<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    Form 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2001

                                       OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________

                          Commission file number 1-7516

                                   KEANE, INC
                                   ----------
             (Exact Name of Registrant as Specified in Its Charter)

Massachusetts                                             04-2437166
-------------                                             ----------
(State or Other Jurisdiction                              (I.R.S. Employer
of Incorporation or Organization)                         Identification Number)

Ten City Square, Boston, Massachusetts                    02129
--------------------------------------                    -----
(Address of Principal Executive Offices)                  (Zip Code)

Registrant's telephone number, including area code: (617) 241-9200
                                                    --------------

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

Title of Each Class                    Name of Each Exchange on Which Registered
-------------------                    -----------------------------------------
Common Stock, $.10 par value           American Stock Exchange

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

-----

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

The aggregate market value of the Common Stock held by nonaffiliates of the
registrant, based on the last sale price of the Common Stock on the AMEX on
March 8, 2002, was $1,019,651,000. As of March 8, 2002, 75,475,071 shares of
Common Stock, $.10 par value per share, and 284,891 shares of Class B Common
Stock, $.10 par value per share, were issued and outstanding.

Documents Incorporated by Reference. The Registrant intends to file a definitive
proxy statement pursuant to Regulation 14A, promulgated under the Securities
Exchange Act of 1934, as amended, to be used in connection with the Registrant's
Annual Meeting of Stockholders to be held on May 29, 2002. The information
required in response to Items 10-13 of Part III of this Form 10-K is hereby
incorporated by reference to such proxy statement.


                                       1

<PAGE>

PART I
------

ITEM 1.              BUSINESS

OVERVIEW

Keane, Inc. (collectively with its subsidiaries, "Keane" or "the Company,"
unless the context requires otherwise) is a leading provider of information
technology (IT) and business consulting services. In business since 1965, the
Company helps clients optimize business performance through the innovative use
and management of information technology. Keane's clients consist primarily of
Global 2000 companies across every major industry, healthcare organizations, and
government agencies. Keane provides its services through an extensive network of
local branch offices in North America and in the United Kingdom, and through
Advanced Development Centers in the United States, Canada, and India. This
integrated client service model enables Keane to deliver services to customers
on-site, off-site, at its near-shore facilities in Canada and through its
offshore development centers in India. Branch offices work in conjunction with
the Company's business consulting arm, Keane Consulting Group, and are supported
by centralized Strategic Practices and Quality Assurance Groups. The Company
develops a high percentage of recurring revenue as a result of its multi-year
outsourcing contracts, broad range of service offerings, and track record of
delivering quality IT solutions consistently and reliably.

Keane seeks to improve its cash position by marketing services that encourage
long-term relationships with customers. The Company rigorously manages its
internal investments and looks to gain economies of scale by enhancing critical
mass to increase revenues in order to decrease Selling, General, &
Administrative ("SG&A") expenses as a percentage of revenue. The Company also
attempts to continuously improve and accelerate the collection of its
receivables. The Company had $129.2 million in cash and investments at the end
of 2001 after the payment of approximately $73.1 million of cash related to
Keane's acquisition of Metro Information Services, Inc. on November 30, 2001.

Keane is a Massachusetts corporation headquartered in Boston. Its common stock
is traded on the American Stock Exchange under the symbol KEA. Information on
Keane can be accessed on the Company's web site at www.keane.com or through its
Investor Relations line at 1-800-75-KEANE.

SERVICES

Keane offers a full range of services that span the full Plan, Build and Manage
life cycle. Specifically, Keane focuses on three highly synergistic service
offerings: Business Consulting, Application Development & Integration (ADI), and
Application Development and Management (ADM) Outsourcing, which is Keane's
flagship service offering. Business Consulting revenue is reported within the
Company's Plan sector. ADI revenue is reported in the Build sector. As part of
its Build services, the Company also provides a full-line of healthcare
information systems and related IT consulting and IT integration services for
healthcare organizations. ADM Outsourcing revenue is reported in the Company's
Manage sector. Keane believes its broad range of services position it as a
strategic partner to clients, enabling it to identify and implement
comprehensive solutions that meet clients' specific business requirements.

Business Consulting (Plan services)

Keane's management consulting services represent a critical component in the
Company's ability to help clients optimize their businesses for today's economy.
The Company provides its business consulting services through Keane Consulting
Group (KCG), the Company's business and management consulting arm. A recent
study by International Data Corporation (IDC), an independent research firm,
forecasts that the worldwide market for business consulting services is expected
to grow at a compounded annual growth rate of 11% through 2005. KCG helps
companies to maximize productivity, increase revenue, reduce costs, and create
capacity for future growth by identifying high-value business opportunities and
providing clients with both strategy and implementation services. KCG delivers
its services by taking a holistic view of business processes, organizational
design and technology architecture. Its operations improvement services can be
divided into three core competency areas: insurance and financial services,
manufacturing and distribution, and technology services. Typical client
engagements include: assisting with the integration of mergers and acquisitions,
streamlining customer operations, optimizing supply chains, enhancing
customer-facing processes, and aligning IT and business strategies. KCG helps
Keane develop strong relationships with senior executives and other
decision-makers. In addition, consulting engagements often lead to follow-on IT
projects as clients rely on Keane to support an idea from its genesis through
implementation and eventual management.


                                       2

<PAGE>

Application Development & Integration (Build services)

In an increasingly global, networked and information-based economy, application
software is becoming more complex, requiring tighter and more sophisticated
integration between front-end and back-end systems to enhance access to critical
corporate data, enable high-value process improvements, and enhance customer
service. As a result, Keane focuses its project-based Application Development
and Integration (ADI) business on the rapidly growing Enterprise Application
Integration (EAI), supply chain, and customer service areas. A recent study by
IDC forecasts that the worldwide market for systems integration services is
expected to grow at a compounded annual growth rate of 15% through 2005. As a
firm with broad-based expertise across the full spectrum of technical
requirements, Keane has become a top-tier provider of large, complex software
development and integration projects for Global 2000 companies. The Company also
provides ADI services for the public sector, which includes agencies within the
U.S. Federal government, various states and other local government entities.
Revenue from public sector business represented approximately 16.5% of Keane's
total revenue in the year 2001. Typical client engagements include the
development of software to create an integrated supply or value chain, the
implementation of an enterprise Customer Relationship Management (CRM) solution
and its integration with an Enterprise Resource Planning (ERP) system, and the
design and implementation of an integrated online state vehicle registration and
motor carrier services system.

Keane believes that it is well positioned to capture large-scale, ADI projects
from both the commercial and public sector markets due to its core competencies
in project and program management, IT architecture, advanced application
development, and legacy system integration. The Company anticipates that these
competencies, together with its long-term relationships with Global 2000
companies, will enable it to benefit from an economic recovery and an increase
in spending on information technology.

Application Development and Management (ADM) Outsourcing (Manage services)

The need to manage critical business applications continues to expand rapidly as
companies add systems to their application portfolios. Given the need to focus
on core competencies and a growing dependence on information technology,
maximizing return on investment from existing application portfolios has become
a critical objective of many organizations. As a result, Global 2000 companies
are turning to best-of-breed outsourcing as an effective solution for building
and supporting their IT systems better, faster, and more cost-effectively.
According to IDC, the market for application outsourcing is expected to grow at
a compounded annual growth rate of 29% through 2005.

Keane's ADM Outsourcing service helps clients manage existing business systems
more efficiently and more reliably, improving the performance of these
applications while better controlling costs. Under this service offering, Keane
assumes responsibility for the management of a client's business applications
with goals of: instituting operational efficiencies that provide cost savings
over current operations; implementing improvements that reduce time-to-market
and enhance flexibility in responding to changing business needs; freeing
personnel resources and management attention for other strategic priorities; and
achieving higher user satisfaction. Some outsourcing engagements include the
hiring of a client's IT personnel as part of the agreement. In these instances,
Keane trains client staff in its proprietary methodologies and processes to work
on the client outsourcing engagement.

Keane seeks to obtain competitive advantages in the ADM Outsourcing market by
generating measurable client benefit, using world class methodologies,
referencing its Global 2000 client base, and emphasizing its continuous process
improvement and seamless client service delivery model. On March 15, 2002, Keane
acquired SignalTree Solutions, a U.S.-based corporation with two development
facilities in India. The addition of SignalTree's delivery capability expanded
Keane's flexible delivery model to include two offshore software development
centers in India. Since the benefit that Keane seeks to provide its customers is
based on management and process improvements, the Company's ADM Outsourcing
business spans multiple vertical industries and includes a broad range of
technologies.

The effectiveness of Keane's ADM Outsourcing capability is demonstrated by the
fact that 37 of its outsourcing engagements have been independently assessed at
Level 3 or 4 on the Software Engineering Institute's (SEI) Capability Maturity
Model (CMM). In addition, SignalTree's technology centers in Hyderabad and Delhi
are independently evaluated at Level 5 on the SEI CMM and comply with ISO 9001
standards. The SEI CMM has five levels of process maturity, and many IT
organizations typically operate at Level 1, the lowest level of maturity. Since
1997, Keane has used the SEI CMM as a standard for objectively measuring its
success in improving its client's application management environment. The SEI
CMM has become the industry's standard method for evaluating the effectiveness
of an IT environment and the process maturity of outsourcing vendors.


                                       3

<PAGE>

ADM outsourcing provides Keane with large client engagements that usually span
three-to-five years in duration. In addition, outsourcing projects typically
supply Keane with contractually-obligated recurring revenue, and with an
incumbent position from which to cross-sell other solutions. The Company has
observed historically that consistently providing measurable business value
within an existing client account strongly positions it to win additional
outsourcing engagements and development and integration projects.

Healthcare Solutions

Keane's Healthcare Solutions Division (HSD) develops and markets a complete line
of patient management, financial management, clinical, long-term care and
practice management systems for healthcare organizations, as well as related IT
consulting and IT integration services. Keane helps healthcare organizations
overcome the challenge of providing higher quality patient care while
administering more efficient operations through the use of information
technology. In addition, Keane's broad range of services help healthcare clients
address ongoing Health Insurance Portability and Accountability Act (HIPAA)
requirements. HIPAA is Federal legislation designed to improve efficiency in the
national healthcare system and protect the privacy of health information. It is
expected to have far-reaching implications on the healthcare industry's IT
infrastructure and business operations. HSD revenues are currently reported
under Keane's ADI (Build) business line.

STRATEGY/DISTINCTIVE CAPABILITIES

Keane's mission is to help companies optimize business performance through the
innovative use and management of information technology (IT). In addition, Keane
aligns its internal focus, measurement processes, and compensation systems to
promote the consistent generation of long-term shareholder value. The Company's
vision is to be recognized as one of the world's great IT services firms by its
customers, employees, and shareholders. Keane seeks to accomplish this objective
by providing high quality and effective IT solutions for its customers. The
Company endeavors to create a positive and supportive work environment for its
employees to foster creativity, teamwork, and individual excellence.

Distinctive capabilities that enable Keane to deliver value to its customers,
and to reach its financial milestones, include a relentless focus on processes
improvement, mature competencies in project and program management, consistent
use of methodologies, a strong quality assurance function, and a seamless client
service delivery model. This model currently includes providing services to
customers on-site at a client's facility, off-site at a separate location,
near-shore at Keane's Advanced Development Center in Canada, and offshore at one
of the Company's two Software Development Centers in India. The Company believes
that the benefits of its seamless delivery model include: the use of common
processes, management, and metrics to improve predictability; a single point of
contact to enhance accountability; the flexibility to move and balance workload
based on business need; and the ability to optimize economic benefit. The
Company continues to invest in its delivery model and competencies in order to
add value to its strategic service offerings and to further strengthen its
capabilities.

Keane's goal is to leverage its core competencies and financial capabilities to
gain market share and competitive strength as well as to increase shareholder
value during the current economic downturn, and to strongly position itself to
take advantage of future increases in IT spending. As a result, the Company has
intensified its internal focus to strengthen the differentiation and market
position of its ADM Outsourcing services. In addition, the Company has
concentrated its Business Consulting and Application Development and Integration
(ADI) services within market segments where it believes demand for such services
will increase in the event of an economic recovery. To enhance its efforts, the
Company is seeking to acquire other IT services firms, at what it considers
favorable purchase prices, in order to increase its critical mass and obtain
additional customers to which it can cross-sell its services.

Business Model

Keane remains focused on its core strengths and follows a business model that is
intended to help the Company achieve sustainable growth. This business model
includes five major elements: recurring revenue, critical mass, operational
excellence, synergy across business units and repeatable solutions. The
combination of these elements helps Keane to mitigate short-term fluctuations in
the IT services market and generate significant long-term per share value.

1.    Recurring Revenue - Keane believes the most important ingredient for
      long-term success in the IT services industry is recurring revenue. The
      Company seeks to build recurring revenue through a combination of services
      provided over multi-year contracts and close customer relationships. The
      Company attempts to increase contractually obligated recurring revenue
      with its ADM Outsourcing service, through which Keane


                                       4

<PAGE>

      typically manages and enhances applications under three-to-five year
      contracts. These contracts provide Keane with significant opportunities
      for expansion and add-on business, while the Company's broad range of
      Plan, Build, and Manage services enables cross-selling opportunities.
      Keane's local branch presence allows the Company to gain a high degree of
      customer intimacy and an understanding of customers' evolving needs,
      providing a ready market for new services. Keane earns customer loyalty by
      providing concrete and measurable business value through the consistent,
      high quality delivery of its services.

2.    Critical Mass - Critical mass is essential for gaining market and
      financial leverage. Increasing critical mass drives down SG&A cost as a
      percentage of revenue, allows depth and breadth of capabilities, and
      builds market presence and mind share to support sales and recruiting
      efforts. Keane's strategy to achieve critical mass is to concentrate on
      business lines and geographic markets where the Company has or can
      establish leadership. These business lines are Business Consulting,
      Application Development & Integration, and ADM Outsourcing. Keane plans to
      focus on geographic markets within North America and Western Europe and
      strives to achieve significant market share in those markets through
      organic growth, supplemented by acquisitions.

3.    Operational Excellence - Already a recognized leader in providing cost
      effective and predictable delivery of services to clients, Keane is
      committed to operational excellence and continuous process improvement in
      all of its functions. Being efficient enables Keane to offer its customers
      high value services at competitive rates without compromising the
      Company's performance margins. Keane achieves operational excellence
      through critical mass, lower travel costs due to its local branch
      presence, process improvements, high utilization of staff, and its
      flexible and integrated client service delivery model. Keane's dedication
      to continuous process improvement is demonstrated through investments in
      measurement programs and the creation of the Keane Center for Excellence
      focused on quality and efficiency enhancements. Operational efficiency
      enables Keane to maintain profitability regardless of macro-economic
      conditions.

4.    Synergy Across Business Units - As a services company dedicated to turning
      customer technology challenges into business opportunities, it is
      imperative that Keane share resources and organizational experience. No
      single business unit can have all of the necessary talent and knowledge to
      meet every possible challenge. Keane strives to be a boundaryless
      organization serving its customers through a local relationship while
      providing access to the best solutions and resources across the Company.
      Keane seeks to accomplish this goal through knowledge management processes
      and systems, methodologies, comprehensive training programs, and strategic
      practices. The responsibilities of strategic practices include collecting,
      refining, and disseminating Keane's intellectual capital through the
      identification of best practices and the development of world-class
      methodologies. These practices enable Keane's branch offices to better
      sell and deliver the Company's business solutions.

5.    Repeatable Solutions - Well-defined, repeatable solutions enable Keane to
      leverage its extensive distribution channel and address widespread market
      needs. Based on extensive organizational experience, Keane's solutions are
      process intensive and backed by well defined methodologies and management
      disciplines. When combined with a strong project management capability,
      these characteristics ensure solutions that are repeatable, measurable,
      and trainable. These factors, in turn, enhance quality, customer
      satisfaction, and profitability.

CLIENTS

Keane's clients consist primarily of Global 2000 organizations, government
agencies, and healthcare organizations. These organizations generally have
significant IT budgets and depend on service providers to help them fulfill
their business optimization and software design, development, implementation,
and management needs.


                                       5

<PAGE>

In 2001, the Company derived its revenue from the following industry groups:

Industry                                  Percentage of Revenue
--------                                  ---------------------
Manufacturing                                      21.7%
Financial Services                                 21.6%
Government                                         16.5%
Healthcare                                         12.3%
Energy/Utilities                                    9.5%
High Technology/Software                            8.9%
Retail/Consumer Goods                               5.2%
Other                                               2.8%
Telecommunications                                  1.5%

The following table is a representative list of clients for which Keane provided
services in 2001:

--------------------------------------------------------------------------------
3M Corporation                               McDonald's Corporation
--------------------------------------------------------------------------------
Allmerica                                    MemorialCare
--------------------------------------------------------------------------------
Aon                                          Miller Brewing
--------------------------------------------------------------------------------
AT&T Corporation                             State of Missouri
--------------------------------------------------------------------------------
Bose Corporation                             National Assn. of Security Dealers
--------------------------------------------------------------------------------
Baxter Healthcare Corporation                State of New York
--------------------------------------------------------------------------------
Baylor Health Care System                    State of North Carolina
--------------------------------------------------------------------------------
Cargill                                      Northern Telecom, Inc.
--------------------------------------------------------------------------------
Carrier                                      State of Ohio
--------------------------------------------------------------------------------
Centrica                                     Optimum Logistics
--------------------------------------------------------------------------------
CGU                                          Pfizer
--------------------------------------------------------------------------------
City of Chicago                              Pharmacia & Upjohn
--------------------------------------------------------------------------------
Crawford & Company                           Princess Cruise Lines
--------------------------------------------------------------------------------
U.S. Department of Justice                   Procter & Gamble Company
--------------------------------------------------------------------------------
Eastman Kodak Company                        Putnam Investments
--------------------------------------------------------------------------------
Ecolab                                       Reader's Digest Association, Inc.
--------------------------------------------------------------------------------
Executive Office for U.S. Attorneys          Robert Wood Johnson Hospital
--------------------------------------------------------------------------------
Fidelity                                     Security Benefit Group
--------------------------------------------------------------------------------
Farmers Insurance Group                      State Street Bank & Trust
--------------------------------------------------------------------------------
First Bank                                   Sony
--------------------------------------------------------------------------------
Ford                                         Square D
--------------------------------------------------------------------------------
General Electric Company                     Supervalu
--------------------------------------------------------------------------------
Great American Insurance                     TracFone
--------------------------------------------------------------------------------
GMAC                                         Transcontinental Gas Pipeline
--------------------------------------------------------------------------------
Guardian Life Insurance                      Tufts Health Plan
--------------------------------------------------------------------------------
Honeywell                                    Unipart
--------------------------------------------------------------------------------
International Business Machines Corporation  U.S. Air Force
--------------------------------------------------------------------------------
Invacare                                     U.S. Customs
--------------------------------------------------------------------------------
J.P. Morgan                                  West Publishing
--------------------------------------------------------------------------------
Johns Hopkins Hospital                       Whirlpool Corporation
--------------------------------------------------------------------------------
Liberty Mutual Insurance Co.                 Zurich Financial Services
--------------------------------------------------------------------------------
State of Maine
--------------------------------------------------------------------------------

Keane's ten largest clients accounted for approximately 32% and 30% of the
Company's total revenue during each of the years ended December 31, 2001 and
2000, respectively. The Company's two largest clients during 2001 and 2000 were
various agencies within the Federal Government and IBM. Federal Government
contracts accounted for approximately 6.9% and 7.5% of the Company's total
revenue in 2001 and 2000, respectively. IBM accounted for approximately 6.5% and
6% of the Company's total revenue for 2001 and 2000, respectively. A significant
decline in revenue from IBM or the Federal Government would have a material
adverse effect upon the Company's total revenue.


                                       6

<PAGE>

With the exception of IBM and the Federal Government, no single client accounted
for more than 5% of the Company's total revenue during any of the three years
ended December 31, 2001.

In accordance with industry practice, many of the Company's orders are
terminable by either the client or the Company on short notice. The Company does
not believe that backlog is material to its business. The Company had orders at
December 31, 2001 of approximately $843 million, in comparison to orders of
approximately $740 million at December 31, 2000.

SALES, MARKETING AND ACCOUNT MANAGEMENT

Keane markets its services and software products through its direct sales force,
which is based in its branch offices and regional areas, as well as through its
centralized Strategic Practices Group. Keane's account executives are assigned
to a limited number of accounts so they can develop an in-depth understanding of
each client's individual needs and form strong client relationships. These
account executives are responsible for ensuring that clients receive responsive
service and that Keane's software solutions achieve client objectives. Account
executives receive in-depth training in Keane's sales processes and service
offerings and are supported by enterprise knowledge management systems in order
to efficiently share organizational learning. Account executives are empowered
to collaborate with Keane's Strategic Practice Group, other branch offices, and
Advanced Development Centers as needed to address specialized customer
requirements.

Keane focuses its marketing efforts on organizations with significant IT budgets
and recurring software development and outsourcing needs. The Company maintains
a corporate branding campaign focused on communicating Keane's value proposition
of reliably delivering application solutions with quantifiable business results.
These branding efforts are actively executed through multiple channels.

EMPLOYEES

On December 31, 2001, Keane had 7,871 employees, including 6,566 business and
technical professionals whose services are billable to clients. The Company
sometimes supplements its technical staff by utilizing subcontractors.

Management believes Keane's growth and success are dependent on the caliber of
its people and will continue to dedicate significant resources to hiring,
training and development, and career advancement programs. Keane's efforts in
these areas are grounded in the Company's core values, namely respect for the
individual, commitment to client success, achievement through teamwork,
integrity, and continuous improvement. Keane strives to hire, promote, and
recognize individuals and teams who embody these values.

The Company generally does not have employment contracts with its key employees.
None of the Company's employees are subject to a collective bargaining
agreement. The Company believes that its relations with its employees are good.

COMPETITION

The IT services market is highly competitive and driven by continual changes in
client business requirements and advances in technology. The Company's
competition varies by the type of service provided and by geographic markets.

Competitors typically include traditional players in the IT services industry,
including large integrators (such as Accenture, Electronic Data Systems (EDS),
Computer Sciences Corporation (CSC), and IBM Global Services); IT solutions
providers (including Sapient Corporation, American Management Systems, Logica,
and KPMG); and management consulting firms (e.g., KPMG Consulting, McKinsey and
Booz Allen). Some of these competitors are larger and have greater financial
resources than the Company. In addition, clients may seek to increase their
internal IT resources to satisfy their software development and management
requirements.

The Company believes that the basis for competition in the IT services industry
includes the ability to create an integrated solution that best meets the needs
of an individual customer, compete cost effectively, develop strong client
relationships, generate recurring revenue, offer flexible client service
delivery options and use of disciplined methodologies. The Company believes that
it competes favorably with respect to those factors. There can be no


                                       7

<PAGE>

assurance that the Company will continue to compete successfully with its
existing competitors or will be able to compete successfully with any new
competitors.

ITEM 2. PROPERTIES

The principal executive office of the Company is located at Ten City Square,
Boston, Massachusetts 02129, in an approximately 34,000 square foot office
building which is leased from City Square Limited Partnership. Some of the
Company's officers, directors, and shareholders are limited partners in this
partnership. See Item 13 -- "Certain Relationships and Related Transactions." At
December 31, 2001, the Company leased and maintained sales and support offices
in more than fifty locations in the United States and three locations in the
United Kingdom. The aggregate annual rental expense for the Company's sales and
support offices was approximately $16.6 million in 2001. The aggregate annual
rental expense for all of the Company's facilities was approximately $19.4
million in 2001. For additional information regarding the Company's lease
obligations, see Note I of Notes to Consolidated Financial Statements.

In October, 2001, the Company entered into a lease with Gateway Developers LLC
("Gateway LLC") for a term of twelve years, pursuant to which the Company agreed
to lease approximately 95,000 square feet of office and development space in a
building under construction at One Chelsea Street in Boston, Massachusetts (the
"New Facility"). The Company will lease approximately 57% of the New Facility
and the remaining 43% will be occupied by other tenants. John Keane Family LLC
is a member of Gateway LLC. The members of John Keane Family LLC are trusts for
the benefit of John F. Keane, Chairman of the Board of the Company, and his
immediate family members.

On October 31, 2001, Gateway LLC entered into a $39.4 million construction loan
(the "Gateway Loan") in connection with the New Facility and an adjacent
building to be located at 20 City Square, Boston, Massachusetts. John Keane
Family LLC and John F. Keane are each liable for certain obligations under the
Gateway Loan if and to the extent Gateway LLC requires funds to comply with its
obligations under the Gateway Loan.

The Company currently expects to occupy the new facility in January 2003. The
Company will consolidate several existing facilities it has in the Boston area
as part of this move. Based upon its knowledge of rental payments for comparable
facilities in the Boston area, the Company believes that the rental payments
under the lease for the New Facility, which will be approximately $3.2 million
per year ($33.00 per square foot for the first 75,000 square feet and $35.00 per
square foot for the remainder of the premises) for the first six years of the
lease term and $3.5 million per year ($36.00 per square foot for the first
75,000 square feet and $40.00 per square foot for the remainder of the premises)
for the remainder of the lease term, plus specified percentages of any annual
increases in real estate taxes and operating expenses, were, at the time the
Company entered into the lease, as favorable to the Company as those which could
have been obtained from an independent third party.

ITEM 3. LEGAL PROCEEDINGS

On September 25, 2000, the U.S. Equal Employment Opportunity Commission ("EEOC")
commenced a civil action against Keane in the United States District Court for
the District of Massachusetts alleging that the Company discriminated against
former employee Michael Randolph and other unspecified "similarly-situated
individuals" by acts of racial harassment, retaliation and constructive
discharge. The EEOC has not specified the amount of damages it is seeking. The
parties are presently engaged in discovery. Because the lawsuit is in pre-trial
stages, management is unable to estimate the effect, if any, it may have on its
consolidated financial position or consolidated results of operations.

The Company is involved in other litigation and various legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of these matters will have a material adverse
effect on its financial condition, results of operations, or cash flows. The
Company believes these litigation matters are without merit and intends to
defend these matters vigorously.


                                       8

<PAGE>

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

No matters were submitted to a vote of the Company's security holders during the
fourth quarter of the year ended December 31, 2001.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY: The executive officers and
directors of the Company are as follows:

<TABLE>
<CAPTION>
          NAME                                 AGE                              POSITION
          ----                                 ---                              --------
<S>                                             <C>     <C>
John F. Keane (3)                               70                 Chairman of the Board and Director
Brian T. Keane                                  41           President, Chief Executive Officer and Director
John J. Leahy                                   44          Senior Vice President and Chief Financial Officer
Robert B. Atwell                                53      Senior Vice President - North American Branch Operations
Irene Brown                                     47                        Senior Vice President
Raymond W. Paris                                64            Senior Vice President - Healthcare Solutions
Renee Southard                                  47               Senior Vice President - Human Resources
Linda B. Toops                                  47                        Senior Vice President
John H. Fain                                    53                 Senior Vice President and Director
Maria A. Cirino (1)(2)                          38                              Director
Philip J. Harkins(2)(3)                         54                              Director
Winston R. Hindle, Jr. (1)(3)                   71                              Director
John F. Keane, Jr. (3)                          42                              Director
John F. Rockart (1)(2)                          70                              Director
Stephen D. Steinour (1)(2)                      43                              Director
</TABLE>

(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Governance and Nominating Committee

All Directors hold office until the next annual meeting of the stockholders and
until their successors have been elected and qualified. Officers of the Company
serve at the discretion of the Board of Directors.

Mr. John Keane, the founder of the Company, has been Chairman of the Board of
Directors since the Company's incorporation in March 1967. Mr. Keane served as
Chief Executive Officer and President of the Company from 1967 to November 1999.
Prior to joining the Company, Mr. Keane worked for IBM's Data Processing
Division and was employed as a consultant by Arthur D. Little, Inc., a
Cambridge, Massachusetts management consulting firm. Mr. Keane is also a
director of Firstwave Technologies, Inc. and Perkin Elmer, Inc.

Mr. Brian Keane joined the Company in 1986 and has served as the Company's
President and Chief Executive Officer since November 1999. From September 1997
to November 1999, Mr. Keane served as Executive Vice President and a member of
the Office of the President of the Company. From December 1996 to September
1997, he served as Senior Vice President. From December 1994 to December 1996,
he was an Area Vice President. From July 1992 to December 1994, Mr. Keane served
as a Business Area Manager and from January 1990 to July 1992, he served as a
Branch Manager. Mr. Keane has been a director of the Company since May 1998. Mr.
Keane has served as a trustee of Mount Holyoke College since May 2000. Brian
Keane is a son of John Keane, the founder, and Chairman of the Company, and a
brother of John Keane, Jr., a director.

Mr. John Keane, Jr. has been a director of the Company since May 1998. Mr. Keane
is the founder of ArcStream Solutions, Inc. and has been its President and Chief
Executive Officer since July 2000. From September 1997 to July 2000, he was
Executive Vice President and a member of the Office of the President of the
Company. From December 1996 to September 1997, he served as Senior Vice
President. From December 1994 to December 1996, he was an Area Vice President.
From January 1994 to December 1994, Mr. Keane served as a Business Area Manager.
From July 1992 to January 1994, he acted as manager of Software Reengineering,
and from January 1991 to July 1992, he


                                       9

<PAGE>

served as Director of Corporate Development. John Keane, Jr. is a son of John
Keane, the founder and Chairman of the Company, and a brother of Brian Keane.

Mr. Leahy joined the Company in August 1999 as Senior Vice President - Finance
and Administration and Chief Financial Officer. From 1982 to August 1999, Mr.
Leahy was employed by PepsiCo, during which time he held a number of positions,
serving most recently as Vice President of Business Planning and Development for
Pepsi-Cola International.

Mr. Atwell joined the Company in 1974, served as Branch Manager from 1974 to
1985 and as head of PMSG from 1985 to 1986. Mr. Atwell left the Company from
1986 to 1991. During that time, he served as Regional Sales Vice President for
Palladian Software, Vice President of Sales for Applied Expert Systems, Vice
President of Sales and Marketing for Access Development Corporation and Vice
President of Broadway and Seymour. In 1991, Keane acquired Broadway and Seymour
and appointed Mr. Atwell Managing Director of the Company's Raleigh/Durham
Branch. Since that time, Mr. Atwell has served as Area Manager from 1993 to
1994, Area Vice President from 1995 to 1999 and as Senior Vice President of
North American Branch Operations from 1999 to present.

Ms. Irene Brown joined the Company in August 1998 and has served as a Senior
Vice President since January 2001. From January 2000 to December 2000, Ms. Brown
served as a Vice President of the Company. From August 1998 to December 1999 she
served as Managing Director -Keane Limited and from August 1975 to July 1998 Ms.
Brown was employed by Icom Solutions, most recently as Managing Director.

Mr. Paris joined the Company in November 1976. Mr. Paris has served as Senior
Vice President - Healthcare Solutions since January 2000 and as Vice President
and General Manager of the Healthcare Solutions Practice from August 1986 to
January 2000. Mr. Paris also served as Area Manager of the Healthcare Solutions
Practice from 1981 to 1986.

Ms. Southard joined the Company in July 1983. Ms. Southard has served as Senior
Vice President - Human Resources since December 1999. Prior to this, Ms.
Southard was Vice President - Human Resources from December 1995 to December
1999. Ms. Southard served as Director of HR Operations from August 1994 to
December 1995, Manager of Human Resources and Administration from September 1993
to August 1994, and Staffing and Employment Manager from August 1988 to
September 1993.

Ms. Linda Toops joined the Company in August of 1992. Ms. Toops has served as
President of Keane Consulting Group (KCG) and Senior Vice President of Keane,
Inc. since June 2000. From 1992 to June 2000, Ms. Toops served as Executive Vice
President of KCG. From 1977 through 1992, Ms. Toops held a variety of sales and
management positions within the IBM Corporation.

Mr. Fain has been a director and Senior Vice President of the Company since
November 2001. Prior to joining the Company, Mr. Fain was the founder, Chief
Executive Officer and Chairman of the Board of Directors of Metro Information
Services, which was acquired by the Company in November 2001. Mr. Fain's role at
Metro Information Services also included serving as President until January 2001
and Chairman of the Compensation Committee until February 1999.

Ms. Cirino has been a director since July 2001. Since 2000, Ms. Cirino has held
the position of CEO and Chairman of Guardent. Prior to 2000, Ms. Cirino served
as Vice President of Sales and Marketing for Razorfish. From 1997 to 1999, Ms.
Cirino held the same position of Vice President of Sales and Marketing for
I-cube, which was acquired by Razorfish in October of 1999. Prior to 1997, Ms.
Cirino held the position of Vice President of Sales for Shiva Corporation. Ms.
Cirino is also a director of Corex Technologies, Inc.

Mr. Harkins has been a director since February 1997. Mr. Harkins is currently
the President and Chief Executive Officer of Linkage, Inc., an organizational
development company founded by Mr. Harkins in 1988. Prior to 1988, Mr. Harkins
was Vice President of Human Resources of the Company.

Mr. Hindle has been a director since February 1995. Mr. Hindle is currently
retired. From September 1962 to July 1994, Mr. Hindle served as a Vice President
and, subsequently, Senior Vice President of Digital Equipment Corporation. Mr.
Hindle is also a director of Clare Corporation, Mestek, Inc. and CareCentric,
Inc.


                                       10

<PAGE>

Dr. Rockart has been a director since the Company's incorporation in March 1967.
Dr. Rockart has been a Senior Lecturer at the Alfred J. Sloan School of
Management of the Massachusetts Institute of Technology since 1974, and was the
Director of the Center for Information Systems Research from 1976 to 2000. Dr.
Rockart is also a director of Comshare, Inc.

Mr. Steinour has been director since July 2001. He currently serves as the Chief
Executive of Citizens Bank of Pennsylvania. Prior to his appointment as Chief
Executive, Mr. Steinour served as Vice Chairman of the Wholesale and Regional
Banking Division at Citizens Bank. Before joining Citizens Bank, he served as
the Division Executive at Recoll Management in Boston and as Executive Vice
President at Bank of New England's Controlled Loan Department.

Compensation of the non-employee directors currently consists of an annual
director's fee of $4,000 plus $1,000 and expenses for each meeting of the Board
of Directors attended. Directors are also eligible to receive periodic stock
option grants under the Company's stock incentive plans. In July 2001, Ms.
Cirino and Mr. Steinour, who joined the Board of Directors in July 2001, each
received options to purchase 10,000 shares of the Company's Common Stock. In
December 2000, all other outside directors received options to purchase 10,000
shares of the Company's Common Stock. Directors who are officers or employees of
the Company do not receive any additional compensation for their services as
directors.


                                       11

<PAGE>

PART II
-------

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

The Company's authorized capital stock consists of 200,000,000 shares of Common
Stock, $.10 par value per share; 503,797 shares of Class B Common Stock, $.10
par value per share; and 2,000,000 shares of Preferred Stock, $.01 par value per
share. As of March 8, 2002, there were 75,475,071 shares of Common Stock
outstanding and held of record by approximately 2,482 registered stockholders;
284,891 shares of Class B Common Stock outstanding and held of record by
approximately 110 registered stockholders; and no shares of Preferred Stock
outstanding.

COMMON STOCK AND CLASS B COMMON STOCK:

Voting. Each share of Common Stock is entitled to one vote on all matters
submitted to stockholders and each share of Class B Common Stock is entitled to
ten votes on all matters submitted to stockholders. The holders of Common Stock
and Class B Common Stock vote as a single class on all actions submitted to a
vote of the Company's stockholders, except that separate class votes of the
holders of Common Stock and Class B Common Stock are required with respect to
amendments to the articles of organization that alter or change the powers,
preferences or special rights of their respective classes or as to affect them
adversely, and with respect to such other matters as may require class votes
under Massachusetts law. Voting for directors is non-cumulative.

As of March 8, 2002, the Class B Common Stock represented less than 1% of the
Company's outstanding equity, but had approximately 4% of the combined voting
power of the Company's outstanding Common Stock and Class B Common Stock. The
substantial voting rights of the Class B Common Stock may make Keane less
attractive as the potential target of a hostile tender offer or other proposal
to acquire the stock or business of Keane and render merger proposals more
difficult, even if such actions would be in the best interests of the holders of
the Common Stock.

Dividends and Other Distributions. The holders of Common Stock and Class B
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared by Keane's Board of Directors, out of funds legally available therefor,
except that the Board of Directors may not declare and pay a regular quarterly
cash dividend on the shares of Class B Common Stock unless a noncumulative per
share dividend which is $.05 per share greater than the per shares dividend paid
on the Class B Common Stock is paid at the same time on the shares of Common
Stock. In the event of a liquidation, dissolution or winding up of Keane,
holders of Common Stock and Class B Common Stock have the right to ratable
portions of Keane's net assets after the payment of all debts and other
liabilities.

Trading Markets. Shares of Class B common Stock are not transferable by a
stockholder except for transfers:

            .     By gift,
            .     In the event of the death of a stockholder, or
            .     By a trust to a person who is the grantor or a principal
                  beneficiary of that trust.

Individuals or entities receiving shares of Class B Common Stock pursuant to
these transfers are referred to as "permitted transferees." The Class B Common
Stock is not listed or traded on any exchange or in any market, and no trading
market exists for shares of the Class B Common Stock. The Class B Common Stock
is, however, convertible at all times, and without cost to the stockholder, into
shares of Common Stock on a share-for-share basis. Shares of Class B Common
Stock are automatically converted into an equal number of shares of Common Stock
in connection with any transfer of those shares other than to a permitted
transferee. In addition, all of the outstanding shares of Class B Common Stock
are convertible into shares of Common Stock upon a majority vote of the Board of
Directors.

Future Issuance of Class B Common Stock; Retirement of Class B Common Stock Upon
Conversion into Common Stock. The Company may not issue any additional shares of
Class B Common Stock without stockholder approval. All shares of Class B Common
Stock converted into Common Stock are retired and may not be reissued.

Other Matters. The holders of Common Stock and Class B Common Stock have no
preemptive rights or, except as described above, rights to convert their stock
into any other securities and are not subject to future calls or assessments by
the Company. The Common Stock is listed on the American Stock Exchange under the
symbol "KEA." All


                                       12

<PAGE>

outstanding shares of Common Stock and Class B Common Stock are fully paid and
nonassessable. The rights, preferences and privileges of holders of Common Stock
and Class B Common Stock are subject to , and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which the
Company may designate and issue in the future.

PREFERRED STOCK: The Company's Articles of Organization authorize the issuance
of up to 2,000,000 shares of Preferred Stock. Shares of Preferred Stock may be
issued from time to time in one or more series, and the Board of Directors is
authorized to determine the rights, preferences, privileges and restrictions,
including the dividend rights, conversion rights, voting rights, terms of
redemption, redemption price or prices and liquidation preferences, of any
series of Preferred Stock, and to fix the number of shares of any such series of
Preferred Stock without any further vote or action by the stockholders. The
voting and other rights of the holders of Common Stock and Class B Common Stock
will be subject to, and may be adversely affected by, the rights of holders of
any Preferred Stock that may be issued in the future. The issuance of shares of
Preferred Stock, while providing desirable flexibility in connection with
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company. The
Company has no present plans to issue any shares of Preferred Stock.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY: The Company's Common Stock is
traded on the American Stock Exchange under the symbol "KEA." The following
table sets forth, for the periods indicated, the high and low closing price per
share as reported by the American Stock Exchange.

                                   Stock Price

                                                        High               Low
                                                       -------           -------

2001
First Quarter                                          $ 18.63           $  9.76
Second Quarter                                           22.00             11.80
Third Quarter                                            19.90             12.95
Fourth Quarter                                           19.70             13.41

2000
First Quarter                                          $ 30.94           $ 22.19
Second Quarter                                           29.38             20.38
Third Quarter                                            25.00             15.84
Fourth Quarter                                           15.95              9.75

The closing price of the Common Stock on the American Stock Exchange on March 8,
2002 was $16.85.

The Company has not paid any cash dividend since June 1986. The Company
currently intends to retain all of its earnings to finance future growth and
therefore does not anticipate paying any cash dividend in the foreseeable
future. The Company's Articles of Organization restrict the ability of the Board
of Directors to declare regular quarterly dividends on the Class B Common Stock.


                                       13

<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                         First Quarter    Second Quarter   Third Quarter    Fourth Quarter
                                         -------------    --------------   -------------    --------------
<S>                                          <C>              <C>              <C>              <C>
Year Ended December 31, 2001

Total revenues                               $ 208,346        $ 196,995        $ 186,637        $ 187,181
Income (Loss) before income taxes               14,211           11,256            8,908           (5,154)
Net income (Loss)                                8,454            6,698            5,302           (3,067)
Net income (Loss) per share (basic)                .12              .10              .08             (.04)
Net income (Loss) per share (diluted)              .12              .10              .08             (.04)

Year Ended December 31, 2000

Total revenues                               $ 216,208        $ 221,799        $ 219,671        $ 214,278
Income (Loss) before income taxes                9,265           13,400           13,884           (2,363)
Net income (Loss)                                5,511            7,975            8,260           (1,392)
Net income (Loss) per share (basic)                .08              .11              .12             (.02)
Net income (Loss) per share (diluted)              .08              .11              .12             (.02)
</TABLE>


                                       14

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

FINANCIAL HIGHLIGHTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
Year Ended December 31,                    2001               2000               1999                1998               1997
------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                <C>                <C>                  <C>                <C>
Income Statement Data:
  Total revenues                        $ 779,159          $ 871,956          $ 1,041,092          $1,076,198         $706,801
  Operating income                         19,753             27,921              116,466             170,187           85,163
  Net income                               17,387             20,354               73,074              96,349           51,371
  Net income per share (basic)                .25                .29                 1.02                1.36              .73
  Net income per share (diluted)              .25                .29                 1.01                1.33              .72
  Weighted average common                  68,474             69,646               71,571              71,053           70,096
      shares outstanding (basic)
  Weighted average common                  69,396             69,993               72,395              72,284           71,603
     shares and common share
     equivalents outstanding
     (diluted)
------------------------------------------------------------------------------------------------------------------------------

Balance Sheet Data:
  Total cash and investments            $ 129,243          $ 115,212          $   142,763          $  129,229         $ 91,022
  Total assets                            679,903            463,594              519,307             458,959          329,176
  Total debt                               15,357              8,616               11,403               3,930            9,493
  Stockholders' equity                    529,173            370,677              422,799             363,784          257,037
  Book value per share                       7.00               5.48                 5.95                5.10             3.65
  Number of shares                         75,509             67,675               71,051              71,336           70,342
     outstanding

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

Financial Performance:
  Total revenue growth (decline)            (10.6)%            (16.2)%               (3.3)%              52.3%            39.7%
  Net margin                                  2.2%               2.3%                 7.0%                9.0%             7.3%
  Return on average equity                    3.9%               5.1%                18.6%               31.0%            22.4%
</TABLE>

All amounts prior to 1999 have been restated to reflect the acquisitions of
Bricker & Associates, Inc., Icom Systems Limited and Fourth Tier, Inc., which
were accounted for as poolings-of-interests.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of Keane's financial condition and results of
operations are based on consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires Keane to
make estimates and judgments that affect the reported amount of assets and
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities at the date of its financial statements. Actual results may
differ from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. Application of
these policies is particularly important to the portrayal of Keane's financial
condition and results of operations. The Company believes that the accounting
policies described below meet these characteristics. Keane's significant
accounting policies are more fully described in the notes to the consolidated
financial statements.

Revenue Recognition:

Keane recognizes revenue as services are performed or products are delivered in
accordance with contractual agreements and generally accepted accounting
principals. For general consulting engagements, revenue is recognized on a time
and materials basis as services are delivered. For the majority of our
outsourcing engagements, the Company


                                       15

<PAGE>

provides a specific level of service each month for which it bills a standard
monthly fee. Revenue for these engagements is recognized in monthly installments
over the billable portion of the contract. These installments may be adjusted to
reflect changes in staffing requirements and service levels consistent with
terms of the contract.

For fixed price engagements, revenue is recognized on a percentage of completion
basis over the life of the contract. Percentage of completion recognition relies
on accurate estimates of the cost, scope and duration of each engagement. If the
Company does not accurately estimate the resources required or the scope of the
work to be performed, then future consulting margins may be negatively affected
or losses on existing contracts may need to be recognized. All future
anticipated losses are recognized in the period they are identified.

Revenue associated with application software products is recognized as the
software products are delivered or installed on a milestone basis. Software
maintenance fees on installed products are recognized on a pro-rated basis over
the term of the service agreement.

In all consulting engagements, outsourcing engagements and software application
sales, the risk of issues associated with satisfactory service delivery exists.
Although management feels these risks are adequately addressed by the Company's
adherence to proven project management methodologies, proprietary frameworks,
and internal project audits, the potential exists for future revenue charges
relating to unresolved issues.

Bad Debt:

Each accounting period, Keane evaluates accounts receivable for risk associated
with a client's inability to make contractual payments or unresolved issues with
the adequacy of Keane's services delivered under maintenance agreements. Billed
and unbilled receivables that are specifically identified as being at risk are
provided for with a charge to revenue in the period the risk is identified.
Considerable judgment is used in assessing the ultimate realization of these
receivables including reviewing the financial stability of the client,
evaluating the successful mitigation of service delivery disputes, and gauging
current market conditions. If the Company's evaluation of service delivery
issues or a client's ability to pay is incorrect, the Company may incur future
charges to revenue.

Goodwill and Intangible Impairment:

Keane evaluates goodwill and other intangible assets associated with acquisition
activity on a periodic basis. This evaluation relies on assumptions regarding
estimated future cash flows and other factors to determine the fair value of the
respective assets. If these estimates or related assumptions change, the Company
may be required to recognize impairment charges.

Deferred Taxes:

Keane accounts for income taxes in accordance with SFAS No. 109, "Accounting for
Income Taxes," which requires that deferred tax assets and liabilities be
recognized using enacted tax rates for the effect of temporary differences
between the book and tax basis of recorded assets and liabilities. SFAS 109 also
requires that deferred tax assets be reduced by a valuation allowance if it is
more likely than not that some portion or all of the deferred tax asset will not
be realized. Based on prior taxable income and estimates of future taxable
income, the Company has determined that it is more likely than not that its net
deferred tax assets will be fully realized in the future. If actual taxable
income varies from these estimates, the Company may be required to record a
valuation allowance against its deferred tax assets resulting in additional
income tax expense which will be recorded in the Company's consolidated
statement of operations.

Restructuring:

Keane has recorded restructuring charges and reserves associated with
restructuring plans approved by management over the last three years. These
reserves include estimates pertaining to employee separation costs and real
estate lease obligations. The reserve associated with lease obligations could be
materially affected by factors such as the ability to obtain subleases, the
creditworthiness of sub-lessees, market value of properties, and the ability to
negotiate early termination agreements with lessors. While the Company believes
that its current estimates regarding lease obligations are adequate, future
events could necessitate significant adjustments to these estimates.


                                       16

<PAGE>

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

This Annual Report on Form 10-K contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed forward-looking statements. Without limiting the foregoing,
the words "believes," "anticipates," "plans," "expects" and similar expressions
are intended to identify forward-looking statements. There are a number of
important factors that could cause the Company's actual results to differ
materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set below under the caption "Certain
Factors That May Affect Future Results."

RESULTS OF OPERATIONS, 2001 vs. 2000: The Company's revenue for 2001 was $774.0
million, a 7% decrease from revenue of $833.6 million in 2000, excluding revenue
associated with Keane's divested help desk business, or $779.2 million in 2001
compared to $876.9 million in 2000, including $43.3 million of revenue from this
divested business. Keane's revenue during 2001 was negatively impacted by the
economic slowdown and the related reduction in technology spending. However,
this was partially offset by a $16.8 million increase in revenue from the
Company's public sector business and a $31.0 million increase in revenue from
its Application Development and Management (ADM) Outsourcing service. ADM
Outsourcing revenue represented 51% of total revenue during 2001 or $393.9
million, an increase of 8.5% from $363.0 million during 2000.

For 2001, revenue from the Company's Plan services was $75.3 million, down from
$107.1 million in 2000. Plan revenue is primarily comprised of business
innovation consulting delivered via Keane Consulting Group (KCG), the Company's
business consulting arm, and IT consulting services, which are sold and
implemented out of Keane's network of branch offices. Plan revenue for 2001 was
negatively impacted by a general deferral of capital expenditures and consulting
projects.

For 2001, revenue from the Company's Build Services was $265.9 million, down
from $327.1 million in 2000, prior to all one-time charges or $322.2 million in
2000 including all one-time charges. During the fourth quarter of 2000, Keane
incurred a charge of $13.5 million, of which $8.6 million was related to the
consolidation and/or closing of certain non-profitable branch offices, employee
severance costs, facility leases, and for other miscellaneous purposes, with the
balance related to increased reserves against accounts receivable. During the
fourth quarter of 2001, Keane booked $10.4 million in one-time charges relating
to the costs of terminations, office closures, and asset write-downs associated
with gaining synergies from the acquisition of Metro Information Services.

As anticipated, Keane's Build revenue, which consists primarily of application
development and integration business, was also adversely affected in 2001 by the
challenging economic environment and the related deferral of new software
development projects in both North America and the United Kingdom. This decline
was offset in part by ongoing Build project revenue from existing Global 2000
customers and revenue of $128.4 million attributable to Public Sector business
from federal and state governments. Engagements within the Public Sector
represented approximately 16.5% of Keane's total revenue in 2001.

Revenue from the Company's Manage Services, which consist primarily of Keane's
ADM Outsourcing service, as well as Application Maintenance and Migration
services, grew to $432.7 million during 2001, an increase of 8% from $399.2
million in 2000, excluding revenue from divested businesses and one-time
charges. Manage revenue was $437.9 million in 2001 and $437.6 million in 2000,
including the divested help desk business and one time charges. Keane's 2001
revenue from Manage services included approximately $16.0 million as a result of
its acquisition of Metro Information Services, on November 30, 2001. Revenue
from the Company's divested Help Desk business was approximately $43.3 million
during 2000 and $5.2 million during 2001. On February 12, 2001 the Company sold
its Help Desk operation to Convergys Corporation in return for $15.7 million in
cash.

The increase in Keane's Manage revenue during 2001 was driven by continuing
sales growth in the Company's ADM Outsourcing business, as Global 2000 customers
seek to improve productivity and efficiencies associated with the management and
enhancement of their application portfolios. This business has not been as
negatively impacted by the economy as Keane's Build business. Based on the
increase in ADM Outsourcing bookings and growth of the sales pipeline during
2001, the Company anticipates that this


                                       17

<PAGE>

business will continue to increase in 2002. One significant example of such
business is Keane's new, ten-year $500 million ADM Outsourcing contract with
PacifiCare Health Systems signed in January of 2002.

However, the Company has observed no indication of a healthier economic climate
or growth in IT spending over the first two months of 2002. As a result, Keane
anticipates continued softness in its Application Development and Integration
business, which represents a majority of its Build sector, and within its Plan
sector, until economic conditions improve and customers begin funding capital
projects once again.

In response to this challenging business climate, the Company expanded its
customer base and critical mass with its acquisition of Metro Information
Services. Metro provides Keane with hundreds of new customers to whom the
Company can cross-sell its services. Of Metro's 300 largest customers that
accounted for 90% of its revenue for the twelve months ended June 30, 2001, 236
were new customers for Keane. In addition, the Company expects to improve
operational leverage by combining corporate functions and consolidating
overlapping branch offices. Of Metro's 33 branch offices, 26 are within
geographic markets currently served by Keane. The Company has identified a
minimum of $15 million in redundant SG&A expenses that can be eliminated and
expects to realize at least $11 million of these savings during 2002.

On March 15, 2002, Keane acquired SignalTree Solutions Holding, Inc., a
privately-held, U.S.-based corporation with two software development facilities
in India and additional operations in the United States, by the merger of a
wholly-owned subsidiary of Keane into SignalTree. Under the terms of the merger
agreement, Keane paid $64.5 million in cash for SignalTree, which purchase price
is subject to adjustment. The enterprise value of the transaction is
approximately 1.2 times SignalTree's 2001 revenue, which was approximately $50
million. Keane expects the addition of SignalTree to enhance its value
proposition to customers by providing access to world-class software development
processes as well as the economic advantage of a large pool of cost-effective
technical professionals.

Salaries, wages and other direct costs for 2001 were $547.9 million, or 70.3% of
total revenue, compared to $621.2 million, or 71.2% of total revenue, for 2000.
The decline in costs is a result of the sale of the Company's lower margin Help
Desk operations and its ongoing efforts to bring costs in alignment with
revenue. As a result, Keane's gross margins for 2001 increased to 29.7%, up from
29.2% during 2000 prior to all one-time charges, or 28.7% during 2000 including
all one-time charges.

Selling, General & Administrative ("SG&A") expenses for 2001 were $186.7
million, or 24.0% of total revenue, compared to $201.9 million, or 23.1% of
total revenue, for 2000. The decline in SG&A expenditures during 2001 is a
result of the sale of the Company's Help Desk operations and aggressive control
of discretionary spending to bring cost in alignment with revenue. The Company
will seek to continue to control aggressively its discretionary expenditures
until economic conditions improve and spending on IT projects increases.

Amortization of goodwill and other intangible assets for 2001 was $14.5 million,
or 1.9% of total revenue, compared to $12.4 million, or 1.4% of total revenue,
in 2000. The increase in amortization for 2001 was attributable to additional
intangible assets as a result of the Company's acquisition of Metro Information
Services in November of 2001 and the acquisitions of Denver Management Group and
Care Computer Systems in July and September of 2000.

Interest and dividend income totaled $7.0 million for 2001, compared to $7.7
million for 2000. The slight decrease in interest and dividend income was
attributable to having less cash earning interest and dividend income as a
result of using cash for acquisitions and the repurchase of Keane stock, and as
a result of interest rate declines. Other income was $2.7 million for 2001 as
compared to other expense of $0.9 million in 2000. This increase in other income
was related to a gain of $4.0 million from the sale of Keane's Help Desk
operation, partially offset by the Company's decision to write-off certain
equity investments totaling $2.0 million during the first quarter of 2001, and
gains from the sale of investments.

The Company's effective tax rate was 40.5% in 2001 and 2000.


                                       18

<PAGE>

Net cash provided from operations was $83.2 million during 2001, and $96.1
million during 2000, before proceeds from the sale of the Help Desk business of
$15.7 million and the investment of $4.0 million for the repurchase of Keane
shares. The Company is focused on continuing to optimize cash flow in order to
fund potential mergers and acquisitions, stock repurchases, and to build
long-term shareholder value.

RESULTS OF OPERATIONS, 2000 VS. 1999: The Company's revenue for 2000 was $872.0
million, a 16% decrease from $1.04 billion in 1999. The decrease in revenue was
primarily a result of the rapid decline in the Company's Year 2000 (Y2K)
compliance revenue. Y2K-related revenue for 2000 was $5.4 million, down 97.4%
from $206.1 million in 1999. Excluding Y2K-related business, revenue for 2000
was $871.5 million, an increase of 4.4% as compared to similar core non-Y2K
revenue in 1999. The Company believes this increase was indicative of the
Company's strong positioning in its three core business lines, Business
Innovation Consulting (Plan), Application Development and Integration (Build),
and Application Development and Management Outsourcing (Manage). Keane's Plan,
Build, and Manage revenue for 2000, excluding Y2K-related revenue, was $107.1
million, $327.1 million, and $437.3 million, respectively.

Salaries, wages, and other direct costs for 2000 were $621.2 million, or 71.2%
of revenue, compared to $702.8 million, or 67.5% of revenue for 1999. This
increase as a percentage of revenue was due primarily to lower utilization of
the Company's billable headcount, caused by the decline of Y2K revenue. In order
to bring costs in closer alignment with revenue, in the fourth quarter of 2000,
the Company incurred a charge of $13.5 million, of which $8.6 million, or 1.0%
of revenue, is related to the consolidation and/or closing of certain
non-profitable branch offices, employee severance costs, facility leases, and
for other miscellaneous purposes.

During the second quarter of 2000, the Company identified ten under-performing
branch offices, which had lost critical mass as a result of the Y2K transition
and were no longer profitable. Throughout the year, Keane took action to address
these under-performing business units through the consolidation of operations,
internal growth, the upgrading of management and sales personnel and office
closures.

Selling, General, & Administrative ("SG&A") expense for 2000 were $201.9 million
or 23.1% of revenue, compared to $199.0 million or 19.1% of revenue in 1999.
This increase was primarily attributable to the decrease in the Company's
revenue and investments the Company continued to make in the development and
marketing of its core business lines.

Amortization of goodwill and other intangible assets for 2000 was $12.4 million,
or 1.4% of revenue, compared to $9.2 million, or 0.9% of revenue, in 1999. The
increase was primarily attributable to acquisitions made during the current and
prior year.

Keane completed two small acquisitions during 2000 at a cost of $32.5 million,
net of cash acquired. On July 19, Keane acquired Denver Management Group, a
management consulting firm focused on supply chain management and integrated
distribution. Denver Management has been incorporated into Keane Consulting
Group. On September 7, Keane acquired Care Computer Systems, Inc., a provider of
software for the long-term care industry, which expanded the healthcare
solutions marketed by Keane's Healthcare Solutions Division.

Interest and other expense for each of 2000 and 1999 were $1.5 million. Interest
and dividend income for 2000 totaled $7.7 million, compared to $7.8 million in
1999.

The Company's effective tax rate for each of 2000 and 1999 was 40.5%.

Net income and earnings per share for 2000 were $20.4 million and $.29 per
diluted share including all charges, and $28.4 million and $.41 per diluted
share excluding all charges. This compares to net income of $73.1 million and
$1.01 per diluted share including all charges, and net income of $81.2 and $1.12
per diluted share excluding all charges for 1999.

On February 5, 2001, Keane announced the sale of its help desk business in a
cash transaction valued at $15.7 million. Revenue from its divested help desk
business and from business units closed as part of its restructuring represented
approximately $52 million in unprofitable revenue for the year 2000.


                                       19

<PAGE>

Net cash provided from operations was at $96 million during 2000, before the
expenditure of $81 million for the repurchase of Keane shares and $32.5 million
in acquisitions, net of cash acquired.

RECENT ACCOUNTING PRONOUNCEMENTS:

In June 1998, the Financial Accounting Standards issued Statement of Financial
Accounting Standards No. 133, (FAS 133), "Accounting for Derivative Instruments
and Hedging Activities." which required adoption in periods beginning after June
15, 1999. FAS 133 was subsequently amended by Statement of Financial Accounting
Standards No. 137, " Accounting for Derivative Instruments and Hedging
Activities- Deferral of the Effective Date of FASB Statement No. 133" and will
now be effective for fiscal years beginning after June 15, 2000, with earlier
adoption permitted. In June 2000, the FASB issued Statement No. 138. "
Accounting for Certain Derivative Instruments and Certain Hedging Activities,"
an amendment to FAS 133 and effective simultaneously with FAS 133. The Company
adopted FAS 133 as amended by FAS 138 in the first quarter of 2001, and FAS133
has not had a significant impact on its financial position or results of
operations.

In July 2001, the FASB issued FAS No. 141, "Business Combinations", and FAS No.
142, "Goodwill and Other Intangible Assets." FAS 141 eliminates the
pooling-of-interests method of accounting for business combinations except for
qualifying business combinations that were initiated prior to July 2001. FAS 141
further clarifies the criteria to recognize intangible assets separately from
goodwill. The requirements of Statement 141 are effective for any business
combination that is initiated after June 30, 2001. Under FAS 142, goodwill and
indefinite lived intangible assets are no longer amortized but are reviewed
annually (or more frequently if impairment indictors arise) for impairment.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The amortization provisions of
Statement 142 apply to goodwill and intangible assets acquired on or after June
30, 2001. With respect to goodwill and intangible assets acquired prior to June
30, 2001, companies are required to adopt Statement 142 in their fiscal year
beginning after December 15, 2001. Because of the different transition dates for
goodwill and intangible assets acquired on or before June 30, 2001 and those
acquired after that date, pre-existing goodwill and intangibles will be
amortized during this transition period until adoption whereas new goodwill and
indefinite lived intangible assets acquired after June 30, 2001 will not. The
Company is currently in the process of evaluating the impact of FAS 142 will
have on its financial position and results of operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and provides a single accounting model for long-lived assets to
be disposed of. The Company is required to adopt SFAS No. 144 for the fiscal
year beginning after December 15, 2001 and is currently in the process of
evaluating the impact on its consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES: The Company's cash and investments at December
31, 2001 increased to $ 129.2 million from $ 115.2 million at December 31, 2000.
This increase was primarily attributable to the continuing efforts by the
Company to decrease its Days Sales Outstanding ("DSO"). The decrease in accounts
receivable was offset by payments for acquired debt related to the Metro
acquisition of $65.9 million and purchases of property, plant and equipment of
$7.6 million. In addition to these payments, the Company spent $ 4.0 million on
the purchase of 326,200 shares of its stock at an average price of $12.40 per
share.

On March 15, 2002 the Company acquired SignalTree Solutions Holding, Inc., a
privately -held, U.S. based corporation with two software development facilities
in India and additional operations in the United States. The Company paid
approximately $64.5 million in cash for the acquisition. As a result, this
transaction will reduce the Company's cash position at the end of the first
quarter of 2002.

On September 19, 2001, the Company announced that its Board of Directors had
authorized the Company to repurchase up to 1,542,800 shares of its common stock
over the next 12 months. Since May of 1999, the Company has invested $108.9
million to repurchase 5,457,200 million shares of its common stock under three
separate authorizations. The timing and amount of additional share repurchases
will be determined by the Company's management based on its evaluation of market
and economic conditions and other factors. A total of 326,200 shares of Common
Stock were repurchased during the first quarter of 2001. There were no shares
repurchased during the second, third or fourth quarter of 2001. The Company
maintains and has


                                       20

<PAGE>

available a $10 million unsecured demand line of credit with a major Boston bank
for operations and acquisition opportunities.

Based on the Company's current operating plan, the Company believes that its
cash and cash equivalents on hand, cash flows from operations, and its current
available line of credit will be sufficient to meet its current capital
requirements for at least the next twelve months.

The Company financed its operations exclusively through its ability to generate
cash from operations. If the Company were to experience a decrease in revenue as
a result of a decrease in demand for its services or a decrease in its ability
to collect receivables, the Company would be required to curtail discretionary
spending related to SG&A expenses and adjusts its workforce in an effort to
maintain profitability. The Company has no significant debt but does have
commitments for cash as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------

Contractual Obligations          Payments Due by Period (in millions)
--------------------------------------------------------------------------------------------------------------------------
                                 Total           Less than 1 year     1-3 years       4-5 years       After 5 years
--------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>              <C>              <C>               <C>
Capital Lease Obligations             2.3               1.1              1.2
--------------------------------------------------------------------------------------------------------------------------
Operating Leases                    129.5              27.0             46.6             22.9             33.0
--------------------------------------------------------------------------------------------------------------------------
Other Obligations                     8.5               7.4              1.1
--------------------------------------------------------------------------------------------------------------------------
Total Contractual Cash              140.3              35.5             48.9             22.9             33.0
Obligations
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Company's material commitments are primarily related to office rentals and
capital expenditures. Contractual obligations related to operating leases
reflects existing rental leases and the proposed new corporate facility as noted
in Footnote I to the consolidated financial statements "Related Parties,
Commitments and Contingencies." The Company is committed to an Enterprise
Application Architecture (EAA) project which will encompass all areas of the
company and further enhance its ability to sustain growth for the organization.
The EAA contract obligations are included in the above chart under the caption
"Other Obligations."

IMPACT OF INFLATION AND CHANGING PRICES: Inflationary increases in costs have
not been material in recent years and, to the extent permitted by competitive
pressures, are passed on to clients through increased billing rates. Rates
charged by the Company are based on the cost of labor and market conditions
within the industry. The Company was able to increase its billing rates over its
increases in direct labor costs in 2001.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS: The following important factors,
among others, could cause actual results to differ materially from those
indicated by forward-looking statements made in this Annual Report on Form 10-K
and presented elsewhere by management from time to time.

Keane's quarterly operating results have varied, and are likely to continue to
vary significantly. This may result in volatility in the market price of Keane's
shares. Keane has experienced and expects to continue to experience fluctuations
in its quarterly results. Keane's gross margins vary based on a variety of
factors including employee utilization rates and the number and type of services
performed by Keane during a particular period. A variety of factors influence
Keane's revenue in a particular quarter, including:

..     general economic conditions which may influence investment decisions or
      cause downsizing;

..     the number and requirements of client engagements;

..     employee utilization rates;

..     changes in the rates Keane can charge clients for services;

..     acquisitions; and

..     other factors, many of which are beyond Keane's control.


                                       21

<PAGE>

A significant portion of Keane's expenses do not vary relative to revenue. As a
result, if revenue in a particular quarter does not meet expectations, Keane's
operating results could be materially adversely affected, which in turn may have
a material adverse impact on the market price of Keane common stock. In
addition, many of Keane's engagements are terminable without client penalty. An
unanticipated termination of a major project could result in an increase in
underutilized employees and a decrease in revenue and profits.

Keane has pursued, and intends to continue to pursue, strategic acquisitions.
Failure to successfully integrate acquired businesses or assets may adversely
affect Keane's financial performance.

In the past five years, Keane has grown significantly through acquisitions. From
January 1, 1999 through December 31, 2001, Keane has completed nine
acquisitions. The aggregate cost of these acquisitions totaled approximately
$266.8 million. Keane's future growth may be based in part on selected
acquisitions. At any given time, Keane may be in various stages of considering
acquisition opportunities. Keane can provide no assurances that it will be able
to find and identify desirable acquisition targets or that it will be successful
in entering into a definitive agreement with any one target. In addition, even
if Keane reaches a definitive agreement, there is no assurance that Keane will
complete any future acquisition.

Keane typically anticipates that each acquisition will bring benefits, such as
an increase in revenue. Prior to completing an acquisition, however, it is
difficult to determine if Keane can actually realize these benefits.
Accordingly, there is a risk that an acquired company may not achieve an
increase in revenue or other benefits for Keane. In addition, an acquisition may
result in unexpected costs, expenses and liabilities. Any of these events could
have a material adverse effect on Keane's business, financial condition and
results of operations.

The process of integrating acquired companies into Keane's existing business may
also result in unforeseen difficulties. Unforeseen operating difficulties may
absorb significant management attention, which Keane might otherwise devote to
its existing business. In addition, the process may require significant
financial resources that Keane might otherwise allocate to other activities,
including the ongoing development or expansion of Keane's existing operations.

Finally, future acquisitions could result in Keane having to incur additional
debt and/or contingent liabilities. Any of these possibilities could have a
material adverse effect on Keane's business, financial condition and result of
operations.

The complex process of integrating Metro and SignalTree Solutions with Keane may
disrupt the business activities of the Company and affect employee morale, thus
affecting the Company's ability to pursue its business plan and retain key
employees.

Integrating the operations and personnel of Metro Information Services, Inc.,
which Keane acquired in November 2001, and SignalTree Solutions, which the
Company acquired in March 2002 with Keane is a complex process. The integration
of each of Metro and SignalTree Solutions may not be completed in the expected
time period or may not achieve the anticipated benefits of the merger. The
successful integration of Metro and SignalTree Solutions with Keane requires,
among other things, integration of finance, human resources and sales
organizations. The diversion of the attention of Keane's management and any
difficulties encountered in the process of combining the companies could cause
the disruption of, or a loss of momentum in, the activities of the combined
company's business. Further, the process of combining Metro and SignalTree
Solutions with Keane could negatively affect employee morale and the ability of
the combined company to retain some of its key employees after the merger. The
inability to successfully integrate the operations and personnel of Metro and
SignalTree Solutions with Keane could have a material adverse effect on Keane's
business, financial condition and results of operations.

Keane's growth could be limited if it is unable to attract personnel in the
Information Technology and business consulting industries. Keane believes that
its future success will depend in large part on its ability to continue to
attract and retain highly skilled technical and management personnel. The
competition for such personnel is intense. Keane may not succeed in attracting
and retaining the personnel necessary to develop its business. If Keane does
not, its business, financial condition and result of operations could be
materially adversely affected.

Keane faces significant competition for its services, and its failure to remain
competitive could limit its ability to maintain existing clients or attract new
clients. The market for Keane's services is highly competitive. The technology
for custom software services can change rapidly. The market is fragmented, and
no company holds a dominant position. Consequently, Keane's competition for
client assignments and experienced personnel varies significantly from city to
city and by the type of service provided. Some of Keane's competitors are larger
and have greater technical, financial and marketing resources and greater name
recognition in the markets they serve than does


                                       22

<PAGE>

Keane. In addition, clients may elect to increase their internal information
systems resources to satisfy their custom software development needs.

In the healthcare software systems market, Keane competes with some companies
that are larger in the healthcare market and have greater financial resources
than Keane. Keane believes that significant competitive factors in the
healthcare software systems market include size and demonstrated ability to
provide service to targeted healthcare markets.

Keane may not be able to compete successfully against current or future
competitors. In addition, competitive pressures faced by Keane may materially
adversely affect its business, financial condition and results of operations.

Keane conducts business in the United Kingdom and India, which exposes it to a
number of difficulties inherent in international activities. As a result of its
acquisition of SignalTree Solutions in March 2002, Keane has two software
development facilities in India and has added approximately 400 technical
professionals to its professional services organization. India is currently
experiencing conflicts with Pakistan over the disputed territory of Kashmir as
well as clashes between different religious groups within the country. These
conflicts, in addition to other unpredictable developments in the political,
economic and social conditions in India, could eliminate or reduce the
availability of these development and professional services. If access to these
services were to be unexpectedly eliminated or significantly reduced, Keane's
ability to meet development objectives important to its new strategy would be
hindered, and its business could be harmed.

If Keane fails to manage its geographically dispersed organization, it may fail
to meet or exceed its financial objectives and its revenues may decline. Keane
performs development activities in the U.S. and Canada and soon will be in
India, and has offices throughout the United States, the United Kingdom, Canada
and India. This geographic dispersion requires substantial management resources
that locally-based competitors do not need to devote to their operations.

Keane's operations in the U.K. and India are subject to currency exchange rate
fluctuations, foreign exchange restrictions, changes in taxation and other
difficulties in managing operations overseas. Keane may not be successful in its
international operations.

Keane may be unable to redeploy its professionals effectively if engagements are
terminated unexpectedly, which would adversely affect its results of operations.

Keane's clients can cancel or reduce the scope of their engagements with Keane
on short notice. If they do so, Keane may be unable to reassign its
professionals to new engagements without delay. The cancellation or reduction in
scope of an engagement could, therefore, reduce the utilization rate of Keane's
professionals, which would have a negative impact on Keane's business, financial
condition and results of operations.

As a result of these and other factors, the Company's past financial performance
should not be relied on as an indication of future performance. Keane believes
that period to period comparisons of its financial results are not necessarily
meaningful and it expects that results of operations may fluctuate from period
to period in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not engage in trading market risk sensitive instruments or
purchasing hedging instruments or "other than trading" instruments that are
likely to expose the Company to market risk, whether interest rate, foreign
currency exchange, and commodity price or equity price risk. The Company has not
purchased options or entered into swaps or forward or futures contracts. The
Company's primary market risk exposure is that of interest rate risk on its
investments, which would affect the carrying value of those investments.
Additionally, the Company transacts business in the United Kingdom, Canada and
India and as such has exposure associated with movement in foreign currency
exchange rates.


                                       23

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page(s)

Reports of Independent Auditors............................................ 25

Consolidated Balance Sheets as of December 31, 2001 and 2000................26

Consolidated Statements of Income
For the Years Ended December 31, 2001, 2000 and 1999........................27

Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 2001, 2000 and 1999........................28

Consolidated Statements of Cash Flows
For the Years ended December 31, 2001, 2000 and 1999........................29

Notes to Consolidated Financial Statements...............................30-43


                                       24

<PAGE>

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF KEANE, INC.:

We have audited the accompanying consolidated balance sheets of Keane, Inc. as
of December 31, 2001 and 2000, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2001. 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 in accordance with auditing standards generally accepted
in the United States. 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 Keane, Inc. at
December 31, 2001 and 2000, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States.


                                                         /s/ Ernst and Young LLP

Boston, Massachusetts
February 11, 2002, except for Note O,
 as to which the date is March 15, 2002


                                       25

<PAGE>

KEANE INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,                                                                       2001              2000
------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>               <C>
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
Assets
Current:
        Cash and cash equivalents                                                $  65,556         $  53,783
        Marketable securities                                                       63,687            59,179
        Accounts receivable, net:
          Trade                                                                    160,172           164,706
          Other                                                                      3,109             1,428
        Prepaid expenses and deferred taxes                                         20,026            15,533
                                                                                 ---------         ---------
          Total current assets                                                     312,550           294,629

Property and equipment, net                                                         33,701            24,132
Goodwill, net                                                                      224,891            75,497
Customer lists                                                                      53,659            10,196
Other intangible assets, net                                                        26,292            32,968
Deferred taxes and other assets, net                                                28,810            26,172
                                                                                 ---------         ---------

                                                                                 $ 679,903         $ 463,594
                                                                                 =========         =========
Liabilities
Current:
        Accounts payable                                                            13,723            16,820
        Accrued expenses and other liabilities                                      51,980            26,953
        Accrued compensation                                                        34,161            17,709
        Notes payable                                                                   --             5,006
        Accrued income taxes                                                         4,675             9,003
        Unearned income                                                              5,178             4,611
        Current capital lease obligations                                            1,154             1,230
                                                                                 ---------         ---------
          Total current liabilities                                                110,871            81,332

Deferred income taxes                                                               25,656             9,205
Long-term portion of capital lease and other obligations                            14,203             2,380

Commitments and contingencies (Note I)

Stockholders' Equity
Preferred stock, par value $.01, authorized
        2,000,000 shares, issued none
Common stock, par value $.10, authorized
        200,000,000 shares, issued
        75,223,971 in 2001 and 72,446,101 in 2000                                    7,522             7,245
Class B common stock, par value $.10, authorized
        503,797 shares, issued and outstanding
        284,891 in 2001 and 2000                                                        28                28
Additional paid-in capital                                                         162,269           121,444
Accumulated other comprehensive income                                              (2,007)           (4,637)
Retained earnings                                                                  361,361           343,974
Less treasury stock at cost, 5,055,602 shares of Common Stock in 2000                   --           (97,377)
                                                                                 ---------         ---------
            Total stockholders' equity                                             529,173           370,677
                                                                                 ---------         ---------

                                                                                 $ 679,903         $ 463,594
                                                                                 =========         =========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       26

<PAGE>

KEANE, INC.

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the Years Ended December 31,                                              2001           2000          1999
------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S>                                                                        <C>            <C>           <C>
Total revenues                                                             $  779,159     $  871,956    $1,041,092

Salaries, wages and other direct costs                                        547,883        621,208       702,795
Selling, general and administrative expenses                                  186,708        201,852       199,009
Amortization of goodwill and other intangible assets                           14,457         12,351         9,169
Restructuring charge                                                           10,358          8,624        13,653
                                                                           ----------     ----------    ----------

Operating income                                                               19,753         27,921       116,466

Interest and dividend income                                                    7,043          7,725         7,827
Interest expense                                                                  295            588            --
Other expenses (income), net                                                   (2,720)           872         1,480
                                                                           ----------     ----------    ----------

Income before income taxes                                                     29,221         34,186       122,813

Provision for income taxes                                                     11,834         13,832        49,739
                                                                           ----------     ----------    ----------

Net income                                                                 $   17,387     $   20,354    $   73,074
                                                                           ==========     ==========    ==========

Net income per share (basic)                                               $      .25     $      .29    $     1.02
                                                                           ==========     ==========    ==========
Net income per share (diluted)                                             $      .25     $      .29    $     1.01
                                                                           ==========     ==========    ==========

Weighted average common shares
outstanding (basic)                                                            68,474         69,646        71,571
                                                                           ==========     ==========    ==========

Weighted average common shares and common share equivalents outstanding
(diluted)                                                                      69,396         69,993        72,395
                                                                           ==========     ==========    ==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       27

<PAGE>

KEANE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended

December 31, 1999, 2000 and 2001
--------------------------------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                                                        Other
                                                                            Class B                     Compre-
                                                    Common Stock          Common Stock      Additional  hensive
                                                    ------------          ------------       Paid-in     Income   Retained
                                                 Shares      Amount     Shares     Amount    Capital     (Loss)    Earnings
---------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>         <C>       <C>        <C>        <C>        <C>
Balance January 1, 1999                        71,363,272   $  7,136    285,303   $     29   $109,606      ($764)  $250,546

Common Stock issued under                         721,893         72                           10,689
   stock option and employee
   purchase plans
Conversions of Class B Common                         191                  (191)
  Stock into Common Stock
Income tax benefit from stock                                                                     515
  option plans
Repurchase of Common Stock
Investments valuation adjustment                                                                          (1,263)
Net income                                                                                                           73,074

Comprehensive income
Balance December 31, 1999                      72,085,356      7,208    285,112         29    120,810     (2,027)   323,620

Common Stock issued under                         360,524         36                              320
   stock option and employee
   purchase plans
Conversions of Class B Common                         221          1       (221)        (1)
  Stock into Common Stock
Income tax benefit from stock                                                                     314
  option plans
Repurchase of Common Stock
Investments valuation adjustment                                                                             538
Foreign currency translation
  Adjustment                                                                                              (3,148)

Net income                                                                                                           20,354

Comprehensive income

Balance December 31, 2000                      72,446,101      7,245    284,891         28    121,444     (4,637)   343,974

Common Stock issued under                          18,000          1                           (8,894)
   stock option and employee
   purchase plans
Common Stock issued in connection               2,759,870        276                           49,460
with acquisition of Metro
Information Services, Inc.
Income tax benefit from stock                                                                     259
  option plans
Repurchase of Common Stock
Investments valuation adjustment                                                                           1,181
Foreign  currency translation
  Adjustment                                                                                               1,449
Net income                                                                                                           17,387

Comprehensive income

                                             ==============================================================================
Balance December 31, 2001                      75,223,971   $  7,522    284,891   $     28   $162,269   $ (2,007)  $361,361
                                             ==============================================================================

<CAPTION>

                                        Treasury Stock        Total
                                            at Cost           Stock-
                                            -------           holders'
                                       Shares      Amount      Equity
------------------------------------------------------------------------
<S>                                 <C>            <C>        <C>
Balance January 1, 1999               (313,064)    ($2,769)   $ 363,784

Common Stock issued under               (6,332)       (162)      10,599
   stock option and employee
   purchase plans
Conversions of Class B Common                                        --
  Stock into Common Stock
Income tax benefit from stock                                       515
  option plans
Repurchase of Common Stock          (1,000,000)    (23,910)     (23,910)
Investments valuation adjustment                                 (1,263)
Net income                                                       73,074
                                                              ---------
Comprehensive income                                             71,811
Balance December 31, 1999           (1,319,396)    (26,841)     422,799

Common Stock issued under              394,794      10,389       10,745
   stock option and employee
   purchase plans
Conversions of Class B Common                                        --
  Stock into Common Stock
Income tax benefit from stock                                       314
  option plans
Repurchase of Common Stock          (4,131,000)    (80,925)     (80,925)
Investments valuation adjustment                                    538
Foreign currency translation
  Adjustment                                                     (3,148)

Net income                                                       20,354
                                                              ---------
Comprehensive income                                             17,744
                                                              ---------
Balance December 31, 2000           (5,055,602)    (97,377)     370,677

Common Stock issued under              737,348      15,186        6,293
   stock option and employee
   purchase plans
Common Stock issued in connection    4,644,454      86,236      135,972
with acquisition of Metro
Information Services, Inc.
Income tax benefit from stock                                       259
  option plans
Repurchase of Common Stock            (326,200)     (4,045)      (4,045)
Investments valuation adjustment                                  1,181
Foreign  currency translation
  Adjustment                                                      1,449
Net income                                                       17,387
                                                              ---------
Comprehensive income                                             20,017
                                                              ---------

                                     ==================================
Balance December 31, 2001                   --          --    $ 529,173
                                     ==================================
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       28

<PAGE>

KEANE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
For the Years Ended December 31,                                         2001         2000         1999
----------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S>                                                                    <C>          <C>          <C>
Cash Flows From Operating Activities:
Net income                                                             $  17,387    $  20,354    $  73,074
Adjustments to reconcile net income to net cash provided
by operating activities:
   Depreciation and amortization                                          26,113       28,991       31,519
   Deferred income taxes                                                   1,808       (5,444)       4,996
   Provision for doubtful accounts                                         2,024        3,086         (625)
   Loss on sale of property and equipment                                   (167)          --           14
   Gain on sale of investments                                            (1,233)          --           --
   Non-cash restructuring charge                                             825        3,403        5,572
   Impairment of long term investments                                     2,000           --           --
   Gain on sale of business unit                                          (4,302)          --           --
   Income tax benefit from stock options                                     259          314          515
   Changes in operating assets and liabilities, net of acquisitions:
   Decrease in accounts receivable                                        41,691       48,432       37,580
   Increase (decrease) in prepaid expenses and other assets               (1,065)       6,748       (6,910)
   Increase (decrease) in accounts payable, accrued expenses,
        unearned income and other liabilities                                758      (18,415)     (24,064)
   Increase (decrease) in income taxes payable                            (2,916)       8,609      (13,548)
                                                                       ---------    ---------    ---------

Net cash provided by operating activities                                 83,182       96,078      108,123
                                                                       ---------    ---------    ---------

Cash Flows From Investing Activities:
Purchase of investments                                                 (104,591)     (30,875)    (110,915)
Sale and maturities of investments                                       102,340       60,191       96,542
Purchase of property and equipment                                        (7,609)     (11,386)     (16,418)
Proceeds from the sale of property and equipment                             419          182           77
Proceeds from sale of business unit                                       16,087           --           --
Payments for current year acquisitions                                    (7,148)     (32,516)     (60,996)
Payments for prior years acquisitions                                     (1,266)      (3,756)          --
                                                                       ---------    ---------    ---------

Net cash used for investing activities                                    (1,768)     (18,160)     (91,710)
                                                                       ---------    ---------    ---------

Cash Flows From Financing Activities:
Payments on acquired debt                                                (65,938)          --           --
Payments under long-term debt, net                                        (5,006)      (3,523)        (563)
Principal payments under capital lease obligations                        (1,303)      (1,376)      (1,217)
Proceeds from issuance of common stock                                     6,293       10,745       10,761
Repurchase of common stock                                                (4,045)     (80,925)     (24,072)
                                                                       ---------    ---------    ---------

Net cash used for financing activities                                   (69,999)     (75,079)     (15,091)
                                                                       ---------    ---------    ---------
Effect of exchange rate changes on cash                                      358       (2,074)          --
Net increase in cash and cash equivalents                                 11,773          765        1,322
Cash and cash equivalents at beginning of year                            53,783       53,018       51,696
                                                                       ---------    ---------    ---------
Cash and cash equivalents at end of year                               $  65,556    $  53,783    $  53,018
                                                                       =========    =========    =========

Supplemental information:
Income taxes paid                                                      $  14,922    $  10,469    $  62,140
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.


                                       29

<PAGE>

KEANE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 2001, 2000, and 1999.
(All amounts in thousands unless stated otherwise and except for share and per
share amounts)

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Keane, Inc. (the "Company") and its wholly owned subsidiaries. All
significant intercompany transactions have been eliminated.

Certain prior year amounts have been reclassified to conform to the current year
presentation.

FISCAL YEAR: The Company records activity in quarterly accounting periods of
equal length based on a monthly schedule of one five-week month followed by two
four-week months. Differences in amounts presented and those which would have
been presented using actual year end dates are not material. All references to
"fiscal 2001", "fiscal 2000" and "fiscal 1999" in the financial statements and
accompanying notes relate to the years ended December 30, 2001, December 31,
2000 and December 31, 1999, respectively. For ease of presentation, December 31
has been utilized for all financial statement captions.

NATURE OF OPERATIONS: Keane provides Information Technology (IT) and business
consulting services. The Company divides its business into three main lines:
Business Consulting, Application Development and Integration (ADI) and
Application Development and Management Outsourcing.

Keane's clients consist primarily of Global 2000 organizations, government
agencies and healthcare organizations. The Company services clients through
branch office operations in major markets of North America and the United
Kingdom. These offices are supported by Keane Consulting Group, a centralized
Strategic Practices Group representing Keane's core services and key
competencies, and seven Advanced Development Centers ("ADC") in the United
States, Canada and India. This delivery structure allows the Company to provide
clients with world-class capabilities representing the organizational experience
and best practices of the entire Company on a responsive and cost-effective
local level.

REVENUE RECOGNITION: The Company provides business innovation consulting and
system design, implementation, and support services under fixed price and time
and materials contracts. For fixed price contracts, revenue is recorded on the
basis of the estimated percentage of completion of services rendered. Losses, if
any, on fixed price contracts are recognized when the loss is determined. For
time and materials contracts, revenue is recorded at contractually agreed upon
rates as the costs are incurred. Revenues for software application sales are
recognized on the basis of customer acceptance over the period of software
implementation.

ALLOWANCE FOR BAD DEBTS: The Company evaluates its accounts receivable for risk
associated with a client's inability to make contractual payments or unresolved
issues with the adequacy of Keane's services delivered under maintenance
agreements. Billed and unbilled receivables that are specifically identified as
being at risk are provided for with a charge to reduce revenue in the period the
risk is identified.

FOREIGN CURRENCY TRANSLATION: For the Company's subsidiaries in Canada and
England, the Canadian dollar and British pound, respectively, are the functional
currencies. All assets and liabilities of the Company's Canadian and English
subsidiaries are translated at exchange rates in effect at the end of the
period. Income and expenses are translated at rates that approximate those in
effect on transaction dates. The translation differences are charged or credited
directly to the translation adjustment account included as part of stockholders'
equity. Realized foreign exchange gains and losses are included in other income
(expense).

CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly liquid
investments with a maturity of three months or less at the time of purchase.
Cash equivalents are currently designated as available-for-sale. Cash
equivalents at December 31, 2001 included investments in commercial paper ($15.0
million) and money market funds ($33.8 million). Cash equivalents at December
31, 2000 included investments in commercial paper ($33.3 million) and money
market funds ($10.6 million).


                                       30

<PAGE>

FINANCIAL INSTRUMENTS: The amounts reflected in the consolidated balance sheets
for cash and cash equivalents, accounts receivable and accounts payable
approximate their fair value due to their short maturities. Based on the
borrowing rates currently available to the Company for bank loans with similar
terms and maturities, the fair value of the company's debt obligations
approximates their carrying value. Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of
investments and trade receivables. The Company's cash, cash equivalents and
investments are held with financial institutions with high credit standings. The
Company's customer base consists of geographically dispersed customers in many
different industries. Therefore, concentration of credit risk with respect to
trade receivables is not considered significant.

INVESTMENTS: Investments are stated at fair value as reported by the investment
custodian. The Company determines the appropriate classification of debt and
equity securities at the time of purchase and re-evaluates such designations as
of each balance sheet date. Investments are currently designated as
available-for-sale, and as such, unrealized gains and losses are reported in a
separate component of stockholders' equity. The Company views its marketable
securities portfolio as available for use in its current operations, and
accordingly, these investments are classified as current assets in the
accompanying balance sheet. As of December 31, 2001, the Company's investments
reflect an increase in market value of $.8 million, which has been reflected in
the statement of stockholder's equity. At December 31, 2000, the Company's
investments reflected a decline in market value of $1.2 million. Realized gains
and losses, as well as interest, dividends and capital gain/loss distributions
on all securities, are included in earnings.

PROPERTY AND EQUIPMENT: Property and equipment is stated at cost. Repair and
maintenance costs are charged to expense. Depreciation is computed on a
straight-line basis over estimated useful lives of 25 to 40 years for buildings
and improvements, and 2 to 5 years for office equipment, computer equipment and
software. Leasehold improvements are amortized over the shorter of the estimated
useful life of the improvement or the term of the lease. Upon disposition, the
cost and related accumulated depreciation are removed from the accounts, and any
gain or loss is included in income.

GOODWILL AND INTANGIBLE ASSETS: Intangible assets consist principally of
goodwill and acquired customer-based intangibles, noncompetition agreements, and
software initially recorded at fair value. Intangibles are amortized on a
straight-line basis over 15 years for goodwill and 3 to 15 years for other
intangibles. At each reporting date, management assesses whether there has been
a permanent impairment in the value of its long-term assets and the amount of
such impairment by comparing anticipated undiscounted future cash flows from
acquired business units with the carrying value of the related goodwill. The
factors considered by management in performing this assessment include current
operating results, trends and prospects, as well as the effects of demand,
competition and other economic factors. Accumulated amortization at December 31,
2001 and 2000 was $46.9 million and $35.4 million, respectively.

INCOME TAXES: The Company accounts for income taxes under the liability method,
which requires recognition of deferred tax assets, and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.

COMPREHENSIVE INCOME: Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", establishes rules for the reporting and
display of comprehensive income and its components. Components of comprehensive
income include net income and certain transactions that have generally been
reported in the consolidated statement of stockholders' equity. Other
comprehensive income is comprised of currency translation adjustments and
available-for-sale securities valuation adjustments. At December 31, 2001,
accumulated other comprehensive income was comprised of foreign currency
translation adjustment of $2.5 million and securities valuation adjustment of
($.5) million, net of tax. At December 31, 2000, accumulated other comprehensive
income was comprised of foreign currency translation adjustment of $3.9 million
and securities valuation adjustment of $.7 million, net of tax.

STOCK-BASED COMPENSATION: The Company grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair value of the shares
at the date of grant. The Company accounts for stock options grants in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees",
and


                                       31

<PAGE>

accordingly, recognizes no compensation expense for the stock option grants. The
Company also grants restricted stock for a fixed number of shares to employees
for nominal consideration. Compensation expense related to restricted stock
awards is recorded ratably over the restriction period.

LEGAL COSTS: The Company accrues costs of settlement, damages and under certain
conditions, costs of defense when such costs are probable and estimable.
Otherwise, such costs are expensed as incurred.

USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INDUSTRY SEGMENT INFORMATION: The Company operates in one reportable
segment-information technology and business consulting services. The Company
offers an integrated mix of end-to-end business solutions, such as Business
Consulting (Plan), Application Development and Integration (Build), and
Application Development and Management Outsourcing (Manage). Approximately 93%,
94% and 96% of the Company's revenue was derived from these offerings for the
years ended December 31, 2001, 2000 and 1999, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting
Standards issued Statement of Financial Accounting Standards No. 133, (FAS 133),
"Accounting for Derivative Instruments and Hedging Activities." which required
adoption in periods beginning after June 15, 1999. FAS 133 was subsequently
amended by Statement of Financial Accounting Standards No. 137, " Accounting for
Derivative Instruments and Hedging Activities- Deferral of the Effective Date of
FASB Statement No. 133" and will now be effective for fiscal years beginning
after June 15, 2000, with earlier adoption permitted. In June 2000, the FASB
issued Statement No. 138. " Accounting for Certain Derivative Instruments and
Certain Hedging Activities," an amendment to FAS 133 and effective
simultaneously with FAS 133. The Company adopted FAS 133 as amended by FAS 138
in the first quarter of 2001, and FAS133 has not had a significant impact on its
financial position or results of operations.

In July 2001, the FASB issued FAS No. 141, "Business Combinations", and FAS No.
142, "Goodwill and Other Intangible Assets." FAS 141 eliminates the
pooling-of-interests method of accounting for business combinations except for
qualifying business combinations that were initiated prior to July 2001. FAS 141
further clarifies the criteria to recognize intangible assets separately from
goodwill. The requirements of Statement 141 are effective for any business
combination that is initiated after June 30, 2001. Under FAS 142, goodwill and
indefinite lived intangible assets are no longer amortized but are reviewed
annually (or more frequently if impairment indictors arise) for impairment.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The amortization provisions of
Statement 142 apply to goodwill and intangible assets acquired on or after June
30, 2001. With respect to goodwill and intangible assets acquired prior to June
30, 2001, companies are required to adopt Statement 142 in their fiscal year
beginning after December 15, 2001. Because of the different transition dates for
goodwill and intangible assets acquired on or before June 30, 2001 and those
acquired after that date, pre-existing goodwill and intangibles will be
amortized during this transition period until adoption whereas new goodwill and
indefinite lived intangible assets acquired after June 30, 2001 will not. The
Company is currently in the process of evaluating the aggregate impact all
provisions of FAS 142 will have on its financial position and results of
operations.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and provides a single accounting model for long-lived assets to
be disposed of. The Company is required to adopt SFAS No. 144 for the fiscal
year beginning after December 15, 2001 and is currently in the process of
evaluating the impact on its consolidated financial statements.


                                       32

<PAGE>

B. INVESTMENTS

The following is a summary of available-for-sale securities:

<TABLE>
<CAPTION>
                                                     Gross Unrealized    Estimated
                                           Cost      Gains     Losses    Fair Value
<S>                                      <C>        <C>        <C>        <C>
December 31, 2001
US Government Obligations                $ 30,017   $    338   $     11   $ 30,344
Corporate bonds                            27,906        651        285     28,272
Corporate passthroughs                      4,997         75          1      5,071
                                         --------   --------   --------   --------

                                           62,920      1,064        297     63,687
                                         ========   ========   ========   ========

Due in one year or less                     8,517                            8,705
Due after one year through three years     22,927                           23,133
Due after three years                      31,476                           31,849
                                         --------                         --------
                                           62,920                           63,687
                                         ========                         ========

December 31, 2000
US Government Obligations                  27,441         30        178     27,293
Corporate bonds                            20,886         67      1,203     19,750
Corporate passthroughs                     12,092         62         18     12,136
                                         --------   --------   --------   --------

                                           60,419        159      1,399     59,179
                                         ========   ========   ========   ========

Due in one year or less                     5,237                            5,237
Due after one year through three years     34,838                           33,438
Due after three years                      20,344                           20,504
                                         --------                         --------
                                         $ 60,419                         $ 59,179
                                         ========                         ========
</TABLE>

Proceeds from the sale of available for sale securities were approximately
$102.3 million during 2001. Net realized gains on those sales were $1.2 million.
There was no gain or loss, based on a specific identification basis, realized on
the sale of available for sale securities during the years ended December 31,
2000 and 1999.

C. ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

                                                            December 31,
                                                          2001             2000
                                                          ----             ----
Billed                                               $ 144,896        $ 141,533
Unbilled                                                28,290           34,163
Allowance for doubtful accounts                        (13,014)         (10,990)
                                                     ---------        ---------
                                                     $ 160,172        $ 164,706
                                                     =========        =========

Accounts receivable is presented net of doubtful accounts. The activity in the
allowance account is as follows:

                                                 December 31,
                                              2001           2000          1999
                                              ----           ----          ----
Beginning of year balance                 $ 10,990       $  7,904       $ 8,133
Provision charged                           13,706          6,778         7,749
Recoveries                                  (3,448)
Write-offs                                  (8,234)        (3,692)       (7,978)
                                          --------       --------       -------
End of year balance                       $ 13,014       $ 10,990       $ 7,904
                                          ========       ========       =======


                                       33

<PAGE>

D. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                                                               December 31,
                                                           2001             2000
                                                           ----             ----
Buildings and improvements                              $ 2,599          $   772
Office equipment                                         52,537           71,316
Computer equipment and software                          12,019           15,316
Leasehold improvements                                   10,753            9,885
Construction in progress                                 13,000               --
                                                        -------          -------
                                                         90,907           97,289
Less accumulated depreciation and amortization           57,206           73,157
                                                        -------          -------
                                                        $33,701          $24,132
                                                        =======          =======

Depreciation expense totaled $11.7 million, $16.2 million and $22.4 million in
2001, 2000 and 1999, respectively. Computer equipment and software includes
assets arising from capital lease obligations at a cost of $.6 million with
accumulated amortization totaling $.3 million at December 31, 2001.

E. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

                                                               December 31,
                                                           2001             2000
                                                           ----             ----
Accrued employee benefits                               $ 8,322          $ 8,226
Accrued rent obligations                                     --            1,609
Accrued restructuring                                    21,723            6,332
Other                                                    21,935           10,786
                                                        -------          -------
                                                        $51,980          $26,953
                                                        =======          =======

F. NOTES PAYABLE

In connection with the Company's acquisition of Parallax Solutions Ltd. in
February of 1999, the Company issued a $6.6 million note payable to the former
owners. During the year 2001, the Company paid the remaining balance of $4.0
million related to this note.

G. CAPITAL STOCK

The Company has three classes of stock: Preferred Stock, Common Stock and Class
B Common Stock. Holders of Common Stock are entitled to one vote for each share
held. Holders of Class B Common Stock generally vote together with holders of
Common Stock as a single class but are entitled to 10 votes for each share held.
The Board of Directors is authorized to determine the rights, preferences,
privileges and restrictions of any series of Preferred Stock, and to fix the
number of shares of any such series. The Common Stock and Class B Common Stock
have equal liquidation and dividend rights except that any regular quarterly
dividend declared shall be $.05 per share less for holders of Class B Common
Stock. Class B Common Stock is nontransferable, except under certain conditions,
but may be converted into Common Stock on a share-for-share basis at any time.
Conversions to common stock totaled 221 and 191 shares in 2000 and 1999,
respectively. There were no conversions during 2001. Shares of common stock
reserved for conversions totaled 284,891 at December 31, 2001.

H. BENEFIT PLANS

STOCK OPTION PLANS: The Company has four stock-based compensation plans, which
are described below. The Company adopted the disclosure provisions of SFAS 123,
"Accounting for Stock-Based Compensation," and has continued to apply APB
Opinion 25 and related Interpretations in accounting for its plans. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates as calculated in
accordance with SFAS 123, the Company's net income and earnings per share for
the years ended December 31, 2001, 2000 and 1999 would have been reduced to the
pro forma amounts indicated below:


                                       34

<PAGE>

                                                    Years Ended December 31,
                                                   2001       2000       1999
                                                 ------------------------------

Net income - as reported                         $ 17,387   $ 20,354   $ 73,074
Net income - pro forma                              8,045      2,596     61,811
Net income per share - as reported (diluted)          .25        .29       1.01
Net income per share - pro forma (diluted)            .12        .04        .85

The effects of applying SFAS 123 in this pro forma disclosure are not likely to
be representative of effects on reported net income for future years.

The fair market value of each stock option is estimated using the Black Scholes
option pricing method, assuming no expected dividends with the following
weighted-average assumptions:

                                                     Years Ended December 31,
                                                   2001        2000        1999
                                                 ------------------------------

Expected life (years)                               4.8         4.4         4.0
                                                    5.5
Expected stock price volatility                     65%         93%         96%
Risk-free interest rate                           5.00%       5.00%       5.27%

The 1992 Stock Option Plan provides for grants of stock options for up to
3,600,000 shares of the Company's Common Stock to employees, officers and
directors of, and consultants and advisors to, the Company. Generally, options
expire five years from the date of grant, require a purchase price of not less
than 100% of the fair market value of the stock as of the date of grant, and are
exercisable at such time or times as the Board of Directors in each case
determines. The Company may grant options that are intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code
("incentive stock options") or nonstatutory options not intended to qualify as
incentive stock options.

The 1998 Stock Incentive Plan, amended in December 1999, provides for grants of
stock options for up to 7,000,000 shares of the Company's Common Stock to
employees, officers and directors of, and consultants and advisors to, the
Company. Generally, options expire five years from the date of grant, require a
purchase price of not less than 100% of the fair market value of the stock as of
the date of grant, and are exercisable at such time or times as the Board of
Directors in each case determines. The Company may grant options that are
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code ("incentive stock options") or nonstatutory options, restricted
stock awards and other stock-based awards, including the grant of shares based
upon certain conditions not intended to qualify as incentive stock options.

In December 2000, the Company initiated a new "Time Accelerated Restricted Stock
Award Plan" (TARSAP) under its 1998 Stock Incentive Plan, whereby the vesting of
certain stock options is directly impacted by the performance of the Company.
The vesting of stock options granted under the TARSAP accelerates upon the
meeting of certain profitability criteria. If these criteria are not met, such
options will vest five years after the date of grant and expire at the end of
ten years.

The Company believes that tying the vesting of larger blocks of certain stock
options directly to financial performance more effectively utilizes options that
would have been granted in future years, while making employees true
stakeholders. The Company also anticipates that more closely aligning the
interest of management and key employees with shareholders will focus employees
on the goals and objectives most important to shareholders, and that the
granting of such options were an important factor in securing employee
confidence, commitment, and trust at a critical junction in the implementation
of its new strategic plan. Finally, the Company believes that the cost to
shareholders of these additional options can be kept reasonable as a result of
its stock repurchase program. Since May of 1999, the Company has invested $108.9
million to repurchase 5, 457,200 million shares of its common stock under three
separate authorizations.

The 2001 Stock Incentive Plan provides for grants of stock options for up to
7,000,000 shares of the Company's Common Stock to employees, officers and
directors of, and consultants and advisors to, the Company. Generally, options
expire five years from the date of grant, require a purchase price of not less
than 100% of the fair market value of the stock as of the date of grant, and are
exercisable at such time or times as the Board of Directors in each case
determines. The Company may grant options that are intended to qualify as
incentive stock options under Section 422


                                       35

<PAGE>

of the Internal Revenue Code ("incentive stock options") or nonstatutory
options, restricted stock awards and other stock-based awards, including the
grant of shares based upon certain conditions not intended to qualify as
incentive stock options.

In November 2001, the Company completed its merger with Metro Information
Services, Inc. In connection with the merger, the Company assumed all options,
whether vested or unvested, to purchase Metro's common stock, issued under
Metro's stock option plans. Each option to purchase shares of Metro's common
stock outstanding as of November 30, 2001 became an option to acquire a number
of shares of Keane common stock equal to the number of shares of Metro's Common
Stock subject to such option, multiplied by a conversion ratio of .48. The
option price has been proportionally adjusted. The number of adjusted shares
under the Metro plan is 571,058. There were no shares exercised under this plan
during December 2001.

The weighted-average fair value of options granted under both Plans during the
years ended December 31, 2001, 2000 and 1999 was $11.96, $11.53 and $14.39,
respectively.

Information with respect to activity under the Company's stock option plans is
set forth below:

                                                                      Weighted
                                                        Common         Average
                                                         Stock   Exercise Price

Outstanding at December 31, 1998                     2,238,060           20.80
  Granted                                            1,582,300           20.60
  Exercised                                           (409,112)           6.69
  Canceled/Expired                                    (517,389)          25.91
                                                    ----------

Outstanding at December 31, 1999                     2,893,859           21.76
  Granted                                            3,580,618           16.58
  Exercised                                           (382,078)           8.75
  Canceled/Expired                                    (870,830)          25.36
                                                    ----------

Outstanding at December 31, 2000                     5,221,569           18.55
  Granted                                            1,723,024           20.14
  Exercised                                           (192,095)           8.98
  Canceled/Expired                                    (475,328)          20.13
                                                    ----------

Outstanding at December 31, 2001                     6,277,170          $19.20
                                                    ==========

Shares available for future issuance under the Company's stock option plans at
December 31, 2001 are 9,219,291.

The following table summarizes information about stock options that were
outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                                             Weighted Average        Weighted Average                          Weighted Average
                                                Remaining             Exercise Price                            Exercise Price
       Range of                 Number         Contractual              Of Options            Number            Of Exercisable
   Exercise Prices           Outstanding          Life                 Outstanding          Exercisable             Options
   ---------------           -----------          ----                 -----------          -----------             -------
<S>                           <C>                  <C>                    <C>                <C>                     <C>
$0.04    --     $4.99            10,000            1.8                    $ 0.04                10,000               $  0.04
 5.00    --      9.99         2,041,310            8.6                      9.75                14,560                  9.72
10.00    --     14.99           192,700            7.9                     13.12                55,110                 13.02
15.00    --     19.99         1,830,792            6.1                     17.40               484,352                 17.30
20.00    --     24.99           475,073            3.1                     22.22               156,514                 22.32
25.00    --     29.99           840,340            2.9                     27.31               271,038                 27.49
30.00    --     39.99           743,183            3.1                     33.91               568,780                 33.89
40.00    --     49.99            66,600            2.7                     44.73                47,674                 44.61
50.00    --     59.99            70,692            5.8                     57.21                48,689                 57.23
60.00    --     74.99             6,480            7.0                     73.03                 4,080                 73.10
                                  -----                                                          -----

$0.04    --    $74.99         6,277,170            5.9                    $19.20             1,660,797               $ 26.90
</TABLE>


                                       36

<PAGE>

STOCK PURCHASE PLANS: The Company's 1992 Employee Stock Purchase Plan provides
for the purchase of 4,550,000 shares of Common Stock by qualifying employees at
a purchase price of 85% of the market value of the stock on the purchase date.
During 2001, 2000 and 1999 participants in this plan purchased 575,841, 384,209,
and 310,051 shares, respectively. Shares available for future purchases totaled
1,963,931 at December 31, 2001.

INCENTIVE COMPENSATION PLANS: During 1988, the Company established incentive
compensation plans for certain officers and selected employees. Payments under
the plans are based on actual performance compared to stated plan objectives.
Compensation expense under the plans in 2001, 2000 and 1999 approximated $18.3
million, $11.2 million and $8.3 million, respectively.

DEFERRED SAVINGS AND PROFIT SHARING PLAN: During 1984, the Company established a
deferred savings and profit sharing plan under Section 401(k) of the Internal
Revenue Code. The plan enables eligible employees to reduce their taxable income
by contributing up to 15% of their salary to the plan. The Company makes
discretionary contributions to the plan based on a percentage of contributions
made by the eligible employees and profits of the Company. The Company's
contributions vest after the employee has completed 42 months of service and for
2001, 2000 and 1999 amounted to approximately $4.5 million, $5.0 million and
$5.1 million, respectively.

DEFINED BENEFIT PLAN: The Company has a defined benefit pension plan that
provides pension benefits to employees of the Company's U.K. subsidiary. Such
benefits are available to employees who were active on August 4, 1998 and not to
employees who joined the Company after that date, and based on the employee's
compensation and service. The plan is closed to new employees. The Company's
policy is to fund amounts required by applicable government regulations. Total
pension expense for 2001, 2000, and 1999 was approximately $1.2 million, $1.4
million and $1.4 million, respectively.

The Company's projected benefit obligation at December 31, 2000 was
approximately $15.2 million. During 2001, service cost and interest cost were
$1.6 million and $1.0 million, respectively. Also during 2001, employee
contributions, actuarial gain, and benefits paid were $.3 million, $1.0 million
and $.3 million, respectively. The projected benefit obligation at December 31,
2001 was $16.8 million.

The fair value of the plan assets as of December 31, 2000 was $17.0 million. The
actual return for the year ended December 31, 2001 was a reduction in plan
assets of $2.6 million. During 2001, employer and employee contributions totaled
$1.5 million and benefits paid totaled $.3 million. The fair value of the plan
assets at December 31, 2001 was $15.6 million.

The components of the 2001 net periodic pension cost were as follows: service
cost was $1.6 million, interest cost was $1.0 million, the expected return on
plan assets was $1.4 million, and net amortization and deferrals was $.4
million.

I. RELATED PARTIES, COMMITMENTS AND CONTINGENCIES

The Company's corporate offices are located in Boston, Massachusetts. The
building is leased from a partnership in which an officer and certain directors
and shareholders of the Company are limited partners. The lease is for a term of
twenty years at annual rentals considered to be at prevailing market rates and
lasting through 2006. The Company is also required to pay specified percentages
of annual increases in real estate taxes and operating expenses. The Company
leases additional office space and apartments under operating leases and capital
leases, some of which may be renewed for periods up to five years, subject to
increased rentals. Rental expense for all of the Company's facilities, except as
noted below, amounted to approximately $19.4 million in 2001, $22.4 million in
2000 and $21.8 million in 1999. The Company is committed to minimum annual
rental payments under all leases, except for the new facility noted below, of
approximately $27 million in 2002, $22.9 million in 2003, $17.3 million in 2004,
$11.3 million in 2005, $ 5.1 million in 2006 and an aggregate of $5.6 million
for 2007 and thereafter.

In October, 2001, the Company entered into a lease with Gateway Developers LLC
("Gateway LLC") for a term of twelve years, pursuant to which the Company agreed
to lease approximately 95,000 square feet of office and development space in a
building under construction at One Chelsea Street in Boston, Massachusetts (the
"New Facility"). The Company will lease approximately 57% of the New Facility
and the remaining 43% will be occupied by other tenants. John Keane Family LLC
is a member of Gateway LLC. The members of John Keane Family LLC are trusts for
the benefit of John F. Keane, Chairman of the Board of the Company, and his
immediate family members.


                                       37

<PAGE>

On October 31, 2001, Gateway LLC entered into a $39.4 million construction loan
(the "Gateway Loan") in connection with the New Facility and an adjacent
building to be located at 20 City Square, Boston, Massachusetts. John Keane
Family LLC and John F. Keane are each liable for certain obligations under the
Gateway Loan if and to the extent Gateway LLC requires funds to comply with its
obligations under the Gateway Loan.

The Company currently expects to occupy the new facility in January 2003. The
Company will consolidate several existing facilities it has in the Boston area
as part of this move. Based upon its knowledge of rental payments for comparable
facilities in the Boston area, the Company believes that the rental payments
under the lease for the New Facility, which will be approximately $3.2 million
per year ($33.00 per square foot for the first 75,000 square feet and $35.00 per
square foot for the remainder of the premises) for the first six years of the
lease term and $3.5 million per year ($36.00 per square foot for the first
75,000 square feet and $40.00 per square foot for the remainder of the premises)
for the remainder of the lease term, plus specified percentages of any annual
increases in real estate taxes and operating expenses, were, at the time the
Company entered into the lease, as favorable to the Company as those which could
have been obtained from an independent third party.

In view of these related party transactions, the Company has concluded that,
during the construction phase of the facility, the estimated construction in
progress costs for the project will be capitalized in accordance with EITF No.
97-10, "The Effect of Lessee Involvement in Asset Construction." A credit in the
same amount is included in the long-term portion of capital lease and other
obligations in the accompanying balance sheet. For purposes of the consolidated
statement of cash flows, the Company characterizes this treatment as a non-cash
financing activity.

The Company is committed to an Enterprise Application Architecture (EAA) project
for the approximate cost of $8.5 million. A majority of the project will be
completed in 2002.

On September 25, 2000, the U.S. Equal Employment Opportunity Commission ("EEOC")
commenced a civil action against Keane in the United States District Court for
the District of Massachusetts alleging that the Company discriminated against
former employee Michael Randolph and other unspecified "similarly-situated
individuals" by acts of racial harassment, retaliation and constructive
discharge. The EEOC has not specified the amount of damages it is seeking. The
parties are presently engaged in discovery. Because the lawsuit is in pre-trial
stages, management is unable to estimate the effect, if any, it may have on its
consolidated financial position or consolidated results of operations.

The Company is involved in other litigation and various legal matters, which
have arisen in the ordinary course of business. The Company does not believe
that the ultimate resolution of these matters will have a material adverse
effect on its financial condition, results of operations, or cash flows. The
Company believes these litigation matters are without merit and intends to
defend these matters vigorously.

J. INCOME TAXES

The provision for income taxes includes federal, state and foreign income taxes
currently payable and those deferred because of temporary differences between
the financial statement and tax bases of assets and liabilities.

For financial reporting purposes, income before income taxes includes the
following components:

      Earnings before income taxes:

          Domestic                                 $27,721
          Foreign                                    1,501
                                                   -------
Total income before provision for income taxes     $29,222


                                       38

<PAGE>

The provision for income taxes consists of the following:

                                                 Years Ended December 31,
                                           2001             2000            1999
                                           ----             ----            ----
Current:
  Federal                              $  8,993         $ 16,748         $34,230
  State                                     147            1,958           9,283
  Foreign                                   886              570           1,230
                                       --------         --------         -------
     Total Current                       10,026           19,276          44,743

Deferred:
  Federal                                 1,605           (4,283)          3,570
  State                                     412             (898)            626
  Foreign                                  (209)            (263)            800
                                       --------         --------         -------
    Total Deferred                        1,808           (5,444)          4,996
                                       --------         --------         -------
                                       $ 11,834         $ 13,832         $49,739
                                       ========         ========         =======

A reconciliation of the statutory income tax provision with the effective income
tax provision is as follows:

                                                    Years Ended December 31,
                                                  2001        2000        1999
                                                  ----        ----        ----

Federal income taxes at 35%                      $10,228     $11,965     $42,985
State income taxes, net of federal tax benefit       363       1,060       6,530
Merger related costs                               1,048          --          --
Other, net                                           195         807         224
                                                 -------     -------     -------
          Total income tax provision             $11,834     $13,832     $49,739
                                                 =======     =======     =======

The components of the net deferred tax assets and liabilities are as follows:

                                                       Years Ended December 31,
                                                          2001          2000
                                                          ----          ----

Current Asset:
   Allowance for doubtful accounts and other reserves   $  2,208      $  5,204
   Accrued expenses                                        9,167         3,300
                                                        --------      --------
      Total current assets                                11,375         8,504

Non-current Asset:
   Amortization of intangible assets                      12,453         9,998
   Depreciation and other                                 11,496         7,135
   Domestic net operating loss carry-forwards              2,298         2,541
                                                        --------      --------
      Total non-current assets                            26,247        19,674

Non-current Liability:
   Intangibles                                           (28,150)       (9,205)
                                                        --------      --------
Net deferred tax assets                                 $  9,472      $ 18,973
                                                        ========      ========

At December 31, 2001, the Company had domestic net operating loss (NOL)
carry-forwards of $5.6 million expiring in 2017 and 2018, which is subject to a
Section 382 limitation due to ownership changes.

Based upon the level of historical taxable income and projections for future
taxable income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences and no valuation allowance is
necessary.

The current component of deferred tax assets is included in prepaid expenses and
deferred taxes on the balance sheet. The non-current asset component is included
in the deferred taxes and other assets, net on the balance sheet.


                                       39

<PAGE>

K. BUSINESS ACQUISITIONS

On November 30, 2001, the Company completed the merger of Metro Information
Services, Inc. (Metro), a provider of information technology, or IT, consulting
and custom software development services and solutions. The merger was completed
by exchanging all of the Common Stock of Metro for 7.4 million shares of the
Company's Common Stock. Each share of Metro was exchanged for .48 of one share
of Keane common stock. In addition, outstanding Metro stock options were
converted at the same ratio into options to purchase 571,058 shares of Keane
Common Stock.

In accordance with recently issued Statement of Financial Accounting Standards
No.141, " Business combinations," and certain provisions of Statement of
Financial Accounting Standard No. 142, "Goodwill and other Intangible Assets,"
The Company used the purchase method of accounting for a business combination to
account for the merger, as well as the new accounting and reporting regulations
for goodwill and other intangibles. Under these methods of accounting, the
assets and liabilities of Metro, including intangible assets, were recorded at
their respective fair values. All intangible assets will be amortized over their
estimated useful life with the exception of goodwill. The financial position,
results of operations and cash flows of Metro were included in the Company's
financial statements effective as of the merger date.

The total cost of the merger was $162.4 million. Portions of the purchase price,
including intangible assets, were identified by independent appraisers utilizing
proven valuation procedures and techniques. In addition, the restructuring
component of the purchase price was in place at the date of acquisition.


                                       40

<PAGE>

The components of the purchase price allocation is as follows:

(in thousands)
-------------------------------------------------------------------------------
Consideration and merger costs:
Value of stock issued                                                 $ 130,796
Fair value of options exchanged                                           4,754
Transaction costs                                                         7,786
Restructuring                                                            10,972
Deferred Tax Liability                                                    8,141
-------------------------------------------------------------------------------
                        Total                                         $ 162,449

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

Allocation of purchase price:

Net liabilities assumed                                               $ (37,984)
Customer lists                                                           45,200
Non-compete agreements                                                      900
Goodwill                                                                154,333
-------------------------------------------------------------------------------
                          Total                                       $ 162,449

The following table presents the condensed balance sheet disclosing the amounts
assigned to each of the major assets acquired and liabilities assumed of Metro
at acquisition date:

(in thousands)
-------------------------------------------------------------------------------
Cash                                                                    $   622
Accounts receivable                                                      40,820
Other current assets                                                      1,004
Property, plant & equipment, net                                          2,790
                                                                        -------
Total assets                                                             45,226

Accounts payable                                                          3,583
Accrued compensation                                                      9,800
Other liabilities                                                         3,889
Note payable                                                             65,938
                                                                        -------
Net assets                                                              $37,984
-------------------------------------------------------------------------------

The unaudited pro forma combined condensed statements of income combine the
historical statements of the Company and Metro as if the merger had occurred at
January 1, 2000. Unaudited pro forma combined condensed financial information is
presented for comparative purposes only and is not necessarily indicative of the
results of operations that would have actually been reported had the merger
occurred at the beginning of the periods presented, nor is it necessarily
indicative of future financial position or results of operations.

                                    Twelve Months Ended     Twelve Months Ended
                                     December 31, 2001       December 31, 2000

Total revenues                           $ 1,029,871             $ 1,185,547
Net income                                    14,870                  22,778
Net income per share (basic)                   $ .22                   $ .30
Net income per share (diluted)                 $ .21                   $ .30

During 2000 and 1999, the Company completed several acquisitions of businesses
complementary to the Company's business strategy. The cost of these
acquisitions, which were accounted for using the purchase method of accounting,
totaled $35.3 million in 2000 and $67.9 million in 1999. In certain cases, the
purchase price included contingent


                                       41

<PAGE>

consideration based upon operating performance of the acquired business. During
2001, the Company paid an additional $1.2 million related to these
contingencies and has been recorded as additional purchase price.

The results of operations of these acquired companies have been included in the
Company's consolidated statement of income from the date of acquisition. The
excess of the purchase price over the fair value of the net assets has been
allocated to identifiable intangible assets and goodwill and is being amortized
on a straight-line basis over periods ranging from three to fifteen years. Pro
forma results of operations for these acquisitions have not been provided as
they were not material to the Company on either an individual or an aggregate
basis.

L. BANK DEBT

In July 1995, the Company secured a $10 million demand line of credit from a
major Boston bank, which expires in July of 2002. Borrowings will bear interest
at the bank's base rate (the prime rate). There were no borrowings under this
line during 2001 or 2000.

M. EARNINGS PER SHARE

A summary of the Company's calculation of earnings per share is as follows:

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                 2001                2000                1999
                                                                 ----                ----                ----
<S>                                                             <C>                 <C>                 <C>
Net income                                                      $17,387             $20,354             $73,074
Weighted average number of common shares
outstanding used in calculation of basic earnings
per share                                                        68,474              69,646              71,571
Incremental shares from the assumed exercise of
dilutive stock options                                              922                 347                 824
                                                                -------             -------             -------
Weighted average number of common shares
outstanding used in calculation of diluted earnings
per share                                                        69,396              69,993              72,395
                                                                =======             =======             =======
Earnings per share
Basic                                                           $   .25             $   .29             $  1.02
                                                                =======             =======             =======
Diluted                                                         $   .25             $   .29             $  1.01
                                                                =======             =======             =======
</TABLE>

For the period ending December 31, 2001, there were 2,348,368 options for common
stock, which were excluded because they were anti-dilutive.

N. RESTRUCTURING CHARGES

In the fourth quarter of 2001, 2000 and 1999, the Company recorded restructuring
charges of $10.4 million, $8.6 million and $13.7 million, respectively. Of these
charges, $4.4 million, $1.7 million and $3.8 million related to a workforce
reduction, primarily technical consultants, of approximately 900, 200 and 600
employees for the years 2001, 2000 and 1999, respectively. In addition, the
Company performed a review of its business strategy and concluded that
consolidating some of its branch offices was key to its success. As a result of
this review, the Company wrote off $.8 million in 2001, $3.4 million in 2000 and
$4.8 million in 1999 of assets, which became impaired as a result of these
restructuring actions. The charges included $4.0 million in 2001, $ 3.5 million
in 2000 and $ 5.1 million in 1999 for branch office closings and certain other
expenditures.

During the fourth quarter of 2001, the Company determined that the cost to
consolidate and/or close certain non-profitable offices would be higher than the
original estimate. The change in estimates resulted in an addition to the
Company's restructuring liability of $1.2 million.


                                       42

<PAGE>

A summary of fiscal year 2001 restructuring activity, which is recorded in
accrued expenses in the accompanying balance sheet, is as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                            Workforce                       Branch Office Closures
                                            Reduction  Impaired Assets      and Other Expenditures        Total
-----------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>                         <C>            <C>
Charges for 1999                            $  3,800          $  4,753                    $  5,100       $ 13,653
Charges for 2000                               1,743             3,403                       3,478          8,624
Charges for 2001                               4,417               825                       3,957          9,199
Change in estimates                               --                --                       1,159          1,159
                                            --------          --------                    --------       --------
                                               9,960             8,981                      13,694         32,635

Cash expenditures for 1999                    (1,000)                                                      (1,000)
Cash expenditures for 2000                    (3,138)                                       (2,832)        (5,970)
Cash expenditures for 2001                    (2,620)                                       (2,494)        (5,114)
                                            --------                                      --------       --------
                                              (6,758)                                       (5,326)       (12,084)

Non cash charges for 1999                                       (4,753)                       (819)        (5,572)
Non cash charges for 2000                                       (3,403)                         --         (3,403)
Non cash charges for 2001                                         (825)                         --           (825)
                                                              --------                    --------       --------
                                                                (8,981)                       (819)        (9,800)

Non cash acquisition charges                   7,226                                         3,746         10,972
                                            --------                                      --------       --------

Balance as of December 31, 2001             $ 10,428          $    ---                    $ 11,295       $ 21,723
-----------------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 2001, the branch office closures consisted of amounts for
properties identified in 2001, 2000 and 1999 in the amounts of $8.3 million,
$2.0 and $1.0 million, respectively.

O. SUBSEQUENT EVENTS

The Company announced on February 13, 2002, that it has signed a definitive
merger agreement to acquire SignalTree Solutions Holding, Inc., a
privately-held, US based corporation with two software development facilities in
India and additional operations in the United States. The acquisition closed on
March 15, 2002. The Company paid approximately $64.5 million in cash for the
acquisition.


                                       43

<PAGE>

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

Not applicable.

PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The response to this Item is contained in part under the caption "Directors and
Executive Officers of the Company" in Part I hereof and the remainder is
incorporated herein by reference to the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held May 29, 2002 (the "2002 Proxy Statement")
under the caption "Election of Directors".

ITEM 11. EXECUTIVE COMPENSATION

The response to this Item is incorporated herein by reference to the Company's
2002 Proxy Statement under the caption "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The response to this Item is incorporated herein by reference to the Company's
2002 Proxy Statement under the caption "Stock Ownership of Certain Beneficial
Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The response to this Item is incorporated herein by reference to the Company's
2002 Proxy Statement under the caption "Certain Related Party Transactions."


                                       44

<PAGE>

PART IV

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

(a) Financial Statements
    --------------------

The following consolidated financial statements are included in Part II, Item 8:

                                                                        Page(s)

Reports of Independent Auditors.............................................25

Consolidated Balance Sheets as of December 31, 2001 and 2000................26

Consolidated Statements of Income
For the Years Ended December 31, 2001, 2000 and 1999........................27

Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 2001, 2000 and 1999........................28

Consolidated Statements of Cash Flows
For the Years Ended December 31, 2001, 2000 and 1999........................29

Notes to Consolidated Financial Statements...............................30-43

(b) Exhibits
    --------

The Exhibits set forth in the Exhibit Index are filed as part of this Annual
Report.

(c) Reports on Form 8-K
    -------------------

The Company filed the following Current Reports on Form 8-K during the
three-month period ended December 31, 2001.

            i.    Current Report on Form 8-K filed with the SEC on October 24,
                  2001, reporting its third quarter financial results and
                  announced the schedule of the meeting and closing date for its
                  acquisition of Metro Information Services, Inc.

            ii.   Current Report on Form 8-K filed with the SEC on November 30,
                  2001, reporting the merger of Metro Information Services, Inc.
                  into a subsidiary of the Company under Item 2 - Acquisition or
                  Disposition of Assets.


                                       45

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                        KEANE, INC.
                                        (Registrant)

                                        /s / Brian T. Keane
                                        -------------------------------------
                                        By:  Brian T. Keane
                                        President and Chief Executive Officer

Date: March 28, 2002

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


/s/  John F. Keane                          /s/ John J. Leahy
--------------------------------------      -------------------------------
John F. Keane                               John J. Leahy
Chairman                                    Senior Vice President and
                                            Chief Financial Officer
                                            (Principal Financial Officer)
                                            (Principal Accounting Officer)

/s/ Brian T. Keane                          /s/ John F. Keane, Jr.
-------------------------------------       -------------------------------
Brian T. Keane                              John F. Keane, Jr.
President, Chief Executive Officer and      Director
Director

/s/ John F. Rockart                         /s/ Maria A. Cirino
-------------------------------------       -------------------------------
John F. Rockart                             Maria Cirino
Director                                    Director

/s/ Philip J. Harkins                       /s/ Winston R. Hindle, Jr.
-------------------------------------       -------------------------------
Philip J. Harkins                           Winston R. Hindle, Jr.
Director                                    Director

/s/ Stephen D. Steinour                     /s/John H. Fain
-------------------------------------       -------------------------------
Stephen Steinour                            Senior Vice President and Director
Director


                                       46

<PAGE>

Exhibit Index
-------------

2.1    Agreement and Plan of Merger, dated as of August 20, 2001, by and among
       the Registrant, Veritas Acquisition Corp. and Metro Information Services,
       Inc. is incorporated herein by reference to Exhibit 2.1 to the
       Registrant's Current Report on Form 8-K dated August 20, 2001, filed on
       August 21, 2001.

3.1    Articles of Organization of the Registrant, as amended, are incorporated
       herein by reference to Exhibit 4.1 to the Registrant's Registration
       Statement on Form S-3 (File No. 33-85206).

3.2    Articles of Amendment to Registrant's Articles of Organization, filed on
       May 29, 1998, are incorporated herein by reference to Exhibit 99.1 to the
       Registrant's Current Report on 8-K, filed on June 3, 1998.

3.3    Second Amended and Restated By-Laws of the Registrant are incorporated
       herein by reference to Exhibit 3 to the Registrant's Quarterly Report on
       Form 10-Q for the fiscal quarter ended June 30, 2000.

3.4    Amendment to Second Amended and Restated Bylaws of the Registrant.

10.1   Keane, Inc. 401(k) Deferred Savings and Profit Sharing Plan is
       incorporated herein by reference to Exhibit to the Registration
       Statement.

*10.2  1992 Stock Option Plan is incorporated herein by reference to the
       Registrant's Annual Report on Form 10-K for the year ended December 31,
       1992.

*10.3  1998 Stock Incentive Plan is incorporated herein by reference to Exhibit
       10 to the Company's Registration Statement on Form S-8 (File No.
       333-56119), as filed with and declared effective by the Commission on
       June 5, 1998.

*10.4  Amendment to 1998 Stock Incentive Plan is incorporated herein by
       reference to the Registrant's Annual Report on Form 10-K for the year
       ended December 31, 2000.

*10.5  Amended and Restated 1992 Employee Stock Purchase Plan, as amended, is
       incorporated herein by reference to Exhibit 10.1 to the Registrants
       Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
       2001.

10.6   Metro Information Services, Inc. Amended and Restated 1997 Stock Option
       Plan.

10.7   Lease dated February 20, 1985, between the Registrant and Jonathan G.
       Davis, as Trustee of City Square Development Trust (the "Trust"), is
       incorporated herein by reference to Exhibit 10.6 to the Registration
       Statement.

10.8   First Amendment of Lease dated March 19, 1985, between the Registrant and
       the Trust, is incorporated herein by reference to Exhibit 10.7 to the
       Registration Statement.

10.9   Second Amendment of Lease dated November 1985, between the Registrant and
       the Trust, is incorporated herein by reference to Exhibit 10.8 to the
       Registration Statement.

10.10  Amended and Restated Guidance Promissory Note dated August 1, 2001, in
       the amount of $10,000,000 between the Registrant and Fleet National Bank
       is incorporated herein by reference to Exhibit 10.1 to the Registrant's
       Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

*10.11 Keane, Inc. 2001 Stock Incentive Plan

21.0   Schedule of Subsidiaries of the Registrant

23.1   Consent of Ernst & Young LLP

*      Management contract or compensatory plan or arrangement required to be
       filed as an exhibit to this form pursuant to Item 14(A) and (C) of this
       report.


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