<PAGE>

                                                                     Exhibit 13


                            SELECTED FINANCIAL DATA

The selected consolidated financial data for the years ended June 30, 2000, 2001
and 2002 have been derived from the Company's financial statements included
elsewhere in this Annual Report which have been audited by Deloitte and Touche,
LLP, independent certified public accountants, whose report thereon is also
included elsewhere in this Annual Report. The selected consolidated financial
data for the years ended June 30, 1998 and 1999 have been derived from audited
financial statements of the Company which are not included in this Annual
Report. The selected consolidated financial data set forth below should be read
in conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Consolidated Financial Statements and Notes
thereto elsewhere in this Annual Report. The financial information for the
periods presented below includes all adjustments necessary for a fair
presentation of results of operations.
<TABLE>
<CAPTION>
                                                        1998             1999             2000             2001             2002
                                                    -----------      -----------      -----------      -----------      -----------

                                                                          (In thousands, except share data)
<S>                                                 <C>              <C>              <C>              <C>              <C>
STATEMENT OF OPERATIONS:
Revenues:
  Processing and servicing ....................     $   159,255      $   201,059      $   261,621      $   362,051      $   422,237
  License fees ................................          28,952           15,975           16,818           30,180           25,020
  Maintenance fees ............................          25,848           17,746           18,752           21,332           24,298
  Other .......................................          19,809           15,351           13,004           19,757           18,922
                                                    -----------      -----------      -----------      -----------      -----------
            Total revenues ....................         233,864          250,131          310,195          433,320          490,477

Expenses
  Cost of processing, servicing and
     support ..................................         129,924          146,704          182,540          255,528          262,105
  Research and development ....................          36,265           21,085           35,631           55,621           55,172
  Sales and marketing .........................          28,839           32,354           44,782           90,283           58,030
  General and administrative ..................          20,677           31,466           40,931           50,474           43,687
  Depreciation and amortization ...............          24,999           24,630           42,830          427,495          435,565
  In-process research and development .........             719            2,201            6,900           18,600              -
  Impairment of intangible assets .............             -                -                -                -            155,072
  Reorganization charge .......................             -                -                -                -             16,365
  Charge for stock warrants ...................          32,827              -                -                -                -
  Exclusivity amortization ....................           2,963              -                -                -                -
                                                    -----------      -----------      -----------      -----------      -----------
            Total expenses ....................         277,213          258,440          353,614          898,001        1,025,996
  Net gain on dispositions of assets ..........          36,173            4,576              -                -                -
                                                    -----------      -----------      -----------      -----------      -----------
  Loss from operations ........................          (7,176)          (3,733)         (43,419)        (464,681)        (535,519)
  Interest:
    Income ....................................           3,464            2,799            7,689           15,415            8,486
    Expense ...................................            (632)            (618)          (8,027)         (13,154)         (12,788)
  Loss on investments .........................             -                -                -            (16,077)             -
                                                    -----------      -----------      -----------      -----------      -----------
  Loss before income tax ......................          (4,344)          (1,552)         (43,757)        (478,497)        (539,821)
  Income tax benefit ..........................            (641)         (12,009)         (11,437)        (115,362)         (98,871)
                                                    -----------      -----------      -----------      -----------      -----------
  Net income (loss) ...........................     $    (3,703)     $    10,457      $   (32,320)     $  (363,135)     $  (440,950)
                                                    ===========      ===========      ===========      ===========      ===========

Diluted income (loss) per common share ........     $     (0.07)     $      0.18      $     (0.61)     $     (4.49)     $     (5.04)
Equivalent number of shares outstanding .......          55,087           56,529           53,367           80,863           87,452

BALANCE SHEET DATA:
  Working capital .............................     $    78,238      $    24,245      $   178,761      $   142,661      $   201,741
  Total assets ................................         250,112          252,761           713,14        2,183,953        1,637,477
  Long-term obligations, less current
    portion ...................................           6,467            3,882          173,236          176,541          175,316
  Total stockholders' equity ..................     $   183,854      $   186,903      $   445,894      $ 1,732,186      $ 1,305,661

</TABLE>


<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

OVERVIEW

         CheckFree was founded in 1981 as an electronic payment processing
company and has become a leading provider of financial electronic commerce
products and services. Our current business was developed through the expansion
of our core electronic payments business and the acquisition of companies
operating in similar or complementary businesses.

         We operate our business through three independent but inter-related
divisions:

         -        Electronic Commerce;
         -        Investment Services; and
         -        Software.

         Through our Electronic Commerce division, we enable consumers to
receive and pay bills electronically. For the year ended June 30, 2002, we
processed approximately 316 million electronic transactions. For the quarter
ended June 30, 2002, we processed approximately 87 million electronic payments
and delivered approximately 3.8 million electronic bills. As of June 30, 2002,
over 6.6 million consumers were enabled to use our systems, with a large
majority of these consumers accessing our services via the Internet using their
own personal computer. The number of transactions we process each year continues
to grow. For the year ended June 30, 2002, growth in the number of transactions
processed exceeded 36%. The Electronic Commerce division accounted for
approximately 72% of our fiscal 2002 revenue.

         Our Electronic Commerce division's products allow consumers to:

         -        receive electronic bills through the Internet;
         -        pay any bill - whether it arrives over the Internet or through
                  traditional mail - to anyone;
         -        make payments not related to bills - to anyone; and
         -        perform customary banking transactions, including balance
                  inquiries, transfers between accounts and online statement
                  reconciliations.

         The majority of consumers using our services access our system through
Consumer Service Providers (CSPs). CSPs are companies, such as banks, brokerage
firms, Internet portals and content sites, Internet-based banks, Internet
financial sites and personal financial management software providers, that use
our products to enable consumers to receive and/or pay bills electronically. We
have relationships with hundreds of CSPs. Some of our largest CSPs, as
determined by type of CSP and number of consumers using our products, are Bank
of America, Bank One, Charles Schwab & Co., Chase Manhattan Bank, Merrill Lynch
& Co., SunTrust, U.S. Postal Service, Wachovia, Wells Fargo and Yahoo!. This
list of our CSPs is not exhaustive and may not fully represent our customer
base.

         We have developed our own open infrastructure, known as Genesis, to
process electronic bills and payments. The Genesis system is accessed by CSPs
using various Web-based applications. In March 2001, we introduced our latest
application for electronic billing and payments - "WebPay for Consumers" (or
WebPay 3.2), which added to our core product the ability for consumers to
receive and pay e-bills over e-mail and to exchange money with each other using
e-mail "invitations" to receive money. WebPay 3.2 helps consumers automate the
complete process of viewing and paying bills - they can receive bills online and
pay those bills online, too. WebPay 3.2 also allows the consumer to "Pay Anyone"
- from a child in college, to a lawn care or other service provider, to a
friend, electronically, using the Genesis system. The number of sites where
consumers can both view and pay bills doubled in 2002, with 584 CSPs now
offering full electronic billing and payment.

         Through our Investment Services division, we provide a range of
outsourced portfolio management services to help more than 250 institutions
deliver portfolio management, performance measurement and reporting services to
their clients. As of June 30, 2002, our clients used the CheckFree APL Portfolio
Accounting System to manage about 1.2 million portfolios totaling more than $500
billion in assets. The Investment Services division accounted for approximately
16% of our fiscal 2002 revenue.

         Our institutional client base includes investment advisors, brokerage
firms, banks and insurance companies. Our fee-based money manager clients are
typically sponsors or managers of "wrap" or separately managed accounts, money
management products, or traditional money managers, managing investments of
institutions and high net worth individuals.

<PAGE>

         Our portfolio management systems are marketed under the product names
APL, and provide the following functions:

         -     account open and trading capabilities;
         -     graphical client reporting;
         -     performance measurement;
         -     decision support tools;
         -     account analytics;
         -     tax lot accounting;
         -     manager due diligence;
         -     multiple strategy portfolios;
         -     straight through processing;
         -     Depository Trust Corporation interfacing;
         -     billing functions; and
         -     system and data security.

         In addition to our APL and APL Wrap portfolio management products, our
Investment Services division also offers investment performance and reporting
products and services. Marketed under M-Search and M-Watch, these products are a
result of the acquisition of Mobius Group, Inc. in March 1999.

         Through our Software division, we deliver software, maintenance,
support and professional services to large financial service providers and other
companies across a range of industries. The Software division is comprised of
three units, each with its own distinct set of software products. The ACH
Solutions unit provides software and services that are used to process more than
two-thirds of the nation's eight billion Automated Clearing House (ACH)
payments. The CheckFree Financial and Compliance Solutions (CFACS) unit enables
organizations to handle their reconciliation and compliance requirements. The
i-Solutions unit provides software and services that enable end-to-end e-billing
and e-statement creation, delivery and payment. The Software division accounted
for approximately 12% of our fiscal 2002 revenue.

         ACH Solutions. Our ACH Solutions unit provides ACH software and
services. ACH is the primary batch-oriented electronic funds transfer system
financial services organizations use to move funds electronically through the
banking system. More than 80 percent of the nation's top 50 ACH originators use
our solutions for ACH processing and more than two-thirds of the nation's eight
billion ACH payments are processed each year through institutions using our
software systems. In addition to the United States, we have provided electronic
payment technology in Australia, Barbados, Chile, Colombia, Dominican Republic,
Guatemala, Jamaica, Malaysia, and Panama.

         ACH Solutions markets software under the product name PEP+ (Paperless
Entry Processing System). PEP+ is an online, real-time system that enables the
originating and receiving of payments through the ACH system. These electronic
transactions are substitutes for paper checks, and are typically used for
recurring payments like direct deposit payroll payments and corporate payments
to contractors and vendors, debit transfers that consumers make to pay insurance
premiums, mortgages, loans and other bills, and business-to-business payments.
Recent new ACH product types allow returned checks, checks at the point-of-sale,
and checks sent to a lockbox to be converted to electronic payments.

         CheckFree Financial and Compliance Solutions. Our CFACS unit provides
software and professional services that enable all types of organizations to
perform automated reconciliation and maintain compliance with federal and state
regulations. Banks, bank holding companies, securities and insurance firms,
corporations and government agencies use our reconciliation and compliance
products and services. Our reconciliation solutions are marketed under the
CheckFree RECON-Plus(TM) brand. These systems reconcile high volumes of complex
transactions that are spread across multiple enterprise-wide systems and include
securities transaction processing, automated deposit verification, consolidated
bank account reconciliation and cash mobilization and improved cash control. In
fiscal 2002 we completed development of RECON-Plus Frontier(TM), a multi-tier
reconciliation system that operates over the Internet.

         CheckFree RECON Securities(TM) enables securities firms to
automatically match intra-day transactions, generate affirmations, facilitate
settlement and reconcile cash and securities transactions at both the omnibus,
or collective and shareholder level. In addition to reconciliation, CFACS
delivers automated regulatory tracking and reporting solutions that

<PAGE>

help organizations maintain compliance. The CFACS compliance products provide
compliance with (1) unclaimed property management, (2) 1099 reporting, (3) fraud
detection, (4) the Bank Secrecy Act and (5) retirement reporting.

         i-Solutions. Our i-Solutions unit provides end-to-end
business-to-consumer and business-to-business software and services for
e-billing and e-statement creation, delivery and payment. i-Solutions helps
billers, financial services organizations and biller service providers leverage
electronic bills and statements as interactive conduits to customer relationship
management, marketing and customer self-service applications.

         i-Solutions enables billers to create online bills and statements and
distribute them to their customers for viewing and payment. Online bills can be
delivered to the biller's customers through any or all of the following options:
through our network of CSPs, directly at the biller's Web site; through e-mail;
and through our Web site MyCheckFree.com, which are serviced through our
Electronic Commerce division. Our software and outsourced application hosting
services deliver: e-bill and e-statement creation; e-bill and e-statement
delivery; e-bill payment transaction management and security; e-bill payment
tracking and history; online marketing from the biller to its customers; and
customer care.

         i-Solutions markets the i-Series product line, which is a set of
e-billing and e-statement software solutions developed for various industry
segments. Each product in the i-Series includes a template for creating e-bills
and e-statements unique to a specific industry segment, reducing development and
deployment time. These solutions are offered in both licensed and outsourced
application service provider (ASP) agreements. Given the nature of the process
we use to convert billing and/or statement information for use over the
Internet, these products are equally marketable in international markets as
well. i-Solutions software has been sold in 23 countries.


RESULTS OF OPERATIONS

         The following table sets forth as percentages of total operating
revenues, certain consolidated statements of operations data:


<Table>
<Caption>
                                                       YEAR ENDED JUNE 30,
                                                    -------------------------
                                                     2000      2001      2002
                                                    -----     -----     -----
<S>                                                 <C>       <C>       <C>
Total revenues                                      100.0%    100.0%    100.0%
Expenses:
    Cost of processing, servicing and support        58.8      59.0      53.4
    Research and development                         11.5      12.8      11.3
    Sales and marketing                              14.4      20.8      11.8
    General and administrative                       13.2      11.7       8.9
    Depreciation and amortization                    13.8      98.7      88.8
    In-process research and development               2.2       4.3       -
    Impairment of intangible assets                   -         -        31.6
    Reorganization charge                             -         -         3.3
                                                    -----     -----     -----
        Total expenses                              114.0     207.2     209.2
                                                    -----     -----     -----
Loss from operations                                (14.0)   (107.2)   (109.2)
Interest:
    Interest income                                   0.2       3.6       1.7
    Interest expense                                 (0.3)     (3.1)     (2.6)
Loss on investments                                   -        (3.7)      -
                                                    -----     -----     -----
Loss before income taxes                            (14.1)   (110.4)   (110.1)
Income tax benefit                                   (3.7)    (26.6)    (20.2)
                                                    -----     -----     -----
Net Loss                                            (10.4)%   (83.8)%   (89.9)%
                                                    =====     =====     =====
</Table>

YEARS ENDED JUNE 30, 2001 AND 2002

         Revenues. Our total revenue increased by 13%, from $433.3 million for
the year ended June 30, 2001 to $490.5 million for the year ended June 30, 2002.
Total company revenue growth was driven by 17% growth in our Electronic Commerce
business and 14% growth in our Investment Services business, offset by a 5%
decline in our Software business.

<PAGE>

Growth in Electronic Commerce revenue is driven primarily by growth in our
subscriber base from just over 5.2 million at June 30, 2001 to over 6.6 million
at June 30, 2002 and by growth in total transactions processed from 231 million
for the year ended June 30, 2001, to over 316 million for the year ended June
30, 2002. The impact of growth in subscribers and transactions processed is
offset by a decline in revenue from interest rate sensitive products, such as
our account balance transfer product, caused by significant decreases in
interest rates from last year. In October 1999, we entered into an agreement
with a third party in which we issued warrants on one million shares of our
stock, exercisable on September 15, 2002, contingent upon maintaining the
existence of our agreement through that date. During the quarter ended June 30,
2002, we recorded a non-cash charge of $2.7 million against revenue resulting
from the probable vesting of those warrants to the third party.

         Growth in Investment Services is driven primarily by an increase in
portfolios managed from over 1.1 million at June 30, 2001, to about 1.2 million
at June 30, 2002, offset by industry consolidations which resulted in the loss
of over 0.1 million portfolios over the past year. The majority of these
portfolios processed at a lower price point than average, based on the service
level provided, resulting in a reduced negative impact. Also, in the quarter
ended March 31, 2002, we announced the elimination of certain of our financial
planning software products within Investment Services, resulting in a modest
decrease in revenue as the product line was in existence the full year in 2001
and less than three quarters of the year in 2002. As a result of the difficult
stock market conditions since late September 2001, portfolio growth has slowed
significantly, and we remain short of historic growth rates in this part of our
business. Due also to poor economic conditions in fiscal 2002, we have
experienced a decline in revenue in our Software business on a year over year
basis. Although revenue from our more mature ACH processing and Reconciliation
products has remained relatively stable, sales of our i-Solutions electronic
billing and statement software have been lower than expected as the recession
continues.

         Across all segments of our business, for the year ended June 30, 2002,
Bank of America generated total revenue of $60.0 million, which represents in
excess of 10% of our total revenue, and they remain the only customer that
exceeds 10% of our total revenue. Because they own approximately ten million
shares of our stock, Bank of America is considered a related party. The ten-year
term of our agreement, which includes annual minimum revenue guarantees of $50
million, is at least twice the length of a typical agreement. We established
subscriber-based pricing at contract execution, which is competitive with
pricing we offer to our other customers, based on the volumes of activity
provided by Bank of America.

         Our processing and servicing revenue increased by $60.2 million, or
17%, from $362.1 million for the year ended June 30, 2001 to $422.2 million for
the year ended June 30, 2002. Processing and servicing revenue occurs in both
our Electronic Commerce and Investment Services businesses. Within Electronic
Commerce, growth in underlying processing and servicing revenue is driven by the
previously mentioned growth in subscribers and transactions. Our acquisition of
TransPoint in September 2000 included a five-year strategic agreement with
Microsoft and a five-year marketing agreement with First Data Corporation, each
of which includes minimum quarterly revenue guarantees, as does our ten-year
strategic agreement with Bank of America. Through June 30, 2002, the agreements
with Microsoft and First Data are operating below the minimum guarantee level.
The Bank of America contract operated under minimums until the December 31, 2001
quarter. As a result of these minimum guarantees, overall subscriber-based
revenue correlates less directly with subscriber growth. Additionally, we
processed over 1.3 million electronic bills in the month ended June 30, 2002,
which is a significant increase from the 1.1 million electronic bills processed
in the month ended March 31, 2002 and the 500,000 electronic bills processed in
the month ended June 30, 2001. This growth is offset by a decline in revenue
from interest rate sensitive products and the previously mentioned $2.7 million
non-cash charge we recorded against revenue related to warrants we issued to a
third party in 1999. One of our larger customers recently announced plans to
utilize "in house" technologies to build and manage the electronic billing and
payment user interface and payment warehouse requirements of their customer
base. While this will result in less use of our services, and a reduction of
quarterly processing and servicing revenue of approximately $2.0 million
starting in the quarter ended September 30, 2002, the payment processing only
service they will utilize will cost us less to operate, and we therefore believe
this will have little impact on our operating income over time. Over the past
two years, we have been offering a transaction based pricing model (versus
subscriber based) primarily to our largest customers, and when combined with
strategic agreements operating below minimum quarterly revenue thresholds, an
increasing number of electronic bills presented, and new product offerings such
as person to person payments, it has become increasingly more difficult to
correlate revenue solely to the number of subscribers, with transactions
processed becoming a more relevant revenue indicator. As a result, we have
identified new revenue indicators to use as our business continues to evolve. As
these indicators relate solely to our Electronic Commerce business, we have
included a table of relevant historic indicators later in the SEGMENT
INFORMATION section of this analysis. Growth in processing and servicing revenue
is also impacted by the previously mentioned growth in portfolios managed in our
Investment Services business.

<PAGE>

         Our license fee revenue decreased by $5.2 million, or 17%, from $30.2
million for the year ended June 30, 2001 to $25.0 million for the year ended
June 30, 2002. License revenue is isolated to our Software business. License
sales have dropped off during the recessionary period that began toward the end
of fiscal 2001 and has continued throughout fiscal 2002. While sales in our more
mature ACH processing and Reconciliation software products have remained fairly
stable, sales of our i-Solutions electronic billing and statement software have
continued to fall short of our expectations during this difficult period. The
reduction in expected license sales in our i-Solutions business unit has
resulted in our recording an impairment charge relative to the intangible assets
we recorded as part of our acquisition of BlueGill. The charge is explained in
the paragraph labeled Impairment of Intangible Assets later in this analysis. As
software purchases are typically seen as investment spending by our customers,
we believe that the environment for software license sales will continue to be
challenging until economic conditions improve, particularly for products early
in their life cycle, such as our i-Solutions offerings.

         Our maintenance fee revenue increased by $3.0 million, or 14%, from
$21.3 million for the year ended June 30, 2001 to $24.3 million for the year
ended June 30, 2002. Maintenance revenue is isolated to our Software business.
Maintenance represents annually renewable product support for our software
customers, which tends to grow with incremental software license sales from the
last four quarters, combined with annual retention rates of existing customers
that exceed 80% across all product lines. Although software sales have declined
on a year over year basis, because of the annuity effect of a renewing customer
base, we have continued to experience growth in maintenance revenue. Pricing has
not had a material impact on maintenance revenue growth.

         Our other revenue, which consists mostly of consulting and
implementation fees across all three of our businesses, decreased by $0.8
million, or 4%, from $19.8 million for the year ended June 30, 2001 to $18.9
million for the year ended June 30, 2002. The decline in other revenue is the
combined result of lower biller implementation fees in our Electronic Commerce
business, lower software implementation engagements from lower software sales in
our Software business and lower implementation and custom reporting fees in our
Investment Services business.

         Cost of Processing, Servicing and Support. Our cost of processing,
servicing and support was $255.5 million, or 59.0% of total revenue, for the
year ended June 30, 2001, and was $262.1 million, or 53.4% of total revenue, for
the year ended June 30, 2002. Cost of processing, servicing and support, as a
percentage of processing only revenue (total revenue less license fees), was
63.4% for the year ended June 30, 2001 versus 56.3% for the year ended June 30,
2002. We continue to achieve improved efficiency and processing quality within
our Genesis processing platform in our Electronic Commerce business. Our ratio
of electronic payments to total payments has improved from 64% at June 30, 2001
to over 71% at June 30, 2002. Electronic payments carry a significantly lower
variable cost per unit than paper-based payments and are far less likely to
result in a costly customer inquiry or claim. The full underlying impact of
improved efficiency and quality, however, is not readily apparent in these
results. We acquired TransPoint in September 2000 and the electronic billing and
payment assets of Bank of America in October 2000. As a result of these
transactions, we supported two additional billing and payment platforms for much
of the year ended June 30, 2001 and one additional platform through March 31,
2002 as we worked to migrate subscribers and billers over to Genesis. The
acquired platforms were less efficient than our Genesis processing platform, and
therefore much more expensive to operate. As an example, during fiscal 2002
alone, we incurred approximately $18 million in costs paid to Bank of America
for their support of the Bank of America West processing platform during the
conversion process. We completed the conversion of the TransPoint subscribers
and billers onto our Genesis platform in the quarter ended June 30, 2001. We
completed the conversion of a portion of the Bank of America East operations in
the quarter ended March 31, 2001, which included subscribers in Georgia,
Tennessee, Florida, Missouri, Arkansas, Iowa, Kansas, Arizona, New Mexico, North
Carolina, South Carolina, Virginia, Maryland and the District of Columbia. We
completed the conversion of the remainder of the Bank of America subscribers,
referred to as Bank of America West, to Genesis in the quarter ended December
31, 2001. After resolving the backlog of open customer care inquiry and claims
during the quarter ended March 31, 2002, we retired the Bank of America
processing platform and were no longer required to reimburse Bank of America for
running the platform on our behalf. Additionally, we have migrated all but a few
CSPs off of our Austin processing platform and have relocated the remaining
technologies to our Norcross, Georgia facility. We expect to fully retire the
Austin platform in the quarter ended September 30, 2002. As a result of these
retirements, we closed our San Francisco customer care facility effective April
30, 2002, our Houston customer care facility effective June 30, 2002, and will
close our Austin office by September 30, 2002. The retirement of the Bank of
America platform and the resulting closing of the San Francisco, Houston and
Austin offices resulted in a recurring reduction in our quarterly processing
cost of almost $5.0 million beginning in the quarter ended June 30, 2002 and
increasing to approximately $6.0 million in the quarter ended September 30,
2002. The net impact of the above programs and actions resulted in a decrease of
over 20% in our direct cost per transaction processed in the year ended June 30,
2002. Refer to the

<PAGE>

Reorganization Charge paragraph below and Note 17 in the Notes to Consolidated
Financial Statements within this report for further information regarding the
one-time charge we recorded as a result of the reorganization actions.

          Research and Development. Our research and development costs were
$55.6 million, or 12.8% of total revenue, for the year ended June 30, 2001, and
$55.2 million, or 11.3% of total revenue, for the year ended June 30, 2002.
Adjusted for capitalized development costs, our gross research and development
costs were $60.5 million, or 14% of total revenue, for the year ended June 30,
2001, and $59.6 million, or 12.2% of total revenue, for the year ended June 30,
2002. During fiscal years 2000 and 2001, we invested heavily in research and
development activities to enhance our product offerings and further distance
ourselves from our competition. We have continued to invest consistently in
research and development activities on a gross dollar basis in all of our
business segments during fiscal 2002 in anticipation and support of revenue
growth, quality enhancement and efficiency improvement opportunities. On March
19, 2002, we announced a company reorganization that resulted in a reduction in
workforce that impacted all areas of the company, including research and
development. As a result, we expect our quarterly costs to be reduced on an
absolute dollar basis, but anticipate continuing to invest significantly in
research and development activities.

         Sales and Marketing. Our sales and marketing costs were $90.3 million,
or 20.8% of total revenue, for the year ended June 30, 2001, and were $58.0
million, or 11.8% of total revenue, for the year ended June 30, 2002. The terms
of our strategic agreement with Bank of America in October 2000 called for us to
provide $25.0 million toward a two year, $45.0 million marketing campaign to be
administered by Bank of America. Because we had no direct influence or control
over the specific nature, timing or extent of the use of funds, we expensed the
$25.0 million as a period cost in the quarter ended December 31, 2000. Net of
this one-time charge, sales and marketing costs were $65.3 million, or 15.1% of
total revenue, for the year ended June 30, 2001. Current year commission
expenses are lower than prior year due to lower overall software sales and lower
biller signings than in the prior year. We reduced the number of i-Solutions
sales and marketing staff in the quarter ended June 30, 2001 and sales and
marketing staff across the company were also impacted by the reduction in force
announced on March 19, 2002. Because our electronic billing and payment services
are offered as a private labeled service through our bank customers, we do not
incur the cost of direct advertising and promotion campaigns. However, our
existing marketing staff continues to provide assistance to our consumer service
provider customers in identifying best practice programs that are successful in
driving increased subscriber adoption and activation. We will continue to
provide marketing assistance to our customers, and with the exception of
seasonal fluctuations in commissions related to software sales, we expect sales
and marketing expenses to remain fairly consistent on a going forward basis.

         General and Administrative. Our general and administrative costs were
$50.5 million, or 11.7% of total revenue, for the year ended June 30, 2001, and
were $43.7 million, or 8.9% of total revenue, for the year ended June 30, 2002.
Our general and administrative costs as a percentage of revenue continue to
decline due to leverage inherent in our business model and efforts to curtail
discretionary spending in a recessionary economy throughout fiscal 2002. Because
we have managed general and administrative expenses down on an ongoing basis
through attrition in related areas, we do not expect further material declines
as a result of the March 19, 2002 reduction in force previously mentioned.

         Depreciation and Amortization. Depreciation and amortization costs
increased from $427.5 million for the year ended June 30, 2001 to $435.6 million
for the year ended June 30, 2002. The significant depreciation and amortization
costs relative to the other costs of our business are composed primarily of
amortization expenses related to the intangible assets we recorded as a result
of the acquisition of BlueGill Technologies in April 2000, the acquisition of
TransPoint in September 2000, and our purchase of the electronic billing and
payment assets of Bank of America in October 2000. Net of intangible
amortization from acquisitions, our depreciation costs related primarily to
fixed assets used in ongoing operations, increased from $34.1 million for the
year ended June 30, 2001 to $41.6 million for the year ended June 30, 2002. The
increase in fixed asset depreciation is the result of continued capital spending
for data processing equipment, related software, and facility improvements in
support of the continued growth of the business. As a result of our decision to
close our San Francisco, Houston and Austin offices, we have certain fixed
assets that have no future use to us, and we accelerated the remaining
depreciation on those assets to reduce their book value to zero to reflect the
timing of the office closings and their resulting shorter useful life. As a
result of our adoption of Statement of Financial Accounting Standards (SFAS)
142, "Goodwill and Other Intangible Assets," on July 1, 2002, we will no longer
amortize goodwill and we expect our quarterly depreciation and amortization cost
to be reduced by approximately $41.8 million.

         In-Process Research and Development. In the three months ended
September 30, 2000, we incurred $18.6 million of in-process research and
development costs in relation to our acquisition of TransPoint. For a detailed
discussion of this charge, please refer to the Notes to Consolidated Financial
Statements included in our June 30, 2001 Annual Report.

<PAGE>

         Impairment of Intangible Assets. In the quarter ended December 31,
2001, we recorded charges totaling $155.1 million for the impairment of
intangible assets. This was the combined result of a charge of $107.4 million
for the impairment of goodwill associated with our acquisition of BlueGill
Technologies in April 2000 (currently referred to as CheckFree i-Solutions), and
of $47.7 million for the retirement of certain technology assets we acquired
from TransPoint in September 2000.

         Upon successful integration of BlueGill Technologies into the
operations of our Software business, during fiscal 2001, we anticipated
continued rapid growth in software license sales for fiscal 2002. We saw a drop
off in demand for electronic billing software during the quarter ended September
30, 2001; however, we did not believe this would impact our longer-term
expectations for this product line and, therefore, we determined there was no
indicator of possible impairment at that time. When sales continued to be
depressed in the quarter ended December 31, 2001, we viewed this as a triggering
event that required evaluation of possible impairment per the guidelines of SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." Our tests relative to the total tangible and
intangible assets related to the i-Solutions product line revealed that the
assets were in fact impaired. This analysis resulted in a charge of $107.4
million to write down the value of goodwill related to the acquisition of
BlueGill.

         As part of the acquisition of TransPoint in September 2000, we were
required to maintain the TransPoint technology for up to three years for any
customer that wished to remain on the system. When valuing the TransPoint
assets, we established an intangible asset for current technology and assigned
it a three-year life. We have migrated all of the subscribers, billers and
consumer service providers to our Genesis platform and the last of our
international partners gave notice of their intention to cancel their
maintenance agreement with us during the December 2001 quarter. Additionally, we
recently concluded that certain components of the TransPoint technology were not
compatible with current or future initiatives. We viewed these as triggering
events that required the evaluation of possible impairment per SFAS 121. Our
overall testing indicated that there was no impairment of the TransPoint assets
in general; however, we then evaluated SFAS 121 requirements related to the
retirement of assets and identified two technologies, delivery applications and
payment interface, for which we have no future use. In the quarter ended
December 31, 2001, we retired these two technologies, resulting in a charge of
$47.7 million.

         Reorganizaton Charge. In January 2002, we announced our plans to close
our customer care facility in San Francisco, effective April 30, 2002, which
resulted in the termination of employees at that facility. At that time, we also
announced our intent to eliminate certain of our financial planning products
within our Investment Services division, which also resulted in a small
reduction of employees in our Raleigh, North Carolina office. On March 19, 2002,
we further announced the closing of our Houston and Austin, Texas offices and a
net reduction in force totaling about 450 employees. As a result of these
actions, we have incurred a charge of $15.9 million in the quarter ended March
31, 2002 and an additional true up charge of $0.5 million in the quarter ended
June 30, 2002, consisting primarily of severance and related employee benefits
and lease termination fees. We accounted for these actions in accordance with
Emerging Issues Task Force (EITF) abstract number 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity."
For further details relating to this charge, please refer to Note 17 in the
Notes to Consolidated Financial Statements elsewhere in this Annual Report.

         Interest. Net interest decreased from net interest income of $2.3
million for the year ended June 30, 2001 to net interest expense of $4.3 million
for the year ended June 30, 2002. Net interest is composed of interest income,
offset by interest expense.

         Interest income decreased from $15.4 million for the year ended June
30, 2001 to $8.5 million for the year ended June 30, 2002. The decrease is a
result of the combined effect of a decrease in our average annual yield, offset
by an increase in our average invested assets of $34.1 million.

         Interest expense declined from $13.2 million for the year ended June
30, 2001 to $12.8 million for the year ended June 30, 2002. The decrease is due
to a modest drop in average interest rates combined with a reduction in our
average outstanding debt and other long-term obligations of approximately $0.3
million. Note that the interest rate on our $172.5 million convertible debt
balance is fixed at 6.5% and this debt has remained in place throughout fiscal
2001 and fiscal 2002.

           Loss on Investments. Due to overall market conditions, certain of our
investments incurred an "other than temporary" decline in market value. As a
result, in the year ended June 30, 2001, we recorded charges of $16.1 million to
appropriately reflect the decline in value of these investments. No additional
charge was required in the year ended June 30, 2002.

<PAGE>

         Income Taxes. We recorded an income tax benefit of $115.4 million, at
an effective rate of 24.1%, for the year ended June 30, 2001, and an income tax
benefit of $98.9 million, at an effective rate of 18.3%, for the year ended June
30, 2002. The reported effective rates differ from the blended statutory rate of
40% in all periods due to certain non-deductible goodwill amortization,
impairment charges related to goodwill, non-deductible in-process research and
development expenses and other non-deductible expenses, offset somewhat by
eligible tax credits.

YEARS ENDED JUNE 30, 2000 AND 2001

         Revenues. Our total revenue increased by 40%, from $310.2 million for
the year ended June 30, 2000 to $433.3 million for the year ended June 30, 2001.
The increase in revenue resulted from the acquisition of BlueGill in April 2000,
the acquisition of TransPoint in September 2000, our strategic alliance with
Bank of America in October 2000, and underlying revenue growth in the mid 20%
range on a year over year basis. Overall revenue growth was driven primarily by
an increase in subscribers in our Electronic Commerce business from 3.5 million
at June 30, 2000 to just over 5.2 million at June 30, 2001 (0.3 million of which
were added from Bank of America in October 2000), an increase in portfolios
managed in our Investment Services business from approximately 950,000 at June
30, 2000 to over 1.1 million at June 30, 2001, and incremental revenue from the
BlueGill acquisition in our Software business.

         Our processing and servicing revenue increased by 38%, from $261.6
million for the year ended June 30, 2000 to $362.1 million for the year ended
June 30, 2001. Net of the incremental revenue from the previously mentioned
agreements, underlying growth in processing and servicing revenue increased by
25% on a year over year basis. Growth in underlying processing and servicing
revenue was driven by the previously mentioned growth in subscribers in our
Electronic Commerce business and portfolios managed in our Investment Services
business. Additionally, we had 173 billers in production, including 30 that were
added through the TransPoint acquisition, that presented nearly 500,000 bills in
the month ended June 30, 2001. This was an increase from the 93 billers that
presented about 94,000 bills in June 2000. In the month ended June 30, 2001, we
processed over 22 million transactions, an increase of 38% compared to the 16
million transactions we processed in the month of June 2000.

         Our license fee revenue increased by 79%, from $16.8 million for the
year ended June 30, 2000 to $30.2 million for the year ended June 30, 2001.
Growth in license revenue was primarily attributable to new revenue resulting
from our acquisition of BlueGill in April 2000. We achieved modest license
revenue growth in the mid single digit range from our more mature software
product lines in the year ended June 30, 2001.

         Our maintenance revenue increased by 14%, from $18.8 million for the
year ended June 30, 2000 to $21.3 million for the year ended June 30, 2001. We
achieved modest increases in maintenance revenue as a result of our acquisition
of BlueGill. This line of billing software, however, was new and related annual
maintenance revenue was just beginning to grow as customers completed their
initial maintenance period and we began to establish a renewal maintenance base.
Additionally, at the start of fiscal 2001, we modified our maintenance revenue
recognition policy. While we continue to recognize maintenance revenue ratably
over the related service period, we delay the onset of revenue recognition until
cash is received, as opposed to estimating renewals in advance of cash receipt.
This change caused some initial timing differences between the quarters ended
September 30, 2000 and December 31, 2000, but did not significantly impact
quarterly revenue since then. Customer retention rates in our more mature
businesses exceeded 80% and price increases did not have a material impact on
maintenance revenue in the year ended June 30, 2001.

         Our other revenue increased by 52%, from $13.0 million for the year
ended June 30, 2000 to $19.8 million for the year ended June 30, 2001. Increased
consulting fees resulting from our BlueGill acquisition and increases related to
biller implementations in our Electronic Commerce business drove growth in other
revenue. We placed 50 additional billers into production in the year ended June
30, 2001, bringing our total to 173.

         Cost of processing, servicing and support. Our cost of processing,
servicing and support was $182.5 million, or 58.8% of total revenue for the year
ended June 30, 2000, and was $255.5 million, or 59.0% of total revenue for the
year ended June 30, 2001. Cost of processing, servicing and support as a
percentage of servicing only revenue (total revenue less license fees) was 62.2%
for the year ended June 30, 2000, and 63.4% for the year ended June 30, 2001. As
previously mentioned, we acquired TransPoint in September 2000 and the
electronic billing and payment assets of Bank of America in October 2000. As a
result of these transactions, we supported two additional billing and
payment-processing platforms for much of the year ended June 30, 2001. Although
expected, this resulted in an increase in our cost of processing as a percentage
of servicing only revenue, as the acquired platforms were less efficient than
our Genesis processing platform. We

<PAGE>

completed the conversion of TransPoint subscribers and billers to the Genesis
processing platform in the quarter ended June 30, 2001. We completed the
conversion of a portion of the Bank of America East operations in the quarter
ended March 31, 2001, which included subscribers in Georgia, Tennessee, Florida,
Missouri, Arkansas, Iowa, Kansas, Arizona, New Mexico, North Carolina, South
Carolina, Virginia, Maryland, and the District of Columbia. Somewhat masked by
less efficient incremental costs resulting from TransPoint and Bank of America
were the underlying improvements in efficiency and processing quality within
Genesis. Our ratio of electronic payments to total payments had improved from
approximately 58% at June 30, 2000 to about 64% as of June 30, 2001.

         Research and Development. Our research and development costs were $35.6
million, or 11.5% of total revenue for the year ended June 30, 2000, and were
$55.6 million, or 12.8% of total revenue for the year ended June 30, 2001.
Adjusted for capitalized development costs of $7.9 million for the year ended
June 30, 2000 and $4.9 million for the year ended June 30, 2001, our gross
expenditures for research and development were $43.5 million, or 14.0% of total
revenue for the year ended June 30, 2000, and $60.5 million, or 14.0% of total
revenue for the year ended June 30, 2001. As a result of our acquisition of
BlueGill, we added a large number of software development engineers and we
continued to invest heavily in our i-Solutions electronic billing software line
of products. In addition, we released WebPay for Consumers, or WebPay 3.2, on
our Genesis processing platform in our Electronic Commerce business in March
2001. This product offering provided consumers the ability to receive and pay
e-bills over e-mail and to exchange money with each other using e-mail
"invitations" to send or receive money.

         Sales and Marketing. Our sales and marketing costs were $44.8 million,
or 14.4% of total revenue for the year ended June 30, 2000, and were $90.3
million, or 20.8% of total revenue for the year ended June 30, 2001. The terms
of our strategic agreement with Bank of America called for us to provide $25.0
million at closing to help support an agreed upon two-year $45.0 million
marketing campaign by Bank of America. Because we could not directly impact the
specific nature, timing or extent of the use of the marketing funds, we expensed
the entire $25.0 million as a period cost in the quarter ended December 31,
2000. Net of this one-time charge, sales and marketing costs were $65.3 million,
or 15.0% of total revenue for the year ended June 30, 2001. We initiated
specific marketing programs during fiscal 2001 to provide direct assistance to
our Consumer Service Provider and biller customers in designing effective
marketing and advertising campaigns geared toward accelerated consumer adoption
of electronic billing and payment services. In addition to the marketing
programs, the increase in our sales and marketing expenses was the result of
increased sales and marketing staff resulting from the BlueGill acquisition,
royalty costs resulting from the TransPoint acquisition, costs associated with
the launch of the new i-Solutions product line, and further investments in core
marketing and communications areas in support of the continued growth of the
business.

         General and Administrative. Our general and administrative expenses
were $40.9 million or 13.2% of total revenue for the year ended June 30, 2000,
and were $50.5 million, or 11.7% of total revenue for the year ended June 30,
2001. While we incurred incremental facility and administrative staff costs in
support of the BlueGill, TransPoint, and Bank of America transactions, and in
support of the overall growth of the company, our general and administrative
costs as a percentage of revenue continued to decline due to the inherent
leverage in our existing business model.

         Depreciation and Amortization. Depreciation and amortization cost
increased from $42.8 million for the year ended June 30, 2000 to $427.5 million
for the year ended June 30, 2001. The significant increase is the direct result
of amortization of intangible assets from the acquisitions of BlueGill and
TransPoint, and the purchase of the electronic billing and payment assets from
Bank of America. Net of intangible asset amortization from all acquisitions, our
depreciation costs related solely to fixed assets, increased from $24.3 million
for the year ended June 30, 2000 to $34.1 million for the year ended June 30,
2001. The increase in fixed asset related amortization was the result of fixed
assets obtained in the BlueGill and TransPoint acquisitions, and increasing
capital expenditures for data processing equipment, related software and new and
improved facilities in support of the continued growth of the business.

         In-Process Research and Development. In the quarter ended June 30,
2000, we incurred $6.9 million of in-process research and development costs in
relation to our acquisition of BlueGill. In the quarter ended September 30,
2000, we incurred $18.6 million of in-process research and development costs in
relation to our acquisition of TransPoint. Please refer to the Notes to
Consolidated Financial Statements included in our June 30, 2001 Annual Report
for a detailed discussion of the charges.

         Interest. Our interest income increased from $7.7 million for the year
ended June 30, 2000 to $15.4 million for the year ended June 30, 2001. Our
balance of cash and invested assets was $207.6 million at June 30, 2000 and
$256.1 million at June 30, 2001. Although interest rates declined throughout the
year ended June 30, 2001, we enjoyed a significant increase

<PAGE>

in average invested assets from $116.1 million at June 30, 2000 to $231.9
million at June 30, 2001. While cash and invested assets fluctuate quarter to
quarter, the primary transactions influencing our cash and investment balances
were the $97.2 million we received in cash as part of the TransPoint acquisition
in September 2000 and the $35.0 million of cash we used in connection with our
asset purchase agreement with Bank of America.

         Our interest expense increased from $8.0 million for the year ended
June 30, 2000 to $13.2 million for the year ended June 30, 2001. While we also
incur interest expense on leases, the increase in interest expense was due
primarily to the $172.5 million of 6 1/2% convertible subordinated notes we
issued in November 1999, which created slightly over seven months of interest
expense in the year ended June 30, 2000 and 12 months of interest expense in the
year ended June 30, 2001.

         Loss on Investments. Due to overall market conditions, certain of our
investments had incurred an "other than temporary" decline in market value. As a
result, in the year ended June 30, 2001, we recorded charges of $16.1 million to
appropriately reflect the decline in value of these investments.

         Income Taxes. We recorded an income tax benefit of $11.4 million with
an effective rate of 26.1% for the year ended June 30, 2000 and an income tax
benefit of $115.4 million with an effective rate of 24.1% for the year ended
June 30, 2001. The reported effective rates differ from the blended statutory
rate of 40% in both periods due to certain non-deductible goodwill, in-process
research and development and other non-deductible expenses, offset somewhat by
jobs credits and tax exempt interest income.


SEGMENT INFORMATION

         The following table sets forth our operating revenue and operating
income (loss) by industry segment for the periods noted. Charges identified as
purchase accounting amortization, in-process research and development, a
one-time marketing charge, impairment of intangible assets, reorganization
charge and charge associated with third party warrants were separated from
operating income for a better understanding of the underlying performance of
each segment. Explanations for these charges can be found in the discussions
above.

<TABLE>
<CAPTION>

                                                                    YEAR ENDED JUNE 30,
                                                            -----------------------------------
                                                               2000         2001         2002
                                                            ---------    ---------    ---------
                                                                      (In thousands)
<S>                                                         <C>          <C>          <C>
Operating revenue:
    Electronic Commerce                                     $ 213,391    $ 301,532    $ 352,054
    Investment Services                                        54,792       69,613       79,574
    Software                                                   42,012       62,175       58,849
                                                            ---------    ---------    ---------
        Total operating revenue                             $ 310,195    $ 433,320    $ 490,477
                                                            =========    =========    =========

Operating income (loss):
    Electronic Commerce                                     $ (18,248)   $ (13,083)   $  39,010
    Investment Services                                        15,830       20,347       24,376
    Software                                                   10,536          837        5,789
    Corporate                                                 (26,120)     (35,746)     (36,500)
Specific items:
    Purchase accounting amortization                          (18,517)    (393,436)    (394,009)
    Impairment of intangible assets                                 -            -     (155,072)
    One-time marketing charge                                       -      (25,000)           -
    In-process research and development                        (6,900)     (18,600)           -
    Reorganization charge                                           -            -      (16,365)
    Charge associated with warrants issued to third party           -            -       (2,748)
                                                            ---------    ---------    ---------
        Total operating loss                                $ (43,419)   $(464,681)   $(535,519)
                                                            =========    =========    =========
</TABLE>


<PAGE>


YEARS ENDED JUNE 30, 2001 AND 2002

         Electronic Commerce. Revenue in our Electronic Commerce business
increased by $50.5 million, or 17%, from $301.5 million for the year ended June
30, 2001 to $352.1 million for the year ended June 30, 2002. In the quarter
ended June 30, 2002, we recorded a non-cash charge of $2.7 million against
Electronic Commerce revenue associated with the probable vesting of warrants we
issued to a third party. In October 1999, we entered into an agreement with a
third party in which we issued warrants on one million shares of our stock,
exercisable on September 15, 2002, contingent upon maintaining the existence of
our agreement through that date. Net of this one-time non-cash charge,
underlying revenue was $354.8 million for the year ended June 30, 2002, for an
increase of 18%. Underlying growth in this business is driven primarily by an
increase in subscribers from just over 5.2 million at June 30, 2001 to over 6.6
million as of June 30, 2002, an increase of 27%. While significant, this growth
rate is lower than we have seen in recent years. We anticipate that subscriber
growth may remain lower than historic growth rates in coming quarters, as
economic conditions may continue to cause financial institutions to remain
aggressive in their managing subscriber counts.

         With our acquisition of TransPoint in September 2000, we became the
preferred provider of electronic billing and payment services to customers
through Microsoft's MSN and Money Central product offerings. The agreement with
Microsoft provides guaranteed revenue of $120 million over a five-year period
that commenced in January 2001. Additionally, as part of the TransPoint
acquisition, we received $60 million of guaranteed revenue and/or cost savings
opportunities through First Data Corporation over a five-year period that began
in September 2000. Effective October 21, 2000, we completed a strategic
agreement with Bank of America, the largest bank in the U.S., to offer
electronic billing and payment services to its customer base. This ten-year
agreement provides annual revenue guarantees of $50.0 million, or $12.5 million
on a quarterly basis. We had been processing certain transactions for Bank of
America prior to the strategic agreement and, therefore, the $50 million
guarantee was not entirely incremental to our underlying revenue. However, we
did add approximately 300,000 incremental subscribers to our subscriber base
upon completion of the strategic agreement. Underlying revenue for each of these
agreements had been below our guaranteed minimum level, until the quarter ended
December 30, 2001, when Bank of America exceeded their minimums. Bank of America
continues to provide in excess of 10% of the total revenue of our Electronic
Commerce business unit as of June 30, 2002.

         When combining subscriber growth with guaranteed minimums, an
increasing number of businesses opting for a transaction-based pricing structure
versus a traditional subscriber-based pricing structure, other payment
transactions which we effect, a couple of large banks that have built their own
in-house user interface and payment warehouse, an emerging electronic billing
revenue stream, and volatile interest-based revenue sources that fluctuate with
interest rate changes, it has become too difficult to correlate revenue solely
to the number of subscribers, with transactions processed becoming a more
meaningful indicator. For the year ended June 30, 2002, we processed in excess
of 316 million transactions, compared to 231 million processed for the year
ended June 30, 2001. Historically, we have provided the total number of
subscribers and total number of transactions processed on a quarterly basis.
Given the evolution of our business, on a going forward basis, we will provide
greater details based on the type of relationship we have with our partners. We
have two primary types of relationships and will include all relationships into
one of two categories: Full Service relationships and Transaction Service
relationships. Partners that have a Full Service relationship with us outsource
their electronic billing and payment process to us. For this group, we have
contracts where our partners pay us either on a per-subscriber basis or a per-
transaction basis, or some combination of both. Partners that have a Transaction
Service relationship with us receive a subset of our electronic billing and
payment transaction services. An example is a bank that hosts its own payment
warehouse and contracts with us to process payments. Our contracts with large
billers and our account balance transfer relationships fall into this category
as well, as our relationship is primarily transaction driven. For our Full
Service relationships, we provide total active subscribers, total transactions
and total revenue attributable to these transactions. For our Transaction
Services relationships, we provide total transactions and total revenue
attributable to these transactions. Since many of these relationships are not
contracted to track active subscribers, we are not in a position to provide
active subscriber counts for this category. Revenue streams within Electronic
Commerce that either do not process through our Genesis platform, such as our
Health and Fitness business, or are not subscriber or transaction driven, such
as implementation services, will be reflected in a third category described
simply as other revenue. The following table provides four quarters of history
in the relevant statistics that we expect to provide on a going forward basis:




<PAGE>

<TABLE>
<CAPTION>
                                                                  QUARTER ENDED
                                                  ------------------------------------------
                                                   9/30/01    12/31/01   3/31/02     6/30/02
                                                  --------    --------   --------   --------
                                                                (In thousands)
<S>                                               <C>         <C>        <C>        <C>
FULL SERVICE RELATIONSHIPS
    Revenue                                       $ 64,968    $ 67,161   $ 71,155   $ 74,132
    Active subscribers                               2,620       2,749      2,930      3,122
    Transactions processed                          56,055      60,947     65,531     69,045

TRANSACTION SERVICE RELATIONSHIPS
    Revenue                                       $  9,878    $ 10,243   $ 10,285   $ 10,669
    Transactions processed                          13,385      15,509     16,866     18,942

OTHER ELECTRONIC COMMERCE
    Revenue                                       $  9,981    $  8,236   $  8,332   $  9,762
    Non-cash revenue charge related to warrants                                     $ (2,748)
</TABLE>


         To date, we have 207 primary billers in production with our E-Bill
electronic billing product offering that are delivering over 1.3 million
electronic bills per month as of June 30, 2002. A primary biller, by our
definition, is one that has the potential to distribute in excess of 100,000
bills on a monthly basis. Also, we have added bill aggregation technology to our
Genesis platform that provides access to additional bills through "scraping,"
which is available to consumer service providers as they upgrade to our Web Pay
for Consumers product. As of June 30, 2002, we are distributing 25 bills through
scraping technology and have implemented another 30 non-primary billers, for a
total consumer choice of among 262 electronic bills. In the prior quarter, we
had reported 26 bills available through scraping, but during the quarter ended
June 30, 2002, one of the related billers decided to contract with us for bill
distribution services. We continue to believe that a complete, integrated round
trip electronic billing and payment experience for an average of six to ten
bills per month per customer is an important factor in driving subscriber
growth. As of June 30, 2002, we estimate that the average consumer using our Web
Pay for Consumer product has the potential to receive from six to nine
electronic bills in major strategic marketing areas throughout the United
States.

         Underlying operating results in our Electronic Commerce business,
excluding a non-cash charge to revenue related to warrants, purchase accounting
amortization, intangible asset impairment charges, in-process research and
development, a one-time marketing charge and reorganization charges, have
improved from an operating loss of $13.1 million for the year ended June 30,
2001 to operating income of $39.0 million for the year ended June 30, 2002. We
continue to drive improved efficiency and processing quality within our Genesis
processing platform. Our ratio of electronic payments to total payments has
improved from 64% as of June 30, 2001 to over 71% as of June 30, 2002.
Electronic payments carry a significantly lower variable cost per unit than
paper payments and are far less likely to result in a costly customer inquiry or
claim. The full underlying impact of improved efficiency and quality, however,
is not readily apparent in these results. We acquired TransPoint in September
2000 and the electronic billing and payment assets of Bank of America in October
2000. As a result of these transactions, we supported two additional billing and
payment processing platforms for much of the year ended June 30, 2001 and one
additional platform through March 2002. The acquired platforms were less
efficient than our Genesis processing platform and, therefore, much more
expensive to operate. During the year ended June 30, 2002, we incurred
approximately $18.0 million of expense to Bank of America for their support of
the Bank of America West processing platform. We completed the conversion of the
TransPoint subscribers and billers onto Genesis in the quarter ended June 30,
2001. We completed the conversion of the Bank of America subscribers onto
Genesis in the quarter ended December 31, 2001. After processing the remaining
pre-conversion customer inquiries and claims during the quarter ended March 31,
2002, we have retired the Bank of America platform. As a result of the
successful conversion of Bank of America subscribers to Genesis and our ability
to retire the Bank of America platform, we announced the closing of our San
Francisco customer care facility effective April 30, 2002 and our Houston
customer care facility effective June 30, 2002. On March 19, 2002, we also
announced an overall company reorganization that resulted in a net reduction in
force of approximately 450 employees across the company, including the closing
of offices mentioned. Additionally, upon retirement of our legacy Austin
processing platform expected during the quarter ended September 30, 2002, we
will also close our Austin, Texas office. The combined impact of these various
actions reduced our quarterly costs by approximately $7.0 million to $8.0
million starting in the quarter ended June 30, 2002. Our focus throughout fiscal
2002 was geared toward improved profitability in our Electronic Commerce
business through programs designed to:

<PAGE>

         -        drive increased subscriber adoption and activation among our
                  partners;
         -        improve product design and usability;
         -        improve overall customer satisfaction; and
         -        reduce variable costs per transaction.

         While there continues to be no guarantee as to the timing or extent of
accelerating adoption of electronic billing and payment services, we believe
that with our continued focus on improved product and service quality, customer
satisfaction and cost efficiency, we are better positioned to maintain our
market leadership position throughout an accelerated growth cycle, should it
occur.

         Investment Services. Revenue in our Investment Services business
increased by $10.0 million, or 14%, from $69.6 million for the year ended June
30, 2001, to $79.6 million for the year ended June 30, 2002. Growth in this
business is due primarily to an increase in portfolios managed from more than
1.1 million at June 30, 2001 to about 1.2 million at June 30, 2002. Much of the
revenue growth has occurred in fee-based versus institutional accounts,
mirroring the movement of the investment industry towards fee-based products and
away from the transactional commission-based model. The lower annual growth in
both revenue and portfolios compared to prior periods is due primarily to the
decline in economic conditions, particularly in the financial services sector,
as well as industry consolidations, which have resulted in the loss of over
100,000 portfolios. However, the majority of these portfolios possessed a much
lower price point than average, based on the services provided, resulting in a
reduced negative impact. A rationalization of our Raleigh, North Carolina office
and discontinuation of our financial planning products was completed during the
year ended June 30, 2002. We expect that these actions will result in a modest
decrease in revenue, offset by a modest increase in operating income in future
periods.

         During the quarter ended March 31, 2002, the division released two new
product offerings: a new trading and reporting tool for multiple strategy
portfolios, which was released to complement CheckFree APL and the APL Browser,
which offers clients access via the Internet to the division's portfolio
accounting and reporting product, creating a highly visible new distribution
channel for money managers and brokers.

         Operating income in our Investment Services segment, excluding purchase
accounting amortization and reorganization charges, has increased by $4.0
million, or 20%, from $20.3 million for the year ended June 30, 2001 to $24.4
million for the year ended June 30, 2002. As previously indicated, much of our
revenue growth has occurred in fee-based versus institutional accounts that may
carry a lower unit price, which in turn places downward pressure on margins as
the cost to process this business is not proportionally lower. We initiated a
quality program that focuses attention on improved system reliability,
particularly trading availability, which is critical to the business unit, and
we have enhanced our disaster recovery capabilities. Throughout fiscal 2002, the
key initiatives in the Investment Services division have been:

         -        extension of product offerings with a shortened time to
                  market;
         -        additional versions of the APL Browser with increased
                  functionality; and
         -        continued development of a relational database allowing our
                  clients easier access to their data.

         Software. Revenue in our Software business has declined by $3.4
million, or 5%, from $62.2 million for the year ended June 30, 2001, to $58.8
million for the year ended June 30, 2002. The downturn in economic conditions in
calendar 2001 and continuing throughout calendar 2002 has caused many businesses
to curtail discretionary expenditures, which has resulted in an overall
dampening of demand for software solutions. To help address the economic
concerns within our i-Solutions business unit, we released two new product
offerings in fiscal 2002:

         -        i-Solutions Select, which is a series of industry-tailored
                  packaged software choices at lower price points; and
         -        new options for billers to host economically priced electronic
                  billing and payment services at CheckFree, which streamlines
                  implementation cycles and lowers costs to billers while
                  delivering both biller direct and e-bill distribution and
                  payment across our network.

         We released these two solutions during the quarter ended September 30,
2001, and while we continue to see increasing interest in the hosting solution,
the direct software sales of both i-Solutions and i-Solutions Select remain
slower than expected during the extended recessionary economy. Our more mature
software units, CFACS and ACH Solutions, also both faced some dampening of
demand during the year. Overall, we believe that software sales in general will
continue to be challenging until economic conditions improve.

<PAGE>
         Operating results in our Software business, excluding purchase
accounting amortization, impairment of intangible assets and reorganization
charges, have improved from operating income of $0.8 million for the year ended
June 30, 2001 to operating income of $5.8 million for the year ended June 30,
2002. Improvement in operating results is primarily the result of continued
efforts to manage discretionary costs in light of current economic conditions.
On March 19, 2002, we announced a company-wide reorganization that resulted in a
net reduction in force of approximately 450 employees. As part of these actions,
we announced the closing of our Ann Arbor, Michigan office. As a result of this
reorganization, we experienced a recurring savings in underlying costs in the
quarter ended June 30, 2002.

         Corporate. Our Corporate segment represents costs for legal, human
resources, finance and various other unallocated overhead expenses. Our
Corporate segment incurred operating expenses of $35.7 million, or 8% of total
revenue, for the year ended June 30, 2001 and of $36.5 million, or over 7% of
total revenue, for the year ended June 30, 2002. Although our total overhead
expenses have increased slightly, as a percentage of revenue, they continue to
improve, reflecting the leverage inherent in our business model. On March 19,
2002, we announced a company-wide reorganization. However, we have been reducing
corporate costs through attrition and discretionary cost management throughout
the year and, therefore, we did not incur significant additional reductions in
staff in this segment. We expect to enjoy continued leverage within our
corporate segment on a going forward basis.

         Purchase Accounting Amortization. The purchase accounting amortization
line represents amortization of intangible assets resulting from all of our
various acquisitions from 1996 forward. The total amount of purchase accounting
amortization has increased from $393.4 million for the year ended June 30, 2001
to $394.0 million for the year ended June 30, 2002. The increase is the result
of intangible assets established by the acquisitions of TransPoint in September
2000 and the purchase of the electronic billing and payment assets of Bank of
America in October 2000, offset by shorter-term intangible assets that fully
amortized in the quarter ended December 31, 2001 and the decline in amortization
expense resulting from the intangible asset impairment charge we recorded in the
quarter ended December 31, 2001. For comparative purposes, the breakout of
purchase accounting amortization by segment is as follows:


<TABLE>
<CAPTION>
                                                                           YEAR ENDED JUNE 30,
                                                                      ------------------------------
PURCHASE ACCOUNTING AMORTIZATION BY SEGMENT                             2000       2001       2002
----------------------------------------------------------------------------------------------------
                                                                              (In thousands)
<S>                                                                   <C>        <C>        <C>
Electronic Commerce                                                   $  2,371   $328,072   $358,476
Investment Services                                                      4,920      5,369      5,665
Software                                                                11,226     59,995     29,868
                                                                      --------   --------   --------
    Total                                                             $ 18,517   $393,436   $394,009
                                                                      ========   ========   ========
</TABLE>


         Impairment of Intangible Assets. In the quarter ended December 31,
2001, we recorded charges totaling $155.1 million for the impairment of
intangible assets. This was the combined result of a charge of $107.4 million
for the impairment of goodwill associated with our acquisition of BlueGill
Technologies in April 2000 (currently referred to as CheckFree i-Solutions), and
of $47.7 million for the retirement of certain technology assets we acquired
from TransPoint in September 2000. Please refer to Impairment of Intangible
Assets in the Results of Operations section of this report for a detailed
explanation of these charges.

         Reorganization Charge. In January 2002, we announced our plans to close
our customer care facility in San Francisco, California, effective April 30,
2002, which resulted in the termination of employees at that facility. At that
time, we also announced our intent to eliminate certain of our financial
planning products within our Investment Services division, which also resulted
in a small reduction of employees in our Raleigh, North Carolina office. On
March 19, 2002, we further announced the closing of our Houston and Austin,
Texas offices and a net reduction in force totaling 450 employees. As a result
of these actions, we have incurred a charge of $15.9 million in the quarter
ended March 31, 2002 and a true-up charge of $0.5 million in the quarter ended
June 30, 2002, consisting primarily of severance and related employee benefits
and lease termination fees. We accounted for these actions in accordance with
EITF abstract number 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity." For further details
relating to this charge, please refer to Note 17 in the Notes to the
Consolidated Financial Statements elsewhere within this report.

         One-Time Marketing Charge. The one-time marketing charge took place in
the three-month period ended December 31, 2000. Our strategic agreement with
Bank of America called for us to provide $25.0 million of cash at closing to
help support an agreed upon two year $45.0 million marketing campaign by Bank of
America. Because we had no direct influence or impact on the specific nature,
timing or extent of the use of the funds, we expensed the $25.0 million as a
period

<PAGE>

cost in the quarter ended December 31, 2000. Additionally, because we do not
market directly to subscribers but rather leave that to our various consumer
service provider customers, we have segregated this charge from ongoing
operations as an unusual, non-recurring event.

          In-Process Research and Development. In the three month period ended
September 30, 2000, we incurred $18.6 million of in-process research and
development costs in relation to our acquisition of TransPoint. For a detailed
discussion of this charge, please refer to the Notes to Consolidated Financial
Statements included in our June 30, 2001 Annual Report.

         Charge Associated with Warrants Issued to a Third Party. In the three-
month period ended June 30, 2002, we incurred a non-cash charge of $2.7 million
against revenue resulting from warrants we issued to a third party in 1999.
During the quarter, we determined it was probable that one million warrants
would vest on the scheduled vesting date of September 15, 2002. The charge was
based on a Black-Scholes valuation of the warrants and was accounted for as a
charge against revenue in accordance with EITF 01-09, "Accounting for
Consideration Given by a Vendor to a Customer." We will revalue the warrants on
the vesting date, and to the extent that final value differs from the $2.7
million charge, we will record the amount necessary to adjust revenue for that
difference.

YEARS ENDED JUNE 30, 2000 AND 2001

         Electronic Commerce. Revenue in our Electronic Commerce business
increased by 41%, from $213.4 million for the year ended June 30, 2000, to
$301.5 million for the year ended June 30, 2001. Net of approximately $35.0
million of incremental revenue provided from TransPoint and Bank of America as
described below, underlying revenue in our Electronic Commerce business grew in
the mid 20% range. The primary driver of this underlying revenue growth was an
increase in subscribers from 3.5 million at June 30, 2000 to just over 5.2
million at June 30, 2001, 0.3 million of which were added by Bank of America in
October 2000.

         We completed our acquisition of TransPoint in September 2000. The
agreement with Microsoft provides guaranteed revenue of $120 million over a
five-year period, which commenced in January 2001. Additionally, as part of the
TransPoint acquisition, we received $60 million of guaranteed revenue and/or
cost saving opportunities through First Data Corporation over a five-year
period, which began in September 2000. Effective October 1, 2000, we completed a
strategic agreement with Bank of America, the largest bank in the U.S., to offer
electronic billing and payment services to its customer base. This ten-year
agreement provides annual revenue guarantees of $50 million ($12.5 million on a
quarterly basis) and Bank of America has agreed to invest $45 million over a two
year period to promote the awareness and adoption of electronic billing and
payment services by their customers. We had been processing certain transactions
for Bank of America before the strategic alliance was completed and, therefore,
the $50 million annual revenue guarantee should not be considered entirely
incremental to our underlying revenue. We did, however, add 300,000 incremental
subscribers to our subscriber base upon completion of the agreement.

         Through June 30, 2001, we had signed 241 named billers to our E-Bill
electronic billing product offering. Combined with the 30 net new billers we
assumed with the TransPoint acquisition, this brought our signed biller total to
271. We had 173 billers in production that delivered nearly 500,000 electronic
bills in the month ended June 30, 2001. Our acquisition of BlueGill was expected
to facilitate our efforts to provide quality billing content by simplifying and
accelerating the process of taking bills from paper to electronic. As of June
30, 2001, we were distributing six popular credit card bills through scraping
technology for a total consumer choice of among 179 electronic bills. As of June
30, 2001, we estimated that the average consumer had the potential to receive
from five to eight electronic bills in major strategic marketing areas
throughout the United States.

         The operating loss in our Electronic Commerce segment, excluding
purchase accounting amortization, a one-time marketing charge of $25.0 million,
and in-process research and development, had improved from $18.2 million for the
year ended June 30, 2000, to $13.1 million for the year ended June 30, 2001. As
a result of the TransPoint acquisition and the purchase of Bank of America's
electronic billing and payment assets, we supported two additional and less
efficient billing and payment processing platforms for most of fiscal 2001.
Although expected, this resulted in a significant increase in our cost of
processing, servicing and support during the year. We completed the conversion
of TransPoint subscribers and billers to the Genesis processing platform in the
quarter ended June 30, 2001. We completed the conversion of a portion of the
Bank of America East subscribers within the quarter ended March 31, 2001. The
remaining Bank of America subscribers, referred to internally as Bank of America
West, converted in the quarter ended December 31, 2001. We expected that until
the final conversion was completed, we would continue to experience higher than
normal incremental processing costs, but at a decreasing rate, as new subscriber
transactions are processed on the more efficient Genesis processing system, and


<PAGE>

that ultimately proved to be true. Somewhat masked by less efficient incremental
costs resulting from TransPoint and Bank of America were underlying improvements
in efficiency and processing quality within Genesis. Our ratio of electronic
payments to total payments improved from approximately 58% at June 30, 2000 to
about 64% as of June 30, 2001. We also incurred additional sales and marketing
and general and administrative expenses as a result of the two transactions.
Throughout fiscal 2001, we continued to focus attention on the following four
areas within our Electronic Commerce business:

         -        delivery of an increasing number of bills electronically over
                  the Internet;
         -        extension of the payment capabilities of our Genesis
                  infrastructure while continuing to deliver market-leading
                  quality and cost efficiency;
         -        co-marketing programs designed to bring billers and channel
                  partners together to strengthen incentives and value delivered
                  to consumers; and
         -        expansion of the number of sites where consumers can receive
                  and pay bills.

         Investment Services. Revenue in our Investment Services business
increased by 27%, from $54.8 million for the year ended June 30, 2000, to $69.6
million for the year ended June 30, 2001. Growth was due primarily to an
increase in portfolios managed from approximately 950,000 at June 30, 2000 to
over 1.1 million at June 30, 2001. Much of the revenue growth occurred in retail
versus institutional accounts that carry a lower unit price. During the quarter
ended March 31, 2001, the business released a significantly enhanced version of
M-Search, a money manager database system, and APL-ASP, an innovative and
flexible new portfolio management services offering for start-up and break away
money managers. When combined with the emergence of Internet-based wrap
services, which created a highly visible new distribution channel for money
managers and brokers, these product enhancements and new distribution channel
opportunities helped to fuel further growth for our Investment Services
business.

         Operating income in our Investment Services business, excluding
purchase accounting amortization, increased by 29%, from $15.8 million for the
year ended June 30, 2000, to $20.3 million for the year ended June 30, 2001.
Although much of our revenue growth occurred in retail versus institutional
accounts that carry a lower unit price, which in turn places downward pressure
on margins as the cost to process this business is not proportionally lower, we
were able offset this pressure with efficiencies elsewhere in the business, as
our operating margins remained consistent year over year.

         Software. Revenue in our Software business increased by 48%, from $42.0
million for the year ended June 30, 2000, to $62.2 million for the year ended
June 30, 2001. The growth in software revenue was primarily attributable to the
acquisition of BlueGill, now operating as CheckFree i-Solutions, as revenue in
our more mature software businesses had increased modestly on a year over year
basis. Growth from i-Solutions sales has come from efforts both domestically and
internationally.

         Operating income in our Software business, excluding purchase
accounting amortization and in-process research and development, declined from
$10.5 million for the year ended June 30, 2000, to $0.8 million for the year
ended June 30, 2001. As expected, the operations acquired from BlueGill provided
downward pressure on operating margins throughout fiscal 2001 as we invested
significantly in this emerging product line. The electronic billing and
statement software product line acquired from BlueGill provided synergies to the
electronic billing and payment products within our Electronic Commerce business.
Investments in this area were expected to facilitate our efforts to provide high
quality billing content, and simplify and accelerate the process of taking bills
and statements from paper to electronic form.

         Corporate. Our Corporate segment represents costs for legal, human
resources, finance and various other unallocated overhead expenses. Our
Corporate segment incurred operating expenses of $26.1 million, or 8.4% of total
revenue for the year ended June 30, 2000, and $35.7 million, or 8.2% of total
revenue for the year ended June 30, 2001. Although we continued to add corporate
resources in support of the growth of the business, our overhead costs as a
percentage of revenue had begun to decline, and were starting to reflect the
expected leverage in our business model.

         Purchase Accounting Amortization. The purchase accounting amortization
line represents amortization of intangible assets resulting from all of our
various acquisitions from 1996 forward. The total amount of purchase accounting
amortization has increased from $18.5 million for the year ended June 30, 2000
to $393.4 million for the year ended June 30, 2001. The increases were the
result of intangible assets created by the acquisitions of BlueGill in April
2000 and TransPoint in September 2000 and the acquisition of the electronic
billing and payment assets of Bank of America effective in October 2000.

<PAGE>

         In-process Research and Development. In the quarter ended June 30,
2000, we incurred $6.9 million of in-process research and development costs
related to the acquisition of BlueGill and, in the quarter ended September 30,
2000, we incurred $18.6 million of in-process research and development costs as
a result of the acquisition of TransPoint. Please refer to the Notes to
Consolidated Financial Statements in our June 30, 2001 Annual Report for a
detailed explanation of these charges.

         One-time Marketing Charge. The one-time marketing charge took place in
the quarter ended December 31, 2000. Our strategic agreement with Bank of
America called for us to provide $25.0 million of cash at closing to help
support a two-year $45.0 million marketing campaign by Bank of America. Because
we did not have the ability to directly impact the specific nature, timing or
extent of the use of the funds, we expensed the $25.0 million as a period cost
in the quarter ended December 31, 2000. Additionally, because we do not market
directly to subscribers, we separated this charge from ongoing operations as an
unusual, non-recurring event.


LIQUIDITY AND CAPITAL RESOURCES

         The following chart provides a summary of our Consolidated Statements
of Cash Flows for the referenced periods:

<TABLE>
<CAPTION>
                                                                CASH FLOWS FOR THE YEAR ENDED JUNE 30,
                                                                --------------------------------------
                                                                    2000         2001         2002
------------------------------------------------------------------------------------------------------
                                                                            (In thousands)
<S>                                                              <C>          <C>          <C>
Cash flow provided by (used in) operating activities             $  21,016    $    (234)   $  45,869
Cash flow used in investing activities                            (108,935)     (26,888)     (58,189)
Cash flow provided by financing activities                         203,547       23,170        3,207
                                                                 ---------    ---------    ---------
    Net increase (decrease) in cash and cash equivalents         $ 115,628    $  (3,952)   $  (9,113)
                                                                 =========    =========    =========
</TABLE>


         As of June 30, 2002, we had $206.0 million of cash, cash equivalents
and short-term investments on hand, and an additional $72.8 million in long-term
investments. Our balance sheet reflects a current ratio of 2.8 and working
capital of $201.7 million. With the retirement of inefficient processing
platforms and the restructuring actions we initiated on March 19, 2002, we
believe that we are in a position to generate positive operating cash flow in
the coming year. As a result, when combined with existing balances, we believe
we have sufficient cash to meet our presently anticipated requirements for the
foreseeable future. However, an extended recessionary economy could have a
negative impact on our continued ability to generate significant cash flow from
operations. To the extent that additional capital resources are required, we
have access to an untapped $30.0 million line of credit.

         For the year ended June 30, 2002, we generated $45.9 million of cash
from operating activities. During our September quarter, we typically use a
significant amount of cash for payments such as our annual incentive
compensation and commissions related to seasonally high software sales from the
previous quarter. As mentioned above, as a result of continuing efforts to
improve operating efficiency, we have been able to generate cash from operating
activities over the past three quarters and we expect to generate positive cash
from operations for the full year ending June 30, 2003.

         From an investing perspective, we used $58.2 million of cash for the
year ended June 30, 2002. This is comprised of $100.7 million of cash used for
the purchase of held to maturity investments, $22.0 million of cash used for the
purchase of fixed assets and software, $4.4 million used for capitalization of
software development costs, and $3.0 million set aside as restricted
investments; offset by $72.3 million in cash received from sales of held to
maturity investments.

         From a financing perspective, for the year ended June 30, 2002, we
generated $3.2 million of cash from financing activities. We received $3.8
million of cash as proceeds from our employee stock purchase plan, $2.3 million
of cash from the exercise of employee stock options, and $0.7 million from the
exercise of common stock warrants; offset by $3.6 million of principal payments
under capital leases and other long-term obligations. Also, on August 8, 2002,
our board of directors authorized us to spend up to $40.0 million for the
repurchase of shares of outstanding stock, the purchase of outstanding
convertible debt, or a combination of the two, at any time before August 31,
2003.

         For the year ended June 30, 2001, we used $0.2 million of cash flow
from operations. Of this amount, $6.7 million represents net proceeds from
trading securities transactions, which GAAP requires us to reflect in cash flow
from operations.

<PAGE>

Also of note, included in cash used in operations was a one-time $25.0 million
cash marketing charge related to our strategic alliance with Bank of America.
Excluding these two items, underlying cash flow provided by operations was $18.5
million.

         From an investing perspective, we used $41.7 million of cash for the
purchase of property and software and we capitalized $4.9 million of software
development costs. We used $67.0 million for the net purchase of
held-to-maturity securities and we capitalized another $10.3 million of
strategic agreement costs. Finally, we received $96.6 million in cash and cash
equivalents through the purchase of TransPoint, net of related acquisition
costs.

         From a financing perspective, we received $15.7 million in proceeds
from the exercise of common stock warrants. We received an additional $6.9
million from the exercise of options from our employee stock option plan and
$4.4 million from the purchase of stock from our employee stock purchase plan.
Finally, we used $3.8 million of cash for principal payments under capital
leases and other long-term obligations.

         For the year ended June 30, 2000, we generated $21.0 million of cash
flow from operations. Of this amount, $3.6 million represented net proceeds from
trading securities transactions, which GAAP requires us to reflect in cash flow
from operations.

         From an investing perspective, we used $39.5 million of cash for the
purchase of property and software, and capitalized $7.6 million of software
development costs. We used $61.0 million for the net purchase of
held-to-maturity securities and another $10.0 million in the purchase of common
stock. Finally, we received $9.2 million in cash and cash equivalents through
the purchase of BlueGill, net of related acquisition costs.

         From a financing perspective, we received $166.9 million of net
proceeds from the issuance of $172.5 million in 6 1/2% convertible subordinated
notes and another $25.5 million in proceeds from the exercise of common stock
warrants and the purchase of our common stock by third parties. We received
additional cash of $9.7 million from the exercise of options from our employee
stock option plans and $2.9 million from the purchase of stock from our employee
stock purchase plan. Finally, we used $1.5 million of cash for principal
payments under capital leases and other long-term obligations.

         The following table represents a summary of our contractual obligations
and commercial commitments over the next several years which provides added
information in understanding expected cash commitments from various obligations
we have entered into over time.

<TABLE>
<CAPTION>
                                                        PAYMENTS DUE
                                                     YEAR ENDED JUNE 30,
                                     ----------------------------------------------------
                                                           2004 TO    2006 TO
CONTRACTUAL OBLIGATIONS                TOTAL      2003       2005       2007    THEREAFTER
-----------------------------------  --------   --------   --------   --------  ----------
                                                        (In thousands)
<S>                                  <C>        <C>        <C>        <C>        <C>
Long-term debt                       $172,500   $      -   $      -   $172,500   $      _
Capital lease obligations               4,761      1,610      2,974        177          -
Operating leases                      136,093     30,956     29,662     20,211     55,264
Unconditional purchase obligations     13,224      6,929      6,295          -          -
Other long-term obligations             5,261      4,078      1,183          -          -
                                     --------   --------   --------   --------   --------
Total contractual cash obligations   $331,839   $ 43,573   $ 40,114   $192,888   $ 55,264
                                     ========   ========   ========   ========   ========
</TABLE>



RECENT ACCOUNTING PRONOUNCEMENTS

         On July 20, 2001, the FASB issued SFAS 141, "Business Combinations" and
SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting. In addition, it requires application of the
provisions of SFAS 142 for goodwill and other intangible assets related to any
business combinations completed after June 30, 2001, but prior to the adoption
date of SFAS 142. SFAS 142 changes the accounting for goodwill and other
intangible assets. Upon adoption, goodwill is no longer subject to amortization
over its estimated useful life. Rather, goodwill will be subject to at least an
annual assessment for impairment by applying a fair-value-based test. All other
acquired intangibles will be separately recognized if the benefit of the
intangible asset is obtained through contractual or other legal rights, or if
the intangible asset can be sold, transferred,


<PAGE>

licensed, or exchanged, regardless of the Company's intent to do so. Other
intangibles will be amortized over their useful lives.

         SFAS 142 becomes effective for the Company on July 1, 2002 and will
have the following significant impacts:

         -        The Company will be required to reclassify approximately $1.3
                  million of unamortized workforce in place intangible assets,
                  net of the associated deferred income taxes, into goodwill.

         -        After the reclassification above, the goodwill balance of
                  approximately $532 million will no longer be amortized. The
                  resulting reduction in amortization expense is estimated at
                  approximately $165 million for each of the Company's fiscal
                  years 2003, 2004 and 2005.

         -        The Company is required to perform a transitional impairment
                  test as of July 1, 2002. This impairment test requires the
                  Company to (1) identify its reporting units, (2) determine the
                  carrying value of each reporting unit by assigning assets and
                  liabilities, including existing goodwill and intangible
                  assets, to those reporting units, and (3) determine the fair
                  value of each reporting unit. If the carrying value of any
                  reporting unit exceeds its fair value, then the amount of any
                  goodwill impairment will be determined through a fair value
                  analysis of each of the assigned assets (excluding goodwill)
                  and liabilities.

         The Company has substantially completed its transitional impairment
test and expects to record a charge in the range of $2 to $5 million for
impairment of goodwill associated with its i-Solutions reporting unit. This
charge will be reflected as the cumulative effect of a change in accounting
principle in our September 30, 2002 financial statements.

         Following the transitional impairment test, the Company's goodwill
balances will be subject to annual impairment tests using the same process
described above. If any impairment is indicated as a result of the annual test,
an impairment charge would be recorded as part of income from operations.

         In August 2001, the FASB issued SFAS 143, "Accounting for Asset
Retirement Obligations." SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated retirement costs. The adoption of SFAS 143 is effective for the
Company for fiscal 2003. The Company does not expect that the adoption of this
statement will have a significant impact on its results of operations and
financial position.

         In August 2001, the FASB issued SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121,
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and the accounting and reporting provisions of Accounting
Principles Board Opinion 30, "Reporting Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" for the disposal of a segment of
a business. SFAS 144 addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and will be effective for the
Company's first quarter of fiscal 2003. The Company does not expect that the
adoption of this statement will have a significant impact on its results of
operations and financial position.

         In April 2002, the Financial Accounting Standards Board issued SFAS
145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." This statement eliminates the
current requirement that gains and losses on extinguishment of debt must be
classified as extraordinary items in the income statement. Instead, the
statement requires that gains and losses on extinguishment of debt be evaluated
against the criteria in APB 30, "Reporting the Results of
Operations--Discontinued Events and Extraordinary Items" to determine whether or
not it should be classified as an extraordinary item. In addition, the statement
contains other corrections to authoritative accounting literature in SFAS 4, 44
and 64. The changes in SFAS 145 related to debt extinguishment will be effective
for the Company's 2003 fiscal year and the other changes were effective
beginning with transactions after May 15, 2002. In August 2002, the Company
announced that its board of directors had authorized a repurchase program under
which the Company may purchase shares of its common stock and convertible notes.
Should the Company purchase any of its convertible notes and realize a gain or
loss on the transaction, SFAS 145 will require the Company to evaluate the
transaction against the criteria in APB 30 to determine if the gain or loss
should be classified as an extraordinary item. If classification as an
extraordinary item is not appropriate, the gain or loss would be included as
part of income from operations.

         In June 2002, the FASB issued SFAS 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
reorganization and similar costs. SFAS 146 supersedes previous accounting
guidance, principally EITF 94-3. SFAS 146 requires that the liability for costs
associated with an exit or disposal activity be recognized

<PAGE>

when the liability is incurred. Under EITF No. 94-3, a liability for an exit
cost was recognized at the date of a company's commitment to an exit plan. SFAS
146 also establishes that the liability should initially be measured and
recorded at fair value. Accordingly, SFAS 146 may affect the timing of
recognizing any future reorganization costs as well as the amount recognized.
The provisions of SFAS 146 are effective for reorganization activities initiated
after December 31, 2002.


APPLICATION OF CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
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. Critical accounting policies are those policies that are both
important to the portrayal of our financial condition and results of operations,
and they require our most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. We believe the policies and estimates described below
relating to intangible assets, equity instruments issued to customers, and
deferred income taxes are our critical accounting policies.

         Discussion with the Audit Committee of the Board of Directors. In
determining which of our accounting policies warranted disclosure as critical in
nature, our senior financial management team prepared an analysis of our
accounting policies and reviewed the policies in detail with our Audit
Committee. After discussing the level of management judgment required to comply
with our accounting policies, we agreed with the Audit Committee that the
following accounting policies are deemed to be critical in nature and should be
disclosed as such.

         Intangible Assets. Over the past several years, we have acquired a
number of businesses and the electronic billing and payment assets of Bank of
America, which resulted in significant intangible assets. As of June 30, 2002,
the balance of such intangible assets on our balance sheet totaled over $1.1
billion and is spread across our three business segments as follows:

         -        Electronic Commerce of $1.08 billion;
         -        Software of $38.7 million; and
         -        Investment Services of $26.0 million.

         Through June 30, 2002, we evaluate our intangible assets for impairment
whenever indicators of impairment exist. SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
requires that if the sum of the future cash flows expected to result from a
company's asset, undiscounted and without interest charges, is less than the
reported value of the asset, an asset impairment must be recognized in the
financial statements. The amount of impairment to recognize is calculated by
subtracting the fair value of the asset from the reported value of the asset.

         In our Software segment, we reviewed our i-Solutions intangible assets
for impairment during the quarter ended December 31, 2001, due to a trend in
lower than expected license sales during the extended recessionary economy. We
determined that the book value of long-lived assets within i-Solutions exceeded
the undiscounted sum of the expected future cash flows from the assets related
to the i-Solutions business unit, which indicated that the intangible assets
were impaired. The actual amount of impairment was then determined by
subtracting the fair value of the expected cash flows from the i-Solutions
business unit from the related long-lived assets. As a result, in accordance
with GAAP, we recorded an impairment charge of $107.4 million against the
balance of i-Solutions goodwill in the quarter ended December 31, 2001. We
applied judgment in developing projections of future cash flows from our
i-Solutions business. Our projections include, but are not limited to,
expectations of product sales and related future product maintenance revenues,
cost of sales, and other operating expenses supporting this business five years
into the future. Additionally, we estimated a terminal value, which represents
the present value of future cash flow beyond the five-year period. Finally, we
assumed a discount rate that we believed fairly represented the risk-free rate
and a risk premium appropriate for this business. Variances from our projected
cash flows, and the related terminal value, could have had a significant impact
on the amount of the impairment charge we recorded. If we had assumed a 10%
increase in our estimated annual cash flows from the i-Solutions business unit,
we would have passed the SFAS 121 undiscounted cash flow test and not recorded
an impairment charge at all. If, however, we reduced our estimated annual cash
flows for the i-Solutions business unit by 10%, our impairment charge would have
increased by approximately $3.6 million.

<PAGE>

         In our Electronic Commerce segment, we reviewed our TransPoint related
technology assets for impairment during the quarter ended December 31, 2001, due
to the termination of a maintenance agreement for this technology from the last
of our international partners and an evaluation of the service potential of the
related technology assets against our current and future initiatives. We
determined that there was no alternative future use for two of the technology
assets, and in accordance with GAAP, we recorded a charge of $47.7 million to
retire these assets. The retirement of the TransPoint technology assets was an
indicator of potential impairment for other intangible assets associated with
this acquisition. SFAS 121 requires us to test for impairment at the lowest
level of separately identifiable cash flows, which we determined in this case,
was our Electronic Commerce division. We performed the initial impairment test
by comparing the sum of expected future cash flows from the assets related to
our Electronic Commerce division, on an undiscounted basis, to the book value of
the Electronic Commerce division long-lived assets. Since the sum of the
undiscounted future cash flows exceeded the long-lived assets book value, there
was no impairment. There were several areas of management judgment used in
performing this analysis. Initially, our projections of future cash flow from
the Electronic Commerce division required management's judgment regarding our
expectations of future revenues, costs, and other operating expenses supporting
this business five years into the future. Additionally, we estimated a terminal
value, which represents the present value of future cash flow beyond the
five-year period. Finally, we assumed a discount rate that we believed fairly
represented the risk-free rate and a risk premium appropriate for this business.
Variances, both positive and negative, from our projected cash flows, and the
related terminal value, would not have had a significant impact on our analysis.
If we had assumed a 10% increase in our estimated annual cash flows from the
Electronic Commerce division, we would have simply passed the SFAS 121
undiscounted cash flow test by a greater margin. If we had assumed a 10%
reduction in our estimated annual cash flows we still would have passed the
undiscounted cash flow test and therefore still not incurred an impairment
charge.

         In January 2002, we announced the intent to eliminate certain of our
financial planning products within our Investment Services division. The
elimination of those products was an indicator of potential impairment for our
long-lived assets associated with that M-Solutions business unit within our
Investment Services segment. We determined that the lowest level of separately
identifiable cash flows at which to test for impairment was our M-Solutions
business unit. We performed the initial impairment test by comparing the sum of
expected future cash flows from the assets related to M-Solutions, on an
undiscounted basis, to the book value of the M-Solutions division's long-lived
assets. Since the sum of the undiscounted future cash flows exceeded the
long-lived assets book value, there was no impairment. As with our other
analyses, there were several areas of management judgment used in performing
this analysis such as our projections of future cash flows from this business,
the estimated terminal value and the discount rate we used. Variances from our
projected cash flows, and the related terminal value, would not have had a
significant impact on our analysis. If we had assumed a 10% increase on our
estimated annual cash flows from the M-Solutions business, we would have simply
passed the SFAS 121 undiscounted cash flow test by a greater margin. Had we had
assumed a 10% reduction in our estimated annual cash flows, we still would have
passed the undiscounted cash flow test, and therefore still not incurred an
impairment charge.

         Equity Instruments Issued to Customers. Within our Electronic Commerce
segment, from time to time, we have determined it appropriate to issue warrants
to certain of our customers to provide an incentive for them to achieve mutually
beneficial long-term objectives. These objectives can take the form of
performance against long-term growth targets, such as the number of the
third-party's customers that become active bill paying subscribers of our
service or the number of bills distributed electronically to the third party's
customers, or more relationship oriented, such as simply remaining a customer at
a specified future date. Accounting standards for these types of warrants
require us to record a charge when it becomes probable that the warrants will
vest. For milestone based warrants the amount of the charge would be the fair
value of the portion of the warrants earned by the customer based on their
progress towards achieving the milestone(s) required to vest in the warrants. At
each reporting date, we would determine the current fair value of the portion of
the warrants previously earned and true-up the charges previously recorded. In
addition, we would record a charge for the fair value of the additional portion
of the warrants earned during that period, again based on the customer's
progress towards the vesting milestones. This would continue until the warrants
vest, at which time a final fair value is determined and the charge is adjusted
accordingly. At the time we issued these warrants, accounting standards in place
indicated that the charge for these type warrants be recorded as an expense.
Since then, the Emerging Issues Task Force ("EITF") of the Financial Accounting
Standards Board ("FASB") issued EITF 01-09, "Accounting for Consideration by a
Vendor to a Customer (Including a Reseller of the Vendor's Products)." This
guidance became effective for financial statements issued after December 15,
2001, and is retroactively applied to existing equity instruments previously
issued. It requires that the charge for the fair value of these types of
warrants be recorded against revenue up to the cumulative amount of revenue
recognized for a customer instead of to expense as was previously the case.
Management must use judgment in determining when the vesting of a warrant
becomes probable. As of June 30, 2002, we had 13 million unvested warrants
outstanding that could potentially result in significant charges against our
revenue, one million of which could vest or will expire in September 2002; two
million of which expire in June 2009; and ten million of which expire in October
2010.

<PAGE>

         In October 1999, we entered into an agreement with a third party in
which we issued warrants on one million shares of our stock, and the ability for
the third party to earn an additional two million warrants. All such warrants
are exercisable on September 15, 2002, contingent upon achievement of various
annual revenue targets and maintaining the existence of our agreement through
that date. In the quarter ended June 30, 2002 we determined it was probable that
one million such warrants would vest on their scheduled vesting date of
September 15, 2002. With competition in our market, we cannot simply assume a
customer will remain a customer until we get close to the date in question. In
addition, ongoing discussions relating to contract extensions and their possible
impact on existing terms affect our judgment as to the probability of vesting.
In our judgment, we believe it is probable that these warrants will vest and,
accordingly, we recorded a charge of $2.7 million against our processing and
servicing revenue. We determined the amount of the charge using a Black-Scholes
valuation of the warrants based on the price of our stock on June 30, 2002,
discounted for the non-marketability of the stock due to trading restrictions
included in the warrant agreement; the strike price of the warrants; the
volatility of our stock; the remaining life of the warrant; and the risk-free
interest rate at that time. Our judgment in this instance consisted of our
estimate that the warrants would in fact vest by September 15, 2002.

         For the remaining 12 million outstanding warrants, it is our judgment
that vesting is not probable. Had we determined vesting was probable or should
vesting become probable in the future, it could result in significant charges
against our revenue. For example, had we determined it was probable that another
one million of the remaining warrants would vest; we could record an additional
charge of as much as $3.9 million against our Electronic Commerce segment
processing and servicing revenue. A portion of this charge would have been
recorded against our fiscal year 2002 revenue, with the remainder to be recorded
against future revenue as the customer progresses toward achieving the vesting
milestones. In addition, the amounts to be recorded each reporting period would
fluctuate with changes in our stock price from period to period until such time
as the milestones are achieved and the warrants vest. Determining the
probability of warrants vesting based on future volumes of active subscribers or
e-bills presented requires us to use judgment based on market conditions now and
in the future, current volumes of active subscribers, assumptions of activation
of currently inactive subscribers, assumptions about growth in new subscribers
and the rate at which new subscribers become active versus recent trends,
evolution of contractual terms as relationships with partners evolve, and the
assumed number of e-bills presented requires us to estimate the number of bills
per active subscriber that will be presented and paid electronically versus by
other means.

         Deferred Income Taxes. As of June 30, 2002, we have $120 million of
deferred income tax assets recorded on our balance sheet, $12 million of which
are recorded in the current asset section of our balance sheet, and $108 million
of which are netted against long-term deferred tax liabilities, in accordance
with GAAP. Deferred income tax assets represent future tax benefits we expect to
be able to apply against future taxable income, and consist primarily of net
operating loss benefits carried forward to future periods. Our ability to
utilize the deferred tax benefits is dependent upon our ability to generate
future taxable income. SFAS 109, "Accounting for Income Taxes" requires us to
record a valuation allowance against any deferred income tax benefits that we
believe may expire before we generate sufficient taxable income to use them. If
we were to record a deferred tax benefit valuation allowance, it would have the
effect of increasing our tax expense thereby decreasing our net income and
decreasing our deferred tax asset balance on our balance sheet. We use current
estimates of future taxable income to determine whether a valuation allowance is
needed. Projecting our future taxable income requires us to use significant
judgment regarding the expected future revenues and expenses in each of our
business segments. In addition, we must assume that tax laws will not change
sufficiently enough to materially impact the expected tax liability associated
with our expected taxable income. While our current projections indicate we will
be able to fully utilize our deferred income tax benefits, should the economic
recession continue for an extended period of time, or competitive pressures or
other business risks result in a significant variance to our projected taxable
income, we could be required to record a valuation allowance up to the full
value of our deferred tax asset balances.



INFLATION

         We believe that the effects of inflation have not had a significant
impact on our results of operations.

<PAGE>


QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         With the acquisition of BlueGill in April 2000, we obtained operations
in Canada and we maintain offices in the United Kingdom. As a result, we have
assets and liabilities outside the United States that are subject to
fluctuations in foreign currency exchange rates. Due to the start up nature of
each of these operations, however, we currently utilize the U.S. dollar as the
functional currency for all international operations. As operations in Canada
and the United Kingdom begin to generate sufficient cash flow to provide for
their own cash flow requirements, we will convert to local currency as the
functional currency in each related operating unit as appropriate. Because we
utilize the U.S. dollar as the functional currency and due to the immaterial
nature of the amounts involved, our economic exposure from fluctuations in
foreign exchange rates is not significant enough at this time to engage in
forward foreign exchange and other similar instruments.

         While our international sales represented less than 2.2% of our revenue
for the year ended June 30, 2002, we now market, sell and license our products
throughout the world. As a result, our future revenue could be affected by weak
economic conditions in foreign markets that could reduce demand for our
products.

         Our exposure to interest rate risk is limited to the yield we earn on
invested cash, cash equivalents and investments and interest based revenue
earned on products such as our account balance transfer business. Our
convertible debt carries a fixed rate, as do any outstanding capital lease
obligations. Our Investment Policy currently prohibits the use of derivatives
for trading or hedging purposes.


SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         Except for the historical information contained herein, the matters
discussed in our Annual Report include certain forward-looking statements within
the meaning of Section 27A of the Securities Act, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Those statements include, but may
not be limited to, all statements regarding our and management's intent, belief
and expectations, such as statements concerning our future profitability, and
our operating and growth strategy. Investors are cautioned that all
forward-looking statements involve risks and uncertainties including, without
limitation, the factors set forth under the caption "Business - Business Risks"
in the Annual Report on Form 10-K for the year ended June 30, 2002 and other
factors detailed from time to time in our filings with the Securities and
Exchange Commission. One or more of these factors have affected, and in the
future could affect, our businesses and financial results in the future and
could cause actual results to differ materially from plans and projections.
Although we believe that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate. Therefore, there can be no assurance that the forward-looking
statements included in this Annual Report will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as
representations by us or any other person that our objectives and plans will be
achieved. All forward-looking statements made in this Annual Report are based on
information presently available to our management. We assume no obligation to
update any forward-looking statements.


<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of CheckFree Corporation and
Subsidiaries:

We have audited the accompanying consolidated balance sheets of CheckFree
Corporation (the "Company") and its subsidiaries as of June 30, 2001 and 2002,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended June 30, 2000, 2001, and 2002. 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 of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries at
June 30, 2001 and 2002, and the results of their operations and their cash flows
for the years ended June 30, 2000, 2001, and 2002 in conformity with accounting
principles generally accepted in the United States of America.


/s/ DELOITTE & TOUCHE LLP


Atlanta, Georgia
August 8, 2002


                                      F-1
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES


                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                JUNE 30,
                                                                       --------------------------
                                                                           2001           2002
                                                                       -----------    -----------
                                                                   (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                                    <C>            <C>
                                     ASSETS
CURRENT ASSETS:
     Cash and cash equivalents .....................................   $   124,122    $   115,009
     Investments ...................................................        35,930         90,958
     Accounts receivable, net ......................................        88,818         88,030
     Prepaid expenses and other assets .............................         8,681          8,355
     Deferred income taxes .........................................        13,725         11,816
                                                                       -----------    -----------
                    Total current assets ...........................       271,276        314,168
PROPERTY AND EQUIPMENT, Net ........................................       109,226         95,625
OTHER ASSETS:
     Capitalized software, net .....................................       187,021         71,845
     Goodwill, net .................................................       820,169        530,758
     Strategic agreements, net .....................................       643,212        519,275
     Other intangible assets, net ..................................        47,118         24,609
     Investments ...................................................        96,042         69,788
     Restricted investments ........................................          --            3,000
     Other noncurrent assets .......................................         9,889          8,409
                                                                       -----------    -----------
                    Total other assets .............................     1,803,451      1,227,684
                                                                       -----------    -----------
                                                                       $ 2,183,953    $ 1,637,477
                                                                       ===========    ===========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable ..............................................   $    19,084    $    10,049
     Accrued liabilities ...........................................        60,090         54,914
     Current portion of long-term obligations ......................         4,528          5,054
     Deferred revenue ..............................................        44,913         42,410
                                                                       -----------    -----------
                    Total current liabilities ......................       128,615        112,427
ACCRUED RENT AND OTHER .............................................         4,758          4,080
DEFERRED INCOME TAXES ..............................................       141,853         39,993
OBLIGATIONS UNDER CAPITAL LEASES- Less current portion .............         4,041          2,816
CONVERTIBLE SUBORDINATED NOTES .....................................       172,500        172,500
COMMITMENTS (Note 12)
STOCKHOLDERS' EQUITY:
     Preferred stock- 50,000,000 authorized shares, $0.01 par value;
        no amounts issued or outstanding ...........................          --             --
     Common stock- 500,000,000 authorized shares, $0.01 par value;
        issued 92,472,299 and 93,629,718 shares, respectively;
        outstanding 86,928,475 and 88,085,894 shares, respectively .           869            881
     Additional paid-in-capital ....................................     2,420,957      2,435,310
     Accumulated deficit ...........................................      (689,455)    (1,130,405)
     Unearned compensation .........................................          (185)          (125)
                                                                       -----------    -----------
                    Total stockholders' equity .....................     1,732,186      1,305,661
                                                                       -----------    -----------
                                                                       $ 2,183,953    $ 1,637,477
                                                                       ===========    ===========
</TABLE>




                 See notes to consolidated financial statements


                                       F-2

<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             YEAR ENDED JUNE 30,
                                                 --------------------------------------------
                                                     2000            2001            2002
                                                 ------------    ------------    ------------
                                                        (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                              <C>             <C>             <C>
REVENUES:
     Processing and servicing ................   $    261,621    $    362,051    $    422,237
     License fees ............................         16,818          30,180          25,020
     Maintenance fees ........................         18,752          21,332          24,298
     Other ...................................         13,004          19,757          18,922
                                                 ------------    ------------    ------------
                    Total revenues ...........        310,195         433,320         490,477
EXPENSES:
     Cost of processing, servicing and support        182,540         255,528         262,105
     Research and development ................         35,631          55,621          55,172
     Sales and marketing .....................         44,782          90,283          58,030
     General and administrative ..............         40,931          50,474          43,687
     Depreciation and amortization ...........         42,830         427,495         435,565
     In-process research and development .....          6,900          18,600              --
     Impairment of intangible assets .........             --              --         155,072
     Reorganization charge ...................             --              --          16,365
                                                 ------------    ------------    ------------
                    Total expenses ...........        353,614         898,001       1,025,996
                                                 ------------    ------------    ------------
LOSS FROM OPERATIONS .........................        (43,419)       (464,681)       (535,519)
OTHER:
     Interest income .........................          7,689          15,415           8,486
     Interest expense ........................         (8,027)        (13,154)        (12,788)
     Loss on investments .....................           --           (16,077)           --
                                                 ------------    ------------    ------------
LOSS BEFORE INCOME TAXES .....................        (43,757)       (478,497)       (539,821)
INCOME TAX BENEFIT ...........................        (11,437)       (115,362)        (98,871)
                                                 ------------    ------------    ------------
NET LOSS .....................................   $    (32,320)   $   (363,135)   $   (440,950)
                                                 ============    ============    ============
BASIC LOSS PER SHARE:
     Net loss per common share ...............   $      (0.61)   $      (4.49)   $      (5.04)
                                                 ============    ============    ============
     Equivalent number of shares .............     53,367,339      80,863,100      87,452,339
                                                 ============    ============    ============
DILUTED LOSS PER SHARE:
     Net loss per common share ...............   $      (0.61)   $      (4.49)   $      (5.04)
                                                 ============    ============    ============
     Equivalent number of shares .............     53,367,339      80,863,100      87,452,339
                                                 ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements



                                      F-3




<PAGE>



                     CHECKFREE CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
<TABLE>

                                            NUMBER OF
                                            SHARES OF      COMMON      ADDITIONAL                                   TOTAL
                                             COMMON       STOCK AT      PAID-IN     UNEARNED       ACCUMULATED   STOCKHOLDERS'
                                             STOCK          PAR         CAPITAL   COMPENSATION       DEFICIT        EQUITY
                                           ----------   -----------   ----------- ------------     -----------   -------------
                                                                   (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                        <C>          <C>           <C>                          <C>            <C>
BALANCE- JUNE 30, 1999 ................    51,756,278   $       518   $   480,385          --      $  (294,000)   $   186,903
 Net loss .............................          --            --            --            --          (32,320)       (32,320)
 Stock options and warrants exercised .     1,795,785            18        35,224          --             --           35,242
 Employee stock purchases .............        99,010             1         2,285          --             --            2,286
 401(k) match .........................        36,226          --           1,059          --             --            1,059
 Issuance of common stock pursuant
           to acquisition .............     4,713,736            47       239,447          --             --          239,494
 Issuance of restricted stock .........        13,000          --             333          (333)          --             --
 Amortization of unearned
           compensation ...............          --            --            --              71           --               71
 Tax benefit associated with exercise
          of stock options and warrants          --            --          13,159          --             --           13,159
                                           ----------   -----------   -----------   -----------    -----------    -----------
BALANCE- JUNE 30, 2000 ................    58,414,035           584       771,892          (262)      (326,320)       445,894
 Net loss .............................          --            --            --            --         (363,135)      (363,135)
 Stock options and warrants exercised .     1,369,885            14        22,609          --             --           22,623
 Employee stock purchases .............        92,721             1         3,623          --             --            3,624
 401(k) match .........................        51,834          --           2,487          --             --            2,487
 Issuance of common stock pursuant
           to acquisition .............    27,000,000           270     1,601,723          --             --        1,601,993
 Amortization of unearned
           compensation ...............          --            --            --              77           --               77
 Tax benefit associated with exercise
          of stock options and warrants          --            --          18,623          --             --           18,623
                                           ----------   -----------   -----------   -----------    -----------    -----------
BALANCE- JUNE 30, 2001 ................    86,928,475           869     2,420,957          (185)      (689,455)     1,732,186
 Net loss .............................          --            --            --            --         (440,950)      (440,950)
 Stock options and warrants exercised .       808,163             9         2,964          --             --            2,973
 Employee stock purchases .............       216,369             2         4,453          --             --            4,455
 401(k) match .........................       132,887             1         3,620          --             --            3,621
 Charge associated with warrants ......          --            --           2,748          --             --            2,748
 Amortization of unearned
           compensation ...............          --            --            --              60           --               60
 Tax benefit associated with exercise
          of stock options and warrants          --            --             568          --             --              568
                                           ----------   -----------   -----------   -----------    -----------    -----------
BALANCE- JUNE 30, 2002 ................    88,085,894   $       881   $ 2,435,310   $      (125)   $(1,130,405)   $ 1,305,661
                                           ==========   ===========   ===========   ===========    ===========    ===========
</TABLE>


                 See notes to consolidated financial statements



                                      F-4


<PAGE>



                     CHECKFREE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                    YEAR ENDED JUNE 30,
                                                                            -----------------------------------
                                                                               2000         2001         2002
                                                                            ---------    ---------    ---------
                                                                                         (IN THOUSANDS)
<S>                                                                            <C>          <C>          <C>
OPERATING ACTIVITIES:
     Net loss ...........................................................   $ (32,320)   $(363,135)   $(440,950)
     Adjustments to reconcile net loss to net cash provided by  (used in)
         operating activities:
     Write off of in-process research and development ...................       6,900       18,600         --
     Loss on investments ................................................        --         16,077         --
     Depreciation and amortization ......................................      42,830      427,495      435,565
     Deferred income tax benefit ........................................     (11,437)    (115,362)     (99,152)
     Impairment of intangible assets ....................................        --           --        155,072
     Charge associated with warrants ....................................        --           --          2,748
     Non-cash portion of reorganization charge ..........................        --           --          1,640
     Net loss on disposition of property and equipment ..................        --             56           55
     Purchases of investments - Trading .................................     (19,002)     (12,369)        --
     Proceeds from maturities and sales of investments, net - Trading ...      22,608       19,029         --
     Change in certain assets and liabilities (net of acquisitions and
          dispositions):
          Accounts receivable ...........................................     (14,499)     (30,510)         788
          Prepaid expenses and other ....................................         644        1,688        2,676
          Accounts payable ..............................................      (4,153)       8,926       (9,035)
          Accrued liabilities and other .................................      20,259       16,808       (1,212)
          Deferred revenue ..............................................       9,188       10,698       (2,503)
          Income tax accounts............................................          (2)       1,765          177
                                                                            ---------    ---------    ---------
                    Net cash provided by (used in) operating activities .      21,016         (234)      45,869
INVESTING ACTIVITIES:
    Purchase of property and software ...................................     (39,495)     (41,701)     (21,980)
    Proceeds from sale of assets ........................................        --          2,257         --
    Capitalization of software development costs ........................      (7,576)      (4,927)      (4,435)
    Purchase of business, net of cash acquired ..........................       9,152       96,599         --
    Capitalization of strategic agreement costs .........................        --        (10,279)        --
    Purchases of investments - Held to maturity .........................     (70,796)    (145,997)    (100,715)
    Increase in restricted investments ..................................        --           --         (3,000)
    Proceeds from maturities and sales of investments - Held to maturity        9,780       79,041       72,329
    Purchase of other investments .......................................     (10,000)      (1,881)        (388)
                                                                            ---------    ---------    ---------
                    Net cash used in investing activities ...............    (108,935)     (26,888)     (58,189)
FINANCING ACTIVITIES:
    Principal payments under capital lease and other
         long-term obligations ..........................................      (1,495)      (3,847)      (3,553)
     Proceeds from stock options exercised ..............................       9,721        6,940        2,285
     Proceeds from employee stock purchase plan .........................       2,903        4,374        3,787
     Proceeds from sale of stock and exercise of warrants ...............      25,515       15,703          688
     Proceeds from issuance of convertible subordinated notes ...........     166,903         --           --
                                                                            ---------    ---------    ---------
                    Net cash provided by financing activities ...........     203,547       23,170        3,207
                                                                            ---------    ---------    ---------
NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS ...................................................     115,628       (3,952)      (9,113)
CASH AND CASH EQUIVALENTS:
     Beginning of period ................................................      12,446      128,074      124,122
                                                                            ---------    ---------    ---------
     End of period ......................................................   $ 128,074    $ 124,122    $ 115,009
                                                                            =========    =========    =========

</TABLE>



                                      F-5
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           AS OF AND FOR THE YEARS ENDED JUNE 30, 2000, 2001 AND 2002

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - CheckFree Corporation (the "Company") is the parent company of
CheckFree Services Corporation ("CheckFree Services"), the principal operating
company of the business. In April 2000, CheckFree Services changed its name from
CheckFree Corporation to CheckFree Services Corporation. Following that change,
in August 2000, CheckFree Holdings Corporation changed its name to CheckFree
Corporation. CheckFree Services was organized in 1981 and is a leading provider
of financial electronic commerce products and services. See Note 20 for a
description of the Company's business segments.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include the results of operations of the Company, its wholly-owned subsidiaries,
and CheckFree Management Corporation, of which the Company is the majority
owner. All significant intercompany transactions have been eliminated.

USE OF ESTIMATES - The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and 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.

BUSINESS COMBINATIONS - For business combinations that have been accounted for
under the purchase method of accounting, the Company includes the results of
operations of the acquired business from the date of acquisition. Net assets of
the companies acquired are recorded at their fair value at the date of
acquisition. The excess of the purchase price over the fair value of tangible
and identifiable intangible net assets acquired is included in goodwill.

Statement of Financial Accounting Standards ("SFAS") 141, "Business
Combinations," eliminated the pooling-of-interest method of accounting for
business combinations and requires all business combinations initiated after
June 30, 2001, to be accounted for using the purchase method. In addition, SFAS
142, "Goodwill and Other Intangible Assets," requires application of the
provisions of SFAS 142 for goodwill and other intangible assets related to any
business combinations completed after June 30, 2001, but prior to the adoption
date of SFAS 142. The Company will adopt FAS 142 on July 1, 2002, however, there
have been no acquisitions completed since June 30, 2001. All previous
acquisitions have been accounted for using the purchase method.

PROCESSING AGREEMENTS - The Company has agreements with transaction processors
to provide origination and settlement services for the Company. Under the
agreements, the Company must fund service fees and returned transactions when
presented. These agreements expire at various dates.

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with maturities of three months or less to be cash
equivalents.

INVESTMENTS - The Company has certain investments in marketable debt securities
that are classified as either available-for-sale, trading or held-to-maturity in
accordance with SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities." At June 30, 2001 and 2002, all such investments are classified as
held to maturity. Held-to-maturity securities are carried at amortized cost and
are adjusted only for other than temporary declines in fair value. Restricted
investments represent amounts that are restricted as to their use in accordance
with leasing arrangements.

The Company has certain other investments in equity and debt securities that are
accounted for under the cost method. Under the cost method of accounting,
investments are carried at cost and are adjusted only for other-than-temporary
declines in fair value, distributions of earnings and additional investments.

The Company periodically evaluates whether any declines in fair value of its
investments are other than temporary. In performing this evaluation, the Company
considers various factors including any decline in market




                                      F-6
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

price, where available, the investee's financial condition, results of
operations, operating trends and other financial ratios.

The Company has received equity instruments in connection with agreements with
certain partners. In such cases, the Company's initial cost is determined based
on the estimated fair value of the equity instruments received. Subsequent
changes in the fair value of these equity instruments are accounted for in
accordance with the investment policies described above.

CONCENTRATIONS OF CREDIT RISK - Financial instruments that potentially subject
the Company to concentrations of credit risks consist of cash, investments and
trade accounts receivable. Excess cash is invested through banks, mutual funds
and brokerage houses primarily in highly liquid securities. The Company has
investment policies and procedures that limit any concentration of credit risk
with single issuers. With respect to accounts receivable, the Company does not
generally require collateral and believes that any credit risk is substantially
mitigated by the nature of our customers and reasonably short collection terms.
The Company maintains reserves for potential credit losses on customer accounts
when deemed necessary.

DERIVATIVE FINANCIAL INSTRUMENTS - On July 1, 2000, the Company adopted SFAS
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," which requires that all derivative financial instruments be
recognized as either assets or liabilities in the balance sheet. SFAS 133, as
amended, requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the
change in fair value of assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value is immediately recognized in earnings.

The Company's Investment Policy currently prohibits the use of derivatives for
trading or hedging purposes. Additionally, the Company performs reviews of its
contracts and has determined that they contain no "embedded derivatives" that
require separate reporting and disclosure under SFAS 133, as amended. As such,
the adoption of SFAS 133, as amended, did not have a material impact on the
Company's financial position or results of operations.

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Property and
equipment are depreciated using the straight-line method over the estimated
useful lives as follows: land improvements, building and building improvements,
15 to 30 years; computer equipment, software and furniture, 18 months to 7
years. Equipment under capital leases are amortized using the straight-line
method over the lesser of their estimated useful lives or the terms of the
leases. Leasehold improvements are amortized over the lesser of the estimated
useful lives or remaining lease periods.

CAPITALIZED SOFTWARE - Capitalized software includes purchased technology
intangible assets associated with acquisitions and capitalized internal
development costs. Purchased technology intangibles are initially recorded based
on the fair value ascribed at the time of acquisition. Internal development
costs are capitalized in accordance with the provisions of either SFAS 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed," or Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The Company
determines whether software costs fall under the provisions of SFAS 86 or SOP
98-1 and accounts for them as follows:

-    SFAS 86- Software development costs incurred prior to the establishment of
     technological feasibility are expensed as incurred. Software development
     costs incurred after the technological feasibility of the subject software
     product has been established are capitalized in accordance with SFAS 86.
     Capitalized software costs are amortized on a product-by-product basis
     using either the estimated economic life of the product on a straight-line
     basis over three to five years, or the current year gross product revenue
     to the current and anticipated future gross product revenue, whichever is
     greater. Unamortized software development costs in excess of estimated
     future net revenues from a particular product are written down to estimated
     net realizable value.


                                      F-7
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


-    SOP 98-1- Software costs incurred in the preliminary project stage are
     expensed as incurred. Software costs incurred after the preliminary project
     stage is complete, management has committed to the project, and it is
     probable the software will be used to perform the function intended are
     capitalized in accordance with SOP 98-1. Capitalized software costs are
     amortized on a product-by-product basis using the estimated economic life
     of the product on a straight-line basis, generally three to five years.
     Capitalized software costs not expected to be completed and placed in
     service are written down to estimated net realizable value.


GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill represents the excess of the
purchase price over the fair value of net assets acquired in business
combinations accounted for under the purchase method. Goodwill is amortized on a
straight-line basis over 5 to 10 years.

Other intangibles represent identifiable intangible assets purchased by the
Company in connection with business combinations. The costs of identified
intangible assets are generally amortized on a straight-line basis over periods
from 8 months to 10 years.

IMPAIRMENT OF LONG-LIVED ASSETS - In accordance with SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," the Company reviews its long-lived assets, including identifiable
intangible assets and goodwill related to those assets, for impairment whenever
events or changes in circumstances indicate that the carrying amount of these
assets may not be recoverable. If such a review is warranted, recoverability is
measured by comparison of the carrying amount of the applicable long-lived
assets to future undiscounted net cash flows the assets are expected to
generate. If assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds their fair market value. During the year ended June 30, 2002, the
Company performed a review of certain of its long-lived assets and determined
that certain assets were impaired. See Note 7 for a description of this review.

TRANSACTION PROCESSING - In connection with the timing of the Company's
financial transaction processing, the Company is exposed to credit risk in the
event of nonperformance by other parties, such as returns and charge backs. The
Company utilizes credit analysis and other controls to manage its credit risk
exposure. The Company also maintains a reserve for future returns and charge
backs. This reserve is included in accrued liabilities in the accompanying
consolidated balance sheets.

COMPREHENSIVE INCOME - Where applicable, the Company reports comprehensive
income in accordance with SFAS 130, "Reporting Comprehensive Income." The
Statement requires disclosure of total non-shareowner changes in equity and its
components. Total non-shareowner changes in equity include all changes in equity
during a period except those resulting from investments by and distributions to
shareowners. The components of other comprehensive income applicable to the
Company would be unrealized holding gains or losses on the Company's
available-for-sale securities and certain transactions associated with
derivative instruments. There were no available-for-sale securities held or
derivative instrument transactions during the years ended June 30, 2000, 2001
and 2002. As a result, there were no components of comprehensive income
applicable to the Company during the years ending June 30, 2000, 2001 and 2002.

STOCK-BASED COMPENSATION - The Company accounts for stock-based compensation in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation expense is not required to be recorded when stock
options are granted to employees as long as the exercise price is not less than
the fair market value of the stock when the option is granted, and in connection
with our Employee Stock Purchase Plan as long as the purchase price is not less
than 85% of the lower of the fair market value at the beginning or end of each
offer period. In October 1995, the Financial Accounting Standards Board ("FASB")
issued SFAS 123, "Accounting for Stock-Based Compensation." SFAS 123 allows the
Company to continue to follow the present APB 25 guidelines, but requires
pro-forma disclosures of net income and earnings per share as if the Company had
adopted the provisions of the Statement.


                                      F-8
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


STOCK-RELATED TRANSACTIONS WITH THIRD PARTIES - The Company accounts for stock
warrants issued to third parties, including customers, in accordance with the
provisions of the Emerging Issues Task Force ("EITF") Issue 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services," and EITF 01-9, "Accounting for
Consideration Given by a Vendor to a Customer (Including a Reseller of the
Vendor's Products)." Under the provisions of EITF 96-18, because none of the
Company's agreements have a disincentive for non-performance, the Company
records a charge for the fair value of the portion of the warrants earned from
the point in time when vesting of the warrants become probable. Final
determination of fair value of the warrants occurs upon actual vesting. EITF
01-9, which became effective during the quarter ended March 31, 2002, requires
that the fair value charge for certain types of warrants issued to customers be
recorded as a reduction of revenue to the extent of cumulative revenue recorded
from that customer.

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE -The Company reports Basic and
Diluted Earnings (Loss) Per Share in accordance with the provisions of SFAS 128
"Earnings Per Share." Basic earnings (loss) per common share is determined by
dividing income (loss) available to common shareholders by the weighted average
number of common shares outstanding. Diluted per-common-share amounts assume the
issuance of common stock for all potentially dilutive equivalent shares
outstanding.

FOREIGN CURRENCY TRANSLATION - Effective with the acquisition of BlueGill
Technologies, Inc. on April 28, 2000, certain wholly owned subsidiaries of the
Company have foreign operations. The financial statements of these foreign
subsidiaries are measured using the US dollar as the functional currency.
Assets, liabilities, revenues and expenses are remeasured using current and
historical exchange rates in accordance with SFAS No. 52, "Foreign Currency
Translation." Translation gains and losses resulting from the remeasurement
process are included in the determination of net income. The net translation
losses for the years ended June 30, 2001 and 2002, and the period from April 28,
2000 to June 30, 2000, were not significant.

REVENUE RECOGNITION - In 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements." The SAB provides guidance on the recognition,
presentation and disclosure of revenue in financial statements filed with the
SEC. Although SAB No. 101 does not change any of the existing accounting
standards on revenue recognition, it draws upon existing rules and explains how
the SEC staff applies these rules, by analogy, to other transactions that
existing rules do not specifically address. SAB No. 101, as amended by SAB No.
101B, became effective for the fourth quarter of the Company's 2001 fiscal year.
The adoption of SAB No. 101 did not have an impact on the Company's results of
operations or financial position.

-    Processing and servicing - Processing and servicing revenues include
     revenues from transaction processing, electronic funds transfer and monthly
     service fees on consumer funds transfer services. The Company recognizes
     revenue when the services are performed.

     As part of processing certain types of transactions, the Company earns
     interest from the time money is collected from its customers until the time
     payment is made to the applicable merchants. These revenues, which are
     generated from trust account balances not included on the Company's
     consolidated balance sheets, are included in processing and servicing
     revenue and totaled $21,485,000, $30,186,000 and $25,090,000 for the years
     ended June 30, 2000, 2001 and 2002, respectively.

-    License fees - The Company recognizes revenue on software transactions in
     accordance with SOP 97-2, "Software Revenue Recognition." In accordance
     with the provisions of SOP 97-2, the Company recognizes revenue from
     software license agreements when there is persuasive evidence that an
     arrangement exists, the fee is fixed and determinable, collectibility is
     probable and the software has been shipped, provided that no significant
     obligation remains under the contract.

-    Maintenance fees - Upon receipt of payment, maintenance fee revenue is
     recognized ratably over the term of the related contractual support period,
     generally 12 months.


                                      F-9
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


-    Other - Other revenue consists primarily of consulting and training
     services. Consulting revenue is recognized principally on a
     percentage-of-completion basis and training revenue is recognized upon
     delivery of the related service.

Customers are billed in accordance with contract terms. Maintenance revenue is
generally billed on an annual basis. The Company records any unrecognizable
portion of billed fees as deferred revenue until such time as revenue
recognition is appropriate.

Estimated losses, if any, on contracts are provided for when probable. Estimated
loss provisions are based on excess costs over the revenues earned from the
contract. Credit losses, if any, are contemplated in the establishment of the
allowance for doubtful accounts.

EXPENSE CLASSIFICATION

-    Processing, servicing and support - Processing, servicing and support costs
     consist primarily of data processing costs, customer care and technical
     support and third party transaction fees, which consist primarily of ACH
     transaction fees.

-    Research and development - Research and development expenses consist
     primarily of salaries and consulting fees paid to software engineers and
     business development personnel, and are reported net of applicable
     capitalized development costs.

-    Sales and marketing - Sales and marketing expenses consist primarily of
     salaries and commissions of sales employees, public relations and
     advertising costs, customer acquisition fees and royalties paid to
     distribution partners.

-    General and administrative - General and administrative expenses consist
     primarily of salaries for administrative, executive, finance and human
     resource employees.

-    Depreciation and amortization - Depreciation and amortization on
     capitalized assets is recorded on a straight-line basis over the
     appropriate useful lives.

-    In-process research and development - In-process research and development
     consists of charges resulting from acquisitions whereby the purchase price
     allocated to in-process software development was based on the determination
     that in-process research and development had no alternative future use
     after taking into consideration the potential for usage of the software in
     different products, resale of the software or other internal use.

-    Impairment of intangible assets - Impairment of intangible assets consists
     of charges resulting from the review of certain of the Company's long-lived
     assets as described in Note 7.

-    Reorganization charge - Reorganization charge resulted from the Company's
     decision to streamline certain of its operations as more fully described in
     Note 17. Employee and other related exit costs were accounted for in
     accordance with EITF 94-3, "Liability Recognition for Certain Employee
     Termination Benefits and Other Costs to Exit an Activity (including Certain
     Costs Incurred in a Restructuring)." EITF 94-3 requires recognition of a
     liability for employee termination benefits and other costs directly
     associated with exiting an activity at the point in time management has
     committed to the exit plan, informed employees of termination benefits to
     be received and where the plan can be carried out without the likelihood of
     significant change.

ADVERTISING COSTS - The Company expenses advertising costs as incurred in
accordance with SOP 93-7, "Reporting on Advertising Costs." Advertising expenses
were not significant for the year ended June 30, 2000. Advertising expense for
the years ended June 30, 2001 and 2002 were $29,925,000 and $2,744,000,
respectively, including $25,000,000 provided to Bank of America during the year
ended June 30, 2001 in connection with the Strategic Agreement described in Note
3. Advertising expenses are included in sales and marketing costs in the
accompanying Consolidated Statements of Operations.


                                      F-10
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      INCOME TAXES - The Company accounts for income taxes in accordance with
      SFAS 109, "Accounting for Income Taxes," which requires an asset and
      liability approach to financial accounting and reporting for income taxes.
      In accordance with SFAS 109, deferred income tax assets and liabilities
      are computed annually for differences between the financial statement and
      tax bases of assets and liabilities that will result in taxable or
      deductible amounts in the future based on enacted tax laws and rates
      applicable to the periods in which the differences are expected to affect
      taxable income. Income tax expense (benefit) is the tax payable or
      refundable for the period plus or minus the change during the period in
      deferred tax assets and liabilities.

      BUSINESS SEGMENTS - The Company reports information about its business
      segments in accordance with SFAS 131, "Disclosures about Segments of an
      Enterprise and Related Information." The Statement defines how operating
      segments are determined and requires disclosure of certain financial and
      descriptive information about a company's operating segments. See Note 20
      for the Company's segment information.

      RECENT ACCOUNTING PRONOUNCEMENTS - On July 20, 2001, the FASB issued SFAS
      141, "Business Combinations" and SFAS 142, "Goodwill and Other Intangible
      Assets." SFAS 141 requires all business combinations initiated after June
      30, 2001 to be accounted for using the purchase method of accounting. In
      addition, it requires application of the provisions of SFAS 142 for
      goodwill and other intangible assets related to any business combinations
      completed after June 30, 2001, but prior to the adoption date of SFAS 142.
      SFAS 142 changes the accounting for goodwill and other intangible assets.
      Upon adoption, goodwill is no longer subject to amortization over its
      estimated useful life. Rather, goodwill will be subject to at least an
      annual assessment for impairment by applying a fair-value-based test. All
      other acquired intangibles will be separately recognized if the benefit of
      the intangible asset is obtained through contractual or other legal
      rights, or if the intangible asset can be sold, transferred, licensed, or
      exchanged, regardless of the Company's intent to do so. Other intangibles
      will be amortized over their useful lives.

      SFAS 142 becomes effective for the Company on July 1, 2002 and will
      have the following impacts:

      -     The Company will be required to reclassify approximately $1.3
            million of unamortized workforce in place intangible assets, net of
            the associated deferred income taxes, into goodwill.

      -     After the reclassification above, the goodwill balance of
            approximately $532 million will no longer be amortized. The
            resulting reduction in amortization expense is estimated at
            approximately $165 million for each of the Company's fiscal years
            2003, 2004 and 2005.

      -     The Company is required to perform a transitional impairment test as
            of July 1, 2002. This impairment test requires the Company to (1)
            identify its reporting units, (2) determine the carrying value of
            each reporting unit by assigning assets and liabilities, including
            existing goodwill and intangible assets, to those reporting units,
            and (3) determine the fair value of each reporting unit. If the
            carrying value of any reporting unit exceeds its fair value, then
            the amount of any goodwill impairment will be determined through a
            fair value analysis of each of the assigned assets (excluding
            goodwill) and liabilities.

      The Company has substantially completed its transitional impairment test
      and expects to record a charge in the range of $2 to $5 million for
      impairment of goodwill associated with its i-Solutions reporting unit.
      This charge will be reflected as the cumulative effect of a change in
      accounting principle in the financial statements for the period ended
      September 30, 2002.

      Following the transitional impairment test, the Company's goodwill
      balances will be subject to annual impairment tests using the same process
      described above. If any impairment is indicated as a result of the annual
      test, an impairment charge would be recorded as part of income from
      operations.

      In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
      Obligations." SFAS 143 addresses financial accounting and reporting for
      obligations associated with the retirement of tangible long-lived assets
      and the associated retirement costs. The adoption of SFAS 143 is effective
      for the Company for fiscal 2003. The Company does not expect that the
      adoption of this statement will have a significant impact on its results
      of operations and financial position.



                                      F-11
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      In August 2001, the FASB issued SFAS 144, "Accounting for the Impairment
      or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121,
      "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets
      to Be Disposed Of" and the accounting and reporting provisions of
      Accounting Principles Board Opinion 30, "Reporting Results of Operations -
      Reporting the Effects of Disposal of a Segment of a Business and
      Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
      for the disposal of a segment of a business. SFAS 144 addresses financial
      accounting and reporting for the impairment or disposal of long-lived
      assets and will be effective for the Company's first quarter of fiscal
      2003. The Company does not expect that the adoption of this statement will
      have a significant impact on its results of operations and financial
      position.


      In April 2002, the FASB issued SFAS 145, "Rescission of FASB Statements
      No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
      Corrections." This statement eliminates the current requirement that gains
      and losses on extinguishment of debt must be classified as extraordinary
      items in the income statement. Instead, the statement requires that gains
      and losses on extinguishment of debt be evaluated against the criteria in
      Accounting Principles Board ("APB") Opinion 30, "Reporting the Results of
      Operations--Discontinued Events and Extraordinary Items" to determine
      whether or not it should be classified as an extraordinary item. In
      addition, the statement contains other corrections to authoritative
      accounting literature in SFAS 4, 44 and 64. The changes in SFAS 145
      related to debt extinguishment will be effective for the Company's 2003
      fiscal year and the other changes were effective beginning with
      transactions after May 15, 2002. In August 2002, the Company announced
      that its board of directors had authorized a repurchase program under
      which the Company may purchase shares of its common stock and convertible
      notes. Should the Company purchase any of its convertible notes and
      realize a gain or loss on the transaction, SFAS 145 will require the
      Company to evaluate the transaction against the criteria in APB 30 to
      determine if the gain or loss should be classified as an extraordinary
      item. If classification as an extraordinary item is not appropriate, the
      gain or loss would be included as part of income from operations.

       In June 2002, the FASB issued SFAS 146, "Accounting for Costs Associated
      with Exit or Disposal Activities," which addresses accounting for
      reorganization and similar costs. SFAS 146 supersedes previous accounting
      guidance, principally EITF 94-3. SFAS 146 requires that the liability for
      costs associated with an exit or disposal activity be recognized when the
      liability is incurred. Under EITF No. 94-3, a liability for an exit cost
      was recognized at the date of a company's commitment to an exit plan. SFAS
      146 also establishes that the liability should initially be measured and
      recorded at fair value. Accordingly, SFAS 146 may affect the timing of
      recognizing any future reorganization costs as well as the amount
      recognized. The provisions of SFAS 146 are effective for reorganization
      activities initiated after December 31, 2002.

      RECLASSIFICATIONS - Certain amounts in the prior years' financial
      statements have been reclassified to conform to the 2002 presentation.

      NOTE 2.  ACQUISITIONS

      TRANSPOINT - On September 1, 2000, the Company acquired MSFDC, L.L.C.
      ("TransPoint") for a total of $1.4 billion, consisting of 17,000,000
      shares of common stock valued at $1.4 billion and $2 million of
      acquisition costs. The acquisition was treated as a purchase for
      accounting purposes, and, accordingly, the assets and liabilities were
      recorded based on their fair values at the date of the acquisition. The
      values ascribed to acquired intangible assets and their respective future
      lives are as follows:

      <Table>
      <Caption>
                                                  INTANGIBLE       USEFUL
                                                    ASSET           LIFE
                                                   --------        -------
                                                (IN THOUSANDS)
      <S>                                          <C>             <C>
      Goodwill ................................    $780,545         5.0 yrs
      Strategic agreements ....................     495,000         5.0 yrs
      Existing product technology .............     209,300         3.0 yrs
      Customer list ...........................      29,000         3.0 yrs
      Tradename ...............................      28,300         1.0 yr
      </Table>

                                      F-12
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      Amortization of intangible assets is on a straight-line basis over the
      assets' respective useful life. TransPoint's operations are included in
      the Consolidated Statements of Operations from the date of acquisition.

      In connection with the acquisition of TransPoint, the Company recorded a
      charge of $18.6 million for purchased In-Process Research and Development
      ("IPR&D"). This charge related to four technologies under development that
      had not demonstrated technological feasibility as of the transaction date.
      These technologies were Biller Integration System and Communications,
      Service Center, Delivery Applications and Payment Systems Interface. As of
      the acquisition date, the Company estimated that these projects were 80%
      complete, that an aggregate of $717,000 would be required to complete
      these four projects, and that revenues would begin in late 2000. An
      after-tax rate of 24% was used in this analysis. As of June 30, 2002,
      these projects were complete.

      BLUEGILL - On April 28, 2000, the Company acquired BlueGill Technologies,
      Inc. ("BlueGill") for a total of $239.9 million, consisting of 4,713,736
      shares of common stock valued at $221.5 million, the issuance of 637,746
      employee stock options valued at $18.5 million and $0.6 million of
      acquisition costs less $0.7 million of cash received for the release of
      shares placed in escrow per the merger agreement. The acquisition was
      treated as a purchase for accounting purposes, and, accordingly, the
      assets and liabilities were recorded based on their fair market values at
      the date of the acquisition. The values ascribed to acquired intangible
      assets and their respective useful lives are as follows:

      <Table>
      <Caption>
                                                    INTANGIBLE        USEFUL
                                                       ASSET           LIFE
                                                    ----------       --------
                                                  (IN THOUSANDS)
      <S>                                           <C>              <C>
      Goodwill ................................     $191,072         5.0 yrs
      Tradename ...............................       15,100         1.0 yr
      Existing product technology .............       13,700         3.7 yrs
      Customer list ...........................       10,600         5.0 yrs
      Workforce in place ......................        2,600         3.0 yrs
      Covenants not to compete ................        1,200         1.0 yr
      </Table>


      Amortization of intangible assets is on a straight-line basis over the
      assets' respective useful life. BlueGill's operations are included in the
      Consolidated Statements of Operations from the date of acquisition.

      In connection with the acquisition of BlueGill Technologies, the Company
      recorded a charge of $6.9 million for purchased IPR&D. This charge related
      to five technologies, which had not demonstrated technological or
      commercial feasibility as of the transaction date. They were print and
      extraction technology, data management engine technology, API technology,
      web application technologies and payment/OFX technology. As of the
      acquisition date, the Company estimated that these projects ranged from
      10% to 50% complete, that an aggregate of $2.1 million would be required
      to complete these five projects, and that, depending upon the project,
      product revenues would begin in mid-to-late 2000. An after-tax discount
      rate of 25% was used in this analysis. As of June 30, 2002, these projects
      were complete.

      PRO FORMA INFORMATION - The unaudited pro forma results of operations of
      the Company for the years ended June 30, 2000 and 2001, assuming the
      acquisitions occurred at the beginning of the period are as follows (in
      thousands):

      <Table>
      <Caption>
                                                       YEAR ENDED JUNE 30,
                                                    ------------------------
                                                      2000             2001
                                                    ---------       ---------
      <S>                                           <C>             <C>
      Total revenues ...........................    $ 316,830       $ 433,329
      Net loss .................................    $(406,582)      $(402,193)
      Basic and Diluted loss per share:
           Net loss per common share ...........    $   (5.42)      $   (4.80)
                                                    =========       =========
           Equivalent number of shares .........       75,078          83,797
                                                    =========       =========
      </Table>





                                      F-13
<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      This information is presented to facilitate meaningful comparisons to on
      going operations and to other companies. The unaudited pro forma amounts
      above do not include a charge for in-process research and development of
      $18.6 million arising from the TransPoint acquisition in 2001 and $6.9
      million arising from the BlueGill acquisition in 2000. The unaudited pro
      forma information is not necessarily indicative of the actual results of
      operations had the transactions occurred at the beginning of the periods
      presented, nor should it be used to project the Company's results of
      operations for any future periods.

      NOTE 3.  STRATEGIC AGREEMENT

      Effective October 1, 2000, the Company completed a previously announced
      10-year strategic agreement with Bank of America, whereby the Company
      acquired the electronic billing and payment assets of Bank of America and
      will provide electronic billing and payment services to Bank of America's
      customer base in exchange for ten million shares of the Company's common
      stock, valued at approximately $253 million, and $35 million of cash. Of
      the cash portion of the purchase price, $25 million was provided to help
      support an agreed upon two year $45 million marketing campaign by Bank of
      America. Because the Company cannot directly impact the specific nature,
      timing or extent of the use of the marketing funds, the entire $25 million
      was expensed upon completion of the agreement. This amount is included in
      sales and marketing expense in the accompanying Consolidated Statement of
      Operations for the year ended June 30, 2001.

      The values ascribed to intangible assets acquired as a result of the
      agreement and their respective useful lives are as follows:

      <Table>
      <Caption>
                                                     INTANGIBLE       USEFUL
                                                       ASSET           LIFE
                                                    ----------      -----------
                                                   (IN THOUSANDS)
      <S>                                            <C>             <C>
      Strategic agreement ....................       $249,424        10.0 yrs
      Existing product technology ............          7,659         1.5 yrs
      Workforce ..............................          3,173         3.0 yrs
      </Table>

      The agreement provides for a revenue guarantee of $500 million to the
      Company over the next ten years. Bank of America also has the ability to
      earn warrants on up to ten million additional shares upon achievement of
      certain milestones more fully described in Note 14.

      As a result of the agreement, as of June 30, 2001 and 2002, Bank of
      America owned 11.5% and 11.4% of the Company, respectively. The following
      amounts related to Bank of America are included in the Company's
      consolidated financial statements for the periods indicated (in
      thousands):

      <Table>
      <Caption>
                                                               JUNE 30,
                                                        --------------------
                                                         2001          2002
                                                        -------       -------
      <S>                                               <C>           <C>
      Current assets:
              Accounts receivable, net .............    $ 9,655       $22,632
                                                        -------       -------
                     Total current assets ..........    $ 9,655       $22,632
                                                        =======       =======
      Current liabilities:
              Accounts payable .....................    $ 5,983       $  --
              Accrued liabilities ..................      2,111           808
              Deferred revenues ....................        477           824
                                                        -------       -------
                     Total current liabilities .....    $ 8,571       $ 1,632
                                                        =======       =======
      </Table>


                                      F-14


<PAGE>




                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)


<Table>
<Caption>
                                                               YEAR ENDED JUNE 30,
                                                          -------------------------
                                                           2000      2001      2002
                                                          -------   -------   -------
      <S>                                                 <C>       <C>       <C>
      Revenues from Bank of America:
           Processing and servicing ...................   $14,796   $42,503   $59,313
           License fees ...............................         2     1,187        40
           Maintenance fees ...........................       209       460       521
           Other ......................................       142       337       148
                                                          -------   -------   -------
                     Total revenues ...................   $15,149   $44,487   $60,022
                                                          =======   =======   =======
</Table>

<Table>
<Caption>
                                                               YEAR ENDED JUNE 30,
                                                          -------------------------
                                                           2000      2001      2002
                                                          -------   -------   -------
      <S>                                                 <C>       <C>       <C>
      Expenses paid to Bank of America:
            Cost of processing, servicing and support..   $  --     $23,154   $20,020
            Sales and marketing .......................      --      25,000      --
                                                          -------   -------   -------
                     Total expenses ...................   $  --     $48,154   $20,020
                                                          =======   =======   =======
</Table>

      Revenues and accounts receivable relate to all segments of the Company but
      primarily to electronic billing and payment services provided to Bank of
      America. Accounts payable, accrued liabilities and cost of processing
      expenses relate to reimbursements to Bank of America in connection with a
      transition services agreement in place while the Company completed the
      conversion of Bank of America customers to its processing platform. That
      conversion was completed during the year ended June 30, 2002. The Company
      subleases office space from Bank of America for two customer care
      facilities. Amounts paid under the sublease agreements are included in
      cost of processing, servicing and support in the table above.

      NOTE 4.  INVESTMENTS

      Investments consist of the following (in thousands):

<Table>
<Caption>
                                                                     JUNE 30,
                                                              ---------------------
                                                                2001         2002
                                                              --------     --------
      <S>                                                     <C>          <C>
      Held-to-Maturity ..................................     $239,507     $254,074
      Other investments .................................        3,296        3,683
      Less:  amounts classified as cash equivalents .....      110,831       94,011
                                                              --------     --------
                          Total investments .............     $131,972     $163,746
                                                              ========     ========
</Table>

      HELD-TO-MATURITY - The following is a summary of Held-to-Maturity
      investment securities (in thousands):

<TABLE>
<CAPTION>
                                                                 GROSS UNREALIZED
                                                    AMORTIZED  ---------------------    FAIR
                                                       COST      GAINS     LOSSES       VALUE
                                                    --------   --------   --------    --------
      <S>                                           <C>        <C>        <C>         <C>
      JUNE 30, 2001:
           Corporate bonds ..................       $ 75,627   $    226   $   (404)   $ 75,449
           Asset-backed securities ..........         29,259         74       --        29,333
           Commercial paper .................         51,186         43         (9)     51,220
           Certificates of deposit ..........           --         --         --          --
           U.S. Government and federal agency
              obligations ...................         22,466        254       --        22,720
           Money market funds ...............         60,969       --         --        60,969
                                                    --------   --------   --------    --------
           Held-to-Maturity investments .....        239,507        597       (413)    239,691

           Less:  amounts classified as cash
              equivalents ...................        110,831       --         --       110,831
                                                    --------   --------   --------    --------
                     Total Held-to-Maturity
                       Investments ..........       $128,676   $    597   $   (413)   $128,860
                                                    ========   ========   ========    ========
</TABLE>


                                      F-15
<PAGE>


                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)


      <TABLE>
      <CAPTION>
                                                              GROSS UNREALIZED
                                                 AMORTIZED  ---------------------       FAIR
                                                   COST       GAINS      LOSSES        VALUE
                                                ---------   ---------   ---------    ---------
      <S>                                       <C>         <C>         <C>          <C>
      JUNE 30, 2002:
           Corporate bonds ..................   $  96,951   $     490   $    (523)   $  96,918
           Asset-backed securities ..........      39,142         428         (10)      39,560
           Commercial paper .................      15,939        --          --         15,939
           Certificates of deposit ..........       3,000        --          --          3,000
           U.S. Government and federal agency
              obligations ...................      23,460         148        --         23,608
           Money market funds ...............      75,582        --          --         75,582
                                                ---------   ---------   ---------    ---------
           Held-to-Maturity investments .....     254,074       1,066        (533)     254,607
           Less:  amounts classified as cash
              equivalents ...................      94,011        --          --         94,011
                                                ---------   ---------   ---------    ---------
                     Total Held-to-Maturity
                       Investments ..........   $ 160,063   $   1,066   $    (533)   $ 160,596
                                                =========   =========   =========    =========
      </TABLE>

      The fair value of Held-to-Maturity securities is based on quoted market
      values.

      The amortized cost and fair value of held-to-maturity investment
      securities at June 30, 2002 by contractual maturity or repricing date are
      as follows (in thousands):
      <TABLE>
      <CAPTION>
                                                           AMORTIZED
                                                             COST        FAIR VALUE
                                                           --------       --------
      <S>                                                  <C>           <C>
      Due in one year or less .........................    $ 90,958       $ 91,210
      Due after one year through five years ...........      69,105         69,386
                                                           --------       --------
                      Total ............................   $160,063       $160,596
                                                           ========       ========
      </TABLE>
      Expected maturities may differ from contractual maturities because debt
      issuers may have the right to call or prepay obligations with or without
      call or prepayment penalties.

      OTHER INVESTMENTS - Other investments are accounted for under the cost
      method and include the following (in thousands):
      <TABLE>
      <CAPTION>
                                                                     JUNE 30,
                                                               -------------------
                                                                2001         2002
                                                               ------       ------
      <S>                                                      <C>          <C>
      Common stock and warrants ............................   $2,198       $2,239
      Convertible debenture ................................    1,000        1,000
      Preferred stock ......................................       98           98
      Venture capital partnership ..........................     --            346
                                                               ------       ------
                         Total other investments ...........   $3,296       $3,683
                                                               ======       ======
      </TABLE>
      Common stock and warrants consist primarily of the Company's strategic
      investment in Billserv.com common stock, which is subject to certain
      trading restrictions. The remainder of common stock and warrants,
      convertible debenture and preferred stock investments are in non-publicly
      traded e-billing related companies. The convertible debenture bears
      interest at 6.5% per annum and is payable in full on September 12, 2003.
      Interest is payable on December 31 and June 30 each year. The debenture
      agreement allows the Company, at its option, to convert the note into
      common shares of the issuer, the number of which is dependent upon the
      valuation of the issuer at that time. Conversion into common stock is
      automatic if the issuer completes an initial public offering. The venture



                                      F-16
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      capital partnership invests in early to mid-stage financial solutions and
      technology companies. The Company has made a commitment to invest $1
      million in the partnership. Actual contributions are made at the point in
      time the partnership identifies a specific company in which to invest. The
      fair value of other investments was approximately $3,906,000 and
      $3,064,000 as of June 30, 2001 and 2002, respectively.

      During the year ended June 30, 2001, the Company recorded a loss on
      certain of its other investments. The loss was the result of the Company's
      evaluation of any other-than-temporary decline in the value of these
      investments. In performing this evaluation the Company considered various
      factors including any decline in market price, where available, the
      investee's financial condition, results of operations, operating trends
      and other financial ratios. Based in these factors, the Company recorded a
      loss of $16,077,000.

      PLEDGED INVESTMENTS - The Company has pledged certain held-to-maturity
      investments as collateral for payments due under operating leases and for
      a standby letter of credit related to an operating lease. Total amount of
      securities pledged at June 30, 2002 was approximately $5,828,000, of which
      $3,000,000 is classified as a restricted investment. The operating leases
      expire at various dates through December 31, 2004. The standby letter of
      credit expires on September 30, 2002, but is automatically renewable
      through the underlying lease expiration date of September 30, 2004.


      NOTE 5.  ACCOUNTS RECEIVABLE

      Accounts receivable consist of the following (in thousands):


      <TABLE>
      <CAPTION>
                                                                           JUNE 30,
                                                                     -----------------
                                                                       2001      2002
                                                                     -------   -------
      <S>                                                            <C>       <C>
      Trade accounts receivable ..................................   $76,973   $80,292
      Unbilled trade accounts receivable .........................     8,875     4,746
      Other receivables ..........................................     5,933     4,992
                                                                     -------   -------
                         Total ...................................    91,781    90,030
                         Less:  allowance for doubtful accounts ..     2,963     2,000
                                                                     -------   -------
                         Accounts receivable, net ................   $88,818   $88,030
                                                                     =======   =======
      </TABLE>

      Trade accounts receivable represents amounts billed to customers. Revenue
      is recognized and customers are billed under service agreements as the
      services are performed. Unbilled trade accounts receivable result
      primarily from extended payment terms on software license agreements. For
      software contracts, revenue is recognized under the provisions of SOP 97-2
      as described in Note 1, and unbilled amounts under those software
      contracts are billed on specific dates according to contractual terms.
      Other receivables are comprised primarily of interest receivable. The
      allowance for doubtful accounts represents management's estimate of
      uncollectible accounts receivable.





                                      F-17
<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      NOTE 6. PROPERTY AND EQUIPMENT

      The components of property and equipment are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                               JUNE 30,
                                                                         -------------------
                                                                          2001        2002
                                                                         --------   --------
<S>                                                                      <C>        <C>
      Land and land improvements .....................................   $  4,944   $  4,944
      Building and building improvements .............................     50,732     51,162
      Computer equipment and software licenses .......................    132,850    148,962
      Furniture and equipment ........................................     16,894     19,830
                                                                         --------   --------
               Total .................................................    205,420    224,898
               Less:  accumulated depreciation and amortization ......     96,194    129,273
                                                                         --------   --------
               Property and equipment, net ...........................   $109,226   $ 95,625
                                                                         ========   ========
</TABLE>

      Depreciation expense totaled $22,915,000, $30,442,000 and $36,430,000 for
      the years ended June 30, 2000, 2001 and 2002, respectively.


      NOTE 7.  INTANGIBLE ASSETS

      The components of the Company's various intangible assets are as follows
      (in thousands):


<TABLE>
<CAPTION>
                                                                                    JUNE 30,
                                                                             -----------------------
                                                                                2001          2002
                                                                             ----------   ----------
      <S>                                                                    <C>          <C>
      Capitalized software:
             Product technology from acquisitions and strategic agreement..  $  252,378   $  166,578
             Internal development costs ...................................      21,771       24,946
                                                                             ----------   ----------
                      Total ...............................................     274,149      191,524
                      Less:  accumulated amortization .....................      87,128      119,679
                                                                             ----------   ----------
                      Capitalized software, net ...........................  $  187,021   $   71,845
                                                                             ==========   ==========

      Goodwill:
             Goodwill .....................................................  $1,009,834   $  838,988
             Less:  accumulated amortization ..............................     189,665      308,230
                                                                             ----------   ----------
                        Goodwill, net .....................................  $  820,169   $  530,758
                                                                             ==========   ==========

      Strategic agreements:
             Strategic agreements .........................................  $  744,424   $  744,424
             Less:  accumulated amortization ..............................     101,212      225,149
                                                                             ----------   ----------
                        Strategic agreements, net .........................  $  643,212   $  519,275
                                                                             ==========   ==========

      Other intangible assets:
             Workforce ....................................................  $   11,944   $   11,944
             Tradenames ...................................................      47,968       47,968
             Customer base ................................................      45,358       45,358
             Covenants not to compete .....................................       1,200        1,200
                                                                             ----------   ----------
                      Total ...............................................     106,470      106,470
                      Less:  accumulated amortization .....................      59,352       81,861
                                                                             ----------   ----------
                      Other intangible assets, net ........................  $   47,118   $   24,609
                                                                             ==========   ==========
</TABLE>


      Amortization of intangible assets totaled $19,915,000, $397,053,000 and
      $399,135,000 for the years ended June 30, 2000, 2001 and 2002,
      respectively.




                                      F-18
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      IMPAIRMENT OF INTANGIBLE ASSETS

      CHECKFREE I-SOLUTIONS
      During the year ended June 30, 2002, the Company identified certain
      indicators of possible impairment of its long-lived assets, primarily
      goodwill and other acquired intangible assets, related to its acquisition
      of BlueGill Technologies, Inc. (currently referred to as CheckFree
      i-Solutions). The main indicators of impairment were recent economic
      conditions, accompanied by internet-based software industry trends that
      have negatively impacted both i-Solutions current operations, as well as
      its expected future growth rates. The Company first evaluated
      recoverability by comparing the projected undiscounted cash flows of the
      i-Solutions business, including an estimated terminal value, to the
      related carrying value of its long-lived assets. As a result of this
      comparison, the Company determined that the i-Solutions assets were
      impaired. The amount of the impairment was then determined by comparing
      the estimated fair value of the i-Solutions assets to the related carrying
      value. The fair value was determined using a discounted cash flow approach
      for the net cash flows of the i-Solutions business and an estimated
      terminal value. The assumptions supporting the estimated cash flows,
      including the discount rate and estimated terminal value, reflect
      management's best estimates at the time. As a result of the fair value
      test, the Company recorded a charge reducing the carrying value of
      CheckFree i-Solutions goodwill by $107,405,000. This amount is included in
      impairment of intangible assets in the Company's Consolidated Statement of
      Operations. CheckFree i-Solutions is included in the Company's Software
      business segment.

      TRANSPOINT
      During the year ended June 30, 2002, the Company performed a review of the
      carrying value of technology assets it acquired as part of the TransPoint
      acquisition in September 2000. The review was prompted by the termination
      of the maintenance agreement for this technology from the last of our
      international partners, and the conclusions reached by the Company in
      evaluating the service potential of the technology against our present and
      future initiatives. As a result of the review, the Company identified two
      technologies for which there is no future use and recorded a charge of
      $47,667,000 to retire these assets. The charge is included in impairment
      of intangible assets in the Company's Consolidated Statement of
      Operations.

      The retirement of the TransPoint technology assets noted above was an
      indicator to the Company of possible impairment of its long-lived assets,
      primarily goodwill and other acquired intangible assets, related to its
      acquisition of TransPoint. The Company evaluated the recoverability of all
      its Electronic Commerce division long-lived assets by comparing the
      projected undiscounted cash flows of the division, including an estimated
      terminal value, to the carrying value of its long-lived assets. The
      assumptions supporting the estimated cash flows, including the estimated
      terminal value, reflect management's best estimates at the time. The
      result of this test indicated that there was no impairment of the
      Company's Electronic Commerce division long-lived assets.


      NOTE 8.  ACCRUED LIABILITIES

      The components of accrued liabilities are as follows (in thousands):
      <TABLE>
      <CAPTION>

                                                                   JUNE 30,
                                                          -----------------------
                                                           2001             2002
                                                          -------          -------
      <S>                                                 <C>              <C>
      Compensation and benefits ....................      $33,141          $28,147
      Reorganization reserve .......................         --              7,800
      Other ........................................       26,949           18,967
                                                          -------          -------
                      Total ........................      $60,090          $54,914
                                                          =======          =======
      </TABLE>

      NOTE 9.  LINE OF CREDIT

      The Company has a line-of credit agreement, which expires on December 30,
      2003. The agreement, which carries an interest rate of LIBOR plus 200
      basis points or Prime, enables the Company to borrow up to $30 million and
      contains certain financial and operating covenants. No amounts were
      outstanding under the line at June 30, 2001 and 2002.



                                      F-19
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      NOTE 10.  CONVERTIBLE SUBORDINATED NOTES

      On November 29, 1999, the Company issued $172,500,000 of 6.5% convertible
      subordinated notes that are due on December 1, 2006. Interest on the notes
      is payable on June 1 and December 1 of each year, commencing on June 1,
      2000. The notes may be converted, at the holder's option, into 13.6612
      shares of common stock per $1,000 of note value, and the Company may
      redeem the notes at any time on or after December 1, 2002. At June 30,
      2002, none of the notes had been converted to common stock. Interest
      expense on the notes for the years ended June 30, 2000, 2001 and 2002, was
      $7,307,000, $12,119,000 and $12,023,000, respectively. The fair value of
      the notes was approximately $151,400,000 and $148,500,000 as of June 30,
      2001 and 2002, respectively.




                                      F-20
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)


      NOTE 11.  CAPITAL LEASE AND OTHER LONG-TERM OBLIGATIONS

      The Company leases certain equipment and software licenses under capital
      leases. The Company is required to pay certain taxes, insurance and other
      expenses related to the leased property.

      The following is a summary of property under capital leases included in
      the accompanying consolidated balance sheets (in thousands):
      <TABLE>
      <CAPTION>
                                                                         JUNE 30,
                                                                    -----------------
                                                                     2001       2002
                                                                    ------     ------
      <S>                                                           <C>        <C>
      Equipment and software licenses ..........................    $8,122     $8,122
      Less:  accumulated depreciation and amortization .........     3,190      5,059
                                                                    ------     ------
                     Property under capital leases, net .......     $4,932     $3,063
                                                                    ======     ======
      </TABLE>

      Future minimum lease payments required by the capital leases and the net
      future minimum lease payments are as follows (in thousands):


           FISCAL YEAR ENDING JUNE 30,
            2003 .............................................        $1,610
            2004 .............................................         1,610
            2005 .............................................         1,364
            2006 .............................................           177
                                                                      ------
             Total future minimum lease payments .............         4,761
             Less:  amount representing interest .............           719
                                                                      ------
             Net future minimum lease payments ...............        $4,042
                                                                      ======


      Additionally, the Company has purchased software licenses under agreements
      with extended payment terms. Total amounts due under these agreements are
      as follows (in thousands):

           FISCAL YEAR ENDING JUNE 30,
            2003 .............................................        $4,078
            2004 .............................................           865
            2005 .............................................           318
                                                                      ------
                    Total ....................................        $5,261
                                                                      ======


      NOTE 12.  COMMITMENTS

      OPERATING LEASES - The Company leases office space and equipment under
      operating leases. Certain leases contain renewal options and generally
      provide that the Company shall pay for insurance, taxes and maintenance.
      In addition, certain leases include rent escalations throughout the terms
      of the lease. Total expense under all operating lease agreements for the
      years ended June 30, 2000, 2001 and 2002 was $19,095,000, $26,519,000 and
      $27,997,000, respectively.



                                      F-21
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)


       Future minimum rental payments under these leases are as follows (in
       thousands):

               FISCAL YEAR ENDING JUNE 30,
                2003 .........................................      $ 30,956
                2004 .........................................        17,232
                2005 .........................................        12,430
                2006 .........................................        10,453
                2007 .........................................         9,758
                Thereafter ...................................        55,264
                                                                    --------
                      Net future minimum lease payments ......      $136,093
                                                                    ========

      The Company has pledged certain held-to-maturity investments as collateral
      for payments due under operating leases and for a standby letter of credit
      related to an operating lease. Total amount of securities pledged at June
      30, 2002 was approximately $5,828,000, of which $3,000,000 is classified
      as a restricted investment. The operating leases expire at various dates
      through December 31, 2004. The standby letter of credit expires on
      September 30, 2002, but is automatically renewable through the underlying
      lease expiration date of September 30, 2004.

      OTHER COMMITMENTS - The Company has agreements for software to be used in
      conjunction with its Electronic Commerce business. The software is to be
      licensed in incremental units over the terms of the agreements to coincide
      with the growth of the Company's business. Total commitments under the
      agreements amount to $13.2 million over the next three years.

      NOTE 13.  CAPITAL STOCK

      On November 1, 2000, the Company's stockholders approved an increase in
      the number of authorized shares of the Company from 165,000,000 to
      550,000,000, consisting of 500,000,000 shares of common stock, $.01 par
      value, 48,500,000 shares of preferred stock, $.01 par value, and 1,500,000
      shares of Series A Junior Participating Cumulative Preferred Stock, $.01
      par value. The preferred stock may be issued in one or more series and may
      be established with such relative voting, dividend, redemption,
      liquidation, conversion and other powers, preferences, rights,
      qualifications, limitations and restrictions as the Board of Directors may
      determine without further stockholder approval. No preferred shares have
      been issued.

      In January 1997, the Company's Board of Directors declared a dividend
      distribution of Preferred Share Purchase Rights to protect its
      stockholders in the event of an unsolicited attempt to acquire the
      Company. On February 14, 1997, the Rights were issued to the Company's
      stockholders of record, with an expiration date of ten years. Until a
      person or group acquires 15% or more of the Company's Common Stock, the
      Rights will automatically trade with the shares of Common Stock. Only when
      a person or group has acquired 15% or more of the Company's Common Stock,
      will the Rights become exercisable and separate certificates issued. Prior
      to the acquisition by a person or group of beneficial ownership of 15% or
      more of the Company's Common Stock, the Rights are redeemable for $.001
      per Right at the option of the Board of Directors.

      NOTE 14.  TRANSACTIONS INVOLVING EQUITY INSTRUMENTS

      EMPLOYEE PLANS - During 1995, the Company adopted the 1995 Stock Option
      Plan (the "1995 Plan"). The options granted under the 1995 Plan may be
      either incentive stock options or non-statutory stock options. The terms
      of the options granted under the 1995 Plan are at the sole discretion of a
      committee of members of the Company's Board of Directors, not to exceed
      ten years. Generally, options vest at either 33% or 20% per year from the
      date of grant. The 1995 Plan originally provided that the Company may
      grant options for not more than 5,000,000 shares of common stock to
      certain key employees, officers and directors. In November of 1998 and
      again in November of



                                      F-22
<PAGE>

                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      2000, the 1995 Plan was amended by a vote of the Company's shareholders to
      extend the maximum option grants to not more than 8,000,000 shares and not
      more than 12,000,000 shares, respectively. Options granted under the 1995
      Plan are exercisable according to the terms of each option, however, in
      the event of a change in control or merger as defined, the options shall
      become immediately exercisable. At June 30, 2002, 2,344,926 additional
      shares are available for grant under the 1995 Plan.

      All options granted under the 1995 Plan were granted at exercise prices
      not less than the fair market value of the underlying common stock at the
      date of grant. In the event that shares purchased through the exercise of
      incentive stock options are sold within one year of exercise, the Company
      is entitled to a tax deduction. The tax benefit of the deduction is not
      reflected in the consolidated statements of operations but is reflected as
      an increase in additional paid-in capital.

      The following table summarizes stock option activity from July 1, 1999 to
      June 30, 2002:

<TABLE>
<CAPTION>
                                                                               YEAR ENDED
                                                ---------------------------------------------------------------------------
                                                    JUNE 30, 2000             JUNE 30, 2001              JUNE 30, 2002
                                                --------------------- ----------------------------- -----------------------
                                                             WEIGHTED                   WEIGHTED                  WEIGHTED
                                                             AVERAGE                    AVERAGE                   AVERAGE
                                                 NUMBER OF   EXERCISE     NUMBER OF     EXERCISE     NUMBER OF    EXERCISE
                                                  SHARES      PRICE        SHARES        PRICE        SHARES       PRICE
                                                ---------    ------       ---------     --------     ---------   ---------
      <S>                                       <C>          <C>          <C>           <C>          <C>         <C>
      Outstanding - Beginning of period.....    5,196,600    $18.69       6,161,785       $30.86     7,128,141      $36.96
      Granted ..............................    1,496,957     74.45       2,049,049        46.71     2,818,928       22.10
      Assumed with BlueGill acquisition ....      637,746      4.31            --           --            --           --
      Exercised ............................     (794,778)    12.32        (635,205)       10.92      (761,750)       3.09
      Cancelled ............................     (354,740)    27.16        (447,488)       34.24    (1,100,646)      41.35
                                                ---------                ----------                  ---------
      Outstanding - End of period ..........    6,161,785    $30.86       7,128,141       $36.96     8,084,673      $34.25
                                                =========    ======      ==========       ======    ==========      ======

      Options exercisable at end of period..    1,850,887    $13.58       2,588,418       $26.40     3,122,949      $38.84
                                                =========    ======      ==========       ======    ==========      ======

      Weighted average per-share fair value
      of options granted during the year ...                 $48.16                       $32.06                   $ 14.81
                                                             ======                      =======                    =======
</TABLE>


      The following table summarizes information about options outstanding at
      June 30, 2002:

<TABLE>
<CAPTION>
                                                   OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                                          ----------------------------------------- ----------------------
                                                            WEIGHTED AVERAGE                    WEIGHTED
                                                       ----------------------------              AVERAGE
                                                          REMAINING       EXERCISE               EXERCISE
      RANGE OF EXERCISE PRICE               NUMBER     CONTRACTUAL LIFE    PRICE      NUMBER      PRICE
      ----------------------------------- -----------  ----------------  ---------- ----------- ----------
<S>                                      <C>                <C>       <C>            <C>         <C>
      $ 0.01 - $  15.00 ..............    1,691,469          6.0          $ 11.55     867,736    $ 10.64
      $15.01 - $  30.00 ..............    2,107,732          8.6            17.79     390,661      21.77
      $30.01 - $  60.00 ..............    3,639,647          8.0            43.39   1,502,642      45.06
      $60.01 - $  90.00 ..............      187,990          7.6            75.06      69,420      76.10
      $90.01 - $ 120.00 ..............      457,835          7.5           104.50     292,490     104.50
                                          -----------                              ----------
                                          8,084,673                       $ 34.25   3,122,949    $ 38.84
                                          =========                       =======  ==========     ======
</TABLE>

      The fair value of each option grant is estimated on the date of grant
      using the Black-Scholes option-pricing model with the following
      weighted-average assumptions used for grants in the years ended June 30,
      2000, 2001 and 2002, respectively: dividend yield of 0% in all periods;
      expected volatility of 83%, 98% and 98%; risk-free interest rates of
      6.30%, 5.62%, and 4.00%; and expected lives of two to seven years.

      The Company agreed to assume responsibility for the 1997 and 1998 Employee
      Incentive Stock Option Plans of BlueGill Technologies, Inc. in conjunction
      with the acquisition of BlueGill in April 2000. All outstanding options
      were converted to equivalent CheckFree options as specifically prescribed
      in the Asset Purchase Agreement. The fair value of the options assumed of
      $18.5 million was estimated on the acquisition date using the
      Black-Scholes option pricing model with the following weighted-average
      assumptions used: dividend yield of 0%, expected volatility of 83%;
      risk-free interest rate of 6.60% and expected lives of one half to seven
      years. The estimated fair



                                      F-23
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      value of the assumed option plans was added to the fair value of Company
      stock issued in determining the purchase price of BlueGill.

      Under the 1997 Associate Stock Purchase Plan, effective for the six-month
      period beginning January 1, 1997, the Company is authorized to issue up to
      1,000,000 shares of Common Stock to its full-time employees, nearly all of
      whom are eligible to participate. Under the terms of the Plan, employees
      can choose, every six months, to have up to 15% of their salary withheld
      to purchase the Company's Common Stock. The purchase price of the stock is
      85% of the lower of its beginning-of-period or end-of-period market price.
      Participation in the plan by eligible employees has ranged from 30% to 50%
      in any given six-month period. Under the Plan, 52,191 shares were issued
      in January of 2000, 34,941 in July of 2000, 56,901 in January of 2001 and
      79,055 in July of 2001, 135,721 in January of 2002 and 128,443 in July of
      2002 from employees' salary withholdings from the respective previous
      six-month period. As of June 30, 2002 there were 387,197 shares available
      for future issuance to the Associate Stock Purchase Plan. Following is a
      summary of the weighted average fair market value of this look-back option
      estimated on the grant date using the Black-Scholes option pricing model,
      and the related assumptions used:

<TABLE>
<CAPTION>
                                     December 31,   June 30,   December 31,   June 30,   December 31,   June 30,
                                         1999         2000         2000         2001         2001         2002
                                        ------       ------       ------       ------       ------       ------
      <S>                               <C>          <C>          <C>          <C>          <C>          <C>
      Fair value of options ......      $ 8.93       $29.15       $11.63       $ 9.28       $ 4.95       $ 4.17
      Assumptions:
         Risk-free interest rate .         5.8%         5.8%         4.4%         4.4%         4.0%         4.0%
         Expected life ...........      3 months     3 months    3 months     3 months     3 months     3 months
         Volatility ..............        83.4%        83.4%        98.2%        98.2%        98.0%        98.0%
         Dividend yield ..........         0.0%         0.0%         0.0%         0.0%         0.0%         0.0%
</TABLE>


      The Company applies APB Opinion 25, "Accounting for Stock Issued to
      Employees" and related Interpretations in accounting for its stock option
      plans and employee stock purchase plan. Had compensation cost for the
      Company's stock-based compensation plans been determined based on the fair
      value at the grant dates for awards under those plans in accordance with
      the provisions of SFAS 123, "Accounting for Stock-Based Compensation," the
      Company's net loss and net loss per share would have been as follows (in
      thousands, except per share data):

<TABLE>
<CAPTION>
                                                                              YEAR ENDED JUNE 30,
                                                                    ---------------------------------------
                                                                       2000          2001           2002
                                                                    ----------    ----------    -----------
<S>                                                                <C>         <C>           <C>
      Pro forma net loss ........................................     $(50,073)   $ (393,961)   $  (476,132)
                                                                    ==========    ==========    ===========
      Pro forma net loss per share;
            Basic and Diluted ...................................       $(0.94)       $(4.87)        $(5.44)
                                                                    ==========    ==========    ===========
</TABLE>

      In the year ended June 30, 2000 the Company issued 13,000 shares of
      restricted stock to certain of its key employees. Under the terms of the
      grants the shares vest annually over a five-year period and full vesting
      is dependent upon the continued employment of the employee for the
      duration of the vesting period. Shares issued were recorded at fair market
      value on the date of the grant with a corresponding charge to
      stockholders' equity. The unearned portion is being amortized as
      compensation expense on a straight-line basis over the related vesting
      period.

      In January 1997 the Board of Directors approved an amendment to the
      Company's 401(k) plan, which authorized up to 1,000,000 shares of Common
      Stock for the Company's matching contribution. The Company issued 36,226
      shares in August 1999, 51,834 shares in August of 2000 and 132,887 shares
      in August 2001 to fund its 401(k)


                                      F-24
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      match that had accrued during the years ended June 30, 1999, 2000 and
      2001, respectively. As of June 30, 2002 there were 625,899 shares
      available for future contributions to the 401(k) plan.


      STOCK-RELATED TRANSACTIONS WITH THIRD PARTIES - In October 2000, the
      Company completed an agreement to acquire various electronic billing and
      payment assets from Bank of America in exchange for ten million shares of
      the Company's common stock. Bank of America has the ability to earn
      warrants on up to ten million additional shares, eight million of which
      vest upon achievement of specific levels of active subscriber adoption of
      electronic billing and payment services and separately, two million upon
      achievement of specific levels of electronic bills presented to those
      subscribers. The warrants contain a strike price of $32.50. Should the
      vesting of these warrants become probable, the Company will record a
      charge for the fair value of the portion of the warrants earned to date
      based on Bank of America's progress towards achieving the milestones set
      forth in the agreement. The Company will continue to record a charge each
      period for any additional portion of the warrants earned, plus any change
      in fair value of the cumulative amount of warrants earned to date, up to
      the point in time that the milestones are achieved and actual vesting
      occurs. Under the provisions of EITF 01-9, any charge associated with
      these warrants will be recorded as a reduction of revenue up to the
      aggregate amount of revenue received from Bank of America.


      In October 1999, the Company entered into an agreement with one of its
      customers. Under the terms of the agreement, the customer purchased
      250,000 shares of the Company's stock, has been issued warrants on one
      million shares, and has the ability to earn warrants on up to two million
      additional shares. All warrants contain a strike price of $39.25 and are
      exercisable on September 15, 2002, contingent upon achievement of various
      annual revenue targets and maintaining the continued existence of the
      agreement through that date. During the quarter ended June 30, 2002,
      vesting of the warrants for one million shares became probable. As such,
      the Company recorded a non-cash charge of $2,748,000 for the fair value of
      the portion of the warrants earned through June 30, 2002 based on a
      Black-Scholes option pricing model valuation. At September 15, 2002, upon
      actual vesting, the Company will determine the final fair value of the one
      million warrants taking into consideration the market value of our stock
      at that date. During the quarter ending September 30, 2002, the Company
      will record a charge for the additional portion of the warrants earned
      since June 30, 2002, and any change in fair value of the portion of the
      warrants earned through June 30, 2002. Under the provisions of EITF 01-9,
      the non-cash charge of $2,748,000 was recorded as a reduction of revenue,
      and any increase or decrease in the fair value upon actual vesting will be
      also be recorded as an increase or decrease to revenue.


      In January 1998 the Company entered into a ten-year processing agreement
      with a strategic partner. Under the terms of the agreement, the partner
      acquired ten-year warrants exercisable at $20 15/16 for ten million shares
      of the Company's Common Stock. Three million warrants vested upon the
      execution of a related processing outsourcing agreement on March 9, 1998.
      During the year ended June 30, 2001, the strategic partner's business was
      dissolved and they therefore do not have the ability to earn any of the
      remaining seven million warrants. During each of the fiscal years ended
      June 30, 2000 and 2001 the strategic partner exercised 750,000 of the
      vested options and 1,500,000 remain outstanding at June 30, 2002.


      In March 1997 the Company entered into a consulting agreement with a third
      party. Under the terms of the agreement the consultant acquired 5-year
      options exercisable at $13.00 for up to 50,000 shares of the Company's
      Common Stock. In June 1998, upon the execution of a processing agreement
      with a key customer, 25,000 of the options vested. The remaining 25,000
      options vested in March 2002. In March 2002, the consultant exercised all
      50,000 options. Any shares acquired by the consultant under the terms of
      the agreement are subject to certain transfer restrictions.


      CONVERTIBLE SUBORDINATED NOTES - In November 1999 the Company issued
      $172,500,000 million of convertible subordinated notes. Each $1,000 note
      may be converted, at the holder's option, into 13.6612 shares of common
      stock at a conversion rate of $73.20 per share. The fair market value of
      the Company's stock on June 30, 2002 was $15.64 per share. Please refer to
      Note 10 for further information regarding the convertible subordinated
      notes.




                                      F-25
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      NOTE 15.  EARNINGS PER SHARE

      The following table reconciles the differences in income and shares
      outstanding between basic and dilutive for the periods indicated (in
      thousands, except per share data):
<TABLE>
<CAPTION>
                                       Year Ended June 30, 2000              Year Ended June 30, 2001
                                ------------------------------------   --------------------------------------
                                   Income        Shares    Per-Share     Income       Shares        Per-Share
                                 (Numerator) (Denominator)   Amount    (Numerator) (Denominator)      Amount
                                 ----------- -------------   ------    ----------- -------------      ------
      <S>                          <C>           <C>       <C>         <C>             <C>        <C>
      Basic EPS ..............     (32,320)      53,367    $  (0.61)   $(363,135)      80,863       $(4.49)
                                                           ========                                 ======
      Effective of dilutive
      securities:
          Options and warrants         --           --          --           --           --           --
          Convertible notes ..         --           --          --           --           --           --
                                 ---------       ------                 --------    ---------
      Diluted EPS ............   $ (32,320)      53,367    $  (0.61)    (363,135)   $  80,863       $(4.49)
                                 =========       ======    ========     ========    =========       ======
<CAPTION>
                                      Year Ended June 30, 2002
                                ------------------------------------
                                   Income       Shares     Per-Share
                                (Numerator) (Denominator)  Amount
                                ----------- -------------  ---------
      <S>                       <C>             <C>        <C>
      Basic EPS ..............  $(440,950)      87,452      $(5.04)
                                                            ======
      Effective of dilutive
      securities:
          Options and warrants         --          --         --
          Convertible notes ..         --          --         --
                                ---------       ------
      Diluted EPS ............  $(440,950)      87,452      $(5.04)
                                =========       ======      ======
</TABLE>

      Anti-dilution provisions of SFAS 128 require consistency between diluted
      per-common-share amounts and basic per-common-share amounts in loss
      periods. The number of anti-dilutive equivalent shares excluded from the
      per-share calculations is 6,157,241, 5,561,894 and 3,255,624 for the
      years ended June 30, 2000, 2001 and 2002, respectively. The after-tax
      effect of interest expense on the convertible subordinated notes of
      approximately $4,384,000, $9,198,000 and $9,498,000 for the years ended
      June 30, 2000, 2001 and 2002, respectively, has not been added back to
      the numerator, as its effect would be anti-dilutive.

      NOTE 16.  EMPLOYEE BENEFIT PLANS

      RETIREMENT PLAN - The Company has a defined contribution 401(k) retirement
      plan covering substantially all of its U.S.-based employees. Under the
      plan eligible employees may contribute a portion of their salary until
      retirement and the Company, at its discretion, may match a portion of the
      employee's contribution. In January 2002, the Company added a similar plan
      covering substantially all its non U.S.-based employees. Total expense
      under both plans amounted to $2,886,000, $3,528,000 and $3,035,000, for
      the years ended June 30, 2000, 2001 and 2002, respectively.

      DEFERRED COMPENSATION PLAN - In January 1999, the Company established a
      deferred compensation plan (the "DCP") covering highly compensated
      employees as defined by the DCP. Under the plan, eligible employees may
      contribute a portion of their salary on a pre-tax basis. The DCP is a
      non-qualified plan, therefore the associated liabilities are included in
      the Company's June 30, 2001 and 2002 Consolidated Balance Sheets. In
      addition, the Company has established a rabbi trust to finance obligations
      under the DCP with corporate-owned life insurance policies on
      participants. The cash surrender value of such policies is also included
      in the Company's June 30, 2001 and 2002 Consolidated Balance Sheets. Total
      expense under the DCP for the years ended June 30, 2000, 2001 and 2002
      amounted to $162,000, $77,000 and $176,000, respectively.

      GROUP MEDICAL PLANS - Effective January 1, 2000, the Company converted all
      of its U.S.-based employees to a group medical self-insurance plan. The
      Company has employed an administrator to manage this plan. Under terms of
      this plan, both the Company and eligible employees are required to make
      contributions. The administrator reviews all claims filed and authorizes
      the payment of benefits. The Company has stop-loss insurance coverage on
      all individual claims exceeding $150,000. Prior to January 1, 2000, the
      Company had a group medical self-insurance plan covering certain of its
      employees, and medical insurance coverage under managed care health plans
      covering the remaining employees. The Company provides medical insurance
      coverage to its non U.S.-based employees through local managed care health
      plans. Total expense for medical insurance coverage amounted to
      $7,359,000, $11,116,000, and $11,588,000 for the years ended June 30,
      2000, 2001 and 2002, respectively. Under the self-insurance plan, the
      Company expenses amounts as claims are incurred and recognizes a liability
      for incurred but not reported claims. At June 30, 2001 and 2002, the
      Company accrued $4,061,000 and $4,153,000, respectively, as a liability
      for costs incurred but not paid under this plan.

      In December 1998, a subsidiary, CheckFree Management Corporation, was
      created to administer the Company's employee medical benefits program. The
      Company owns a controlling interest in the subsidiary, and therefore, the
      accompanying consolidated financial statements include the subsidiary's
      results of operations.

                                      F-26
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      NOTE 17.  REORGANIZATION CHARGE

      During the year ended June 30, 2002, the Company announced it would
      streamline operations in its Electronic Commerce division, refine its
      strategy for the i-Solutions business unit of its Software division, and
      discontinue certain product lines associated with its Investment Services
      division. As a result of these actions, the Company closed or consolidated
      operations in several locations and eliminated certain other positions in
      the Company. The streamlining of its Electronic Commerce division
      operations results from efficiencies gained from the consolidation of
      three legacy transaction processing platforms to its Genesis platform and
      resulted in the closing of its San Francisco, California location on April
      30, 2002; its Houston, Texas location on June 30, 2002; and its Austin,
      Texas location by September 30, 2002. The refinement in strategy for the
      i-Solutions business resulted in the closing of its Ann Arbor, Michigan
      and Singapore locations on March 19, 2002.

      As a result of these actions, the Company recorded $16,365,000 of
      reorganization charges, including $1,640,000 of non-cash asset impairment
      charges, $10,962,000 of severance and related benefits costs for the
      termination of 707 employees, and $3,763,000 of other exit costs,
      including lease termination fees and other closure, employee and
      professional costs. These amounts are included in reorganization charge in
      the Company's Consolidated Statement of Operations. Revenues and operating
      income related to the discontinued product lines in the Investment
      Services division are immaterial to the Company. The Company anticipates
      the reorganization plan to be substantially complete by June 2003.

      A summary of activity related to the reorganization charges recorded in
      the year ended June 30, 2002, is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                             REORGANIZATION
                                                 REORGANIZATION     CASH     RESERVE AT JUNE
                                                   CHARGES (1)    PAYMENTS      30, 2002
                                                   -----------   ----------   -----------
      <S>                                           <C>          <C>           <C>
      Severance and other employee costs .....      $10,962      $(6,261)      $ 4,701
      Office closure and business exit costs .        3,677         (649)        3,028
      Other exit costs .......................           86          (15)           71
                                                    -------      -------       -------
            Total ............................      $14,725      $(6,925)      $ 7,800
                                                    =======      =======       =======

      (1) Excludes $1,640,000 of non-cash asset impairment charges
</TABLE>

      In conjunction with the reorganization activities described above, the
      Company revised the estimated useful lives of the Existing Product
      Technology and Customer Base intangible assets related to the product
      lines that are to be discontinued from its Mobius Group acquisition, the
      Workforce intangible asset from its strategic agreement with Bank of
      America, and certain property and equipment assets associated with office
      locations that were to be closed. This resulted in additional depreciation
      and amortization expense of $3,318,000 for the year ended June 30, 2002,
      which represents an after-tax impact of $2,710,000 and an impact to
      earnings per share of $(0.03) for the year ended June 30, 2002.

      NOTE 18.  INCOME TAXES

      The Company's income tax benefit consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                                YEAR ENDED JUNE 30,
                                                    ------------------------------------------
                                                        2000            2001            2002
                                                    ---------       ---------       ---------
      <S>                                           <C>             <C>              <C>
      Current:
           Federal ...........................      $    --         $    --          $   --
           State and local ...................           --              --              --
           Foreign ...........................           --              --               281
                                                    ---------       ---------       ---------
                     Total current ...........           --              --               281
      Deferred federal and state .............        (11,437)       (115,362)        (99,152)
                                                    ---------       ---------       ---------
                     Total income tax benefit       $ (11,437)      $(115,362)      $ (98,871)
                                                    =========       =========       =========
</TABLE>

                                      F-27
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)



      Income tax expense differs from the amounts computed by applying the U.S.
      federal statutory income tax rate of 35 percent to income before income
      taxes as a result of the following (in thousands):

<TABLE>
<CAPTION>
                                                                        YEAR ENDED JUNE 30,
                                                            -----------------------------------------
                                                              2000            2001             2002
                                                            ---------       ---------       ---------
      <S>                                                   <C>             <C>             <C>
      Computed "expected" tax benefit ................      $ (15,315)      $(167,243)      $(188,937)
       Nondeductible in-process research and
         development of acquired businesses ..........          2,415           6,510            --
      Nondeductible intangible amortization ..........          3,572          60,346         101,294
      State and local taxes, net of federal income tax
         benefits ....................................         (1,636)        (14,917)        (11,685)
      Other, net .....................................
                                                                 (473)            (58)            457
                                                            ---------       ---------       ---------
                    Total income tax benefit .........      $ (11,437)      $(115,362)      $ (98,871)
                                                            =========       =========       =========
</TABLE>


      The tax effects of temporary differences that give rise to significant
      portions of the deferred tax assets and deferred tax liabilities at June
      30, 2001 and 2002 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            JUNE 30,
                                                                   -------------------------
                                                                      2001            2002
                                                                   ---------       ---------
      <S>                                                          <C>             <C>
      Deferred tax assets:
           Federal and state net operating loss carryforwards      $  72,972       $  80,692
           Federal and state tax credit carryforwards .......          4,300           5,311
           Allowance for bad debts and returns ..............          1,278             951
           Accrued compensation and related items ...........          1,420           1,227
           Stock warrants ...................................         21,484          18,298
           Property and equipment ...........................            602             451
           Other investments ................................          3,335           3,143
           Deferred revenue .................................          2,749           2,254
           Reserve accruals .................................          8,172           7,188
                                                                   ---------       ---------
                          Total deferred tax assets .........        116,312         119,515
      Deferred tax liabilities:
           Capitalized software .............................        (69,864)        (24,063)
           Intangible assets ................................       (174,482)       (123,629)
           Prepaid expenses .................................            (94)           --
                                                                   ---------       ---------
                          Total deferred tax liabilities ....       (244,440)       (147,692)
                                                                   ---------       ---------
                           Net deferred tax liabilities .....      $(128,128)      $ (28,177)
                                                                   =========       =========
</TABLE>


      At June 30, 2002, the Company has approximately $218,671,203 of state and
      $196,561,289 of federal net operating loss carryforwards available,
      expiring in 2009 to 2016 and 2009 to 2022, respectively. Additionally, at
      June 30, 2002, the Company has approximately $868,297 of state and
      $4,746,364 of federal tax credit carryforwards available, expiring in 2008
      to 2012 and 2009 to 2022, respectively.

      The realization of the Company's deferred tax assets, which relate
      primarily to net operating loss carryforwards and temporary differences is
      dependent on generating sufficient taxable income in future periods.
      Although realization is not assured, management believes it is more likely
      than not that the net deferred tax assets will be realized.




                                      F-28
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)



      NOTE 19.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                                                                            YEAR ENDED JUNE 30,
                                                             -----------------------------------------------
                                                                  2000             2001              2002
                                                              -----------       -----------       -----------
                                                                                (IN THOUSANDS)
      <S>                                                     <C>               <C>               <C>
      Interest paid ....................................      $     5,982       $    12,119       $    12,041
                                                              ===========       ===========       ===========
      Income taxes paid (received), net ................      $      (229)      $    (1,442)      $        49
                                                              ===========       ===========       ===========
      Supplemental disclosure of non-cash investing and
           financing activities:
           Capital lease additions and purchase of other
                long-term assets .......................      $     5,688       $     5,716       $     1,539
                                                              ===========       ===========       ===========
           Stock funding of 401(k) match ...............      $     1,059       $     2,487       $     3,621
                                                              ===========       ===========       ===========
           Stock funding of Associate Stock Purchase
                Plan ...................................      $     2,287       $     3,587       $     4,433
                                                              ===========       ===========       ===========
           Purchase price of business acquisitions .....      $   239,900       $ 1,351,649       $      --
                Issuance of common stock and stock
                  options pursuant to acquisitions .....         (240,000)       (1,350,083)             --
                Cash acquired in acquisitions ..........           (9,052)          (97,200)             --
                Acquisition costs paid in prior period .             --                (965)             --
                                                              -----------       -----------       -----------
                     Net cash received .................      $    (9,152)      $   (96,599)      $      --
                                                              ===========       ===========       ===========
</TABLE>

      NOTE 20.  BUSINESS SEGMENTS

      The Company operates in three business segments - Electronic Commerce,
      Software and Investment Services. These reportable segments are strategic
      business units that offer different products and services. A further
      description of each business segment along with the Corporate services
      area follows:

      -     Electronic Commerce - Electronic Commerce provides services that
            allow consumers to receive electronic bills through the Internet,
            pay bills received electronically or in paper form to anyone and
            perform ordinary banking transactions including balance inquiries,
            transfers between accounts and on-line statement reconciliation.
            These services are primarily directed to financial institutions,
            internet financial sites, personal financial management software
            providers and the customers of these businesses.

      -     Software - Software includes software products and related services
            for electronic billing, ACH processing and account reconciliation.
            These products and services are primarily directed to large
            corporations and financial institutions.

      -     Investment Services - Investment Services includes investment
            portfolio management services and investment trading and reporting
            services. These products and services are primarily directed to
            fee-based money managers and financial planners who manage
            investments of institutions and high net worth individuals.

      -     Corporate - Corporate services include human resources, legal,
            finance and various other of the Company's unallocated overhead
            charges.

      The accounting policies of the segments are the same as those described in
      Note 1 "Summary of Significant Accounting Policies." The Company evaluates
      performance based on revenues and operating income (loss) of the
      respective segments. Segment operating income (loss) excludes intangible
      asset amortization, in-process research and development costs and
      significant one-time charges related to various business and asset
      acquisitions. There are no intersegment sales.



                                      F-29
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)



      The following sets forth certain financial information attributable to the
      Company's business segments for the years ended June 30, 2000, 2001 and
      2002:
<TABLE>
<CAPTION>
                                                                         YEAR ENDED JUNE 30,
                                                         -----------------------------------------------
                                                              2000             2001              2002
                                                          -----------       -----------       -----------
                                                                           (IN THOUSANDS)
      <S>                                                 <C>               <C>               <C>
         Revenues:
            Electronic Commerce ....................      $   213,391       $   301,532       $   352,054
            Software ...............................           42,012            62,175            58,849
            Investment Services ....................           54,792            69,613            79,574
                                                          -----------       -----------       -----------
                    Total ..........................      $   310,195       $   433,320       $   490,477
                                                          ===========       ===========       ===========


      Segment operating income (loss):
            Electronic Commerce ....................      $   (18,248)      $   (13,083)      $    39,010
            Software ...............................           10,536               837             5,789
            Investment Services ....................           15,830            20,347            24,376
            Corporate ..............................          (26,120)          (35,746)          (36,500)
                                                          -----------       -----------       -----------
                    Total ..........................          (18,002)          (27,645)           32,675
      Purchase accounting amortization .............          (18,517)         (393,436)         (394,009)
      Impairment of intangible assets ..............             --                --            (155,072)
      Reorganization charge ........................             --                --             (16,365)
      One-time marketing charge ....................             --             (25,000)             --
      In-process research and development ..........           (6,900)          (18,600)             --
      Charge associated with warrants ..............             --                --              (2,748)
      Net other income (expense) ...................             (338)          (13,816)           (4,302)
                                                          -----------       -----------       -----------
                    Total loss before income taxes .      $   (43,757)      $  (478,497)      $  (539,821)
                                                          ===========       ===========       ===========


      Identifiable assets:
            Electronic Commerce ....................      $   102,220       $ 1,603,069       $ 1,218,340
            Software ...............................          273,120           206,746            63,792
            Investment Services ....................           47,246            50,113            41,347
            Corporate ..............................          290,528           324,025           313,998
                                                          -----------       -----------       -----------
                    Total ..........................      $   713,114       $ 2,183,953       $ 1,637,477
                                                          ===========       ===========       ===========


      Capital expenditures:
            Electronic Commerce ....................      $    18,299       $    28,355       $    15,654
            Software ...............................            1,773             2,938             2,074
            Investment Services ....................            2,868             6,771             2,643
            Corporate ..............................           16,555             9,317             3,148
                                                          -----------       -----------       -----------
                    Total ..........................      $    39,495       $    47,381       $    23,519
                                                          ===========       ===========       ===========

      Depreciation and amortization:
            Electronic Commerce ....................      $    19,282       $   350,277       $   385,729
            Software ...............................           12,317            62,485            32,887
            Investment Services ....................            7,634             9,421            10,706
            Corporate ..............................            3,597             5,312             6,243
                                                          -----------       -----------       -----------
                    Total ..........................      $    42,830       $   427,495       $   435,565
                                                          ===========       ===========       ===========
</TABLE>

                                      F-30
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)



      No single customer accounted for 10% or more of consolidated revenues for
      the year ended June 30, 2000. For the years ended June 30, 2001 and 2002,
      one customer accounted for $44,500,000 and $60,022,000 of consolidated
      revenues, respectively. Revenues for that customer were generated through
      the Electronic Commerce and Software segments for the year ended June 30,
      2001 and through the Electronic Commerce, Software and Investment Services
      segments for the year ended June 30, 2002. Foreign sales for the year
      ended June 30, 2000 were insignificant. Foreign sales based on the
      location of the customer, for the years ended June 30, 2001 and 2002 were
      $7,636,000 and $10,772,000, respectively.

      Long-lived assets by geographic area are as follows (in thousands):
<TABLE>
<CAPTION>
                                                         YEAR ENDED JUNE 30,
                                                      -------------------------
                                                         2001           2002
                                                      ----------     ----------
      <S>                                             <C>            <C>
      United States ......................            $1,804,275     $1,238,961
      Other ..............................                 2,471          3,151
                                                      ----------     ----------
                    Total ................            $1,806,746     $1,242,112
                                                      ==========     ==========
</TABLE>


      NOTE 21.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

      The following quarterly financial information for the years ended June 30,
      2001 and 2002 includes all adjustments necessary for a fair presentation
      of quarterly results of operations (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                            QUARTER ENDED
                                            --------------------------------------------------------------------------
                                               SEPTEMBER 30           DECEMBER 31           MARCH 31         JUNE 30
                                            ------------------      ---------------      -------------      ---------
      <S>                                   <C>                     <C>                  <C>                <C>
      FISCAL 2001
      Total revenue ..................      $           90,757      $       107,721      $     113,069      $ 121,773
      Loss from operations ...........                 (76,363)            (150,570)          (123,255)      (114,493)
      Net loss .......................                 (58,358)            (116,022)          (101,067)       (87,688)
      Basic earnings per share:
           Net loss per common share .      $            (0.91)     $         (1.34)     $       (1.17)     $   (1.01)
                                            ==================      ===============      =============      =========
           Equivalent number of shares                  64,216               86,286             86,682         86,774
                                            ==================      ===============      =============      =========
      Diluted earnings per share:
           Net loss per common share .      $            (0.91)     $         (1.34)     $       (1.17)     $   (1.01)
                                            ==================      ===============      =============      =========
           Equivalent number of shares                  64,216               86,286             86,682         86,774
                                            ==================      ===============      =============      =========
</TABLE>


<TABLE>
<CAPTION>
                                                                            QUARTER ENDED
                                            --------------------------------------------------------------------------
                                               SEPTEMBER 30           DECEMBER 31           MARCH 31         JUNE 30
                                            ------------------      ---------------      -------------      ---------
      <S>                                   <C>                     <C>                  <C>                <C>
      FISCAL 2002
      Total revenue ..................      $          116,675      $       121,338      $     124,586      $ 127,878
      Loss from operations ...........                (112,045)            (258,251)           (95,337)       (69,886)
      Net loss .......................                 (88,947)            (215,133)           (77,459)       (59,411)
      Basic earnings per share:
           Net loss per common share .      $            (1.02)     $         (2.47)     $       (0.89)     $   (0.67)
                                            ==================      ===============      =============      =========
           Equivalent number of shares                  87,090               87,217             87,446         88,063
                                            ==================      ===============      =============      =========
      Diluted earnings per share:
           Net loss per common share .      $            (1.02)     $         (2.47)     $       (0.89)     $   (0.67)
                                            ==================      ===============      =============      =========
           Equivalent number of shares                  87,090               87,217             87,446         88,063
                                            ==================      ===============      =============      =========
</TABLE>


                                      F-31
<PAGE>
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)

      The sum of the quarterly loss per share does not equal the year-to-date
      loss per share for the respective fiscal periods, due to changes in the
      number of shares outstanding at each quarter-end.

      NOTE 22.  GUARANTOR FINANCIAL INFORMATION

      CheckFree Management Corporation is a guarantor of the Company's
      $172,500,000 convertible subordinated notes that were issued November 29,
      1999. CheckFree Management Corporation was formed as a medical claims
      management subsidiary in order to appropriately minimize, control, and
      manage the medical claims liabilities of the Company and its subsidiaries.
      As of June 30, 2001 and 2002, the Company and its subsidiaries own
      approximately 89% of CheckFree Management Corporation. As of June 30, 2001
      and 2002, the assets of CheckFree Management Corporation represent less
      than 2% of the total consolidated assets of the Company, and therefore,
      separate financial statements and financial disclosures are not deemed
      significant.



                                      F-32