23     $   0.15   $   0.29    $   0.05    $   0.37    $   0.19      $   0.47  $   0.21
                                      ======================   ====================    ====================      ==================
</TABLE>      

 *Includes a charge of $1,250 for a contract loss provision.
**Includes a change in estimate primarily to reduce accrued employee benefits by
  $750.
  Certain quarterly information has been reclassified to conform to the
  September 30, 1997 classification.



<PAGE>
 
Report of Independent Auditors

The Board of Directors and Stockholders
Systems & Computer Technology Corporation

     We have audited the accompanying consolidated balance sheets of Systems & 
Computer Technology Corporation as of September 30, 1997 and 1996, and the 
related consolidated statements of operations, stockholders' equity, and cash 
flows for each of the three years in the period ended September 30, 1997. Our 
audits also included the financial statement schedule listed in the Index at 
Item 14(a). These financial statements and schedule are the responsibility of 
the Company's management. Our responsibility is to express an opinion on these 
financial statements and schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing 
standards. Those standards 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. An audit also includes 
assessing the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly, 
in all material respects, the consolidated financial position of Systems & 
Computer Technology Corporation at September 30, 1997 and 1996, and the 
consolidated results of its operations and its cash flows for each of the three 
years in the period ended September 30, 1997, in conformity with generally 
accepted accounting principles. Also, in our opinion, the related financial 
statement schedule, when considered in relation to the basic financial 
statements taken as a whole, presents fairly in all material respects the 
information set forth therein.

/s/ Ernst & Young LLP

Philadelphia, Pennsylvania
October 24, 1997, except for 
  Note I, as to which the date
  is December 3, 1997