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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                        For The Year Ended June 30, 2000

                         Commission File Number: 0-26802

                              CHECKFREE CORPORATION
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                               58-2360335
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

                           4411 EAST JONES BRIDGE ROAD
                             NORCROSS, GEORGIA 30092
                    (Address of principal executive offices,
                               including zip code)

                                 (678) 375-3000
                         (Registrant's telephone number,
                              including area code)

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

         Securities registered pursuant to Section 12(g) of the Act:   Common Stock, $.01 par value
                                                                       Preferred Stock Purchase Rights
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         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days.  Yes  X   No
                                                       ----     ----

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

         The aggregate market value of our Common Stock held by our
non-affiliates was approximately $2,524,575,485 on September 15, 2000.

         There were 76,011,344 shares of our Common Stock outstanding on
September 15, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of our Annual Report to Stockholders for the fiscal year ended
June 30, 2000 are incorporated by reference in Part II.

         Portions of our Proxy Statement for the 2000 Annual Meeting of
Stockholders are incorporated by reference in Part III.



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                                TABLE OF CONTENTS
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                                                      PART I

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Item 1.    Business.......................................................................................      3

Item 2.    Properties.....................................................................................     31

Item 3.    Legal Proceedings..............................................................................     31

Item 4.    Submission of Matters to a Vote of Security Holders............................................     31


                                                      PART II

Item 5.    Market for the Registrant's Common Equity and Related Stockholder Matters......................     32

Item 6.    Selected Financial Data........................................................................     32

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation...........     32

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.....................................     33

Item 8.    Financial Statements and Supplementary Data....................................................     33

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........     33


                                                     PART III

Item 10.   Directors and Executive Officers of the Registrant.............................................     34

Item 11.   Executive Compensation.........................................................................     34

Item 12.   Security Ownership of Certain Beneficial Owners and Management.................................     34

Item 13.   Certain Relationships and Related Transactions.................................................     34


                                                      PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K................................     35

Signatures ...............................................................................................     50
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                                     PART I

ITEM 1.  BUSINESS.

         All references to "we," "us," "our," "CheckFree" or the "Company" in
this Annual Report on Form 10-K mean CheckFree Corporation and all entities
owned or controlled by CheckFree Corporation, except where it is made clear that
the term only means the parent company.

OVERVIEW

         We are the leading provider of electronic billing and payment services.
We operate our business through three independent but inter-related divisions:

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

         Our Electronic Commerce business provides services that allow consumers
to:

         -        receive electronic bills through the Internet;
         -        pay any bill--electronic or paper--to anyone; and
         -        perform customary banking transactions, including balance
                  inquiries, transfers between accounts and on-line statement
                  reconciliations.

         We currently provide electronic billing and payment services for over
3.5 million consumers. Our services are available through over 350 sources,
including:

         -        23 of the 25 largest U.S. banks;
         -        8 of the top 10 U.S. brokerage firms;
         -        Internet portals;
         -        Internet-based banks;
         -        Internet financial sites like Quicken.com; and
         -        personal financial management software like Quicken and
                  Microsoft Money.

         We have developed contracts with over 1,100 merchants nationwide that
allows us to remit 58% of all of our bill payments electronically. As of June
30, 2000, we were processing approximately 16 million transactions per month
and, for the year ended June 30, 2000, we processed nearly 170 million
transactions.

         In March 1997, we introduced electronic billing -"E-Bill"-- which
enables merchants to deliver billing as well as marketing materials
interactively to their customers over the Internet. Through June 30, 2000, we
have placed 93 billers into production and are now delivering over 94,000
electronic bills monthly through E-Bill.

         For example, when a customer instructs us to pay a bill, we have the
ability to process the payment either by electronic funds transfer, by paper
check, or by draft drawn on the customer's account. Our patented bill payment
processing system in Norcross, Georgia determines the preferred method of
payment based on a credit analysis of the customer, assessing the customer's
payment history, the amount of the bill to be paid and other relevant factors.
If the results of the credit analysis are favorable, we will assume the risk of
collection of the funds from the customer's account, and if we have an
electronic connection to the merchant, the remittance will be sent
electronically. Otherwise, the remittance will be sent to the merchant by a
paper check or draft drawn directly on the customer's checking account. In an
electronic remittance, the funds are transmitted electronically to the merchant
with the customer's account number included as an addenda record. For a paper
draft, the customer's name, address, and account number is printed on the face
of the check. In addition, our processing system provides the ability to
aggregate multiple electronic and paper remittances due to merchants. Thus, if
multiple payments are going to the same merchant on the same day, we may send
one check for the sum of these payments and include a remittance statement that
provides the customers' names, addresses, account numbers, and payment amounts.
Our strategy is to drive operational efficiency and improve profitability by
increasing the percentage of transactions we process electronically. Since June
1998, we have increased our electronic payments ratio from 32% of total payments
processed electronically to 58% by June 2000.

         We are also a leading provider of institutional portfolio management
and information services and financial application software. Our Investment
Services business offers portfolio accounting and performance measurement
services to investment advisors, brokerage firms, banks and insurance companies
and financial planning application software to financial planners. Our portfolio
management system solution includes:



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         -        data conversion;
         -        personnel training;
         -        trading system;
         -        graphical client reporting;
         -        performance measurement;
         -        technical network support and interface setup; and
         -        Depository Trust Corporation interfacing.

         Our financial planning software applications include:

         -        retirement and estate planning modules;
         -        cash flow, tax and education planning modules;
         -        asset allocation module; and
         -        investment manager performance database system.

Our fee-based money manager clients are typically sponsors or managers of wrap
money management products or traditional money managers, managing investments of
institutions and high net worth individuals.

         Our Software businesses provide electronic commerce and financial
applications software and services for businesses and financial institutions. We
design, market, license and support the following software applications, among
others:

         -        i-Solutions.

                           The i-Solutions product line, which is a set of
                  electronic billing software products developed for various
                  industry segments, was added through the acquisition of
                  BlueGill Technologies, Inc. in April 2000. These products
                  allow billers to install and launch an electronic billing
                  product, send e-mail notifications and present electronic
                  bills through the Internet, and connect to a variety of bill
                  aggregators and payment methods. Each product includes an
                  electronic billing web site template that is unique to a
                  specific industry segment. Using the template as a sample
                  design of their Internet billing site, our customers spend
                  less time developing and designing the look and feel of their
                  Internet billing sites, which accelerates the product
                  implementation process.

         -        Electronic Funds Transfer.

                           Through our Paperless Entry Processing System Plus
                  software, we offer an online, real-time system providing an
                  operational interface for originating and receiving payments
                  through the automated clearinghouse. The automated
                  clearinghouse is a nationwide electronic clearing and
                  settlement system that processes electronically originated
                  credit and debit transfers among participating depository
                  institutions. 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. You may obtain additional
                  information on the automated clearinghouse at the Federal
                  Reserve Commission's website at http://www.federalreserve.gov.
                  We do not maintain a direct connection with the automated
                  clearinghouse, but rather, clear our electronic transactions
                  through KeyBank, N.A., under the terms of an automated
                  clearinghouse agreement.

         -        Reconciliation.

                           Through our ReconPlus software, we provide United
                  States banks, international banks and corporate treasury
                  operations with automated check and non-check reconciliations
                  in high volume, multi-location environments. Some of the
                  services provided by ReconPlus are automated deposit
                  verification, consolidated bank account reconciliation and
                  cash mobilization, immediate and accurate funds availability
                  data and improved cash control.

         -        Other.

                           We also provide software solutions like regulatory
                  compliance solutions for Form 1099 processing, safe box
                  accounting and other applications.

         During the fiscal year June 30, 2000, Electronic Commerce accounted for
69% of our revenues, Investment Services accounted for 18% of our revenues, and
Software accounted for 13% of our revenues.

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ELECTRONIC COMMERCE INDUSTRY BACKGROUND

         The majority of today's consumer bill payments are completed using
traditional paper-based methods. According to the Gartner Group, of the
estimated 17 billion consumer bills produced each year, 81% are paid by paper
check, 12% are paid by electronic means and 7% by other means. Many traditional
financial transactions, however, can now be completed electronically due to the
emergence of new communications, computing and security technologies. Many
financial institutions and businesses have invested in these technologies and
are creating the infrastructure for recording, reporting and executing
electronic transactions. We believe the broad impact of the Internet will
increase the use of electronic methods to execute financial transactions.

     Persistence of Traditional Financial Transaction Processes

         Many traditional methods of completing financial transactions still
persist, including:

         -        Paper Checks.

                           It is estimated that 65 billion checks were written
                  in the United States in 1998. The use of checks imposes
                  significant costs on financial institutions, businesses and
                  their customers. These costs include the writing, mailing,
                  recording and manual processing of checks.

         -        Paper Billing.

                           It is estimated that over 17 billion paper bills are
                  produced each year, with the cost of submitting a paper bill,
                  including printing, postage and billing inserts, as high as
                  $3.00 per bill.

         -        Conventional Banking.

                           Many financial transactions are conducted in person
                  at banks. Banks incur substantial expenses in providing
                  personnel and physical locations, while bank customers incur
                  transportation costs and personal inconvenience when traveling
                  to a bank facility. Over 90% of the 80 million banking
                  households in the United States are still conducting most of
                  their financial transactions using conventional banking
                  methods.

         -        Business to Business Payments.

                           While consumers bear costs and inconvenience
                  receiving and paying paper bills, businesses experience an
                  even higher level of cost and inefficiency when receiving and
                  paying paper bills. For businesses, issues like discounts for
                  prompt payment, returns, allowances, disputed charges and
                  other adjustments, as well as reconciliation to the business'
                  own records, increase the costs of payment.

     The Internet's Role in Driving Electronic Commerce

         We believe the broad impact of the Internet is driving financial
institutions, businesses and consumers to adopt practices of electronic billing
and payment, banking and business-to-business payments. We expect that the
growth in these electronic commerce activities will increase the need for
services that support secure, reliable and cost-effective financial transactions
between and among these market participants. We believe the combination of the
following trends is driving adoption of electronic commerce:

         -        Expanding PC Ownership.

                           Declining prices for personal computers and rapid
                  growth in the number of computer-literate consumers are
                  driving increased penetration of personal computers in U.S.
                  homes.

         -        Increasing Internet Accessibility.

                           Reduced communications costs, improved web browsers
                  and faster connection speeds have made the Internet
                  increasingly accessible to consumers and to businesses
                  offering products and services on-line. International Data
                  Corporation estimates that there were 52 million Internet
                  users in the United States at the end of 1998 and that this
                  figure will grow to 136 million by the end of 2002.

         -        Increasing Acceptance of Electronic Commerce.

                           Consumers have grown increasingly comfortable with
                  the security of electronic commerce and are willing to conduct
                  large transactions on-line. International Data Corporation


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                  estimates that the total value of goods and services purchased
                  over the Internet in the United States will increase from
                  approximately $26 billion in 1998 to over $269 billion in
                  2002.

         -        Emergence of New Industry Participants.

                           New businesses have emerged which use the broad
                  adoption of the Internet to compete with traditional
                  businesses. Traditional financial institutions now compete
                  with Internet-based banks, brokerages and other financial
                  services companies. These companies do not offer consumers the
                  possibility of traditional, manual financial transactions and
                  are driving further adoption of electronic commerce.

THE ELECTRONIC SOLUTION

         We believe that consumers will move their financial transactions from
traditional paper-based to electronic transactions if they have an
easy-to-access, easy-to-use, compelling, secure and cost-effective solution for
receiving and paying their bills electronically. We believe that, compared with
conventional paper-based transactions, electronic transactions cost much less to
complete, give rise to far fewer errors and generate far fewer subscriber
inquires. We believe that an electronic solution should allow consumers at their
access point of choice to:

         -        receive electronic bills through the Internet;
         -        pay any bill-- electronic or paper-- to anyone; and
         -        perform customary banking transactions, including balance
                  inquiries, transfers between accounts and on-line statement
                  reconciliations.

         We also believe that these functionalities must be delivered on a
platform that:

         -        is fully supported by end-to-end customer care;
         -        is available 24 hours a day, 7 days a week; and
         -        provides the highest level of security, availability and
                  privacy.

         Over the past sixteen years, we have developed market leading expertise
and technological capability to provide electronic commerce solutions with these
functionalities.

THE CHECKFREE ADVANTAGE

         Our experience as a leading provider of electronic billing and payment
and banking services has facilitated the building of a state of the art
infrastructure. We have leveraged this infrastructure by developing a full suite
of electronic commerce services, all of which we offer in an integrated fashion
through multiple distribution channels.

     Infrastructure

         Our infrastructure allows consumers to receive and pay both
conventional and electronically presented bills and handle traditional banking
transactions electronically. The key components of our infrastructure are:

         -        Connectivity with Merchants.

                           We have established electronic connectivity to over
                  1,100 merchants, which allows us to remit 58%of all of our
                  bill payments electronically. Electronic remittance may be
                  accomplished at a lower cost than remittances using the
                  traditional paper-based method. In addition, electronic
                  remittance significantly reduces payment exceptions and
                  related costs associated with customer care.

         -        Scalable Genesis Platform.

                           Our Genesis platform, completed in 1998, is an
                  internally developed data processing system created by our
                  in-house engineers to process electronic billings and
                  payments. The Genesis platform was designed to be scaled to
                  handle more than 30 million consumers. We have made
                  significant investments in processes and technologies
                  supporting our Genesis platform to ensure that transactions
                  are executed with the highest level of security, reliability
                  and efficiency.

         -        Connectivity to Billers.

                           We believe that our ability to provide consumers with
                  access to electronic bills will substantially spur adoption of
                  the electronic solution. By targeting the largest billers in
                  key industries and in selected population centers, we believe
                  we can provide a significant number of bills to most consumers
                  at their access point of choice. We have contracts with 157
                  billers, which



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                  represents the opportunity to deliver over 500 million bills
                  per month. Our goal is to implement over 200 live billers by
                  the end of fiscal 2001, an improvement of at least 115% over
                  the 93 billers in production at June 30, 2000. To encourage
                  billers to utilize our services, we anticipate funding a
                  portion of some billers' set-up costs.

         -        Experienced Customer Care Staff.

                           We have approximately 815 trained, experienced
                  customer care and merchant services staff that offer seamless
                  end-to-end customer care. We believe that customer care that
                  provides answers to all the questions that consumers may have
                  about their transactions is a critical component of providing
                  a compelling, easy-to-use solution that consumers will
                  ultimately adopt.

     Distribution

         We believe that consumers are most attracted to an electronic solution
that enables them to receive and pay all of their bills at a single site. For
many consumers, the site they choose will be their financial institution's
website, while others will prefer Internet portals or sites operated by
individual merchants. Through contracts with over 350 sources, we are able to
distribute our services to whichever access and aggregation site the consumer
prefers. Significant among these contracts are our agreements with:

         -        23 of the 25 largest U.S. banks;
         -        8 of the top 10 U.S. brokerage firms;
         -        Internet portals;
         -        Internet-based banks;
         -        Internet financial sites like Quicken.com; and
         -        personal financial management software like Quicken and
                  Microsoft Money.

OUR BUSINESS STRATEGY

         Our business strategy is to provide an expanding range of convenient,
secure and cost-effective electronic commerce services and related products to
financial institutions, Internet portals, businesses and their customers. We
have designed our services and products to take advantage of opportunities we
perceive in light of current trends and our fundamental strategy. The key
elements of our business strategy are to:

         -        Drive increased adoption of electronic commerce services by
                  consumers.

                           We believe that consumers will move their financial
                  transactions from traditional paper-based methods to
                  electronic transactions if they have an easy-to-access,
                  easy-to-use, secure, compelling and cost-effective method for
                  receiving and paying their bills electronically. Our strategy
                  to drive adoption of our electronic services will focus on the
                  following initiatives.

                           We intend to use the broad adoption of the Internet
                  by consumers to encourage the use of our web-based electronic
                  commerce services by our financial institution and Internet
                  portal customers. To further drive demand, we are also
                  providing our services through Internet portals. This strategy
                  should provide consumers with ready access to easy-to-use,
                  cost-effective applications for receiving and paying their
                  bills electronically. Part of our strategy to drive consumer
                  adoption is working with Internet portals to offer our
                  services to consumers on a free-trial basis. Initially, this
                  strategy will result in foregone revenues, but we anticipate
                  converting a majority of these new customers to fee-based
                  services at the end of the trial period. As consumers continue
                  to adopt electronic commerce services, financial institutions
                  and billers will see greater efficiencies from providing
                  electronic billing and payment services to their customers.

                           We are proposing new pricing structures to our
                  financial institution customers to facilitate their offering
                  electronic billing and payment to a broad spectrum of
                  consumers. Our traditional financial institution pricing
                  structure was based on subscriber fees, with an average cost
                  to the financial institution of approximately $4 per
                  subscriber per month. Under the old pricing structure, the
                  costs to our financial institution customers grew roughly
                  proportionally to the number of subscribers added, regardless
                  of activity. Our new pricing programs are negotiated
                  individually with each customer and include a monthly fixed
                  fee to the financial institution to cover our infrastructure
                  costs which helps our financial institution customers more
                  accurately predict the costs, a small monthly per subscriber
                  fee and a new fee based on the number of transactions
                  processed by the financial institution. We believe the new
                  pricing structure should allow our financial institution
                  customers to justify promoting the service through free trials
                  and other offers.

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                           Additionally, we believe that financial institutions
                  and Internet portals that offer electronic banking will
                  experience increased customer retention, have a superior
                  marketing channel and be able to offer enhanced customer
                  service.

         -        Continue to distribute electronic commerce services through
                  multiple channels.

                           We maintain alliances with market-leading companies
                  to achieve deeper market penetration and have begun an
                  initiative to offer our electronic commerce services through
                  Internet portals. To better reach smaller financial
                  institutions, we have entered into distribution agreements
                  with some independent firms that we believe can more
                  efficiently address the needs of this industry segment.
                  Additionally, by making services available to users of
                  personal financial management software, like Quicken,
                  Microsoft Money and Managing Your Money and of business
                  management software, like QuickBooks, we expand public access
                  to, and awareness of, our services.

         -        Focus on customer care and technical support.

                           We believe that providing superior quality and
                  accessible and reliable customer care is essential to
                  establishing and maintaining successful relationships with our
                  customers. We support and service customers through numerous
                  activities, including technical and non-technical support,
                  through help desk, e-mail and facsimile, as well as through
                  service implementation and training. We are enhancing our
                  support of our services through advanced Internet-based
                  communications technologies that enable us to efficiently
                  respond to billing and payment inquiries made by financial
                  institutions, billers and their customers. In anticipation of
                  greater adoption of our electronic commerce services, we are
                  increasing the number of our customer care personnel and
                  focusing on our efficiency in handling customer care
                  inquiries. Additionally, we established a third operational
                  center in Phoenix, Arizona to house customer care and check
                  printing and distribution functions.

         -        Continue to improve operational efficiency and effectiveness.

                           We believe that as our business grows and the number
                  of transactions we process increases, we will be able to take
                  advantage of operating efficiencies associated with increased
                  volumes, thereby reducing our unit costs. We recently began an
                  internal program called the "sigma challenge" which ties
                  employee performance evaluations and compensation to the
                  achievement of process and system improvements. Sigma is a
                  measure of quality typically used by manufacturing firms to
                  minimize defects. The sigma challenge applies sigma
                  measurements as a barometer of our performance on our key
                  metrics of system availability and payment timeliness. Small
                  changes in our performance drive significant sigma movements,
                  focusing our attention on critical tasks and peak performance.
                  The sigma challenge is designed to take our quality
                  performance from 99.0%, or 3.8 sigma, where we began our
                  fiscal year 2000, to 99.9%, or 4.6 sigma, by the end of fiscal
                  2000. A 4.6 sigma is the quality standard set by the
                  telecommunications industry for delivering their services to
                  businesses and consumers or "dial-tone" quality. By the end of
                  fiscal 2000, we fell slightly below our goal by achieving a
                  quality level of 4.5 sigma. Our goal for fiscal 2001 is to
                  achieve and maintain a 4.6 sigma level of quality.
                  Additionally, we expect to derive further operational
                  efficiency and effectiveness by increasing our electronic
                  links with billers, enabling a larger percentage of our
                  consumer transactions to be processed electronically.

         -        Drive new forms of electronic commerce services.

                           Our electronic commerce services are currently
                  applied to banking, billing and payment and brokerage
                  transactions. We believe that new applications will be
                  developed as a result of the growth in electronic commerce
                  generally, and Internet-based commerce specifically. We intend
                  to leverage our infrastructure and distribution to address the
                  requirements of consumers and businesses in these new
                  applications. For example, we plan to leverage our core
                  payment and processing network to accomplish person-to-person
                  and small business payments.



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PRODUCTS AND SERVICES

     Electronic Commerce

         Our electronic commerce services are primarily targeted to consumers
through financial institutions and Internet portals. We believe that our
services offer significant benefits to financial institutions and Internet
portals, including an enhanced electronic relationship with their consumers
under which they can market other products and services and, for financial
institutions, a lower cost of providing traditional banking and bill payment
services. We are continually developing new electronic commerce services and
enhancing our existing services for each of our target markets.

         We have arrangements with more than 350 sources through which
electronic payment services are provided to their customers. The following
financial institutions are some of our largest customers of our electronic
commerce services, as determined by the number of subscribers:

         -        Bank of America;              -        KeyCorp;
         -        Bank One;                     -        Merrill Lynch & Co.;
         -        Charles Schwab & Co.;         -        NationsBank;
         -        Chase Manhattan Bank;         -        U.S. Bancorp; and
         -        First Union;                  -        Wells Fargo.


This list of our customers is not exhaustive and may not fully represent our
customer base.

         Bill Payment and Banking. Our bill payment services enable financial
institution and Internet portal customers, as well as direct consumer
subscribers to pay bills electronically using a variety of devices like personal
computers and touch-tone telephones. Bills paid by consumers using our bill
payment services typically include credit card, monthly mortgage and utility
bills, but a cornerstone of our services is that we can facilitate electronic
payment by consumers to anyone, regardless of whether payment is ultimately made
through an electronic or traditional paper method. Consumers can use our
services to make any payment electronically from any checking account at any
financial institution in the United States. Recurring bills like mortgages can
be paid automatically and scheduled in advance, as specified by the consumer. As
of June 30, 2000, we had over 3.5 million consumers using our bill payment and
home banking services.

         We support home electronic banking services for financial institutions
and their customers. Among these are balance inquiries, fund transfers, customer
service, customer billing and marketing. Our service facilitates on-line
reconciliation to personal computer and web-based account registers, matching
cleared items with previously entered transactions.

         Revenues are generated through contracts with individual financial
institutions. We historically negotiated with the financial institution an
implementation fee, a base monthly fee per customer account on the service
provided, and in some cases, a variable per transaction fee which may decrease
based on the volume of transactions. We recently announced the adoption of new
pricing programs that include a monthly fixed fee to the financial institution
to cover our infrastructure costs which helps our financial institution
customers more accurately predict the costs, a small monthly per subscriber fee
and a new fee based on the number of transactions processed. Contracts typically
have three to five year terms and generally provide for minimum fees if
transaction volumes are not met. We utilize direct sales and distribution
alliances to market to financial institutions and have the ability to customize
services for each institution.

         Billing and Payment. Our electronic billing and payment service permits
billers to deliver full-color electronic bills to their customers, together with
detailed information and electronic promotional inserts. We also offer the
opportunity to market interactively, and to use one-to-one marketing techniques.
The recipients can use the service to electronically make the payment. We are
marketing the service to be incorporated into our electronic banking and bill
payment services. We have entered into a variety of arrangements with financial
institutions, Internet portals and billers to provide these services and, in
some cases, will share revenue derived from billers with the financial
institutions and the Internet portals. In the near term, we will offer
free-trial periods for our electronic billing and payment services to accelerate
the rate of adoption of our services. We believe that billers could eventually
achieve substantial savings by utilizing our billing and payment service, but we
believe that an even stronger incentive for billers to present bills
electronically is the opportunity our system offers for more effective marketing
to customers.

         Business Payments. We facilitate electronic payments for businesses
through our offerings of business bill payment and banking and electronic
accounts receivable processing services. As we do for consumers, we enable
businesses to make payments to anyone. We employ a direct sales force to market
the service through banks and others. Our electronic accounts receivable
collections for businesses are provided to health and fitness and various other
industries, enabling these businesses to collect monthly fees through electronic
funds transfer or credit cards.

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Services are typically provided under contracts for three years with automatic
renewals. For providing collection services, businesses pay us implementation
fees, transaction fees and credit card discount fees.

     Investment Services

         We offer portfolio management and information services for fee-based
money managers and financial planners within investment advisory firms,
brokerage firms, banks and insurance companies. Our fee-based money manager
clients are typically sponsors or managers of wrap money management products or
traditional money managers, who manage investments of institutions and high net
worth individuals.

         Our full range of portfolio management services provides our clients
with portfolio management tools, tax lot reporting, trade modeling, performance
measurement and reconciliation. Our information services and software allow
traditional money managers and consultants to allocate client assets, select and
benchmark performance of money managers and report on manager performance. Each
of these features allows our clients to avoid spending time on these functions
and focus on their key business.

         Revenues in our portfolio management services are generated through
multiple year agreements that provide for monthly revenue on a volume basis.
Revenue from our information services and software is typically generated
through annual agreements.

         Our integrated outsourced solution utilizes a Unix platform. The system
is highly scalable, making us the system of choice for firms managing a large
number of portfolios.

     Software

         We are a leading provider of electronic commerce and financial
applications software and services for businesses and financial institutions. We
design, market, license and support software products for automated
clearinghouse processing, reconciliation and regulatory compliance. In addition,
we offer software consulting and training services.

         Our financial application software revenues are derived primarily from
the sale of software licenses and software maintenance fees. Our software is
sold under perpetual licenses, and maintenance fees are received through
renewable agreements.

         In April 1998, we announced our intention to divest ourselves of many
of our software products and businesses. By September 1998, we sold our item
processing, wire transfer and cash management, leasing, mortgage, and imaging
software products and businesses.

         Our retained software products provide systems that range from back
office operations to front-end interface with the clients of our customers.
Applications include automated clearinghouse origination and processing
reconciliation, regulatory compliance and safe deposit box accounting. While we
have no pending agreements to dispose of our remaining software businesses, we
do receive offers for them from time to time.

         i-Solutions. The i-Solutions product line, which is a set of electronic
billing software products developed for various industry segments, was added
through the acquisition of BlueGill Technologies, Inc. in April 2000. These
products allow billers to install and launch an electronic billing product, send
e-mail notifications and present electronic bills through the Internet, and
connect to a variety of bill aggregators and payment methods. Each product
includes an electronic billing web site template that is unique to a specific
industry segment. Using the template as a sample design of their Internet
billing site, our customers spend less time developing and designing the look
and feel of their Internet billing sites, which accelerates the product
implementation process.

         Automated Clearinghouse. The automated clearinghouse network was
developed in the 1970s to permit the electronic transfer of funds, curtailing
the growth in the number of paper checks in circulation. The automated
clearinghouse network acts as the clearing facility for routing electronic funds
transfer entries between financial institutions. All automated clearinghouse
transfers are handled in a standard format established through the National
Automated Clearing House Association. More than 15,000 financial institutions
participate in the automated clearinghouse system. There are 31 automated
clearing houses, which geographically coincide with the twelve Federal Reserve
Banks, their branches and processing centers. Our electronic funds transfer
products are interrelated and may be used by either businesses or financial
institutions depending on the services they offer their customers and employees.

         We developed the Paperless Entry Processing System Plus, with 40 of the
top 50 originators utilizing the product to process approximately 70% of all
automated clearinghouse transactions nationally, it is the most widely used,
comprehensive automated clearinghouse processing system in the United States.
Paperless Entry Processing



                                      -10-
<PAGE>   11

System Plus is an on-line, real-time system providing an operational interface
for originating and receiving electronic payments through the automated
clearinghouse.

         Reconciliation. Our reconciliation products allows users to verify and
compare their financial records, data and accounts against related information
derived from third party sources. RECON-PLUS provides United States banks,
international banks and corporate treasury operations with automated check and
non-check reconciliations in high volume, multi-location environments. These
systems are often tailored so that banks and multi-bank holding companies may
deliver reconciliation services meeting the specific needs of corporate
customers. Those reconciliation products are also designed for non-banking
corporations that perform account reconciliation in-house as well as companies
with many branch locations. Services provided by our reconciliation products
include:

         -        automated deposit verification;
         -        consolidated bank account reconciliations and cash
                  mobilization;
         -        immediate and accurate funds availability data; and
         -        improved cash control.

         In 1995, we introduced RECON-PLUS for Windows, a client/server based
reconciliation system. RECON-PLUS for Windows is most frequently used for
internal reconciliation by large businesses, financial service firms, and
utilities, including the reconciliation of debit and credit card transactions,
checks, automated teller machine transactions, automated clearinghouse transfers
and securities transactions.

         Our account reconciliation package is one of the most widely used
account reconciliation systems in the United States banking industry. The
account reconciliation package/service management system which was developed in
1995 to replace and augment the existing package, is a fully integrated on-line
and real time system that enables banks to immediately process their customer
transactions to produce accurate, timely reconciliations while streamlining
back-office processes. The account reconciliation package/service management
system also groups accounts across banks within bank holding companies and
allows banks to streamline their operations by reconciling their intra-bank
transactions.

         Other Software Products. We also offer software products and services
dealing with safe box accounting and compliance with government regulations.

         Licenses. We generally grant non-exclusive, non-transferable perpetual
licenses to use our application software at a single site. Our standard license
agreements contain provisions designed to prevent disclosure and unauthorized
use of our software. License fees vary according to a number of factors,
including the types and levels of services we provide. Multiple site licenses
are available for an additional fee. In our license agreements, we generally
warrant that our products will function in accordance with the specifications
set forth in our product documentation. A significant portion of the license fee
payable under our standard license agreement is due upon the delivery of the
product documentation and software to the customer, with the balance of the
license fee due upon installation. The standard license fee for most products
covers the installation of our software and maintenance for the first three to
twelve months.

         Maintenance and Support. Maintenance includes enhancements to our
software. Customers who obtain maintenance generally retain maintenance service
from year to year. To complement customer support, we frequently participate in
user groups with our customers. These groups exchange ideas and techniques for
using our products and provide a forum for customers to make suggestions for
product acquisition, development and enhancement.

COMPETITION

     Electronic Commerce

         Portions of the electronic commerce market are becoming increasingly
competitive. We face significant competition in all of our customer markets.
First, we need to switch billers and consumers from paper bills sent by mail and
paid by check to electronic bill presentment and payment. Second, a number of
banks have developed, and others may in the future develop, home banking
services in-house. For example, Chase Manhattan Corporation, First Union
Corporation and Wells Fargo & Co. recently announced the formation of a new
venture called Spectrum that will allow individuals and businesses to receive
and pay bills electronically. To the best of our knowledge Spectrum has done
limited electronic presentment of bills, and is developing a "pay anyone"
capability. In addition, recently Mastercard International announced that it
would begin offer online bill presentment to enable people to receive and pay
bills over the Internet by September 2000. A number of relatively small
companies, like Travelers Express, recently acquired by Marshall & Ilsley Bank
Inc., compete with us in electronic bill payment. As previously announced, we
have entered into an agreement to acquire TransPoint and its operations and the
transaction closed on September 1, 2000. We also compete for business bill
payment customers with ACI and



                                      -11-
<PAGE>   12

Deluxe Data, which provide automated clearinghouse processing. We also face
increased competition from new competitors offering billing and payment services
utilizing scan and pay technology. These "scan and pay" companies offer a
service whereby a consumer's bill is received by the company, scanned to create
an electronic image of the bill, and electronically delivered to the consumer
who can elect to pay that bill either by writing a paper check or through an
electronic transfer of funds. We believe that our competitors, however, will
need to make substantial progress to able to offer electronic commerce services
comparable to the services we currently offer to our customers through multiple
distribution channels.

         Because the electronic commerce industry is expected to grow
substantially in the coming years, we anticipate continued strong competition,
but we believe that the increased attention and credibility this competition
will bring to the industry may broaden the market and increase the percentage of
financial transactions which are effected by electronic means.

     Investment Services

         Competition for portfolio services includes two main segments. We
compete with providers of portfolio accounting software, including Advent
Software, and PORTIA, a division of Thomson Financial. We also compete with
service bureau providers like SunGard Portfolio Solutions and FMC Service
Bureau.

     Software

         The computer application software industry is highly competitive. In
the financial applications software market, we compete directly or indirectly
with a number of firms, including large diversified computer software service
companies and independent suppliers of software products. We believe that there
is at least one direct competitor for most of our software products, but no
competitor competes with us in all of our software product areas.

         Our product lines also have numerous competitors. The RECON-PLUS
product competes with Chesapeake, Driscoll and Geac.

         We believe that the major factors affecting customer decisions in our
market, in addition to price, are product availability, flexibility, the
comprehensiveness of offered products, and the availability and quality of
product maintenance, customer support and training. Our ability to compete
successfully also requires that we continue to develop and maintain software
products and respond to regulatory change and technological advances. We believe
that we currently compete favorably in the marketplace with respect to these
criteria. See "Business -- Business Risks (Competitive pressures we face may
have a material adverse effect on us)."

         CheckFree i-Solutions (formerly BlueGill) is expanding into
international markets where we may discover new local competitors that have the
advantages of existing relationships with customers, local technical support
staff, and local language support.

SALES, MARKETING AND DISTRIBUTION

         Our sales, marketing and distribution efforts are designed to maximize
access to potential customers. We market and support our services both directly
and indirectly through a direct sales and technical sales support force of over
100 employees and, to achieve deeper market penetration, through select
distribution alliances with companies which are involved in our target customer
markets. In order to foster a better understanding of the needs of our larger
bank customers, and to help us respond to identified needs, we employ a number
of account managers assigned to specific banks. We solicit billers for our
electronic billing and payment services through a regionally assigned sales
force.

         In the electronic commerce segment, we offer our services and related
products to the nation's largest financial institutions directly through our
sales force, and market to smaller institutions through strategic alliances with
companies like EDS, Fiserv, Alltel and Equifax. We currently offer substantially
all of our services and related products only to the domestic marketplace.

         Recently, we announced our initiative to offer our electronic commerce
services through Internet portals. We believe that these Internet portals will
enhance and speed up the rate of adoption of electronic commerce services by
consumers. Part of this strategy contemplates working with Internet portals to
offer our services to consumers on a free-trial basis. Initially, this strategy
will result in foregone revenue, but we anticipate converting a majority of
these new customers to fee-based services at the end of the trial period.
Additionally, the distribution of electronic home banking and electronic
consumer and business billing and payment services is widened though inclusion
or access through front-end personal financial management software, like
Quicken, Microsoft Money and Managing Your Money.



                                      -12-
<PAGE>   13

         We market investment services through our direct sales force. We
generate new customers through direct solicitation, user groups and
advertisements. We also participate in trade shows and sponsor industry seminars
for distribution alliances.

         We market financial application software products through our direct
sales force and through indirect sales through Alltel banking services.
Salespersons have specific product responsibility and receive support from
technical personnel as needed. We generate new customers through direct
solicitations, user groups, advertisements, direct mail campaigns and strategic
alliances. We also participate in trade shows and sponsor industry technology
seminars for prospective customers. Existing customers are often candidates for
sales of additional products or for enhancements to products they have already
purchased.

         An element of our strategy is the creation and maintenance of
distribution alliances that maximize access to potential customers for our
electronic commerce services and related products. We believe that these
alliances enable us to offer services and related products to a larger customer
base than can be reached through stand-alone marketing efforts. We seek
distribution alliances with companies who have maximum penetration and leading
reputations for quality with our target customers. To date, we have entered into
or are negotiating distribution alliances with several companies, including
AT&T, Alltel, EDS, Fiserv, Five Paces, and Home Financial Network. We also have
arrangements with MicroBank for RECON-PLUS for Windows. On October 29, 1997, we
entered into a 10-year processing alliance with Integrion Financial Network,
L.L.C. to provide financial institutions with a fully integrated, end-to-end,
cost effective electronic billing and payment processing service employing
Integrion's Gold Message Standard for Electronic Commerce, its Interactive
Financial Services platform and our processing infrastructure.

         One of the ramifications of this strategy is that we do not, for the
most part, have a direct relationship with the end-users of our products. See
"Business -- Business Risks (We rely on third parties to distribute our
electronic commerce services, which may not result in widespread adoption)."

CUSTOMER CARE AND TECHNICAL SUPPORT

         The provision of high quality customer care, technical support and
operations is an integral component of our strategy in each business segment. To
meet customers' needs most efficiently, our customer care staff is organized
into vertical teams that support each of our business segments. These teams,
however, share common resources, training and orientation to ensure cost
efficiency and consistency of quality standards and measures. From an
accessibility standpoint, all customer care teams provide service by phone,
e-mail and facsimile. Through advanced communications technology, we have a
virtual call center enabling incoming calls to be transparently routed to
various physical support sites as volume demands dictate. An important driver of
our profit margins is the percentage of transactions we complete electronically.
Experience has shown that the demand on customer care resources reduces
substantially as the percentage of electronic remittances grows. We have long
been a leader in electronic remittance, and our merchant systems group
continually establishes and maintains electronic links directly to the internal
systems of payees.

         The level and types of services we provide vary by customer market. The
customer care group, consisting of approximately 815 employees, supports payment
inquiry, customer service and technical support and interfaces with the merchant
systems group to improve posting efficiencies. Representatives in our business
customer care group are individually assigned to business customers in order to
provide high-level customer service and technical support. Our consumer care
group provides various levels of support that depend upon the customer's
requirements. This includes providing direct customer care on a private label
basis as well as research and support.

         In order to maintain the ability to provide quality customer service as
our subscriber base increases, we established a third operational center in
Phoenix, Arizona to house customer care, check printing and distribution
functions. This center, when fully staffed, will house up to 800 associates
focused on customer care services.

         To maintain our customer care standards, we employ extensive internal
monitoring systems and conduct ongoing customer surveys. The feedback from these
sources is used to identify areas of strength and opportunities for improvement
in customer care and to aid in adjusting resources to a level commensurate with
efficient response.

REMITTANCES

         Payment Systems. Across our various electronic commerce service
offerings, we utilize the Federal Reserve's Automated Clearing House for
electronic funds transfers, and the conventional paper check clearing systems
for settlement of payments by check or draft. Like other users of these payment
clearance systems, we access these systems through contractual arrangements with
processing banks. For access to conventional paper check clearing systems, we do
not need a special contractual relationship, except for contractual
relationships with



                                      -13-
<PAGE>   14

the processing bank and its customers. These users are subject to applicable
federal and state laws and regulations, Federal Reserve Bank operating letters,
and the National Automated Clearing House Association Operating Rules. There are
risks typically faced by companies utilizing each of these payment clearance
systems, and we have our own set of operating procedures and proprietary risk
management systems and practices to mitigate credit-related risks. See "Business
-- Business Risks (The transactions we process expose us to credit risks)" and
"-- Business Risks (Our business could become subject to increased government
regulation, which could make our business more expensive to operate)."

         Automated Clearinghouse. The automated clearinghouse is used by banks,
corporations and governmental entities for electronic settlement of
transactions, direct deposits of payroll and government benefits and payment of
bills like mortgages, utility payments and loans. We use the automated
clearinghouse to execute some of our customers' payment instructions. Like other
users of the automated clearinghouse, we bear credit risk resulting from
returned transactions caused by insufficient funds, stop payment orders, closed
accounts, frozen accounts, unauthorized use, disputes, theft or fraud. See
"Business -- Business Risks (The transactions we process expose us to credit
risks)" and "-- Business Risks (Our business could become subject to increased
government regulation, which could make our business more expensive to
operate)."

         Paper Drafts. We use conventional check clearance methods for paper
drafts to execute some customers' payment instructions. We bear no credit risk
with paper drafts written on a customer's checking account returned for
insufficient funds, stop payment orders, closed accounts or frozen accounts.
Nonetheless, we may bear other risks for theft or fraud associated with paper
drafts due to unauthorized use of our services. When a customer instructs us to
pay a bill, we have the ability to process the payment either by electronic
funds transfer or by paper draft, drawn on the customer's checking account, on
which the customer's pre-authorized signature is laser imprinted. We manage the
risk we assume by adjusting the mix of electronic and paper draft transactions
in individual cases and overall. Regardless of whether we use paper drafts or
electronic funds transfers, we retain all risks associated with transmission
errors when we are unable to have erroneously transmitted funds returned by an
unintended recipient.

         Other Clearance Systems. While we presently utilize the two principal
payment clearance systems, we intend to use other clearance systems like
automated teller machine networks to provide balance inquiry and fund transfers
functions, and other clearance systems that may develop in the future.

         Risk Mitigation. Our patented bill payment processing system determines
the preferred method of payment to balance processing costs, operational
efficiencies and risk of loss. We manage our risks associated with the use of
the various payment clearance systems through risk management systems, internal
controls and system security. We also maintain a reserve for these risks, which
reserve was $0.3 million at June 30, 2000, and we have not incurred losses in
excess of 0.93% of our revenues in any of the past five years. As further
protection against losses due to transmission errors, we maintain errors and
omissions insurance. See "Business -- Business Risks (The transactions we
process expose us to credit risks)" and "-- Business Risks (We may be unable to
protect our proprietary technology, permitting competitors to duplicate our
products and services)."

TECHNOLOGY

         Our historical approach to technology has been to utilize a combination
of hardware, networks, proprietary software and databases to solve our customer
needs and to meet the varying requirements of the electronic commerce market.

         Electronic Commerce. Our core technology capabilities were developed to
handle settlement services, merchant database services and on-line inquiry
services on a traditional mainframe system with direct communications to
businesses.

         We have implemented a logical, nationwide client-server system.
Consumer, business and financial institution customers all act as clients
communicating across dial-up telephone lines, private leased lines, various
types of networks or the Internet to our computing complex in Norcross, Georgia.
Within this complex, there is a wide variety of application servers that capture
transactions and route them to our back-end banking, billing and payment
applications for processing. The back-end applications are run on IBM
mainframes, Tandems or Unix servers.

         We have developed proprietary databases within our client-server
system, including a financial institution file that allows accurate editing and
origination of automated clearinghouse and paper transactions to financial
institutions. We have also developed a merchant information file consisting of
over 1 million companies that allows accurate editing and initiation of payments
to billers. These databases have been constructed over the past 15 years as a
result of our transaction processing experience.



                                      -14-
<PAGE>   15

         Platform Integration: The Genesis Project. In 1998, we integrated the
existing legacy data processing sites and platforms operated in Columbus, Ohio,
Aurora, Illinois, and Austin, Texas, into our central processing site at our
headquarters in Norcross, Georgia. We recently completed the planned migrations
of our customers to the new Genesis platform from our Aurora, Illinois and
Columbus, Ohio platforms. We have designated this integration the Genesis
Project. The integration has required the acquisition of, and investment in,
extensive hardware and in operating and system software, as well as extensive
communications links and systems. The Genesis Project requires substantial
engineering and development of proprietary software. Redundancy, anomaly
monitoring, and off-site backup and recovery systems are planned as a part of
the project. See "Business -- Business Risks (We may experience breakdowns in
our payment processing system that could damage customer relations and expose us
to )."

         The Austin platform was designated to host subscribers using a
particular personal financial management product that is not expected to be
supported indefinitely. We expect that these financial institutions will migrate
these subscribers to different software, which will prompt further migrations to
Genesis.

         Significant numbers of high-level employees have been and will be hired
to facilitate the accomplishment of the Genesis Project, and to manage the
integrated site. We intend to operate the legacy platforms without substantial
disruption until all of our customers have been migrated to the Genesis
platform. To date, over 2 million of our nearly 3 million customers have been
migrated to the Genesis platform.

         Redundancy and Back-up Systems. We believe that we have implemented
appropriate back-up and recovery procedures to ensure against any loss of data
on any platform. To maximize availability, we have redundant computer systems to
ensure that financial transaction requests can always be honored. Archival
storage is kept on site as well as off site in fireproof facilities. Diesel
generators provide power to the computing facilities in the event of a power
disruption.

         Our operations are dependent on our ability to protect our computer
equipment against damage from fire, earthquake, power loss, telecommunications
failure or similar event. Although we have contracted for the emergency
provision of an alternate site to aid in disaster recovery, this measure will
not eliminate the significant risk to our operations from a natural disaster or
system failure. Any damage or failure that causes interruptions in our
operations could have a material adverse effect on our business, operating
results and financial condition. Our property and business interruption
insurance may not be adequate to compensate us for all losses that may occur.
See "Business -- Business Risks (We may experience breakdowns in our payment
processing system that could damage customer relations and expose us to
liability)."

         Sigma Challenge. We recently began an internal program called the
"sigma challenge" which ties employee performance evaluations and compensation
to the achievement of process and system improvements. Sigma is a measure of
quality typically used by manufacturing firms to minimize defects. The sigma
challenge applies sigma measurements as a barometer of our performance on our
key metrics of system availability and payment timeliness. Small changes in our
performance drive significant sigma movements, focusing our attention on
critical tasks and peak performance. The sigma challenge is designed to take our
quality performance from 99.0%, or 3.8 sigma, where we began our fiscal year
2000, to 99.9%, or 4.6 sigma, by the end of fiscal 2000. A 4.6 sigma is the
quality standard set by the telecommunications industry for delivering their
services to businesses and consumers or "dial-tone" quality. By the end of
fiscal 2000, we fell slightly below our goal by achieving a quality level of 4.5
sigma. Our goal for fiscal 2001 is to achieve and maintain a 4.6 sigma level of
quality.

         Financial Application Software. Our financial application suite of
software products offers a wide range of software addressing both end user
access and back room operational systems located in the customer data centers.
Every effort is taken to insure that each system is targeted for the appropriate
platform to optimize the characteristics of available technology with the
business requirements of each application and its market.

         Investment Services. Investment Services employs advanced technology
for its portfolio management services and utilizes IBM RS/6000's to process the
portfolio management software. Services are provided primarily as a service
bureau offering with the data center residing at our Chicago office. This data
center functions seven days a week, twenty-four hours a day. Clients can obtain
access from their personal computers either through a dedicated circuit or
through dial-up applications. The Chicago data center is the communication
center for more than 160 dedicated links together with four concentration hub
sites located in New Jersey, New York, Boston and San Diego. Each of these hub
sites supports the concentration of local dedicated links plus dial-up access.
In addition to the dedicated private network, clients use frame relay services
from several companies to access services.



                                      -15-
<PAGE>   16

RESEARCH AND DEVELOPMENT

         We maintain a research and development group with a long-term
perspective of planning and developing new services and related products for the
electronic commerce, financial application software and investment services
markets. We have established the following guidelines for pursuing the
development of new services:

         -        distinctive benefits to customers;
         -        ability to establish a leadership position in the market
                  served;
         -        sustainable technological advantages; and
         -        first to market.

         We believe that in the emerging electronic commerce market it will be
critical to rapidly develop, test and offer new services and enhancements. To
that end, our goal for the time period from conceptualization to commercial
availability of new services is less than one year. As of June 30, 2000, our
research and development group consisted of approximately 475 employees.
Additionally, we use independent third party software development contractors as
needed. We spent 19.4% of revenues during the six-month transition period ended
June 30, 1996, 18.6% of revenues during the fiscal year ended June 30, 1997,
15.5% of revenues during the fiscal year ended June 30, 1998, 8.4% of revenues
during the fiscal year ended June 30, 1999 and 11.5% of revenues during the
fiscal year ended June 30, 2000 on research and development. These research and
development expenditures have been reduced for capitalized software development
costs of $1.3 million in the six-month transition period ended June 30, 1996,
none in the fiscal year ended June 30, 1997, $0.7 million in the fiscal year
ended June 30, 1998, $7.4 million in the fiscal year ended June 30, 1999 and
$7.9 million for the fiscal year ended June 30, 2000. We anticipate that we will
continue to commit substantial resources to research and development activities
for the foreseeable future.

GOVERNMENT REGULATION

         We believe that we are not required to be licensed by the Office of the
Comptroller of the Currency, the Federal Reserve Board, or other federal or
state agencies that regulate or monitor banks or other types of providers of
electronic commerce services. The Office of the Comptroller of the Currency,
however, periodically audits us, since we are a supplier of products and
services to financial institutions. There can be no assurance that a federal or
state agency will not attempt to regulate us, which could impede our ability to
do business in the regulator's jurisdiction. A number of states have legislation
regulating or licensing check sellers, money transmitters or service providers
to banks, and we have registered under this legislation in specific instances.
We do not believe that any state or federal legislation of this type materially
affects us. In addition, through our processing agreements, we agree to comply
with the data, recordkeeping, processing, and other requirements of applicable
federal and state laws and regulations, Federal Reserve Bank operating letters,
and the National Automated Clearing House Association Operating Rules imposed on
our processing banks. We may be subject to audit or examination under any of
these requirements. Violations of these requirements could limit or further
restrict our access to the payment clearance systems or our ability to obtain
access to these systems from banks. Further, the Federal Reserve rules provide
that we can only access the Federal Reserve's automated clearinghouse through a
bank. If the Federal Reserve rules were to change to further restrict our access
to the automated clearinghouse or limit our ability to provide automated
clearinghouse transaction processing services, our business could be materially
adversely affected.

         In conducting various aspects of our business, we are subject to laws
and regulations relating to commercial transactions generally, like the Uniform
Commercial Code, and are also subject to the electronic funds transfer rules
embodied in Regulation E, promulgated by the Federal Reserve Board. The Federal
Reserve's Regulation E implements the Electronic Fund Transfer Act, which was
enacted in 1978. Regulation E protects consumers engaging in electronic
transfers, and sets forth the basic rights, liabilities, and responsibilities of
consumers who use electronic money transfer services and of financial
institutions that offer these services. For us, Regulation E sets forth
disclosure and investigative procedures. For consumers, Regulation E establishes
procedures and time periods for reporting unauthorized use of electronic money
transfer services and limitations on the consumer's liability if the
notification procedures are followed within prescribed periods. These
limitations on the consumer's liability may result in liability to us.

         Given the expansion of the electronic commerce market, it is possible
that the Federal Reserve might revise Regulation E or adopt new rules for
electronic funds transfer affecting users other than consumers. Congress has
held hearings on whether to regulate providers of services and transactions in
the electronic commerce market, and it is possible that Congress or individual
states could enact laws regulating the electronic commerce market. If enacted,
these laws, rules, and regulations could be imposed on our business and industry
and could have a material adverse effect on our business, operating results and
financial condition. See "Business -- Business Risks (Our business could become
subject to increased government regulation, which could make our business more
expensive to operate)."



                                      -16-
<PAGE>   17
PROPRIETARY RIGHTS

         We own the following federally registered trademarks and service
marks:

         -        CEC CENTER FOR ELECTRONIC COMMERCE and Design(R);
         -        CHECKFREE(R);
         -        CHECKFREE and Design(R);
         -        CHECKFREE (Stylized Letters)(R);
         -        CHECKFREE-BILL and Design(R);
         -        CHECKFREE EASY(R);
         -        CHECKFREE EXTRA(R);
         -        CHECKFREE FREES YOU FROM CHECKS(R);
         -        CHECKFREE MANAGER(R);
         -        CHECKFREE WALLET(R);
         -        CLAS(R);
         -        CLRS(R);
         -        CLUB HOOCH(R);
         -        CPIM(R);
         -        CSSII(R);
         -        DASH(R);
         -        DECISION MANAGER(R);
         -        DISC and Design(R);
         -        DISC CHECKBOOK-PLUS(R);
         -        DISC WORLD$NET(R);
         -        ECP(R);
         -        EPOCH(R);
         -        FASTOCK PC(R);
         -        FMS(R);
         -        INTEGRATED DECISION MANAGER(R);
         -        MAX(R);
         -        M-VEST(R)
         -        MOBILEPAY(R);
         -        MOBIUS GROUP and Design(R);
         -        MOE(R);
         -        MOE and Design(R)
         -        MPREPS(R);
         -        M-SEARCH(R);
         -        MSEARCH(R);
         -        MWATCH(R);
         -        OMNI(R);
         -        ORBS(R);
         -        PAWWS(R);
         -        PAWTRACKS(R);
         -        PEP+(R);
         -        PEP PAPERLESS ENTRY PROCESSING(R);
         -        PODIUM(R);
         -        PTT(R);
         -        QUICKILL(R);
         -        SBA(R);
         -        SERVANTIS SYSTEMS(R);
         -        SERVANTIS WORLD$NET(R);
         -        STYLE ANALYSIS PLUS(R)
         -        SUPRRB(R);
         -        TCM THE CONTROL MACHINE(R);
         -        THE SECONDARY MARKETER(R);
         -        THE WAY MONEY MOVES and Design(R);
         -        TRS(R);
         -        TST(R); and
         -        VAULT(R).

         We also own the following foreign service mark registrations in New
Zealand:

         -        CHEQUEFREE; and
         -        CHECKFREE.

         Additionally, we have applied to federally register the following
marks:

         -        BLUEGILL(TM);
         -        BLUEGILL Logo (Miscellaneous Design)(TM);
         -        CHECKFREE(SM);
         -        CHECKFREE CHARITY NET(TM);
         -        CHECKFREE E-BILL(SM);
         -        CHECKFREE ELECTRIC MONEY(TM);
         -        CHECKFREE ELECTRIC MONEY(SM);
         -        M-PLAN(TM);
         -        M-PREPS(TM);
         -        MISSINGMONEY and Design (SM);
         -        MISSINGMONEY.COM and Design (SM);
         -        MISSINGMONEY.COM SECUREMATCH (SM);
         -        MY-BILLS.COM(SM);
         -        SSI(TM);
         -        SSI and Design(TM); and
         -        THE GREAT AMERICAN GIVEBACK(SM).

         We have also applied to register the following marks internationally:

         -        BLUEGILL (Canada);
         -        BLUEGILL Logo (Canada);
         -        BLUEGILL (European Community); and
         -        BLUEGILL Logo (European Community).



                                      -17-
<PAGE>   18


          We have conducted preliminary searches for the following marks and are
evaluating appropriate action concerning filing applications for the marks:

         -        APECS CLIENT/SERVER(TM);
         -        APL(TM);
         -        CHECKFREE and Design(SM);
         -        CHECKFREE APECS;(TM);
         -        CHECKFREE A.R.M.(TM);
         -        CHECKFREE ARP;
         -        CHECKFREE ARP/SMS;
         -        CHECKFREE DEBIT SOLUTIONS(TM);
         -        CHECKFREE DIRECTCOLLECT;
         -        CHECKFREE IRS(TM);
         -        CHECKFREE IRS/SRS(TM);
         -        CHECKFREE IS MAKING AN ELECTRONIC STATEMENT ON BILLING (SM);
         -        CHECKFREE LCR(TM);
         -        CHECKFREE MAGNETS(TM);
         -        CHECKFREE RECON(TM);
         -        CHECKFREE RECON-PLUS(TM);
         -        CHECKFREE RECON SECURITIES(TM);
         -        CHECKFREE RPS(TM);
         -        CHECKFREE RRS(TM);
         -        CHECKFREE SOLUTION SERIES(TM);
         -        CHECKFREE SOLUTION SERIES STORER(TM);
         -        CHECKFREE SPECTRUM SERVICE (SM);
         -        CHECKFREE STORER(TM);
         -        CHECKFREE TRADE RECON(TM);
         -        CHECKFREE WEB RECON(TM);
         -        DYNAMIC SUMMARY(TM);
         -        ECENTER (SM);
         -        EVENT TRACKING(TM);
         -        EXCHANGE(TM);
         -        FUND EXPEDITE (SM);
         -        INSTASEND (SM);
         -        INVOICE LITE (SM);
         -        JOIN THE CLUB (SM);
         -        MISSINGCUSTOMERS (SM);
         -        MONEY ANYWHERE(TM);
         -        PAYMAIL (SM);
         -        RECON-SELECT(TM);
         -        REVOLUTIONIZING THE WAY MONEY MOVES(SM);
         -        RMS(TM);
         -        SMS(TM);
         -        WARP 1 (SM); and
         -        YOU'VE GOT BILLS (SM).

         We are also the owner of a multitude of domain name registrations,
including:

         -        billdelivery.com
         -        billercare.com
         -        billme.com
         -        check-free.com
         -        checkfree.com
         -        checkfree-ecx.com
         -        checkfreeva.com
         -        custcare.com
         -        ficare.com
         -        fortracs.com
         -        getbills.com
         -        missingcustomer.com
         -        missingcustomer.net
         -        missingcustomer.org
         -        missingcustomers.com
         -        missingcustomers.net
         -        missingcustomers.org
         -        mybills.com
         -        mybills.net
         -        mybills.org
         -        paybills.org
         -        paymybills.org
         -        paythebill.com
         -        rcm2001.com
         -        stockcontrol.com; and
         -        cfree.com

          We regard our financial transaction services and related products like
our software as proprietary and rely on a combination of patent, copyright,
trademark and trade secret laws, employee and third party nondisclosure
agreements, and other intellectual property protection methods to protect our
services and related products. Although we believe our consumer financial
software to be proprietary, we do not depend on our software to compete, but
rather on our services to which the software provides access.

          We also copyright some of our programs and software documentation and
trademark some product names. Our management believes that these actions provide
appropriate legal protection for our intellectual property rights in our
software products. Furthermore, our management believes that the competitive
position for some of our products depends primarily on the technical competence
and creative ability of our personnel and that our business is not materially
dependent on copyright protection or trademarks See "Business -- Business Risks
(We may be unable to protect our proprietary technology, permitting competitors
to duplicate our products and services)."

          Our United States Letters Patent No. 5,383,113, issued on January 17,
1995, relates to our system and method for electronically providing services
including payment of bills and financial analysis. Incorporating the system
described in the patent, we can pay any bill from any checking account at any
financial institution in the United States on the consumer's behalf by selecting
a preferred means of payment from various options described above. See "Business
-- Payment Clearance Systems." Our patent expires on January 17, 2012. See
"Business --



                                      -18-
<PAGE>   19

Competition," "Business -- Business Risks (Competitive pressures we face may
have a material adverse effect on us)" and "Business -- Business Risks (We may
be unable to protect our proprietary technology, permitting competitors to
duplicate our products and services)."

          Existing intellectual property laws afford only limited protection,
and it may be possible for unauthorized third parties to copy our services and
related products or to reverse engineer or obtain and use information we regard
as proprietary. There can be no assurance that our competitors will not
independently develop services and related products that are substantially
equivalent or superior to ours. As the technology we use evolves, however, our
dependence upon the patented technology continues to decrease.

EMPLOYEES

         As of September 1, 2000, we employed approximately 2,475 full-time
employees, including approximately 770 in systems and research and development,
including software development, approximately 815 in customer care, and
approximately 890 in sales and marketing, administration, financial control,
corporate services, and human resources. We are not a party to any collective
bargaining agreement and are not aware of any efforts to unionize our employees.
We believe that our relations with our employees are good. We believe our future
success and growth will depend in large measure upon our ability to attract and
retain qualified technical, management, marketing, business development and
sales personnel.

BUSINESS RISKS

         We desire to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Many of the following
important factors discussed below have been discussed in our prior filings with
the Securities and Exchange Commission. In addition to the other information in
this report, readers should carefully consider that the following important
factors, among others, in some cases have affected, and in the future could
affect, our actual results and could cause our actual consolidated results of
operations for the fiscal year ended June 30, 2001, and beyond, to differ
materially from those expressed in any forward-looking statements made by us, or
on our behalf.

         During fiscal 2000, we also entered into the following transactions
which, in some cases have affected, and in the future could affect, our actual
results and could cause our actual consolidated results of operations for the
fiscal year ended June 30, 2001, and beyond, to differ materially from those
expressed in any forward-looking statements made by us, or on our behalf:

         -        On April 28, 2000, we consummated our acquisition of BlueGill
                  Technologies, Inc. pursuant to a merger agreement originally
                  executed on December 21, 1999, whereby the BlueGill
                  stockholders received 4,713,736 shares of our common stock;

         -        On September 1, 2000, we consummated our acquisition of
                  TransPoint, a joint venture among Microsoft Corporation, First
                  Data Corporation, Citibank, N.A., and their subsidiaries,
                  pursuant to a merger agreement originally executed on February
                  15, 2000, whereby Microsoft, First Data, and Citibank received
                  17,000,000 shares of our common stock; and

         -        On April 28, 2000 we entered into a strategic agreement Bank
                  of America, N.A., whereby Bank of America will receive
                  10,000,000 restricted shares of our common stock and
                  performance-based warrants for the right to acquire an
                  additional 10,000,000 shares of our common stock.

RISKS RELATED TO OUR BUSINESS

THE MARKET FOR OUR ELECTRONIC COMMERCE SERVICES IS EVOLVING AND MAY NOT CONTINUE
TO DEVELOP OR GROW RAPIDLY ENOUGH FOR US TO REMAIN CONSISTENTLY PROFITABLE.

         If the number of electronic commerce transactions does not continue to
grow or if consumers or businesses do not continue to adopt our services, it
could have a material adverse effect on our business, financial condition and
results of operations. The electronic commerce market is still evolving and
currently growing at a rapid rate. We believe future growth in the electronic
commerce market will be driven by the cost, ease-of-use and quality of products
and services offered to consumers and businesses. In order to consistently
increase and maintain our profitability, consumers and businesses must continue
to adopt our services.



                                      -19-
<PAGE>   20

WE HAVE NOT OPERATED PROFITABLY IN THE PAST AND EXPECT TO EXPERIENCE NET LOSSES
IN THE FUTURE.

     We have not consistently operated profitably to date. Since our inception,
our accumulated losses have totaled approximately $326,320,000. We incurred:

         -        a loss from operations of $3.7 million and net income of $10.5
                  million for the fiscal year ended June 30, 1999; and

         -        a loss from operations of $43.4 million and a net loss of
                  $32.3 million for the fiscal year ended June 30, 2000.

         We anticipate having a net loss from operations in fiscal 2001 and may
experience net losses and may not be able to sustain or increase our
profitability in the future. For the fiscal year ended June 30, 2000, we
invested over $35.6 million in research and development and over $44.8 million
in sales and marketing. We intend to continue to make significant investments in
research and development and sales and marketing. If the investment of our
capital is not successful to grow our business, it will have a material adverse
effect on our business and financial condition, as well as negatively impact
your investment in our business and limit our ability to pay dividends in the
future to our stockholders.

OUR FUTURE PROFITABILITY DEPENDS ON UPON OUR ABILITY TO IMPLEMENT OUR STRATEGY
SUCCESSFULLY TO INCREASE ADOPTION OF ELECTRONIC BILLING AND PAYMENT METHODS.

         Our future profitability will depend, in part, on our ability to
implement our strategy successfully to increase adoption of electronic billing
and payment methods. Our strategy includes investment of time and money during
fiscal 2001 in programs designed to:

         -        drive consumer awareness of electronic billing and payment;
         -        encourage consumers to sign up for and use our electronic
                  billing and payment services offered by our distribution
                  partners;
         -        build our infrastructure to handle seamless processing of
                  transactions;
         -        continue to develop state of the art, easy-to-use technology;
                  and
         -        increase the number of billers whose bills we can present and
                  pay electronically.

         If we do not successfully implement our strategy, revenue growth will
be minimal, and expenditures for these programs will not be justified.

         Our investment in these programs will have a negative impact on our
short-term profitability. Additionally, our failure to implement these programs
successfully or to increase substantially adoption of electronic commerce
billing and payment methods by consumers who pay for the services could have a
material adverse effect on our business, financial condition and results of
operations.

COMPETITIVE PRESSURES WE FACE MAY HAVE A MATERIAL ADVERSE EFFECT ON US.

         Electronic commerce is new and evolving rapidly, resulting in a dynamic
competitive environment. We face significant competition in our each of our
business units, Electronic Commerce, Investment Services and Software
businesses. Increased competition or other competitive pressures may result in
price reductions, reduced margins or loss of business, any of which could have a
material adverse effect on our business, financial condition and results of
operations. Further, we expect competition to persist, increase and intensify in
the future. First, we need to switch billers and consumers from paper bills sent
by mail and paid by check to electronic bill presentment and payment. Second, a
number of financial institutions have developed, and others in the future may
develop, in-house home banking services similar to ours. For example, in June
1999, Chase Manhattan Corporation, First Union Corporation and Wells Fargo & Co.
announced the formation of a new venture called Spectrum that will allow
individuals and businesses to receive and pay bills electronically. To the best
of our knowledge, Spectrum has done limited electronic presentment of bills, and
is developing a "pay anyone" capability. In addition, recently MasterCard
International announced that it would begin offering online bill presentment to
enable people to receive and pay bills over the Internet by September 2000. We
also face increased competition from billers directly presenting bills to their
customers electronically and from new competitors offering billing and payment
services utilizing scan and pay technology. These "scan and pay" companies offer
a service whereby a consumer's bill is received by the company, scanned to
create an electronic image of the bill, and electronically delivered to the
consumer who can elect to pay that bill either by writing a paper check or
through an electronic transfer of funds. We cannot assure you that we will be
able to compete effectively against financial institutions, Spectrum,
MasterCard, billers directly delivering bills to their customers, scan and pay
companies or other current and future electronic commerce competitors.

         In addition, we cannot assure you that we will be able to compete
effectively against current and future competitors in the investment services
and software products markets. The markets for our investment services and


                                      -20-
<PAGE>   21

software products are also highly competitive. In Investment Services, our
competition comes primarily from providers of portfolio accounting software. In
Software, our competition comes from several different market segments,
including large diversified computer software and service companies and
independent suppliers of software products. Because there are relatively low
barriers to entry, we expect competition in the software market to increase
significantly in the future.

         Across all of our market segments, many of our current and potential
competitors have longer operating histories, significantly greater financial,
technical, marketing, customer service and other resources, greater name
recognition and a larger installed base of customers than we do. As a result,
these competitors may be able to respond to new or emerging technologies and
changes in customer requirements faster and more effectively than we can, or to
devote greater resources to the development, promotion and sale of products than
we can. If these competitors were to acquire a significant market share, it
could have a material adverse effect on our business, financial condition and
results of operations.

SOME OF OUR CUSTOMERS MAY COMPETE AGAINST US THAT MAY RESULT IN A LOSS OF
REVENUE.

         From time to time, some of our customers may compete against us that
may have a material adverse effect on our revenues and results of operations.
For example, in June 1999, Chase Manhattan, First Union and Wells Fargo
announced the formation of Spectrum that will allow individuals and businesses
to receive and pay bills electronically. Other of our significant customers may
in the future decide to compete against us and such competition may have a
material adverse affect on our business and financial results.

SECURITY AND PRIVACY BREACHES IN OUR ELECTRONIC TRANSACTIONS MAY DAMAGE CUSTOMER
RELATIONS AND INHIBIT OUR GROWTH.

         Any failures in our security and privacy measures could have a material
adverse effect on our business, financial condition and results of operations.
We electronically transfer large sums of money and personal information about
consumers, including bank account and credit card information, social security
numbers, and merchant account numbers. If we are unable to protect, or consumers
perceive that we are unable to protect, or consumers perceive that we are unable
to protect, the security and privacy of our electronic transactions, our growth
and the growth of the electronic commerce market in general could be materially
adversely affected. A security or privacy breach may:

         -        cause our customers to lose confidence in our services;
         -        deter consumers from using our services;
         -        harm our reputation;
         -        expose us to liability;
         -        increase our expenses from potential remediation costs; and
         -        decrease market acceptance of electronic commerce
                  transactions.

         While we believe that we utilize proven applications designed for
premium data security and integrity to process electronic transactions, there
can be no assurance that our use of these applications will be sufficient to
address changing market conditions or the security and privacy concerns of
existing and potential subscribers.

WE RELY ON THIRD PARTIES TO DISTRIBUTE OUR ELECTRONIC COMMERCE SERVICES, WHICH
MAY NOT RESULT IN WIDESPREAD ADOPTION.

         We rely on our contracts with financial institutions, businesses,
billers, Internet portals and other third parties like Intuit Inc. to provide
branding for our electronic commerce services and to market our services to
their customers. None of these third parties accounted for more than 10% of our
total revenue for the year ended June 30, 1999 or for the year ended June 30,
2000. These contracts are an important source of the growth in demand for our
electronic commerce services. If any of these third parties abandon, curtail or
insufficiently increase its marketing efforts, it could have a material adverse
effect on our business, financial condition and results of operations.

CONSOLIDATION IN THE BANKING INDUSTRY MAY ADVERSELY AFFECT OUR ABILITY TO SELL
OUR ELECTRONIC COMMERCE SERVICES, INVESTMENT SERVICES AND SOFTWARE.

         Mergers, acquisitions and personnel changes at key financial
institutions have the potential adversely to affect our business, financial
condition and results of operations. Currently, the banking industry is
undergoing large-scale consolidation, causing the number of financial
institutions to decline. This consolidation could cause us to lose:

         -        current and potential customers;

         -        business opportunities, if combined financial institutions
                  were to determine that it is more efficient to develop
                  in-house home banking services similar to ours or offer our
                  competitors' products or services; and


                                      -21-
<PAGE>   22

         -        revenue, if combined financial institutions were able to
                  negotiate a greater volume discount for, or to discontinue the
                  use of, our products and services.

WE ARE DEPENDENT UPON A SMALL NUMBER OF FINANCIAL INSTITUTION CUSTOMERS FOR A
SIGNIFICANT PERCENTAGE OF OUR SUBSCRIBERS.

         We rely on our contracts with three key financial institutions for a
substantial portion of our subscriber base and the volume of electronic
transactions that we process. As of June 30, 2000, these three financial
institutions accounted for approximately 1.6 million subscribers, or
approximately 47% of our total subscriber base. No single customer, however,
accounts for more than 10% of our revenues. The loss of the contract with any of
these key financial institutions or a significant decline in the number of
transactions processed through them could have a material adverse effect on our
business, financial condition and results of operations.

IF WE DO NOT SUCCESSFULLY RENEW OR RENEGOTIATE OUR AGREEMENTS WITH OUR
CUSTOMERS, OUR BUSINESS MAY SUFFER.

         Our agreements for electronic commerce services with financial
institutions generally provide for terms of three to five years. These
agreements are renegotiated from time to time when financial institutions
migrate from our PC-based platform to our web-based platform. If we are not able
to renew or renegotiate these agreements on favorable terms, it could have a
material adverse effect on our business, financial condition and results of
operations.

         The profitability of our Software business depends, to a substantial
degree, upon our software customers electing to periodically renew their
maintenance agreements. If a substantial number of our software customers
declined to renew these agreements, our revenues and profits in this business
segment would be materially adversely affected.

OUR FUTURE PROFITABILITY DEPENDS ON AN INCREASE IN THE PROPORTION OF
TRANSACTIONS WE PROCESS ELECTRONICALLY.

         If we are unable to increase the percentage of transactions that we
process electronically, our margins could decrease, which could have a material
adverse effect on our business, financial condition and results of operations.
We processed electronically 49% of our transactions for the year ended June 30,
1999 and 58% of the transactions for the year ended June 30, 2000. Our future
profitability will depend, in part, on our ability to increase the percentage of
transactions we process electronically. Compared with conventional paper-based
transactions, electronic transactions:

         -        cost much less to complete;
         -        give rise to far fewer errors, which are costly to resolve;
                  and
         -        generate far fewer subscriber inquiries and, therefore,
                  consume far fewer customer care resources.

THE TRANSACTIONS WE PROCESS EXPOSE US TO CREDIT RISKS.

         Any losses resulting from returned transactions, merchant fraud or
erroneous transmissions could result in liability to financial institutions,
merchants or subscribers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic and
conventional paper-based transactions we process expose us to credit risks.
These include risks arising from returned transactions caused by:


         -        insufficient funds;
         -        unauthorized use;
         -        stop payment orders;
         -        payment disputes;
         -        closed accounts;
         -        theft;
         -        frozen accounts; and
         -        fraud.

         We are also exposed to credit risk from merchant fraud and erroneous
transmissions.

WE MAY EXPERIENCE BREAKDOWNS IN OUR PAYMENT PROCESSING SYSTEM THAT COULD DAMAGE
CUSTOMER RELATIONS AND EXPOSE US TO LIABILITY.

         A system outage or data loss could have a material adverse effect on
our business, financial condition and results of operations. To successfully
operate our business, we must be able to protect our payment processing and
other systems from interruption by events that are beyond our control. For
example, our system may be subject to loss of service interruptions caused by
hostile third parties similar to those experienced by many companies operating
Internet websites during February 2000 or other instances of deliberate system
sabotage. Other events that could cause system interruptions include:

         -        fire;
         -        natural disaster;
         -        power loss;
         -        telecommunications failure;
         -        unauthorized entry; and
         -        computer viruses.



                                      -22-
<PAGE>   23


         For the fiscal year ended June 30, 1999, we incurred a charge of $2.7
million due to problems accessing and using our system. Without the charge, our
loss from operations in our electronic commerce segment would have been $2.8
million compared to the actual $5.5 million we lost. These problems stemmed from
system errors we experienced in April 1999 due to system degradation issues in
connection with the migration of subscribers to our Genesis platform, which
resulted in consumers inability to connect with and transmit data to our
processing system. This system failure did not result in the loss of any
consumer data.

         Although we completed the initial migration of some of our subscribers
from our pre-existing data processing platforms to a new system that we call the
Genesis platform, we will continue to migrate subscribers from non-Genesis
platforms to the Genesis platform at the request of our other customers. Our
main processing facility is located in Norcross, Georgia, and we have other
processing facilities located in Ohio, Illinois and Texas. During the transition
from the pre-existing platforms to the Genesis platform, we may be exposed to
loss of data or unavailability of systems due to inadequate back-ups, reduced or
eliminated redundancy, or both. Although we regularly back-up our data logs
hourly and our overall system daily, as well as take other measures to protect
against data loss and system failures, there is still some risk that we may lose
critical data or experience system failures. We constantly review our usage and
capacity constraints. We have engineered our systems to ensure that we never
exceed 80% utilization of capacity at peak processing times. That means that, in
general, we average processing at 40% - 50% of capacity, with no peak time
consuming more than 80% of the system's resources. As a precautionary measure,
we have entered into disaster recovery agreements for the processing systems at
all our sites, and we conduct business resumption tests on a scheduled basis.
Our property and business interruption insurance may not be adequate to
compensate us for all losses or failures that may occur.

WE MAY EXPERIENCE SOFTWARE DEFECTS AND DEVELOPMENT DELAYS, DAMAGING CUSTOMER
RELATIONS, DECREASING OUR POTENTIAL PROFITABILITY AND EXPOSING US TO LIABILITY.

         Our electronic commerce services and our software products are based on
sophisticated software and computing systems which often encounter development
delays, and the underlying software may contain undetected errors or defects.
Defects in our software products and errors or delays in our processing of
electronic transactions could result in:

         -        additional development costs;
         -        diversion of technical and other resources from our other
                  development efforts;
         -        loss of credibility with current or potential customers;
         -        harm to our reputation; or
         -        exposure to liability claims.

         In addition, we rely on technologies supplied to us by third parties
that may also contain undetected errors or defects that could have a material
adverse effect on our business, financial condition and results of operations.
Although we attempt to limit our potential liability for warranty claims through
disclaimers in our software documentation and limitation-of-liability provisions
in our license and customer agreements, we cannot assure you that these measures
will be successful in limiting our liability.

WE EXPERIENCE SEASONAL FLUCTUATIONS IN OUR NET SALES CAUSING OUR OPERATING
RESULTS TO FLUCTUATE.

         We have historically experienced seasonal fluctuations in our net
sales, and we expect to experience similar fluctuations in the future. If our
net sales are below the expectations of securities analysts and investors due to
seasonal fluctuations, our stock price could decrease unexpectedly. Our growth
in new electronic commerce subscribers is affected by seasonal factors like
holiday-based personal computer sales. These seasonal factors may impact our
operating results by concentrating subscriber acquisition and set-up costs,
which may not be immediately offset by revenue increases primarily due to
introductory service price discounts. Additionally, on-line interactive service
subscribers generally tend to be less active users during the summer months,
resulting in lower revenue during this period.

         Our software sales also have historically displayed seasonal
variability, with sales and earnings generally stronger in the quarters ended
December 31 and June 30 of each year and generally weaker in the quarters ended
September 30 and March 31 of each year. The seasonality in software sales is
due, in part, to calendar year-end buying patterns of financial institution
customers and our software sales compensation structure, which measures sales
performance at our June 30 fiscal year end.



                                      -23-
<PAGE>   24

IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGE OR CHANGES IN INDUSTRY
STANDARDS, OUR SERVICES COULD BECOME OBSOLETE AND WE COULD LOSE OUR CUSTOMERS.

         If competitors introduce new products and services embodying new
technologies, or if new industry standards and practices emerge, our existing
product and service offerings, proprietary technology and systems may become
obsolete. Further, if we fail to adopt or develop new technologies or to adapt
our products and services to emerging industry standards, we may lose current
and future customers, which could have a material adverse effect on our
business, financial condition and results of operations. The electronic commerce
industry is changing rapidly. To remain competitive, we must continue to enhance
and improve the functionality and features of our products, services and
technologies. For example, we are currently migrating our products and services
from a PC-based platform to a web-based platform.

OUR INABILITY TO MANAGE GROWTH COULD ADVERSELY AFFECT OUR BUSINESS.

         We have experienced rapid growth in our revenues, from $76.8 million in
the twelve months ended June 30, 1996 to $310.2 million in the fiscal year ended
June 30, 2000, and we intend to continue to grow our business significantly. To
support our growth plans, we will have to significantly expand our existing
management, operational, financial and human resources and management
information systems and controls. If we are not able to manage our growth
successfully, we will not grow as planned which could have a material adverse
effect on our business, financial condition and results of operations.

WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, PERMITTING COMPETITORS
TO DUPLICATE OUR PRODUCTS AND SERVICES.

         Our success and ability to compete is dependent, in part, upon our
proprietary technology, which includes our patent for our electronic billing and
payment processing system, our source code information for our software
products, and our operating technology. We rely primarily on patent, copyright,
trade secret and trademark laws to protect our technology. In addition, we have
been granted a patent for some features of our electronic billing and payment
processing system, which we believe provides some measure of security for our
technologies. If challenged, we cannot assure you that our patent will prove to
be valid or provide the protection that we need. Further, the source code for
our proprietary software is protected both as a trade secret and as a
copyrighted work. We generally enter into confidentiality and assignment
agreements with our employees, consultants and vendors, and generally control
access to and distribution of our software, documentation and other proprietary
information.

         Because our means of protecting our proprietary rights may not be
adequate, it may be possible for a third party to copy, reverse engineer or
otherwise obtain and use our technology without authorization. In addition, the
laws of some countries in which we sell our products do not protect software and
intellectual property rights to the same extent as the laws of the U.S.
Unauthorized copying, use or reverse engineering of our products could have a
material adverse effect on our business, financial condition and results of
operations.

         A third party could also claim that our technology infringes its
proprietary rights. As the number of software products in our target markets
increases and the functionality of these products overlap, we believe that
software developers may increasingly face infringement claims. These claims,
even if without merit, can be time-consuming and expensive to defend. A third
party asserting infringement claims against us in the future may require us to
enter into costly royalty arrangements or litigation.

OUR BUSINESS COULD BECOME SUBJECT TO INCREASED GOVERNMENT REGULATION, WHICH
COULD MAKE OUR BUSINESS MORE EXPENSIVE TO OPERATE.

         We believe that we are not required to be licensed by the Office of the
Comptroller of the Currency, or OCC, the Federal Reserve Board or other federal
agencies that regulate or monitor banks or other types of providers of
electronic commerce services. A number of states have legislation regulating or
licensing check sellers, money transmitters or service providers to banks, and
we have registered under this legislation in specific instances. Because
electronic commerce in general, and most of our products and services in
particular, are so new, the application of many of these laws and regulations is
uncertain and difficult to interpret. The entities responsible for interpreting
and enforcing these laws and regulations could amend these laws or regulations
or issue new interpretations of existing laws or regulations. Any of these
changes could lead to increased operating costs and reduce the convenience and
functionality of our products or services, possibly resulting in reduced market
acceptance. It is also possible that new laws and regulations may be enacted
with respect to the Internet, including taxation of electronic commerce
activities. The adoption of any of these laws or regulations may decrease the
growth of the Internet, which could in turn decrease the demand for our products
or services, increase our cost of doing business or could otherwise have a
material adverse effect on our business, financial condition and results of
operations.



                                      -24-
<PAGE>   25

         The Federal Reserve rules provide that we can only access the Federal
Reserve's automated clearinghouse through a bank. If the Federal Reserve rules
were to change to further restrict our access to the automated clearinghouse or
limit our ability to provide automated clearinghouse transaction processing
services, it could have a material adverse effect on our business, financial
condition and results of operations.

OUR QUARTERLY OPERATING RESULTS FLUCTUATE AND MAY NOT ACCURATELY PREDICT OUR
FUTURE PERFORMANCE.

         Our quarterly results of operations have varied significantly and
probably will continue to do so in the future as a result of a variety of
factors, many of which are outside our control. These factors include:

         -        changes in our pricing policies or those of our competitors;
         -        relative rates of acquisition of new customers;
         -        seasonal patterns;
         -        delays in the introduction of new or enhanced services,
                  software and related products by us or our competitors or
                  market acceptance of these products and services; and
         -        other changes in operating expenses, personnel and general
                  economic conditions.

         As a result, we believe that period-to-period comparisons of our
operating results are not necessarily meaningful, and you should not rely on
them as an indication of our future performance. In addition, our operating
results in a future quarter or quarters may fall below expectations of
securities analysts or investors and, as a result, the price of our common stock
may fluctuate.

RISKS RELATED TO OUR COMMON STOCK

OUR COMMON STOCK HAS BEEN VOLATILE SINCE DECEMBER 15, 1999.

         Since December 15, 1999, our stock price has been extremely volatile,
trading at a high of $125.63 per share and a low of $28.50 per share for the
period. The volatility in our stock price has been caused by:

         -        actual or anticipated fluctuations in our operating results;
         -        actual or anticipated fluctuations in our subscriber growth;
         -        announcements by us, our competitors or our customers;
         -        announcements of the introduction of new or enhanced products
                  and services by us or our competitors;
         -        announcements of joint development efforts or corporate
                  partnerships in the electronic commerce market;
         -        market conditions in the banking, telecommunications,
                  technology and other emerging growth sectors;
         -        rumors relating to our competitors or us; and
         -        general market or economic conditions.

AVAILABILITY OF SIGNIFICANT AMOUNTS OF OUR COMMON STOCK FOR SALE IN THE FUTURE
COULD ADVERSELY AFFECT OUR STOCK PRICE.

         The availability for future sale of a substantial number of shares of
our common stock in the public market, or issuance of common stock upon the
exercise of stock options, warrants or conversion of the notes or otherwise
could adversely affect the market price for our common stock. As of September 1,
2000, we had outstanding 75,997,926 shares of our common stock, of which
53,416,751 shares of our issued and outstanding common stock were held by
nonaffiliates. The holders of the remaining 22,581,175 shares were entitled to
resell them only by a registration statement under the Securities Act of 1933 or
an applicable exemption from registration. As of September 1, 2000, we had an
additional 21,100,943 shares of our common stock available for future sale,
including:

         -        outstanding options to purchase 6,826,726 shares of our common
                  stock, of which options for 1,901,676 shares were fully vested
                  and exercisable at an average weighted exercise price of
                  approximately $13.63 per share;
         -        issued warrants to purchase 10,500,000 shares of our common
                  stock, of which warrants for 1,825,000 shares were fully
                  vested and exercisable at a weighted exercise price of
                  approximately $20.83 per share;
         -        up to 658,874 shares available for issuance under our
                  Associate Stock Purchase Plan;
         -        up to 758,786 shares available for issuance under our 401(k)
                  Plan; and
         -        up to 2,356,557 shares of our common stock issuable upon
                  conversion of the notes.

         As of September 1, 2000, the following entities hold shares or warrants
to purchase shares of our common stock in the following amounts:

         -        Microsoft Corporation, which holds 8,567,250 shares;
         -        First Data Corporation, which holds 6,567,250 shares;
         -        Citibank, N.A., which holds 2,015,500 shares;


                                      -25-
<PAGE>   26

         -        Intuit, Inc., which holds 2,500,000 shares;
         -        Integrion Financial Network, L.L.C., which with current and
                  former members, collectively holds warrants to purchase up to
                  8,800,000 shares, 1,800,000 of which are fully vested and
                  exercisable; and
         -        Bank One, which holds 250,000 shares and warrants to purchase
                  1,000,000 shares and may be entitled to receive warrants to
                  purchase up to 2,000,000 additional shares, none of which are
                  vested or exercisable.

         Each of Intuit, Integrion, and Bank One may be entitled to registration
rights. If Intuit, Integrion or Bank One, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, these sales may have an adverse effect on the market price of our common
stock.

         We have also agreed with Microsoft, First Data and Citibank to file a
shelf registration statement that would allow continuous resales of the shares
that they will receive on the closing date of the acquisition. Although
Microsoft and First Data will be limited in their ability to transfer their
shares of our common stock during the next three years pursuant to stockholder
agreements with us, they will be able to transfer significant portions of their
common stock in the future in both registered and unregistered sales. One year
after the acquisition is completed, Microsoft, First Data and Citibank may be
able to sell up to the greater of one percent of our average weekly trading
volume or one percent of our outstanding common stock in reliance on
registration exemptions. In addition, Microsoft and First Data will be permitted
to a limited extent to engage in hedging transactions with respect to our common
stock. Sales of substantial amounts of our common stock by either Microsoft or
First Data, or the perception that these sales could occur, may adversely affect
prevailing market prices for our common stock.

         If we complete the strategic agreement, we will issue Bank of America,
N.A., an aggregate of 10 million shares of our common stock and warrants to
acquire an additional 10 million shares of our common stock.

         We have agreed to provide Bank of America with registration rights in
connection with the strategic agreement. If Bank of America, by exercising their
registration rights, cause a large number of shares to be registered and sold in
the public market, these sales may have an adverse effect on the market price of
our common stock. One year after the strategic agreement is consummated is
completed, Bank of America may be able to sell up to the greater of one percent
of our average weekly trading volume or one percent of our outstanding common
stock in reliance on registration exemptions. Sales of substantial amounts of
our common stock by Bank of America, or the perception that these sales could
occur, may adversely affect prevailing market prices for our common stock.

ANTI-TAKEOVER PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAKE
ANY CHANGE IN CONTROL MORE DIFFICULT.

         Our certificate of incorporation and by-laws contain provisions that
may have the effect of delaying or preventing a change in control, may
discourage bids at a premium over the market price of our common stock and may
adversely affect the market price of our common stock and the voting and other
rights of the holders of our common stock. These provisions include:

         -        division of our board of directors into three classes serving
                  staggered three-year terms;
         -        removal of our directors by the stockholders only for cause
                  upon 80% stockholder approval;
         -        prohibiting our stockholders from calling a special meeting of
                  stockholders;
         -        ability to issue additional shares of our common stock or
                  preferred stock without stockholder approval;
         -        prohibiting our stockholders from unilaterally amending our
                  certificate of incorporation or by-laws except with 80%
                  stockholder approval; and
         -        advance notice requirements for raising business or making
                  nominations at stockholders' meetings.

         We also have a stockholder rights plan that allows us to issue
preferred stock with rights senior to those of our common stock without any
further vote or action by our stockholders. The issuance of our preferred stock
under the stockholder rights plan could decrease the amount of earnings and
assets available for distribution to the holders of our common stock or could
adversely affect the rights and powers, including voting rights, of the holders
of our common stock. In some circumstances, the issuance of preferred stock
could have the effect of decreasing the market price of our common stock.

         We are also subject to provisions of the Delaware corporation law that,
in general, prohibit any business combination with a beneficial owner of 15% or
more of our common stock for five years unless the holder's acquisition of our
stock was approved in advance by our board of directors.

         In addition, both the commercial alliance agreement with Microsoft and
the marketing agreement with First Data, each of which we will execute in
connection with the closing of the TransPoint acquisition, both allow the
termination of the agreement by Microsoft or First Data, as the case may be,
under specific change of control circumstances. If either Microsoft or First
Data terminates under these circumstances, we will lose a portion of the



                                      -26-
<PAGE>   27

future revenue guarantees under the applicable agreement. This potential
termination event could discourage third parties from acquiring us.

WE ARE SUBJECT TO SIGNIFICANT INFLUENCE BY SOME STOCKHOLDERS THAT MAY HAVE THE
EFFECT OF DELAYING OR PREVENTING A CHANGE IN CONTROL.

         At September 1, 2000, our directors, executive officers and principal
stockholders and their affiliates collectively owned approximately 30% of the
outstanding shares of our common stock. As a result, these stockholders are able
to exercise significant influence over matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying or
preventing a change in control.

RISKS OF OUR ACQUISITIONS OF BLUEGILL AND TRANSPOINT.

WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE TRANSPOINT MERGERS.

         The success of the TransPoint mergers will depend, in part, on our
ability to realize the anticipated growth opportunities and synergies from
combining our and TransPoint businesses. To realize the anticipated benefits of
this combination, our management team must develop strategies and implement a
business plan that will:

         -        effectively combine TransPoint's electronic billing and
                  payment services with our services;
         -        successfully use the anticipated opportunities for
                  cross-promotion and sales of the products and services of
                  CheckFree and TransPoint;
         -        successfully retain and attract key employees of the combined
                  company, including operating management and key technical
                  personnel, during a period of transition and in light of the
                  competitive employment market; and
         -        while integrating the combined company's operations, maintain
                  adequate focus on our core businesses in order to take
                  advantage of competitive opportunities and to respond to
                  competitive challenges.

         If our management team is not able to develop strategies and implement
a business plan that achieves any these objectives, we may not realize the
anticipated benefits of the TransPoint. In particular, anticipated growth in
revenue, earnings before interest, taxes, depreciation, and amortization, or
"EBITDA," and cash flow may not be realized, which would have an adverse impact
on us and the market price of our common stock.

WE ARE REQUIRED TO AMORTIZE GOODWILL THAT WILL CAUSE OUR EARNINGS PER SHARE TO
DECREASE.

         Because we will be accounting for the BlueGill and TransPoint mergers
using the purchase method, the mergers will result in a charge to our earnings
that will decrease our earnings per share. In connection with the BlueGill
merger, we will be required to amortize approximately $253,308,793 of goodwill
and other intangible assets over a period of five years or $50,661,759 per year.
In connection with the TransPoint mergers, we will be required to amortize
approximately $824,977,763 of goodwill and other intangible assets over a period
of five years or approximately $164,996,000 per year. Additionally, because we
issued shares of our common stock in connection with the both merger agreements,
and since historically BlueGill and TransPoint have not been profitable, the
BlueGill and TransPoint mergers and related TransPoint commercial transactions
may cause our earnings per share to decrease. A drop in our earnings per share
could have a negative impact on the market price of our common stock. Analysts
and investors carefully review a company's earnings per share and often base
investment decisions on a company's earnings per share.

THE SHARES ISSUED PURSUANT TO THE MERGER AGREEMENT AND RELATED TRANSACTIONS WILL
RESULT IN IMMEDIATE AND SUBSTANTIAL DILUTION IN OUR PER SHARE EARNINGS AND A
SUBSTANTIAL INCREASE IN OUR LOSS FROM OPERATIONS.

         The BlueGill merger and the TransPoint mergers, on a pro forma basis,
would result in immediate and substantial dilution of per share earnings from
$0.18 to ($5.04), or $5.22 per share, for the year ended June 30, 1999 and
earnings from ($0.23) to ($3.90) per share, or $3.67 per share, for the nine
months ended March 31, 2000. Additionally, the BlueGill merger and the mergers,
on a pro forma basis, would increase our loss from operations from $3,733,000 to
$476,958,000 for the year ended June 30, 1999 and from $18,413,000 to
$349,212,000 for the nine months ended March 31, 2000. The anticipated dilution
and the increase in our loss from operations could have a negative impact on the
market price of our common stock. Analysts and investors carefully review a
company's earnings per share and often base investment decisions on a company's
operating profits and losses and per share earnings.



                                      -27-
<PAGE>   28

THE BLUEGILL AND TRANSPOINT MERGERS MAY RESULT IN DISRUPTION OF OUR EXISTING
BUSINESS, DISTRACTION OF OUR MANAGEMENT AND DIVERSION OF OTHER RESOURCES.

         The integration of the BlueGill and TransPoint businesses may take
management time and resources that will have to be diverted from the main
business of the combined company. This diversion of time and resources could
cause the market price of our common stock to decrease. Our management will need
to spend their time integrating both BlueGill and TransPoint into our
operations. Management will need to focus some of its efforts on the integration
of both BlueGill and TransPoint and away from our main business. This could
cause our business to suffer. Additionally, we will need to devote resources
into the continued development of our business and operations.

THE COMPLETION OF THE TRANSPOINT MERGERS MAY CAUSE A BREACH UNDER VARIOUS
AGREEMENTS TO WHICH TRANSPOINT IS A PARTY AND POSSIBLY LEAD TO THE TERMINATION
OF, OR NONPERFORMANCE UNDER, THESE AND OTHER TRANSPOINT AGREEMENTS.

         The completion of the TransPoint mergers may violate the terms of
various agreements to which TransPoint is a party. We will attempt to obtain the
consent or waiver of the counterparties to these agreements, but we may be
unsuccessful in our attempts. In addition, various persons with which TransPoint
historically has had business relationships may attempt to be released from, or
fail to perform their obligations under, their contracts as a result of the
mergers, even if the terms of their contract with TransPoint do not allow a
release or nonperformance. If we are not able to obtain consents or waivers from
the counterparties to TransPoint's contracts, or if a sufficient number of
TransPoint's business partners refuse to perform their obligations, our
business, financial condition and results of operations may be adversely
affected.

MICROSOFT, FIRST DATA, CITIBANK AND THE FORMER EMPLOYEES OF THE TRANSPOINT
BUSINESS MAY ENGAGE FREELY IN MANY ACTIVITIES THAT MAY BE COMPETITIVE WITH OUR
BUSINESS.

         In connection with the completion of the TransPoint mergers, we entered
into a commercial alliance agreement with Microsoft and a marketing agreement
with First Data. Both of these agreements contain limited covenants of the other
party not to compete with us. These covenants, however, contain exceptions that
could allow the other parties to engage in activities that could be competitive
with our future business. These competitive activities, or the perception by
investors that activities by Microsoft and First Data are competitive with our
business, could adversely affect our business and the market price of our common
stock. The TransPoint mergers did not create any obligation whatsoever on the
part of Citibank to refrain from any business activities which are competitive
with, or even hostile to, us. Although we would like to expand our business
relationship with Citibank, nothing in or about the merger should be interpreted
as increasing the likelihood that we will be successful in winning additional
business from Citibank, or in preventing Citibank from competing against us.

         In addition, although the TransPoint merger agreement allows us to
attempt to solicit employees of Microsoft and First Data that formerly were
primarily engaged in the TransPoint business after the completion of the
TransPoint mergers, we may be unable to hire any of these employees. If these
employees decide not to work for us, they will be able to work for our
competitors or develop a business that competes with us.

THE MARKETING AGREEMENT WITH FIRST DATA AND THE COMMERCIAL ALLIANCE AGREEMENT
WITH MICROSOFT WILL LIMIT THE FLEXIBILITY OF OUR MANAGEMENT.

         The marketing agreement with First Data that we will execute upon
completion of the mergers requires us to purchase payment processing and other
products from First Data under specified circumstances, even if our management
has other reasons for choosing a different supplier. In addition, the commercial
alliance agreement with Microsoft requires the development of our products that
are used with products made by Microsoft to conform to specified standards.
Accordingly, as a result of these agreements with Microsoft and First Data, our
management's flexibility to make business decisions will be limited in various
respects.

OUR OBLIGATION TO SUPPORT THE TRANSPOINT BILLING AND PAYMENT PLATFORM FOR AT
LEAST THREE YEARS MAY DISTRACT OUR MANAGEMENT AND ADVERSELY EFFECT OUR FINANCIAL
RESULTS.

         Under the TransPoint merger agreement, we have agreed to support
TransPoint's billing and payment platform for three years after the closing of
the mergers, including allowing TransPoint's customers to renew contracts during
the three year period on substantially the same terms. In addition, Microsoft
and First Data will not be obligated to assist us with maintaining the
TransPoint platform after the one year anniversary of the closing of the
mergers. This support of the TransPoint platform may result in a significant
diversion of our resources and management from our other business activities and
may require us to continue contracts with TransPoint customers that we would
otherwise decide not to continue for economic or other reasons.



                                      -28-
<PAGE>   29

BECAUSE WE WILL BE A NEWLY-INTEGRATED ENTITY AFTER THE COMPLETION OF THE
TRANSPOINT MERGERS, THE HISTORICAL FINANCIAL STATEMENTS IN THIS ANNUAL REPORT ON
FORM 10-K MAY BE OF LIMITED VALUE IN EVALUATING OUR FUTURE PERFORMANCE.

         The combination of our and TransPoint's businesses will result in a new
enterprise that has not operated before as a single integrated unit. The
financial information in this Annual Report on Form 10-K concerning our
individual operations may be of limited value in evaluating our financial and
operating prospects in the future.

AFTER THE MERGER, BLUEGILL MAY NOT ACHIEVE ANTICIPATED REVENUES, EARNINGS OR
CASH FLOW.

         We can not assure you that BlueGill will achieve its anticipated
revenues, earnings or cash flow. Any shortfall may decrease the value and price
of our common stock and have an adverse effect on our business or financial
condition.

THE TRANSPOINT BUSINESS IS A NEW ENTERPRISE.

         The domestic TransPoint entities were formed beginning in June 1997,
began limited operations in May 1999 and formally commenced commercial
operations of their services in February 2000. Accordingly, the TransPoint
business is a new enterprise with a limited history of financial information,
especially with respect to results of operations.

AS A RESULT OF THE BLUEGILL AND TRANSPOINT MERGERS, WE WILL HAVE AN INCREASED
INTERNATIONAL PRESENCE IN WHICH WE HAVE HAD LIMITED BUSINESS EXPERIENCE.

         Historically, we have not offered or sold our products and services
internationally. International operations are subject to many risks that are
difficult or impossible to predict or control, including the following:

         -        unexpected changes in laws and regulatory requirements;
         -        longer payment cycles;
         -        adverse economic or political changes;
         -        exchange rate risks associated with conversion of foreign
                  currencies to United States dollars;
         -        potential trade restrictions;
         -        problems in collecting accounts receivables; and
         -        potentially adverse tax consequences.

         If we are unable to successfully adapt our business operations to these
additional risks and requirements, it could have a material adverse effect on
our business and financial condition.

ANTI-TAKEOVER PROVISIONS IN THE TRANSPOINT COMMERCIAL AGREEMENTS MAY MAKE A
CHANGE IN CONTROL OF OUR COMPANY MORE DIFFICULT.

         Both the commercial alliance agreement with Microsoft and the marketing
agreement with First Data, each of which we will execute in connection with the
closing of the mergers, allow the termination of the agreement by Microsoft or
First Data, as the case may be, under specific change of control circumstances.
If either Microsoft or First Data terminates under these circumstances, we will
lose a portion of the future revenue guarantees under the applicable agreement.
These potential termination events could discourage third parties from acquiring
us.

RISKS OF OUR STRATEGIC AGREEMENT WITH BANK OF AMERICA.

WE MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE STRATEGIC AGREEMENT.

         The success of the strategic agreement with Bank of America will
depend, in part, on our ability to realize the anticipated growth opportunities
and synergies from combining Bank of America's electronic billing and payment
assets with our business. To realize the anticipated benefits of the strategic
agreement, our management team must develop strategies and implement a business
plan that will:

         -        effectively combine Bank of America's electronic billing and
                  payment assets with our assets and services;
         -        successfully use the anticipated opportunities for
                  cross-promotion and sales of the products and services of
                  CheckFree and Bank of America; and
         -        while integrating Bank of America's electronic billing and
                  payment assets with our operations, maintain adequate focus on
                  our core businesses in order to take advantage of competitive
                  opportunities and to respond to competitive challenges.



                                      -29-
<PAGE>   30

         If our management team is not able to develop strategies and implement
a business plan that achieves these objectives, we may not realize the
anticipated benefits of the strategic agreement. In particular, anticipated
growth in revenue, earnings before interest, taxes, depreciation, and
amortization, or "EBITDA," and cash flow may not be realized, which would have
an adverse impact on us and the market price of our common stock.

WE MAY NOT BE ABLE TO PROVIDE ELECTRONIC BILLING AND PAYMENT SERVICES TO THE
BANK OF AMERICA SUBSCRIBERS FOR THE FEES WE AGREED TO IN THE STRATEGIC AGREEMENT
WITH BANK OF AMERICA.

         The success of the strategic agreement with Bank of America will
depend, in part, on our ability to ultimately provide electronic billing and
payment services to the Bank of America subscribers at a cost to us that is less
than the fees we have agreed to receive. If we are unable to provide electronic
billing and payment services to the Bank of America subscribers profitably, the
strategic agreement will have a material adverse effect on our business,
financial condition and results of operations.

BANK OF AMERICA'S MARKETING EFFORTS MAY NOT BE SUCCESSFUL IN GENERATING
ADDITIONAL SUBSCRIBERS FOR OUR ELECTRONIC BILLING AND PAYMENT SERVICES.

         If Bank of America's marketing efforts to generate additional
subscribers are not successful, it could have a material adverse effect on our
business, financial condition and results of operations. Although Bank of
America currently lists some 400,000 subscribers to their legacy electronic
billing and payment services, we do not know how many of those subscribers
actively use those services or how many of those subscribers will migrate to our
electronic billing and payment services. In order to realize the benefit of the
strategic agreement with Bank of America and to consistently increase and
maintain our profitability, we must encourage the existing Bank of America
subscribers to actively utilize our billing and payment services, as well as
generate additional subscribers from the Bank of America base of customers. We
currently serve an additional approximately 400,000 Bank of America customers on
our own systems under the terms of a pre-existing contract.

OUR ASSUMPTION OF CERTAIN LONG-TERM LEASEHOLD OBLIGATIONS COULD HAVE AN ADVERSE
IMPACT ON OUR RESULTS OF OPERATIONS.

         As part of the strategic agreement with Bank of America, we are
assuming certain of Bank of America's long-term leasehold obligations which, if
we are unable to use the leased premises efficiently in our business (or find a
third party to assume the leasehold obligations), could have a material adverse
effect on our profitability and results of operations.

OUR ABILITY TO SUCCEED IN TRANSITIONING BANK OF AMERICA'S BILLING AND PAYMENT
SERVICES FROM A LEGACY SYSTEM TO OUR SYSTEM IS DEPENDENT ON RETAINING QUALIFIED
BANK OF AMERICA EMPLOYEES KNOWLEDGEABLE IN THE OPERATION OF A LEGACY SYSTEM.

         The success of the strategic agreement with Bank of America is
dependent on our ability to retain qualified Bank of America employees with
experience operating Bank of America's billing and payment processing system.
Bank of America operates its electronic billing and payment services on a legacy
system that we expect to migrate to our processing systems. If we are unable to
retain the experienced Bank of America employees through the transition and
migration process, we will have to either divert our current employees from
other important work or incur a significant expense to hire people qualified to
operate a legacy system to assist us with the transition and migration process.
Competition for qualified employees is intense and employees qualified to
operate a legacy system are in short supply.

WE ARE REQUIRED TO DEPRECIATE THE ACQUIRED ASSETS OVER THEIR USEFUL LIVES THAT
WILL CAUSE OUR EARNINGS PER SHARE TO DECREASE.

         Because we will be accounting for the transaction as an asset purchase,
the purchase will result in a charge to our earnings that will decrease your
earnings per share. We will be required to amortize approximately $412 million
over a period of ten years or approximately $41.2 million per year.

         We will issue 10 million shares of our common stock in connection with
the strategic agreement. Assuming the transaction was completed on July 1, 1998,
the strategic agreement would result in immediate and substantial dilution of
per share earnings from $0.18 diluted to $(0.48) diluted for the year ended June
30, 1999, and dilution of per share earnings from $(0.23) to $(0.38) for the
nine months ended March 31, 2000. The anticipated dilution could have a negative
impact on the market price of our common stock. Analysts and investors carefully
review a company's earnings per share and often base investment decisions on a
company's per share earnings.



                                      -30-
<PAGE>   31

ITEM 2.  PROPERTIES.

         We lease the following office facilities:

         -        approximately 229,000 square feet in Norcross, Georgia;
         -        approximately 150,000 square feet in Dublin, Ohio;
         -        approximately 100,000 square feet in Phoenix, Arizona;
         -        approximately 51,000 square feet in Aurora, Illinois;
         -        approximately 32,000 square feet in Austin, Texas;
         -        approximately 30,000 square feet in Owings Mills, Maryland;
         -        approximately 30,000 square feet in Ann Arbor, Michigan;
         -        approximately 23,000 square feet in Waterloo, Ontario, Canada;
         -        approximately 17,000 square feet in Jersey City, New Jersey;
         -        approximately 14,000 square feet in Downers' Grove, Illinois;
         -        approximately 10,000 square feet in Chicago, Illinois;
         -        approximately 3,000 square feet in San Diego, California;
         -        approximately 3,000 square feet in Ashburn, Virginia;
         -        approximately 2,000 square feet in Boston, Massachusetts; and
         -        approximately 1,000 square feet in Houston, Texas.

We own a 51,000 square foot conference center in Norcross, Georgia that includes
lodging, training, and fitness facilities for our customers and employees.
Although we own the building, it is on land that is leased through June 30,
2021. We believe that our facilities are adequate for current and near-term
growth and that additional space is available to provide for anticipated growth.

ITEM 3.  LEGAL PROCEEDINGS.

         There are no material legal proceedings pending against us.

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

          None.


                                      -31-
<PAGE>   32

                                     PART II

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

          Our common stock is traded on the Nasdaq National Market under the
symbol "CKFR." The following table sets forth the high and low sales prices of
our common stock for the periods indicated as reported by the Nasdaq National
Market.

<TABLE>
<CAPTION>
                                                                                                  COMMON STOCK
                                                                                                      PRICE
                                                                                                      -----
FISCAL PERIOD                                                                               HIGH                LOW
-------------                                                                               ----                ---

<S>                                                                                        <C>                <C>
FISCAL 1999
First Quarter.......................................................................       $  31.50           $ 8.25
Second Quarter......................................................................       $  23.44           $ 5.75
Third Quarter.......................................................................       $  46.00           $20.63
Fourth Quarter......................................................................       $  69.13           $24.50

FISCAL 2000
First Quarter.......................................................................       $  44.25           $23.13
Second Quarter......................................................................       $ 107.50           $34.00
Third Quarter.......................................................................       $ 125.63           $55.77
Fourth Quarter......................................................................       $  70.75           $28.50

FISCAL 2001
First Quarter (through September 20, 2000)..........................................       $  72.00           $41.75
</TABLE>

         On September 20, 2000, the last reported bid price for our common stock
on the Nasdaq National Market was $44.06 per share. As of September 20, 2000,
there were approximately 686 holders of record of our common stock.

         We currently anticipate that all of our future earnings will be
retained for the development of our business and do not anticipate paying cash
dividends on our common stock for the foreseeable future. In addition, our line
of credit does not allow for the payment of cash dividends on our common stock.
Our board of directors will determine future dividend policy based on our
results of operations, financial condition, capital requirements and other
circumstances. During the last ten years, we have not paid cash dividends.

          During the past fiscal year, we have issued the following unregistered
securities and repurchased shares of our common stock:

<TABLE>
<CAPTION>
                         TYPE OF          NUMBER           UNDERWRITER /                                     EXEMPTION
      DATE             SECURITIES        OF SHARES          PURCHASER               CONSIDERATION            CLAIMED
------------------    --------------    ----------    --------------------    ------------------------    ------------
<S>                   <C>               <C>           <C>                     <C>                         <C>
October 26, 1999      common stock         250,000         Banc One                      $9,562,500         Section
                                                          Corporation                                        4(2)
 August 5, 1999       common stock          12,000    Peter F. Sinisgalli       Grant of restricted         Section
                                                                                stock                        4(2)
 July 19, 1999        common stock           1,000        John Frech            Grant of restricted         Section
                                                                                stock                        4(2)
</TABLE>

ITEM 6.  SELECTED FINANCIAL DATA.

          The information required by this item is included under the caption
"SELECTED FINANCIAL DATA" in our Annual Report and is incorporated herein by
reference.

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

         The information required by this item is included under the caption
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION" in our Annual Report and is incorporated herein by reference.



                                      -32-
<PAGE>   33

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 on Form 10-K include certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 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 ,our
operating and growth strategy, and Year 2000 issues. 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" included elsewhere in this Annual Report on Form 10-K 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 on Form 10-K 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 a representation by us or any other person that our
objectives and plans will be achieved. All forward-looking statements made in
this Annual Report on Form 10-K are based on information presently available to
our management. We assume no obligation to update any forward-looking
statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         None.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

          Our consolidated balance sheets as of June 30, 1999 and 2000 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended June 30, 1998, 1999 and 2000 and the notes to the
financial statements, together with the independent auditors' report thereon
appear in our Annual Report and are incorporated herein by reference.

          Our Financial Statement Schedule and Independent Auditors' Report on
Financial Statement Schedule are included in response to Item 14 below.

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

          None.


                                      -33-
<PAGE>   34

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

          The information required by this item is included under the captions
"ELECTION OF DIRECTORS," "EXECUTIVE OFFICERS" and "SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE" in our Proxy relating to our 2000 Annual Meeting
of Stockholders to be held on November 1, 2000, and is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION.

          The information required by this item is included under the captions
"INFORMATION CONCERNING THE BOARD OF DIRECTORS" and "EXECUTIVE COMPENSATION" in
our Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

          The information required by this item is included under the captions
"OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS" and "OWNERSHIP
OF COMMON STOCK BY PRINCIPAL STOCKHOLDERS" in our Proxy Statement and is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is included under the captions
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" and "COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION" in our Proxy Statement and is incorporated
herein by reference.



                                      -34-
<PAGE>   35


                                     PART IV

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

         (a)      The following documents are filed as part of this report:

                  (1)(i) The following financial statements appearing in our
2000 Annual Report to Stockholders are incorporated herein by reference:

                  Independent Auditors' Report.

                  Consolidated Balance Sheets as of June 30, 1999 and 2000.

                  Consolidated Statements of Operations for each of the three
                  years in the period ended June 30, 2000.

                  Consolidated Statements of Stockholders' Equity for each of
                  the three years in the period ended June 30, 2000.

                  Consolidated Statements of Cash Flows for each of the three
                  years in the period ended June 30, 2000.

                  Notes to the Consolidated Financial Statements.

                  (1)(ii) The following financial statements of CheckFree
Management Corporation are included in this Annual Report on Form 10-K:

                  Independent Auditors' Report.

                  Balance Sheets of CheckFree Management Corporation as of June
                  30, 1999 and 2000.

                  Statements of Operations of CheckFree Management Corporation
                  for the period from inception (December 8, 1998) through June
                  30, 1999 and for the fiscal year ended June 30, 2000.

                  Statements of Stockholder's Equity of CheckFree Management
                  Corporation for the period from inception (December 8, 1998)
                  through June 30, 1999 and for the fiscal year ended June 30,
                  2000.

                  Notes to the Financial Statements of CheckFree Management
                  Corporation.

                  (2) The following financial statement schedule is included in
this Annual Report on Form 10-K and should be read in conjunction with the
Consolidated Financial Statements contained in the Annual Report:

                  Schedule II -- Valuation and Qualifying Accounts.

                  Independent Auditors' Report on Financial Statement Schedule.

Schedules not listed above are omitted because of the absence of the conditions
under which they are required or because the required information is included in
the financial statements or the notes thereto.

                  (3)      Exhibits:

      EXHIBIT                                      EXHIBIT
      NUMBER                                     DESCRIPTION
      ------                                     -----------

       2(a)                Agreement and Plan of Merger, dated as of December
                           20, 1999, among the Company, CheckFree Acquisition
                           Corporation IV, and BlueGill Technologies, Inc.
                           (Reference to Appendix A of Form S-4 Registration
                           Statement (333-32644) and incorporated herein by
                           reference.)

       2(b)                Agreement and Plan Merger and Contribution Agreement,
                           dated as of February 15, 2000, among Microsoft
                           Corporation, First Data Corporation, Citibank, N.A.,
                           MS II, LLC, First Data, L.L.C., H & B Finance, Inc.,
                           First Data International Partner, Inc., MSFDC
                           International, Inc., Citicorp Electronic Commerce,
                           Inc., CheckFree Holdings Corporation, Chopper Merger
                           Corporation, and CheckFree Corporation (Reference is

                                      -35-
<PAGE>   36

                           made to Exhibit 2(b) of the Registration Statement on
                           Form S-4 (333-32644) and incorporated herein by
                           reference.)

       2(c)                Amended and Restated Agreement and Plan of Merger,
                           dated as of July 7, 2000, among CheckFree Holdings
                           Corporation, Microsoft Corporation, First Data
                           Corporation, Citibank, N.A., H&B Finance, Inc., FDC
                           International Partner, Inc., FDR Subsidiary Corp., MS
                           FDC International, Inc., Citi TransPoint Holdings
                           Inc., TransPoint Acquisition Corporation, Tank
                           Acquisition Corporation, Chopper Merger Corporation,
                           CheckFree Corporation, Microsoft II, LLC and First
                           Data, L.L.C. (Reference is made to Exhibit 2(c) of
                           the Registration Statement on Form S-4 (333-32644)
                           and incorporated herein by reference.)

       3(a)                Restated Certificate of Incorporation of the Company.
                           (Reference is made to Exhibit 3(a) to the Current
                           Report on Form 8-K, dated December 22, 1997, filed
                           with the Securities and Exchange Commission on
                           December 30, 1997, and incorporated herein by
                           reference.)

       3(b)       *        Certificate of Ownership and Merger Merging CheckFree
                           Corporation into CheckFree Holdings Corporation.

       3(c)                By-Laws of the Company. (Reference is made to Exhibit
                           3(b) to the Current Report on Form 8-K, dated
                           December 22, 1997, filed with the Securities and
                           Exchange Commission on December 30, 1997, and
                           incorporated herein by reference.)

       3(d)       *        Form of Specimen Stock Certificate.

       4(a)                Articles FOURTH, FIFTH, SEVENTH, EIGHTH, TENTH AND
                           ELEVENTH of the Company's Restated Certificate of
                           Incorporation (contained in the Company's Restated
                           Certificate of Incorporation filed as Exhibit 3(a)
                           hereto) and Articles II, III, IV, VI and VIII of the
                           Company's By-Laws (contained in the Company's By-Laws
                           filed as Exhibit 3(b) hereto).

       4(b)                Rights Agreement, dated as of December 16, 1997, by
                           and between the Company and The Fifth Third Bank, as
                           Rights Agent. (Reference is made to Exhibit 4.1 to
                           Amendment No. 1 to Registration Statement on Form
                           8-A, filed with the Securities and Exchange
                           Commission on May 12, 1999, and incorporated herein
                           by reference.)

       10(a)               CheckFree Corporation Amended and Restated Associate
                           Stock Purchase Plan. (Reference is made to Exhibit
                           4(a) to Post-Effective Amendment No. 1 to Form S-8,
                           as amended (Registration No. 333-21795), filed with
                           the Securities and Exchange Commission on January 14,
                           1998, and incorporated herein by reference.)

       10(b)               CheckFree Corporation Amended and Restated 1995 Stock
                           Option Plan. (Reference is made to Exhibit 4(a) to
                           Post-Effective Amendment No. 1 to Form S-8, as
                           amended (Registration No. 33-98446), filed with the
                           Securities and Exchange Commission on January 9,
                           1998, and incorporated herein by reference.)

       10(c)               CheckFree Corporation Amended and Restated 1993 Stock
                           Option Plan. (Reference is made to Exhibit 4(a) to
                           Post-Effective Amendment No. 1 to Form S-8, as
                           amended (Registration No. 33-98442), filed with the
                           Securities and Exchange Commission on January 9,
                           1998, and incorporated herein by reference.)

       10(d)               CheckFree Corporation Amended and Restated 1983
                           Non-Statutory Stock Option Plan. (Reference is made
                           to Exhibit 4(a) to Post-Effective Amendment No. 1 to
                           Form S-8, as amended (Registration No. 33-98440),
                           filed with the Securities and Exchange Commission on
                           January 9, 1998, and incorporated herein by
                           reference.)

       10(e)               CheckFree Corporation Second Amended and Restated
                           1983 Incentive Stock Option Plan. (Reference is made
                           to Exhibit 4(a) to Post-Effective Amendment No. 1 to
                           Form S-8, as amended (Registration No. 33-98444),
                           filed with the Securities and Exchange Commission on
                           January 9, 1998, and incorporated herein by
                           reference.)



                                      -36-
<PAGE>   37

       10(f)               Form of Indemnification Agreement. (Reference is made
                           to Exhibit 10(a) to Registration Statement on Form
                           S-1, as amended (Registration No. 33-95738), filed
                           with the Securities and Exchange Commission on August
                           14, 1995, and incorporated herein by reference.)

       10(g)               Schedule identifying material details of
                           Indemnification Agreements substantially identical to
                           Exhibit 10(f). (Reference is made to Exhibit 10(g) to
                           the Company's Form 10-K for the year ended June 30,
                           1997, filed with the Securities and Exchange
                           Commission on September 26, 1997, and incorporated
                           herein by reference.)

       10(h)               Noncompete, Nondisclosure, and Assignment Agreement,
                           dated February 1, 1990, between Peter J. Kight and
                           the Company. (Reference is made to Exhibit 10(i) to
                           Registration Statement on Form S-1, as amended
                           (Registration No. 33-95738), filed with the
                           Securities and Exchange Commission on August 14,
                           1995, and incorporated herein by reference.)

       10(i)               Noncompete, Nondisclosure, and Assignment Agreement,
                           dated February 1, 1990, between Mark A. Johnson and
                           the Company. (Reference is made to Exhibit 10(j) to
                           Registration Statement on Form S-1, as amended
                           (Registration No. 33-95738), filed with the
                           Securities and Exchange Commission on August 14,
                           1995, and incorporated herein by reference.)

       10(j)               ACH Operations Agreement, dated April 1, 1994,
                           between the Company and Society National Bank.
                           (Reference is made to Exhibit 10(ii) to Registration
                           Statement on Form S-1, as amended (Registration No.
                           33-95738), filed with the Securities and Exchange
                           Commission on August 14, 1995, and incorporated
                           herein by reference.)

       10(k)               Merchant Processing Agreement, dated March 13, 1995,
                           between the Company and Society National Bank.
                           (Reference is made to Exhibit 10(jj) to Registration
                           Statement on Form S-1, as amended (Registration No.
                           33-95738), filed with the Securities and Exchange
                           Commission on August 14, 1995, and incorporated
                           herein by reference.)

       10(l)               Executive Employment Agreement between the Company
                           and Peter J. Kight. (Reference is made to Exhibit
                           10(z) to the Company's Form 10-K for the year ended
                           June 30, 1997, filed with the Securities and Exchange
                           Commission on September 26, 1997, and incorporated
                           herein by reference.)

       10(m)               Executive Employment Agreement between the Company
                           and Lynn D. Busing. (Reference is made to Exhibit
                           10(f) to the Form 10-Q for the quarter ended March
                           31, 1996, filed with the Securities and Exchange
                           Commission, and incorporated herein by reference.)

       10(n)               Agreement for ACH Services between the Company and
                           The Chase Manhattan Bank, N.A., dated as of July 1,
                           1996. (Reference is made to Exhibit 10(qqq) to the
                           Form 10-K for the transition period ended June 30,
                           1996, filed with the Securities and Exchange
                           Commission, and incorporated herein by reference.)

       10(o)               Loan and Security Agreement, dated as of May 13,
                           1997, among KeyBank National Association, the
                           Company, CheckFree Software Solutions, Inc.,
                           CheckFree Services Corporation, Security APL, Inc.,
                           Servantis Systems, Inc., and Servantis Services, Inc.
                           (Reference is made to Exhibit 10(ee) to the Company's
                           Form 10-K for the year ended June 30, 1997, filed
                           with the Securities and Exchange Commission on
                           September 26, 1997, and incorporated herein by
                           reference.)

       10(p)               First Amendment to Loan and Security Agreement by and
                           between KeyBank National Association, as Lender, and
                           CheckFree Corporation, as Borrower, dated as of
                           December 9, 1998. (Reference is made to Exhibit 10.1
                           to the Company's Form 10-Q for the quarter ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 17, 1999, and incorporated
                           herein by reference.)

       10(q)               CheckFree Corporation Incentive Compensation Plan.
                           (Reference is made to Exhibit 10(ff) to the Company's
                           Form 10-K for the year ended June 30, 1997, filed
                           with the Securities and Exchange Commission on
                           September 26, 1997, and incorporated herein by
                           reference.)

                                      -37-
<PAGE>   38

       10(r)               Form of Stockholder Agreement entered into between
                           the Company and each of Microsoft Corporation and
                           First Data Corporation. (Reference is made to Exhibit
                           10(ff) of the Company's Registration Statement on
                           Form S-4 (Registration No. 333-41098) filed with the
                           Securities and Exchange Commission on July 10, 2000
                           and incorporated herein by reference).**

       10(s)               Form of Registration Rights Agreement entered into
                           between the Company and each of Microsoft Corporation
                           and First Data Corporation. (Reference is made to
                           Exhibit 10(gg) of the Company's Registration
                           Statement on Form S-4 (Registration No. 333-41098)
                           filed with the Securities and Exchange Commission on
                           July 10, 2000 and incorporated herein by
                           reference).**

       10(t)               Form of Registration Rights Agreement entered into
                           between the Company and Citibank, N.A. (Reference is
                           made to Exhibit 10(hh) of the Company's Registration
                           Statement on Form S-4 (Registration No. 333-41098)
                           filed with the Securities and Exchange Commission on
                           July 10, 2000 and incorporated herein by
                           reference).**

       10(u)               Form of Commercial Alliance Agreement entered into
                           between the Company and Microsoft Corporation.
                           (Reference is made to Exhibit 10(ff) of the Company's
                           Amendment No. 1 to the Registration Statement on Form
                           S-4 (Registration No. 333-32644) filed with the
                           Securities and Exchange Commission on April 18, 2000
                           and incorporated herein by reference).**

       10(v)               Form of Marketing Agreement entered into between the
                           Company and First Data Corporation. (Reference is
                           made to Exhibit 10(gg) of the Company's Amendment No.
                           1 to the Registration Statement on Form S-4
                           (Registration No. 333-32644) filed with the
                           Securities and Exchange Commission on April 18, 2000
                           and incorporated herein by reference).**

        13        *        Portions of the Annual Report to Stockholders for the
                           year ended June 30, 2000.

        21        *        Subsidiaries of the Company.

        23        *        Consent of Deloitte & Touche LLP.

        24        *        Power of Attorney.

        27        *        Financial Data Schedule.

        99        *        Financial Statement Schedule and Independent
                           Auditors' Report.

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


    * Filed with this report.
   ** Portions of this Exhibit have been given confidential treatment by the
      Securities and Exchange Commission.

         (b)      REPORTS ON FORM 8-K.

                  We filed the following Current Reports on Form 8-K since March
                  31, 2000:

                  (i)      Current Report on Form 8-K/A, dated March 16, 2000,
                           filed with the Securities and Exchange Commission on
                           April 27, 2000 (Items 5 and 7);
                  (ii)     Current Report on Form 8-K, dated April 2, 2000,
                           filed with the Securities and Exchange Commission on
                           April 3, 2000 (Items 5 and 7);
                  (iii)    Current Report on Form 8-K, dated April 27, 2000,
                           filed with the Securities and Exchange Commission on
                           April 27, 2000 (Items 5 and 7);
                  (iv)     Current Report on Form 8-K, dated April 28, 2000,
                           filed with the Securities and Exchange Commission on
                           April 28, 2000 (Items 5 and 7);


                                      -38-
<PAGE>   39

                  (v)      Current Report on Form 8-K, dated April 28, 2000,
                           filed with the Securities and Exchange Commission on
                           May 15, 2000 and amended on July 10, 2000 (Items 2
                           and 7);
                  (vi)     Current Report on Form 8-K, dated May 22, 2000, filed
                           with the Securities and Exchange Commission on May
                           23, 2000 (Items 5 and 7);
                  (vii)    Current Report on Form 8-K, dated June 6, 2000, filed
                           with the Securities and Exchange Commission on June
                           7, 2000 (Items 5 and 7);
                  (viii)   Current Report on Form 8-K, dated July 12, 2000,
                           filed with the Securities and Exchange Commission on
                           July 12, 2000 (Items 5 and 7); and
                  (ix)     Current Report on Form 8-K, dated August 2, 2000,
                           filed with the Securities and Exchange Commission on
                           August 3, 2000 (Items 5 and 7).

         (c)      EXHIBITS.

                  The exhibits to this report follow the Signature Page.

         (d)      FINANCIAL STATEMENT SCHEDULES.

                  The financial statement schedule and the independent auditors'
report thereon are included in Exhibit 99 to this Annual Report on Form 10-K.


                                      -39-


<PAGE>   40
INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
  CheckFree Management Corporation:

We have audited the accompanying balance sheet of CheckFree Management
Corporation (the "Company") as of June 30, 1999 and 2000, and the related
statements of operations, stockholders' equity and cash flows for the period
from December 8, 1998 (date of inception) to June 30, 1999 and the year ended
June 30, 2000. 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 audit.

We conducted our audit 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 audit provides a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at June 30, 1999 and 2000, and
the results of its operations and its cash flows for the period from December 8,
1998 (date of inception) to June 30, 1999 and the year ended June 30, 2000 in
conformity with accounting principles generally accepted in the United States of
America.



/s/ Deloitte & Touche LLP
-------------------------

Atlanta, Georgia
August 7, 2000


                                       40
<PAGE>   41




                        CHECKFREE MANAGEMENT CORPORATION
                                  BALANCE SHEET
                             JUNE 30, 1999 AND 2000




<TABLE>
<CAPTION>
                                                                     1999      2000
                                                                   --------   --------
                                                                  (IN THOUSANDS, EXCEPT
                                                                       SHARE DATA)

<S>                                                                <C>        <C>
                            ASSETS
CURRENT ASSETS:
    Cash .......................................................   $    291   $      4
    Related party note receivable, current portion .............      1,970      3,678
                                                                   --------   --------
                    Total current assets .......................      2,261      3,682

RELATED PARTY NOTE RECEIVABLE, less current portion ............     27,798     23,873
                                                                   --------   --------
                                                                   $ 30,059   $ 27,555
                                                                   ========   ========

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Related party advance ......................................   $   --     $    250
    Accrued claims .............................................        318      2,572
    Deposit for future claims liability ........................      1,970      3,678
                                                                   --------   --------
                    Total current liabilities ..................      2,288      6,500

DEPOSIT FOR FUTURE CLAIMS LIABILITY- Less current
        portion ................................................     27,430     20,708

REDEEMABLE PREFERRED STOCK:
     Class C,  350 authorized shares, $100  par value;
        350 shares issued and outstanding ......................         36         36
     Class D,  750 authorized shares, $100  par value;
        750 shares issued and outstanding ......................         78         78
                                                                   --------   --------
                    Total redeemable preferred stock ...........        114        114

STOCKHOLDERS' EQUITY:
     Preferred stock- Class B,  600 authorized shares, $100  par
       value;  600 shares issued, no amounts outstanding .......       --         --
     Common stock- Class A, 1,900 authorized shares, $100 par
        value; 1,900 shares issued and outstanding .............        190        190
                                                                   --------   --------
     Retained earnings .........................................         37         43
                                                                   --------   --------
                    Total stockholders' equity .................        227        233
                                                                   --------   --------
                                                                   $ 30,059   $ 27,555
                                                                   ========   ========
</TABLE>
                        See notes to financial statements

                                      -41-

<PAGE>   42


                        CHECKFREE MANAGEMENT CORPORATION

                             STATEMENT OF OPERATIONS



<TABLE>
<CAPTION>
                                                            DECEMBER 8, 1998
                                                                (DATE OF       YEAR ENDED
                                                              INCEPTION) TO      JUNE 30,
                                                              JUNE 30, 1999        2000
                                                              -------------    -----------

                                                                      (IN THOUSANDS)

<S>                                                            <C>            <C>
REVENUES:
     Interest income from related party ....................   $      1,300   $      2,457
     Other interest income .................................             43             18
                                                               ------------   ------------
                    Total revenues .........................          1,343          2,475

EXPENSES:
     Interest expense on deposit for future claims liability          1,185          2,227
     General and administrative ............................            117            235
                                                               ------------   ------------
                    Total expenses .........................          1,302          2,462
                                                               ------------   ------------

INCOME BEFORE INCOME TAXES .................................             41             13
INCOME TAX EXPENSE .........................................           --             --
                                                               ------------   ------------
NET INCOME .................................................             41             13

DIVIDENDS ON REDEEMABLE PREFERRED STOCK ....................              4              7
                                                               ------------   ------------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS ...............   $         37   $          6
                                                               ============   ============
</TABLE>


                        See notes to financial statements


                                      -42-

<PAGE>   43

                        CHECKFREE MANAGEMENT CORPORATION

                        STATEMENT OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                              NUMBER OF      PREFERRED     NUMBER OF         COMMON                        TOTAL
                                              SHARES OF      STOCK AT      SHARES OF        STOCK AT      RETAINED     STOCKHOLDERS'
                                           PREFERRED STOCK     PAR        COMMON STOCK        PAR         EARNINGS        EQUITY
                                            ------------    ----------    ------------   ------------   -----------    ------------

                                                                      (IN THOUSANDS, EXCEPT SHARE DATA)

<S>                                          <C>            <C>            <C>           <C>            <C>            <C>
BALANCE - DECEMBER 8, 1998 ..............           --      $     --              --     $       --     $      --      $       --
     Issuance of preferred stock for cash            600            60            --             --            --                60
     Exchange of preferred stock for
           redeemable preferred stock ...           (600)          (60)           --             --            --               (60)
     Dividends accrued on redeemable
           preferred stock ..............           --            --              --             --              (4)             (4)
     Issuance of common stock for cash ..           --            --             1,900            190          --               190
     Net income .........................           --            --              --             --              41              41
                                            ------------    ----------    ------------   ------------   -----------    ------------
BALANCE- JUNE 30, 1999 ..................           --            --             1,900            190            37             227
    Net income ..........................           --            --              --             --              13              13
    Dividends accrued on redeemable
           preferred stock ..............           --            --              --             --              (7)             (7)
                                            ------------    ----------    ------------   ------------   -----------    ------------
BALANCE- JUNE 30, 2000 ..................           --      $     --             1,900   $        190   $        43    $        233
                                            ============    ==========    ============   ============   ===========    ============
</TABLE>


                        See notes to financial statements

                                      -43-
<PAGE>   44


                        CHECKFREE MANAGEMENT CORPORATION
                             STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                        DECEMBER 8, 1998
                                                                            (DATE OF       YEAR ENDED
                                                                          INCEPTION) TO     JUNE 30,
                                                                          JUNE 30, 1999       2000
                                                                           ------------    ------------
                                                                                  (IN THOUSANDS)

<S>                                                                        <C>             <C>
OPERATING ACTIVITIES:
     Net income ........................................................   $         41    $         13
                                                                           ------------    ------------
                    Net cash provided by operating activities ..........             41              13

INVESTING ACTIVITIES:
     Loan  to related party ............................................        (30,512)           --
     Principal payments received on related party note .................            743           2,218
                                                                           ------------    ------------
                    Net cash provided by  (used in) investing activities        (29,769)          2,218

FINANCING ACTIVITIES:
     Proceeds from assumption of health plan liabilities ...............         30,474            --
     Payments made on health plan liabilities ..........................           (755)         (2,760)
     Advance from related party ........................................           --               249
     Redeemable preferred stock dividends paid .........................           --                (7)
     Proceeds from issuance of common stock ............................            190            --
     Proceeds from issuance of preferred stock .........................            110            --
                                                                           ------------    ------------
                    Net cash provided by (used in) financing activities          30,019          (2,518)
                                                                           ------------    ------------

NET INCREASE (DECREASE) IN CASH ........................................            291            (287)

CASH:
     Beginning of period ...............................................           --               291
                                                                           ------------    ------------
     End of period .....................................................   $        291    $          4
                                                                           ============    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
     Interest paid .....................................................   $      1,185    $      2,227
                                                                           ============    ============
     Dividends accrued on redeemable preferred stock ...................   $          4    $          7
                                                                           ============    ============
</TABLE>


                        See notes to financial statements

                                      -44-
<PAGE>   45

                        CHECKFREE MANAGEMENT CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
 AS OF JUNE 30, 1999 AND 2000, FOR THE PERIOD FROM DECEMBER 8, 1998 TO JUNE 30,
                     1999 AND THE YEAR ENDED JUNE 30, 2000



1.    DESCRIPTION OF THE BUSINESS

      CheckFree Management Corporation (the "Company") was formed from a plan of
      recapitalization of RCM Systems, Inc., a wholly owned subsidiary of
      CheckFree Corporation ("CheckFree"), on December 8, 1998. The Company was
      formed as a medical claims management subsidiary in order to appropriately
      minimize, control, and manage the medical claims liabilities of CheckFree
      and its subsidiaries. As of June 30, 1999 and 2000, CheckFree and its
      subsidiaries own approximately 63% and 89% of the Company, respectively.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation - The accompanying financial statements include the
      results of operations of the Company since its inception date, December 8,
      1998, and 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.

      Cash and Cash Equivalents - The Company considers all highly liquid debt
      instruments purchased with maturities of three months or less to be cash
      equivalents. The Company held no cash equivalents at June 30, 1999 or
      2000.

      Deposit for Future Claims Liability- The Company accounts for the deposit
      for future claims liability under deposit accounting as set forth in
      Statement of Position ("SOP") 98-7, "Deposit Accounting & Accounting for
      Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk"
      issued by the Accounting Standards Executive Committee. Under deposit
      accounting, the Company recorded the cash received from CheckFree
      Corporation as a deposit liability. As the Company makes payments of
      medical claims, they record a reduction in the accrued deposit for future
      claims liability. The deposit liability account is also adjusted by
      calculating the effective yield on the deposit to reflect the actual
      medical claim payments to date and expected future medical claims, with a
      corresponding credit or charge to interest income or expense.

      Comprehensive Income - The Company reports Comprehensive Income in
      accordance with the provisions of 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. There were no components
      of other comprehensive income applicable to the Company for the periods
      ended June 30, 1999 or 2000.

      Recent Accounting Pronouncements.- In June 1998, the Financial Accounting
      Standards Board issued SFAS 133, "Accounting for Derivative Instruments
      and Hedging Activities," which requires that all derivative financial
      instruments be recognized as either assets or liabilities in the balance
      sheet. SFAS No. 133 will be effective for the Company's first quarter of
      fiscal 2001. SFAS 133 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 completed a
      review of its contracts and determined that they contained no "imbedded
      derivatives" that require separate reporting and disclosure under SFAS
      133. As such, the adoption of SFAS 133 on July 1, 2000 will not have a
      material impact on results of operations or other comprehensive income.

                                      -45-

<PAGE>   46

                        CHECKFREE MANAGEMENT CORPORATION
                   NOTES TO FINANCIAL STATEMENTS- (CONTINUED)

3.    RELATED PARTY NOTE RECEIVABLE

      On December 30, 1998, the Company loaned $30,511,871 to CheckFree Services
      Corporation ("CheckFree Services") and received a promissory note calling
      for principal and interest payments to be made monthly commencing February
      1, 1999. The note matures on March 1, 2005 and bears interest at 8.51% per
      annum. CheckFree Services is a stockholder in the Company and is a wholly
      owned subsidiary of CheckFree. Interest income on the note amounted to
      $1,300,000 and $2,458,000 for the periods ended June 30, 1999 and 2000,
      respectively.

      Principal payments due on the note are as follows (in thousands):

                FISCAL YEAR
                ENDING JUNE 30,
                ---------------
                2001 ...................................   $ 3,678
                2002 ...................................     4,800
                2003 ...................................     6,099
                2004 ...................................     7,552
                2005 ...................................     5,422
                                                           -------
                               Total ...................   $27,551
                                                           =======


      At June 30, 1999 and 2000, the estimated fair value of the note receivable
      approximates the carrying value based on currently available instruments
      with similar interest rates and remaining maturities.



4.    DEPOSIT FOR FUTURE CLAIMS LIABILITY

      On December 21, 1998, the Company and CheckFree Services entered into an
      exchange agreement whereby CheckFree Services contributed cash of
      $30,507,860 in exchange for 350 shares of Class C Redeemable Preferred
      Stock and the Company agreed to unconditionally assume and undertake to
      pay certain health plan liabilities of CheckFree Services . The health
      plan liabilities recorded by the Company were based on the present value
      (at an assumed discount rate of 8.51%) of claims estimated to be incurred
      over a five-year period commencing January 1, 1999. Estimated annual claim
      liability reduction is as follows (in thousands):

                FISCAL YEAR
                ENDING JUNE 30,
                ---------------
                2001 ...................................   $ 3,678
                2002 ...................................     4,800
                2003 ...................................     6,099
                2004 ...................................     7,552
                2005 ...................................     2,257
                                                           -------
                               Total ...................   $24,386
                                                           =======

                                      -46-
<PAGE>   47


                        CHECKFREE MANAGEMENT CORPORATION
                   NOTES TO FINANCIAL STATEMENTS- (CONTINUED)


5.    REDEEMABLE PREFERRED STOCK

         The holders of Class C, and Class D Redeemable Preferred Stock have
         certain rights, privileges and preferences, which include the
         following:

                  Dividends- The holders are entitled to receive dividends
         before any dividend is declared or paid on shares of Class A Common
         Stock. Such dividends are cumulative and are payable at times
         determined by the Board of Directors.

                  Voting Rights-The holders are entitled to one vote per share
         and each class has certain rights with respect to election of the
         Company's Board of Directors.

                  Redemption - On or after January 1, 2004, the Company may, at
         its option, redeem the shares of Class C and Class D preferred stock
         for cash, the amount of which is determined by the "Formula Value",
         plus any accrued but unpaid dividends. The "Formula Value" provides for
         the price to be par value plus a percentage of the increase in the
         Company valuation from the inception date, not to exceed a per share
         price of $500.

         On or after January 1, 2005, the holders of Class C and Class D
         preferred stock may require the Company to redeem their shares for
         cash, the amount of which is determined by the Formula Value defined
         above, plus any accrued but unpaid dividends. At June 30, 1999 the
         redemption value of the preferred stock is approximately equal to its
         carrying value.

                  Liquidation Preference - In the event of liquidation,
         dissolution or winding up of the Company, holders of Class C and Class
         D preferred stock are entitled to receive, prior to and in preference
         to any distributions to the holders of Class B preferred stock or Class
         A common stock, an amount determined by the Formula Value, plus any
         accrued but unpaid dividends.

         A summary of redeemable preferred stock activity for the periods ended
         June 30, 1999 and 2000 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                               CLASS C       CLASS D      TOTAL
                                                             ----------    ----------    ----------
<S>                                                          <C>           <C>           <C>
Issuance of redeemable preferred stock ...................   $       35    $       75    $      110
Dividends accrued ........................................            1             3             4
                                                             ----------    ----------    ----------
           Redeemable preferred stock at June 30, 1999....           36            78           114
Dividends paid ...........................................           (2)           (5)           (7)
Dividends accrued ........................................            2             5             7
                                                             ----------    ----------    ----------
           Redeemable preferred stock at June 30, 2000....   $       36    $       78    $      114
                                                             ==========    ==========    ==========
</TABLE>


6.       CAPITAL STOCK

         The Company's capital stock consists of the following:

         Class A Common Stock- Holders of the stock are entitled to one vote per
         share and have certain rights with respect to election of the Company's
         Board of Directors.

         Class B Preferred Stock- The holders of Class B, Preferred Stock have
         certain rights, privileges and preferences, which include the
         following:

                  Dividends- The holders are entitled to receive dividends
         before any dividend is declared or paid on shares of Class A Common
         Stock. Such dividends are cumulative and are payable at times
         determined by the Board of Directors.


                                      -47-
<PAGE>   48

                        CHECKFREE MANAGEMENT CORPORATION
                   NOTES TO FINANCIAL STATEMENTS- (CONTINUED)

                  Voting Rights- The holders are entitled to one vote per share
         and each class has certain rights with respect to election of the
         Company's Board of Directors.

                  Liquidation Preference - In the event of liquidation,
         dissolution or winding up of the Company, subject to the redeemable
         preferred stock preferences, holders of Class B preferred stock are
         entitled to receive an amount equal to the par value plus any accrued
         but unpaid dividends.

         In December 1998, the Company entered into a Stockholders' Agreement
         with each holder of common and preferred stock. The agreement restricts
         the sale or transfer of any shares of stock without express written
         consent of all stockholders. In addition, the agreement provides that
         the holder of the Class A Common Stock, CheckFree, is subject to
         capital calls when and if the Board of Directors determines that the
         Company will have a cash shortfall for any quarter. Through June 30,
         2000, no additional capital contributions were required.



7.       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 basis 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.

         The Company files separate federal and state tax returns. Accordingly,
         the income tax provisions included in the Statement of Operations have
         been determined as if the Company was a separate taxpayer.

         Income tax expense differs from the amounts computed by applying the
         U.S. federal statutory income tax rate of 34 percent to income before
         income taxes as a result of the following (in thousands):

<TABLE>
<CAPTION>
                                                      DECEMBER 8, 1998
                                                          (DATE OF       YEAR ENDED
                                                        INCEPTION) TO     JUNE 30,
                                                        JUNE 30, 1999       2000
                                                        ------------    ------------

<S>                                                     <C>             <C>
Federal and state tax at statutory rates ............   $         14    $       (236)
Deductible medical claims ...........................           (257)         (1,126)
Change in valuation allowance .......................            243           1,362
                                                        ------------    ------------
               Total ................................   $       --      $       --
                                                        ============    ============
</TABLE>



      At June 30, 1999 and 2000, the Company's deferred tax assets were as
follows (in thousands):

<TABLE>
<CAPTION>
                                                        JUNE 30, 1999   JUNE 30, 2000
                                                        -------------   -------------
<S>                                                     <C>             <C>
Deferred tax assets- net operating loss carryforwards   $        243    $      1,605
Valuation allowance .................................           (243)         (1,605)
                                                        ------------    ------------
               Total ................................   $       --      $       --
                                                        ============    ============
</TABLE>


         At June 30, 2000, the Company's has approximately $4,011,000 of state
         and federal net operating loss carryforwards that expire in 2019. A
         valuation allowance has been recorded due to the uncertainty of the
         realizability of the net operating loss carryforwards.



                                      -48-
<PAGE>   49

                        CHECKFREE MANAGEMENT CORPORATION
                   NOTES TO FINANCIAL STATEMENTS- (CONTINUED)

8.       OTHER RELATED PARTY TRANSACTIONS

         On December 21, 1998, the Company entered into an Administrative
         Services Agreement (the "Agreement") with CheckFree . Under the terms
         of the Agreement, CheckFree receives a monthly administrative fee for
         services provided to the Company. The Agreement calls for annual fee
         increases of 4% and carries a two-year initial term, with an automatic
         renewal clause. Total amounts paid under the agreement for the periods
         ended June 30, 1999 and 2000 amounted to $115,000 and $235,000,
         respectively.




                                      -49-










<PAGE>   50
                                   SIGNATURES

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

<TABLE>
<CAPTION>
<S>                                            <C>
                                                              CHECKFREE CORPORATION


Date: September 25, 2000                                      By:   /s/ David E. Mangum
                                                                 -----------------------------------------------
                                                                       David E. Mangum, Executive Vice
                                                                       President and Chief Financial
                                                                       Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on our behalf and in the capacities indicated on the 25th day of September, 2000.

         Signature                             Title


         *Peter J. Kight                       Chairman of the Board and Chief Executive Officer
------------------------------------           (Principal Executive Officer)
         Peter J. Kight


         *David E. Mangum                      Executive Vice President and Chief Financial Officer
------------------------------------           (Principal Financial Officer)
         David E. Mangum


         *Gary A. Luoma, Jr.                   Vice President and Chief Accounting Officer
------------------------------------           (Principal Accounting Officer)
         Gary A. Luoma, Jr.


         *William P. Boardman                  Director
------------------------------------
         William P. Boardman


         *James D. Dixon                       Director
------------------------------------
         James D. Dixon


                                               Director
------------------------------------
         Henry C. Duques


         *Mark A. Johnson                      Director
------------------------------------
         Mark A. Johnson


                                               Director
------------------------------------
         Lewis C. Levin


         *Eugene F. Quinn                      Director
------------------------------------
         Eugene F. Quinn


         *Jeffrey M. Wilkins                   Director
------------------------------------
         Jeffrey M. Wilkins


*By:     /s/Curtis A. Loveland
    --------------------------------
         Curtis A. Loveland,
         Attorney-in-Fact
</TABLE>


                                      -50-