<PAGE>   1
                                                                      Exhibit 13


                             SELECTED FINANCIAL DATA

The selected consolidated financial data for the years ended June 30, 1999, 2000
and 2001 have been derived from the Company's financial statements included
elsewhere in this Annual Report which have been audited by Deloitte and Touche,
LLP, independent certified public accountants, whose report thereon is also
included elsewhere in this Annual Report. The selected consolidated financial
data for the years ended December 31, 1997 and 1998 have been derived from
audited financial statements of the Company which are not included in this
Annual Report. The selected consolidated financial data set forth below should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and Notes thereto elsewhere in this Annual Report. The earnings per share
amounts prior to fiscal year 1998 have been restated to comply with Statement of
Financial Accounting Standards No. 128 "Earnings per Share" (SFAS 128) as
required. For further discussion of earnings per share and the impact of SFAS
128, see Note 1 to the consolidated financial statements. The financial
information for the periods presented below includes all adjustments necessary
for a fair presentation of results of operations.

<TABLE>
<CAPTION>

                                                            1997            1998            1999            2000            2001
                                                        -----------     -----------     -----------     -----------     -----------
<S>                                                     <C>             <C>             <C>             <C>             <C>
STATEMENT OF OPERATIONS:
Revenues:
  Processing, servicing and
    merchant discount ..............................    $   104,522     $   159,255     $   201,059     $   261,621     $   362,051
  License fees .....................................         33,088          28,952          15,975          16,818          30,180
  Maintenance fees .................................         22,567          25,848          17,746          18,752          21,332
  Other ............................................         16,268          19,809          15,351          13,004          19,757
                                                        -----------     -----------     -----------     -----------     -----------
            Total revenues .........................        176,445         233,864         250,131         310,195         433,320

Expenses
  Cost of processing, servicing and
     support .......................................        102,721         129,924         146,704         182,540         255,528
  Research and development .........................         32,869          36,265          21,085          35,631          55,621
  Sales and marketing ..............................         32,670          28,839          32,354          44,782          90,283
  General and administrative .......................         18,707          20,677          31,466          40,931          50,474
  Depreciation and amortization ....................         24,919          24,999          24,630          42,830         427,495
  In-process research and development ..............        140,000             719           2,201           6,900          18,600
  Charge for stock warrants ........................           --            32,827            --              --              --
  Exclusivity amortization .........................          5,958           2,963            --              --              --
                                                        -----------     -----------     -----------     -----------     -----------
            Total expenses .........................        357,844         277,213         258,440         353,614         898,001
  Net gain on dispositions of assets ...............          6,250          36,173           4,576            --              --
                                                        -----------     -----------     -----------     -----------     -----------
  Income (loss) from operations ....................       (175,149)         (7,176)         (3,733)        (43,419)       (464,681)
  Interest:
    Income .........................................          2,153           3,464           2,799           7,689          15,415
    Expense ........................................           (834)           (632)           (618)         (8,027)        (13,154)
  Loss on investments ..............................           --              --              --              --           (16,077)
                                                        -----------     -----------     -----------     -----------     -----------
  Income (loss) before income tax ..................       (173,830)         (4,344)         (1,522)        (43,757)       (478,497)
  Income tax expense (benefit) .....................        (12,017)           (641)        (12,009)        (11,437)       (115,362)
                                                        -----------     -----------     -----------     -----------     -----------
  Net income (loss) ................................    $  (161,813)    $    (3,703)    $    10,457     $   (32,320)    $  (363,135)
                                                        ===========     ===========     ===========     ===========     ===========

Diluted income (loss) per common share .............    $     (3.44)    $     (0.07)    $      0.18     $     (0.61)    $     (4.49)
Equivalent number of shares outstanding ............         46,988          55,087          56,529          53,367          80,863


BALANCE SHEET DATA:
  Working capital ..................................    $    20,002     $    78,238     $    24,245     $   178,761     $   142,661
  Total assets .....................................        223,836         250,112         252,761         713,114       2,183,953
  Long-term obligations, less current portion ......          8,401           6,467           3,882         173,236         176,541
  Total stockholder's equity .......................        148,644         183,854         186,903         445,894       1,732,186

</TABLE>


<PAGE>   2


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

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 provide electronic billing and payment services for over 5.2 million
consumers as of June 30, 2001. Our services reach hundreds of sources, either
directly or through reseller relationships, including:

         -        9 of the 10 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 approximately 64% of all of our bill payments electronically.
We processed over 22 million transactions for the month of June 2001 and, for
the year ended June 30, 2001, we processed over 231 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. In March 2001, we introduced
the latest version of our electronic billing and payment products, "WebPay for
Consumers" (or WebPay 3.2), which provides consumers with the ability to receive
and pay e-bills over e-mail and to exchange money with each other using e-mail
"invitations" to send or receive money. As of June 30, 2001, we have 173 billers
in production and are delivering nearly 500,000 electronic bills monthly.
Additional biller content became available in the fourth quarter of fiscal 2001
through our ability to deliver bills scraped from biller-direct sites, which
added six national credit card bills to the 173 bills available through
traditional electronic and billing payment services.

         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, it will be
sent by check. If the results are not favorable, the remittance will be sent to
the merchant by a 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 are printed on the face
of the check. In addition, our processing system is able 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 approximately 64% by June 2001.




<PAGE>   3

         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:

         -        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 portfolios under management
have grown to over 1.1 million as of June 30, 2001.

         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 our 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. Given the nature of the process we use to convert billing
              and/or statement information for use over the Internet, these
              products are equally marketable in international markets as well.

         -    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 web site 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.



<PAGE>   4

         -    Reconciliation.

                  Through our ReconPlus software, we provide U.S. 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 such as regulatory
              compliance solutions for Form 1099 processing, safe box accounting
              and other applications.

         During the fiscal year June 30, 2001, Electronic Commerce accounted for
70% of our revenues, Investment Services accounted for 16% of our revenues, and
Software accounted for 14% of our revenues.

         Our current business was developed through expansion of our core
Electronic Commerce business and the acquisition of companies operating in
similar or complementary businesses. Our major acquisitions include Servantis
Systems Holdings, Inc. in February 1996, Security APL, Inc. in May 1996, Intuit
Services Corporation in January 1997, Mobius Group, Inc. in March 1999, BlueGill
Technologies, Inc. in April 2000, and MSFDC, L.L.C (TransPoint) in September
2000. In October 2000, we completed the strategic agreement we entered into with
Bank of America in April 2000, under which we acquired certain of Bank of
America's electronic billing and payment assets.


RESULTS OF OPERATIONS

         The following table sets forth percentages of revenue represented by
consolidated statements of operations data:
<TABLE>
<CAPTION>

                                                                                      YEAR ENDED JUNE 30,
                                                                        --------------------------------------------
                                                                           1999            2000            2001
                                                                        -----------     -----------     ------------
<S>                                                                       <C>              <C>              <C>
Total revenues ..............................................             100.0%           100.0%           100.0%
Expenses:
    Cost of processing, servicing and support ...............              58.7             58.8             59.0
    Research and development ................................               8.4             11.5             12.8
    Sales and marketing .....................................              12.9             14.4             20.8
    General and administrative ..............................              12.6             13.2             11.7
    Depreciation and amortization ...........................               9.8             13.8             98.7
    In-process research and development .....................               0.9              2.2              4.3
                                                                          -----            -----            -----
         Total expenses .....................................             103.3            114.0            207.2
    Net gain on dispositions of assets ......................               1.8             --               --
                                                                          -----            -----            -----
    Loss from operations ....................................              (1.5)           (14.0)           (107.2)

    Interest:
       Income ...............................................               1.1              0.2              3.6
       Expense ..............................................              (0.2)            (0.3)            (3.1)
    Loss on investments .....................................              --               --               (3.7)
                                                                          -----            -----            -----
    Loss before income taxes ................................              (0.6)           (14.1)           (110.4)

    Income tax benefit ......................................              (4.8)            (3.7)           (26.6)
                                                                          -----            -----            -----
    Net income (loss)
                                                                            4.2%           (10.4)%          (83.8)%
                                                                          =====            =====            =====
</TABLE>

YEARS ENDED JUNE 30, 2000 AND 2001

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


<PAGE>   5

October 2000), an increase in portfolios managed in our Investment Services
business from approximately 950,000 at June 30, 2000 to over 1.1 million at June
30, 2001, and incremental revenue from the BlueGill acquisition in our Software
business. Refer to SEGMENT INFORMATION later in this commentary for further
information regarding results of our three business segments.

         Our processing and servicing revenue increased by 38%, from $261.6
million for the year ended June 30, 2000 to $362.1 million for the year ended
June 30, 2001. Our acquisition of TransPoint included a five-year strategic
agreement with Microsoft and a five-year marketing agreement with First Data
Corporation, each of which includes minimum quarterly revenue guarantees, as
does our ten-year strategic agreement with Bank of America. In each case, actual
subscriber revenue is below minimums as of June 30, 2001 and, as a result,
overall subscriber based revenue growth will correlate less directly with
subscriber growth until Bank of America-related and TransPoint-related
subscribers generate sufficient revenue to exceed the quarterly minimums. Net of
the incremental revenue from these agreements, underlying growth in processing
and servicing revenue increased by 25% on a year over year basis. Growth in
underlying processing and servicing revenue is driven by the previously
mentioned growth in subscribers in our Electronic Commerce business and
portfolios managed in our Investment Services business. Additionally, we now
have 173 billers in production, including 30 that were added through the
TransPoint acquisition, that presented nearly 500,000 bills in the month ended
June 30, 2001. This has increased significantly from the 94 billers that
presented about 94,000 bills in June 2000. In the month ended June 30, 2001, we
processed over 22 million transactions, an increase of 38% compared to the 16
million transactions we processed in the month of June 2000. As mentioned in
previous reports, we are offering a transaction based pricing model for our
largest customers, and when combined with strategic agreements operating below
minimum quarterly revenue thresholds, it will become increasingly difficult to
correlate revenue solely to the number of subscribers, with transactions
processed becoming an additional revenue indicator.

         Our license fee revenue increased by 79%, from $16.8 million for the
year ended June 30, 2000 to $30.2 million for the year ended June 30, 2001.
Growth in license revenue is primarily attributable to new revenue resulting
from our acquisition of BlueGill in April 2000. We achieved modest license
revenue growth in the mid single digits from our more mature software product
lines in the year ended June 30, 2001. Although we anticipate continued growth
in license revenue, we expect current economic conditions to have a dampening
effect on the rate of growth, at least in the near term.

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

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

         Cost of processing, servicing and support. Our cost of processing,
servicing and support was $182.5 million, or 58.8% of total revenue for the year
ended June 30, 2000, and was $255.5 million, or 59.0% of total revenue for the
year ended June 30, 2001. Cost of processing, servicing and support as a
percentage of servicing only revenue (total revenue less license fees) was 62.2%
for the year ended June 30, 2000, and 63.3% for the year ended June 30, 2001. As
previously mentioned, we acquired TransPoint in September 2000 and the
electronic billing and payment assets of Bank of America in October 2000. As a
result of these transactions, we have supported two additional billing and
payment processing platforms for much of the year ended June 30, 2001. Although
expected, this has resulted in an increase in our cost of processing as a
percentage of servicing only revenue as the acquired platforms are less
efficient than our Genesis processing platform. We completed the conversion of
TransPoint subscribers and billers to the Genesis processing platform in the
quarter ended June 30, 2001. We completed the conversion of a portion of the
Bank of America East operations in the quarter ended March



<PAGE>   6

31, 2001, which includes subscribers in Georgia, Tennessee, Florida, Missouri,
Arkansas, Iowa, Kansas, Arizona, New Mexico, North Carolina, South Carolina,
Virginia, Maryland, and the District of Columbia. The remaining Bank of America
subscribers, referred to as Bank of America West, are expected to be converted
in the quarter ended December 31, 2001, with the remainder of legacy Bank of
America subscribers converting from our Austin processing platform in the
following quarter. Until the final conversion is completed, we will continue to
experience higher than normal incremental processing costs, but at a decreasing
rate, as new subscriber transactions are processed on the more efficient Genesis
processing system. Somewhat masked by less efficient incremental costs resulting
from TransPoint and Bank of America are underlying improvements in efficiency
and processing quality within Genesis. Our ratio of electronic payments to total
payments has improved from approximately 58% at June 30, 2000 to about 64% as of
June 30, 2001. Electronic payments carry a significantly lower variable cost per
unit than paper based transactions and are far less likely to result in a costly
customer claim.

         Research and Development. Our research and development costs were $35.6
million, or 11.5% of total revenue for the year ended June 30, 2000, and were
$55.6 million, or 12.8% of total revenue for the year ended June 30, 2001.
Adjusted for capitalized development costs of $7.9 million for the year ended
June 30, 2000 and $4.9 million for the year ended June 30, 2001, our gross
expenditures for research and development were $43.5 million, or 14.0% of total
revenue for the year ended June 30, 2000, and $60.5 million, or 14.0% of total
revenue for the year ended June 30, 2001. As a result of our acquisition of
BlueGill, we added a large number of software development engineers and we have
continued to invest heavily in our i-Solutions electronic billing software line
of products. In addition, we released WebPay for Consumers, or WebPay 3.2, on
our Genesis processing platform in our Electronic Commerce business in March
2001. This product offering provides consumers the ability to receive and pay
e-bills over e-mail and to exchange money with each other using e-mail
"invitations" to send or receive money. While we plan to continue to invest a
significant portion of our revenue into research and development activities in
all business segments in anticipation and support of revenue growth, quality
enhancement and efficiency improvement opportunities, we expect that research
and development will decline as a percentage of revenue in future periods.

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

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

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

         In-Process Research and Development. In the quarter ended June 30,
2000, we incurred $6.9 million of in-process research and development costs in
relation to our acquisition of BlueGill. In the quarter ended September






<PAGE>   7

30, 2000, we incurred $18.6 million of in-process research and development costs
in relation to our acquisition of TransPoint. Please refer to the Notes to
Consolidated Financial Statements included herein for a detailed discussion of
these charges.

         Interest. Our interest income increased from $7.7 million for the year
ended June 30, 2000 to $15.4 million for the year ended June 30, 2001. Our
balance of cash and invested assets was $207.6 million at June 30, 2000 and
$256.1 million at June 30, 2001. Although interest rates have declined
throughout the year ended June 30, 2001, we have seen a significant increase in
average invested assets from $116.1 million at June 30, 2000 to $231.9 million
at June 30, 2001. While cash and invested assets fluctuate quarter to quarter,
the primary transactions influencing our cash and investment balances were the
$97.2 million we received in cash as part of the TransPoint acquisition in
September 2000 and the $35.0 million of cash we used in connection with our
asset purchase agreement with Bank of America.

         Our interest expense increased from $8.0 million for the year ended
June 30, 2000 to $13.2 million for the year ended June 30, 2001. While we also
incur interest expense on leases, the increase in interest expense is due
primarily to the $172.5 million of 6 1/2% convertible subordinated notes we
issued in November 1999, which created slightly over 7 months of interest
expense in the year ended June 30, 2000 and 12 months of interest expense in the
year ended June 30, 2001. None of the 6 1/2% convertible debt had been converted
to shares of our common stock as of June 30, 2001.

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

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

YEARS ENDED JUNE 30, 1999 AND 2000

         Revenues. Our total revenue increased by 24%, from $250.1 million for
the year ended June 30, 1999 to $310.2 million for the year ended June 30, 2000.
On a pro forma basis, net of the divestitures of our mortgage business in
September 1998 and our imaging business in October 1998, and adjusting for the
acquisition of Mobius Group in March 1999 and BlueGill in April 2000, revenue
increased 22%, from $252.9 million for the year ended June 30, 1999 to $308.5
million for the year ended June 30, 2000. The increase in pro forma revenue was
driven by increases of 26% in our Electronic Commerce segment, 25% in our
Investment Services segment, and 1% in our Software segment. Growth in
Electronic Commerce revenue is driven primarily by an increase in subscribers
from nearly 3.0 million at June 30, 1999 to over 3.5 million at June 30, 2000.
The 3.5 million subscriber number is net of approximately 0.4 million
subscribers utilizing old legacy or non-Year 2000 compliant front ends that were
purged by financial institutions during the six months ended December 31, 2000.
Pro forma growth in Investment Services revenue is driven primarily by an
increase in portfolios managed from approximately 715,000 at June 30, 1999 to
approximately 950,000 at June 30, 2000. In spite of dampened demand caused by
customer focus on Year 2000 projects early in the fiscal year, the Software
segment was able to achieve nominal growth on a pro forma basis for the year
ended June 30, 2000.

         Our processing and servicing revenue increased by 30%, from $201.1
million for the year ended June 30, 1999 to $261.6 million for the year ended
June 30, 2000. On a pro forma basis, adjusting for the acquisition of Mobius
Group in March 1999, processing and servicing revenue increased by 27%, from
$205.4 million for the year ended June 30, 1999, to $261.9 million for the year
ended June 30, 2000. Pro forma growth in processing and servicing revenue is
primarily the result of the previously mentioned growth in subscribers in our
Electronic Commerce segment and portfolios managed in our Investment Services
segment. Our processing agreements with portals allow for a free trial period
for subscribers who enroll through the portal. Because these subscribers were
not generating revenue during this free period, we did not count them in our
active subscriber base. Additionally, we had 93 billers in production that
presented approximately 94,000 bills in the month ended June 30, 2000. The
number of bills we presented electronically has increased by 52% since the month
ended March 31, 2000 and was up significantly from just over 13,000 per month at
June 30, 1999. We exited the quarter ended June 30, 2000 processing about 16
million transactions on a monthly basis, compared to about 12 million as of June
30, 1999.



<PAGE>   8

         Our license fee revenue increased by 5%, from $16.0 million for the
year ended June 30, 1999 to $16.8 million for the year ended June 30, 2000. On a
pro forma basis, adjusting for the impact of divested software businesses and
the acquisition of BlueGill in April 2000, license revenue declined by 3% from
$15.7 million for the year ended June 30, 1999 to $15.3 million for the year
ended June 30, 2000. In spite of dampened demand caused by customer focus on
Year 2000 projects early in the fiscal year, the Software segment was able to
generate fairly consistent license sales on a year over year basis.

         Our maintenance fee revenue increased by 6%, from $17.7 million for the
year ended June 30, 1999 to $18.8 million for the year ended June 30, 2000. On a
pro forma basis, adjusting for the impact of divested software businesses and
the acquisition of BlueGill, maintenance revenue increased by 10%, from $16.9
million for the year ended June 30, 1999 to $18.6 million for the year ended
June 30, 2000. This increase was due to first year maintenance fees from new
maintenance paying customers added late in fiscal 1999 and throughout fiscal
2000 and moderate price increases, offset by maintenance retention rates in the
mid to upper 80% range for the renewal maintenance base in the Software segment.

         Our other revenue decreased by 16%, from $15.4 million for the year
ended June 30, 1999 to $13.0 million for the year ended June 30, 2000. On a pro
forma basis, adjusting for the impact of divested software businesses and the
acquisitions of Mobius Group and BlueGill, other revenue decreased by 15%, from
$14.9 million for the year ended June 30, 1999 to $12.7 million for the year
ended June 30, 2000. The decrease in pro forma revenue was due primarily to the
decline in software implementations and other software consulting engagements
resulting from customer software implementation freezes earlier in fiscal 2000
in preparation for and follow up from the Year 2000.

         Cost of Processing, Servicing and Support. Our cost of processing,
servicing and support was $146.7 million or 58.7% of total revenue for the year
ended June 30, 1999, and was $182.5 million or 58.8% of total revenue for the
year ended June 30, 2000. Cost of processing, servicing and support as a
percentage of servicing only revenue was 62.7% for the year ended June 30, 1999,
and was 62.2% for the year ended June 30, 2000. From an efficiency perspective,
our ratio of electronic payments to total payments improved from 49% at June 30,
1999 to 58% at June 30, 2000. Electronic payments carry a significantly lower
variable cost per unit than paper based payments. Additionally, we saw
improvements from the leverage inherent in converting the majority of our
subscribers from two legacy systems to our Genesis processing system. These
improvements, however, were offset by E-Bill implementation costs as we
continued to move an increasing number of billers into live production, and by
transaction costs generated by portal subscribers operating within their free
period. Additionally, throughout the year ended June 30, 2000, we invested
significantly in quality improvement and infrastructure improvement initiatives
to prepare for future growth.

         Research and Development. Our research and development costs were $21.1
million or 8.4% of total revenue for the year ended June 30, 1999, and were
$35.6 million or 11.5% of total revenue for the year ended June 30, 2000.
Adjusted for capitalized development costs of $7.4 million for the year ended
June 30, 1999 and $7.9 million for the year ended June 30, 2000, our gross
research and development costs were $28.5 million, or 11.4% of total revenue for
the year ended June 30, 1999, and $43.5 million, or 14.0% of total revenue for
the year ended June 30, 2000. While $0.9 million of the increase was
attributable to BlueGill, we have continued to invest a significant portion of
our revenue into research and development activities in all business segments in
anticipation and support of revenue growth, quality enhancement and efficiency
improvement opportunities.

         Sales and Marketing. Our sales and marketing costs were $32.4 million
or 12.9% of total revenue for the year ended June 30, 1999, and were $44.8
million or 14.4% of total revenue for the year ended June 30, 2000. While
BlueGill accounted for $2.3 million of the increase, we increased our sales
staff to sign additional billers in support of our electronic billing offerings,
and we increased program management staff in support of new non-subscriber based
products designed to leverage our existing electronic payment infrastructure.

         General and Administrative. Our general and administrative expenses
were $31.5 million or 12.6% of total revenue for the year ended June 30, 1999,
and were $40.9 million or 13.2% of total revenue for the year ended June 30,
2000. Aside from the $0.9 million of added cost directly attributable to
BlueGill and a full year of Mobius Group operations, the increase in general and
administrative expense is due principally to an increase in facilities costs
resulting from upgraded facilities in Dublin, Ohio and Jersey City, New Jersey
and a new facility in Phoenix, Arizona, and increased administrative staff
required to manage growth in all areas of the Company.

         Depreciation and amortization. Our depreciation and amortization costs
increased from $24.6 million for the year ended June 30, 1999 to $42.8 million
for the year ended June 30, 2000. The increase was primarily the






<PAGE>   9

result of amortization of intangible assets resulting from the Mobius Group and
BlueGill acquisitions. The amount of the increase directly attributable to
BlueGill alone was $10.2 million. The remaining increase is the result of
capital spending in support of continued growth and quality improvement
initiatives.

         In-Process Research and Development. The in-process research and
development charge of $2.2 million for the year ended June 30, 1999 resulted
from our purchase of the Mobius Group in March 1999 and the charge of $6.9
million for the year ended June 30, 2000 resulted from our purchase of BlueGill
in April 2000. Please refer to the Notes to Consolidated Financial Statements
included herein for a detailed discussion of these charges.

         Interest. Our interest income increased from $2.8 million for the year
ended June 30, 1999 to $7.7 million for the year ended June 30, 2000. The
increase was primarily due to an increase in average cash and investments from
$43.3 million for the year ended June 30, 1999 to $116.1 million for the year
ended June 30, 2000. The increase in average cash and investments is primarily
the result of proceeds from the convertible subordinated debenture offering in
November 1999.

         Our interest expense increased from $0.6 million for the year ended
June 30, 1999 to $8.0 million for the year ended June 30, 2000. The increase is
due primarily to $172.5 million of 6 1/2% convertible subordinated notes that we
issued in November 1999 which resulted in just over seven months of interest
expense in the year ended June 30, 2000.

         Income Taxes. For the year ended June 30, 1999, we recorded an income
tax benefit of $12.0 million (effective rate not meaningful) and, for the year
ended June 30, 2000, we recorded an income tax benefit of $11.4 million with an
effective rate of 26%. In the year ended June 30, 1999, we recorded a one-time
tax benefit of approximately $12.2 million arising out of our medical benefits
management subsidiary. Net of this one-time benefit, the effective rates in both
years differ from the statutory rate of 35% due to goodwill, in-process research
and development and other non deductible expenses; jobs credits; state income
taxes; and tax exempt interest income.


SEGMENT INFORMATION

         The following table sets forth our operating revenue and operating
income by industry segment for the periods noted. Charges identified as purchase
accounting amortization, in-process research and development, a one time
marketing charge, and net gain on dispositions of assets were separated from the
operating results for a better understanding of the underlying performance of
each segment. Explanations of these charges can be found in the discussions
above.
<TABLE>
<CAPTION>

                                                                                                   YEAR ENDED JUNE 30,
                                                                                    -----------------------------------------------
                                                                                       1999              2000                2001
                                                                                    ---------          ---------          ---------
                                                                                                    (IN THOUSANDS)
<S>                                                                                 <C>                <C>                <C>
Operating Revenue:
     Electronic Commerce ..................................................         $ 169,443          $ 213,391          $ 301,532
     Investment Services ..................................................            39,304             54,792             69,613
     Software .............................................................            41,384             42,012             62,175
                                                                                    ---------          ---------          ---------
               Total Operating Revenue ....................................         $ 250,131          $ 310,195          $ 433,320
                                                                                    =========          =========          =========

Operating Income (Loss):
     Operating Income (Loss) Excluding Specific Items:
          Electronic Commerce .............................................         $  (3,126)         $ (18,248)         $ (13,083)
          Investment Services .............................................            11,250             15,830             20,347
          Software ........................................................            15,931             10,536                837
          Corporate .......................................................           (23,348)           (26,120)           (35,746)
     Specific Items:
           Purchase accounting amortization ...............................          (393,436)            (6,815)           (18,517)
           In-process research and development ............................            (2,201)            (6,900)           (18,600)
           One time marketing charge ......................................              --                 --              (25,000)
           Net gain on dispositions of assets .............................             4,576               --                 --
                                                                                    ---------          ---------          ---------
                  Total Operating Loss ....................................         $  (3,733)         $ (43,419)         $(464,681)
                                                                                    =========          =========          =========
</TABLE>
<PAGE>   10

         In order to provide a meaningful analysis of the underlying performance
of our business segments, for each period presented we have separated the effect
of purchase accounting amortization, in-process research and development costs
and significant one-time charges related to our various business and asset
acquisitions and divestitures.

YEARS ENDED JUNE 30, 2000 AND 2001

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

         We completed our acquisition of TransPoint in September 2000 and, with
this acquisition, became the preferred provider of electronic billing and
payment services to customers offered through Microsoft's MSN and Money Central
product offerings. The agreement with Microsoft provides guaranteed revenue of
$120 million over a five-year period, which commenced in January 2001.
Additionally, as part of the TransPoint acquisition, we received $60 million of
guaranteed revenue and/or cost saving opportunities through First Data
Corporation over a five-year period, which began in September 2000. Effective
October 1, 2000, we completed a strategic agreement with Bank of America, the
largest bank in the U.S., to offer electronic billing and payment services to
its customer base. This ten-year agreement provides annual revenue guarantees of
$50 million ($12.5 million on a quarterly basis) and Bank of America has agreed
to invest $45 million over a two year period to promote the awareness and
adoption of electronic billing and payment services by their customers. We had
been processing certain transactions for Bank of America before the strategic
alliance was completed and, therefore, the $50 million annual revenue guarantee
should not be considered entirely incremental to our underlying revenue. We did,
however, add 300,000 incremental subscribers to our subscriber base upon
completion of the agreement. In each of these agreements, actual subscriber
revenue is below minimums as of June 30, 2001, and as a result, overall
subscriber based revenue growth will correlate less closely with the growth in
the number of subscribers until Bank of America and Microsoft subscribers
generate sufficient subscriber revenue to exceed the quarterly minimums.

         To date, we have signed 241 named billers to our E-Bill electronic
billing product offering. Combined with the 30 net new billers we assumed with
the TransPoint acquisition, this brings our signed biller total to 271. We now
have 173 billers in production that delivered nearly 500,000 electronic bills in
the month ended June 30, 2001. Our acquisition of BlueGill is expected to
facilitate our efforts to provide quality billing content by simplifying and
accelerating the process of taking bills from paper to electronic. Also, we are
adding bill aggregation technology to our Genesis platform and currently plan to
add access to up to 30 additional billers through "bill scraping" over the
course of calendar 2001, which will be available to our consumer service
provider partners as they upgrade to Web Pay for Consumers. As of June 30, 2001,
we are distributing six popular credit card bills through scraping technology
for a total consumer choice of among 179 electronic bills. We believe that a
complete, integrated round trip electronic billing and payment experience for an
average of six to ten bills per customer per month is an important factor in
driving subscriber growth. As of June 30, 2001, we estimate that the average
consumer has the potential to receive from five to eight electronic bills, and
by the end of the calendar year, we expect to extend that number to eight to ten
electronic bills for consumers in major strategic marketing areas throughout the
United States.

         When combining subscriber growth within guaranteed revenue minimums and
increasing electronic billing revenue with a transaction based pricing model
available to our largest bill payment customers, it has become more difficult to
correlate revenue solely to the number of subscribers, with transactions
processed becoming an additional key indicator. During the month ended June 30,
2001, we processed over 22 million transactions, compared to about 16 million in
the quarter ended June 30, 2000.

         The operating loss in our Electronic Commerce segment, excluding
purchase accounting amortization, a one time marketing charge of $25.0 million,
and in-process research and development, has improved from $18.2 million for the
year ended June 30, 2000 to $13.1 million for the year ended June 30, 2001. As a
result of the TransPoint acquisition and the purchase of Bank of America's
electronic billing and payment assets, we have supported two additional and less
efficient billing and payment processing platforms for most of fiscal 2001.
Although expected, this has resulted in a significant increase in our cost of
processing, servicing and support during the year. We completed the conversion
of TransPoint subscribers and billers to the Genesis processing platform in the
quarter ended June 30, 2001. We completed the conversion of a portion of the
Bank of America East subscribers within the quarter ended March 31, 2001. The
remaining Bank of America subscribers, referred to internally as





<PAGE>   11

Bank of America West, are expected to be converted in the quarter ended December
31, 2001 with the remainder of legacy Bank of America subscribers converting
from our Austin processing platform in the following quarter. Until the final
conversion is completed, we will continue to experience higher than normal
incremental processing costs, but at a decreasing rate, as new subscriber
transactions are processed on the more efficient Genesis processing system.
Somewhat masked by less efficient incremental costs resulting from TransPoint
and Bank of America are underlying improvements in efficiency and processing
quality within Genesis. Our ratio of electronic payments to total payments has
improved from approximately 58% at June 30, 2000 to about 64% as of June 30,
2001. Electronic payments carry a significantly lower variable cost per unit
than paper based transactions and are far less likely to result in a costly
customer claim. We have also incurred additional sales and marketing and general
and administrative expenses as a result of the two transactions. Throughout
fiscal 2001, we have continued to focus attention on the following four areas
within our Electronic Commerce business:

         -        delivery of an increasing number of bills electronically over
                  the Internet;

         -        extension of the payment capabilities of our Genesis
                  infrastructure while continuing to deliver market-leading
                  quality and cost efficiency;

         -        co-marketing programs designed to bring billers and channel
                  partners together to strengthen incentives and value delivered
                  to consumers; and

         -        expansion of the number of sites where consumers can receive
                  and pay bills.

         While there are no guarantees as to the timing or extent of accelerated
adoption of electronic billing and payment services, we believe that with our
recent transactions with BlueGill, TransPoint and Bank of America, along with
other previously described strategic alliances, we are better positioned to
maintain our market leadership position throughout an accelerated growth cycle
should it occur.

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

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

         Revenue in our Software business increased by 48%, from $42.0 million
for the year ended June 30, 2000 to $62.2 million for the year ended June 30,
2001. The growth in software revenue is primarily attributable to the
acquisition of BlueGill, now operating as CheckFree i-Solutions, as revenue in
our more mature software businesses has increased modestly on a year over year
basis. Growth from i-Solutions sales has come from successful efforts both
domestically and internationally. While we expect software revenue to continue
to grow, current market conditions have placed a dampening effect on the rate of
growth in the near term.

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

         Our Corporate segment represents costs for legal, human resources,
finance and various other unallocated overhead expenses. Our Corporate segment
incurred operating expenses of $26.1 million or 8.4% of total revenue





<PAGE>   12

for the year ended June 30, 2000 and $35.7 million or 8.2% of total revenue for
the year ended June 30, 2001. Although we continue to add corporate resources in
support of the growth of the business, our overhead costs as a percentage of
revenue have begun to decline, and are starting to reflect the expected leverage
in our business model.

         The purchase accounting amortization line represents amortization of
intangible assets resulting from all of our various acquisitions from 1996
forward. The total amount of purchase accounting amortization has increased from
$18.5 million for the year ended June 30, 2000 to $393.4 million for the year
ended June 30, 2001. The increases are the result of intangible assets created
by the acquisitions of BlueGill in April 2000 and TransPoint in September 2000
and the acquisition of the electronic billing and payment assets of Bank of
America effective in October 2000. For comparative purposes, the breakout of
purchase accounting amortization by segment is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                                FOR THE YEAR ENDED JUNE 30,
                                                                ---------------------------------------------------
                                                                  1999                  2000                 2001
                                                                --------              --------             --------
<S>                                                             <C>                   <C>                  <C>
Electronic Commerce ..................................          $  2,364              $  2,371             $328,072

Investment Services
                                                                   3,157                 4,920                5,369
Software .............................................             1,294                11,226               59,995
                                                                --------              --------             --------
     Total ...........................................          $  6,815              $ 18,517             $393,436
                                                                ========              ========             ========
</TABLE>


         In the quarter ended June 30, 2000, we incurred $6.9 million of
in-process research and development costs related to the acquisition of BlueGill
and, in the quarter ended September 30, 2000, we incurred $18.6 million of
in-process research and development costs as a result of the acquisition of
TransPoint. Please refer to the Notes to Consolidated Financial Statements
included herein for a complete description of the in-process research and
development charges.

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

YEARS ENDED JUNE 30, 1999 AND 2000

         Revenue in our Electronic Commerce segment increased by 26%, from
$169.4 million for the year ended June 30, 1999 to $213.4 million for the year
ended June 30, 2000. This increase was primarily due to an increase in
subscribers from nearly 3.0 million at June 30, 1999 to 3.5 million at June 30,
2000. During the quarter ended September 30, 1999, a few of our financial
institution customers removed approximately 200,000 subscribers from our system
that were either utilizing our low fee maintenance only processing services
through proprietary PC-based front ends or that no longer promoted certain
legacy financial manager software. Additionally, in the quarter ended December
31, 1999, we assisted our financial institution customers in removing another
200,000 subscribers who were utilizing personal financial management software
that was not Year 2000 compliant. The majority of these combined reductions were
on older contracts with lower than average associated monthly fees.

         As of June 30, 2000, we had signed 157 billers to our E-Bill electronic
billing product offering, and we had 93 billers in production that presented
approximately 94,000 bills in the final month of fiscal 2000. The number of
bills we presented electronically had increased by 52% since the month ended
March 31, 2000 and was up significantly from just over 13,000 per month at June
30, 1999. As of June 30, 2000, we had the potential to process an average of
four to five bills per month for our existing customer base. We exited the
quarter ended June 30, 2000 processing about 16 million transactions on a
monthly basis, compared to about 12 million as of June 30, 1999.

         Our operating loss in our Electronic Commerce segment, net of purchase
accounting amortization, increased from $3.1 million for the year ended June 30,
1999, to $18.2 million for the year ended June 30, 2000. In April 1999, we
experienced a system error that led some users of our electronic payment service
to experience intermittent problems accessing and using the system. As a result
of this outage, we recorded charges totaling $2.7 million. Net of these charges,
the operating loss in our Electronic Commerce segment would have been $0.4
million in the year ended June 30, 1999. During the year ended June 30, 2000, we
invested heavily in the following four areas:



<PAGE>   13

         -        marketing and price incentives to spur industry growth;

         -        compressing the time from E-Bill contract execution to live
                  billing;

         -        improved infrastructure and programs that improve quality and
                  performance; and

         -        extension of payment offerings through leverage of our
                  existing payment infrastructure.

         From an efficiency perspective, our ratio of electronic payments to
total payments improved from 49% at June 30, 1999 to 58% at June 30, 2000.
Additionally, we saw improvements from the leverage inherent in converting
two-thirds of our subscribers from two legacy systems to our Genesis processing
system. However, as subscribers signed up for electronic billing and payment
offerings through portals and other sponsors that offer free trial periods, we
incurred the variable costs associated with processing transactions from these
customers with no revenue to offset the costs.

         Revenue in our Investment Services segment increased by 39%, from $39.3
million for the year ended June 30, 1999 to $54.5 million for the year ended
June 30, 2000. On a pro forma basis, assuming that Mobius Group had been in
place for a full year in fiscal 1999, revenue increased by 25%, from $43.9
million for the year ended June 30, 1999 to $54.8 million for the year ended
June 30, 2000. Growth in pro forma revenue was primarily the result of an
increase in portfolios managed from approximately 715,000 at June 30, 1999 to
over 950,000 at June 30, 2000. A significant portion of portfolio growth over
fiscal 2000 occurred in retail versus institutional accounts that carry a lower
unit price. In October 1999, we launched our new M-Plan product from Mobius
Group. Consultants, plan sponsors, investment managers and financial planners
use M-Plan for integrating retirement, capital needs, tax, education and real
estate planning needs for their customers. Additionally, in March 2000, we
released revisions to our M-Search product from Mobius Group that allows
Internet based data collection capabilities to the product which will make data
collection on money manager returns and asset allocations more timely.

         Reported operating income in our Investment Services segment, net of
purchase accounting amortization, increased from $11.3 million for the year
ended June 30, 1999 to $15.8 million for the year ended June 30, 2000. On a pro
forma basis, adjusting for the Mobius Group acquisition, operating income
increased from $11.8 million for the year ended June 30, 1999 to $15.8 million
for the year ended June 30, 2000. As indicated earlier, much of the portfolio
growth over the year had occurred in retail versus institutional accounts that
carried a lower unit price, which placed downward pressure on margins as the
cost to process this business was not proportionally lower.

         Reported revenue in our Software segment increased by 2%, from $41.4
million for the year ended June 30, 1999 to $42.0 million for the year ended
June 30, 2000. On a pro forma basis, net of the impact of divestitures in fiscal
1999 and the acquisition of BlueGill in fiscal 2000, revenue increased by 1%,
from $39.6 million for the year ended June 30, 1999 to $40.1 million for the
year ended June 30, 2000. The revenue results were expected, given purchasing
moratoriums by customers concerned with Year 2000 issues through calendar year
1999 and into calendar year 2000.

         Reported operating income in our Software segment, net of purchase
accounting amortization, declined from $15.9 million for the year ended June 30,
1999 to $10.5 million for the year ended June 30, 2000. The decrease in
operating income reflects investments in new initiatives such as the launch of
missingmoney.com, a state-sponsored Internet site developed with the National
Association of Unclaimed Property Administrators designed to enable individuals
to find and claim money owed to them from non-refunded deposits, unclaimed
securities and other accounts held by states. Also, incremental resources had
been assigned to a new automated clearinghouse alliance services program that
carries a profit margin that is inherently lower than that of our traditional
product offerings in this area and the acquisition of BlueGill in April 2000
provided a few months of loss from operations due to significant investment
inherent in this new business.

         Our Corporate segment operating loss increased from $23.3 million, or
9.3% of total revenue for the year ended June 30, 1999 to $26.1 million, or 8.4%
of total revenue for the year ended June 30, 2000. During the year ended June
30, 1999, we incurred $1.9 million of non-recurring costs related to a
terminated follow-on stock offering, the creation of a special-purpose employee
medical benefits management subsidiary, and the sale of a building in Columbus,
Ohio. Net of these one-time charges, our operating loss for the year ended June
30, 1999 would have been $21.4 million, or 8.6% of total revenue. On an adjusted
basis, our corporate overhead as a percentage of revenue continued to decrease.


<PAGE>   14

LIQUIDITY AND CAPITAL RESOURCES

         The following table sets forth a summary of cash flow activity and
should be referred to in conjunction with statements regarding our liquidity and
capital resources (in thousands):
<TABLE>
<CAPTION>


                                                                             SUMMARY OF CASH FLOWS FOR THE
                                                                                  YEAR ENDED JUNE 30,
                                                                  ----------------------------------------------------
                                                                       1999              2000               2001
                                                                  ---------------    --------------     --------------
<S>                                                                <C>                <C>                <C>
Cash flow provided by (used in) operating activities .........     $  25,571          $  21,016          $    (234)
Cash flow used in investing activities .......................       (16,217)          (108,935)           (26,888)
Cash flow provided by (used in) financing activities .........       (33,443)           203,547             23,170
                                                                   ---------          ---------          ---------
   Net increase (decrease) in cash and cash equivalents ......     $ (24,089)         $ 115,628          $  (3,952)
                                                                   =========          =========          =========
</TABLE>


         As of June 30, 2001, we have $160.1 million in cash, cash equivalents
and short-term investments on hand and an additional $96.0 million in long-term
investments. Our balance sheet reflects a current ratio of 2.11 and working
capital of $142.7 million. We believe that existing cash, cash equivalents and
investments will be more than sufficient to meet our presently anticipated
requirements for the foreseeable future. To the extent that additional capital
resources are required, we have access to an untapped $30 million line of
credit.

         For the year ended June 30, 2001, we used $0.2 million of cash flow
from operations. Of this amount, $6.7 million represents net proceeds from
trading securities transactions, which GAAP requires us to reflect in cash flow
from operations. Also of note, included in cash used in operations was a one
time $25.0 million cash marketing charge related to our strategic alliance with
Bank of America.

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

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

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

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

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

         For the year ended June 30, 1999, we generated $25.6 million of cash
flow from operations. Of this amount, $14.3 million represented net proceeds
from trading securities transactions, which are reflected as operating in nature
for accounting purposes.

         From an investing perspective, we used $40.4 million of cash for the
purchase of property and software, of which approximately $14.9 million was for
the purchase of land and a building in Dublin, Ohio and another $6.4


<PAGE>   15

million in leasehold improvements to ready the building for occupancy. The
remaining $19.1 million was used for computer equipment, software and leasehold
improvements in support of initiatives to grow the business and improve quality.
We received $18.4 million from the net sale of the various software business
divestitures during the year and the sale of a building in Columbus, Ohio and
$14.9 million from the repayment of a note receivable established in fiscal 1998
related to the purchase of the Dublin, Ohio facility. We capitalized $8.0
million in software development costs related to new business initiatives in all
three of our business segments. Additionally, we spent approximately $0.2
million in cash in connection with the acquisition of Mobius Group, purchased
$1.9 million in held-to-maturity securities and received $1.0 million in
proceeds from the sale of held-to-maturity securities.

         From a financing perspective, we used $31.3 million in the purchase of
approximately 4.7 million shares of treasury stock for an average price of
approximately $6.65 per share. We used $3.3 million of cash for principal
payments under capital leases and another $3.6 million to fund an escrow account
to release our obligation for bonds with the Department of Economic Development
of the State of Ohio to facilitate the sale of land an a building in Columbus,
Ohio. We received $2.9 million in proceeds from the exercise of options under
the employee stock option plan and $1.9 million from the purchase of shares
under the employee stock purchase plan.


INFLATION

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

MARKET RISK

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

         While our international sales represented less than 2% of our revenue
for the year ended June 30, 2001, we now market, sell and license our products
throughout the world. As a result, our future revenue could be somewhat affected
by weak economic conditions in foreign markets that could reduce demand for our
products.

         Our exposure to interest rate risk is limited to the yield we earn on
invested cash, cash equivalents and investments and interest based revenue
earned on products such as our account balance transfer business. Our
convertible debt carries a fixed rate, as do any outstanding capital lease
obligations. Although our Investment Policy currently prohibits the use of
derivatives for trading or hedging purposes, we believe that our limited
interest rate risk currently does not warrant the use of such instruments.

RECENT ACCOUNTING PRONOUNCEMENTS

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

         SFAS 142 becomes effective for us on July 1, 2002. We are still
assessing the impact of all the statement provisions on our financial position
and results of operations; however, based on our review to date, we expect the
following significant impacts:



<PAGE>   16

         -        Upon adoption, we will be required to reclassify approximately
                  $2 million of unamortized workforce in place intangible assets
                  into goodwill.

         -        Upon adoption, the balance of goodwill and workforce in place
                  is expected to be $624 million and we will discontinue
                  amortizing these assets at that time. The resulting reduction
                  in amortization expense is estimated at approximately $200
                  million for each of our fiscal years 2003 and 2004, and
                  approximately $192 million for our 2005 fiscal year.

         -        We will be required to perform a transitional goodwill
                  impairment test as of July 1, 2002. The impairment test will
                  require us to: (1) identify our reporting units, (2) determine
                  the carrying value of each reporting unit by assigning assets
                  and liabilities, including existing goodwill and intangible
                  assets, to those reporting units, and (3) determine the fair
                  value of each reporting unit. If the carrying value of any
                  reporting unit exceeds its fair value, we will determine the
                  amount of any goodwill impairment through a detailed fair
                  value analysis of each of the assigned assets (excluding
                  goodwill). At this time, we do not anticipate any charge
                  resulting from the transitional impairment test; however, due
                  to the extensiveness of the efforts involved, that test has
                  not yet been performed. Under the provisions of SFAS 142, we
                  are required to complete the test before December 31, 2002.

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


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

         Except for the historical information contained herein, the matters
discussed in our Annual Report include certain forward-looking statements within
the meaning of Section 27A of the Securities Act, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Those statements include, but may
not be limited to, all statements regarding our and management's intent, belief
and expectations, such as statements concerning our future profitability, and
our operating and growth strategy. Investors are cautioned that all
forward-looking statements involve risks and uncertainties including, without
limitation, the factors set forth under the caption "Business - Business Risks"
in the Annual Report on Form 10-K for the year ended June 30, 2001 and other
factors detailed from time to time in our filings with the Securities and
Exchange Commission. One or more of these factors have affected, and in the
future could affect, our businesses and financial results in the future and
could cause actual results to differ materially from plans and projections.
Although we believe that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate. Therefore, there can be no assurance that the forward-looking
statements included in this Annual Report will prove to be accurate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as
representations by us or any other person that our objectives and plans will be
achieved. All forward-looking statements made in this Annual Report are based on
information presently available to our management. We assume no obligation to
update any forward-looking statements.










<PAGE>   17
INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheets of CheckFree
Corporation (the "Company") and its subsidiaries as of June 30, 2000 and 2001,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended June 30, 1999, 2000, and 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries at
June 30, 2000 and 2001, and the results of their operations and their cash flows
for the years ended June 30, 1999, 2000, and 2001 in conformity with accounting
principles generally accepted in the United States of America.




/s/ Deloitte & Touche LLP

Atlanta, Georgia
August 3, 2001



                                      F-1

<PAGE>   18


                     CHECKFREE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                            YEAR ENDED JUNE 30,
                                                                                   -----------------------------------
                                                                                       2000                 2001
                                                                                   -------------       ---------------
                                                                                    (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                                                <C>                  <C>
                                     ASSETS
CURRENT ASSETS:
     Cash and cash equivalents .................................................   $   128,074          $   124,122
     Investments ...............................................................        56,548               35,930
     Accounts receivable, net ..................................................        58,308               88,818
     Prepaid expenses and other assets .........................................        12,813                8,681
     Deferred income taxes .....................................................         9,733               13,725
                                                                                   -----------          -----------
                    Total current assets .......................................       265,476              271,276
PROPERTY AND EQUIPMENT, Net ....................................................        93,214              109,226
OTHER ASSETS:
     Capitalized software, net .................................................        37,189              187,021
     Goodwill, net .............................................................       213,305              820,169
     Strategic agreements, net .................................................          --                643,212
     Other intangible assets, net ..............................................        37,975               47,118
     Investments ...............................................................        23,003               96,042
     Deferred income taxes .....................................................        29,248                 --
     Other noncurrent assets ...................................................        13,704                9,889
                                                                                   -----------          -----------
                    Total other assets .........................................       354,424            1,803,451
                                                                                   -----------          -----------
                                                                                   $   713,114          $ 2,183,953
                                                                                   ===========          ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable ..........................................................   $    10,158          $    19,084
     Accrued liabilities .......................................................        43,958               60,090
     Current portion of long-term obligations ..................................         5,955                4,528
     Deferred revenue ..........................................................        26,644               44,913
                                                                                   -----------          -----------
                    Total current liabilities ..................................        86,715              128,615
ACCRUED RENT AND OTHER .........................................................         7,269                4,758
DEFERRED INCOME TAXES ..........................................................          --                141,853
OBLIGATIONS UNDER CAPITAL LEASES- Less current portion .........................           736                4,041
CONVERTIBLE SUBORDINATED NOTES .................................................       172,500              172,500
COMMITMENTS (Note 21)
STOCKHOLDERS' EQUITY:
     Preferred stock- 15,000,000 and 50,000,000 authorized shares, respectively,
        $0.01 par value; no amounts issued or outstanding ......................          --                   --
     Common stock- 150,000,000 and 500,000,000 authorized shares, respectively,
        $0.01 par value: issued 63,957,859 and 92,472,299 shares, respectively;
        outstanding 58,414,035 and 86,928,475 shares, respectively .............           584                  869
     Additional paid-in-capital ................................................       771,892            2,420,957
     Accumulated deficit .......................................................      (326,320)            (689,455)
     Unearned compensation .....................................................          (262)                (185)
                                                                                   -----------          -----------
                    Total stockholders' equity .................................       445,894            1,732,186
                                                                                   -----------          -----------
                                                                                   $   713,114          $ 2,183,953
                                                                                   ===========          ===========
</TABLE>


                 See notes to consolidated financial statements


                                      F-2

<PAGE>   19



                     CHECKFREE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                YEAR ENDED JUNE 30,
                                                 ----------------------------------------------
                                                       1999           2000             2001
                                                 -------------   -------------   --------------
                                                        (IN THOUSANDS, EXCEPT SHARE DATA)

REVENUES:
<S>                                              <C>             <C>             <C>
     Processing and servicing ................   $    201,059    $    261,621    $    362,051
     License fees ............................         15,975          16,818          30,180
     Maintenance fees ........................         17,746          18,752          21,332
     Other ...................................         15,351          13,004          19,757
                                                 ------------    ------------    ------------
                    Total revenues ...........        250,131         310,195         433,320

EXPENSES:
     Cost of processing, servicing and
       support................................        146,704         182,540         255,528
     Research and development ................         21,085          35,631          55,621
     Sales and marketing .....................         32,354          44,782          90,283
     General and administrative ..............         31,466          40,931          50,474
     Depreciation and amortization ...........        427,495          24,630          42,830
     In-process research and development .....          2,201           6,900          18,600
                                                 ------------    ------------    ------------
                    Total expenses ...........        258,440         353,614         898,001
     Net gain on dispositions of assets ......          4,576            --              --
                                                 ------------    ------------    ------------
LOSS FROM OPERATIONS .........................         (3,733)        (43,419)       (464,681)
OTHER:
     Interest income .........................          2,799           7,689          15,415
     Interest expense ........................           (618)         (8,027)        (13,154)
     Loss on investments .....................           --              --           (16,077)
                                                 ------------    ------------    ------------
LOSS BEFORE INCOME TAXES .....................         (1,552)        (43,757)       (478,497)
INCOME TAX BENEFIT ...........................        (12,009)        (11,437)       (115,362)
                                                 ------------    ------------    ------------
NET INCOME (LOSS) ............................   $     10,457    $    (32,320)   $   (363,135)
                                                 ============    ============    ============


BASIC EARNINGS (LOSS) PER SHARE:
     Net income (loss) per common share ......   $       0.20    $      (0.61)   $      (4.49)
                                                 ============    ============    ============
     Equivalent number of shares .............     52,444,375      53,367,339      80,863,100
                                                 ============    ============    ============
DILUTED EARNINGS (LOSS) PER SHARE:
     Net income (loss) per common share ......   $       0.18    $      (0.61)   $      (4.49)
                                                 ============    ============    ============
     Equivalent number of shares .............     56,529,165      53,367,339      80,863,100
                                                 ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements



                                      F-3
<PAGE>   20


                     CHECKFREE CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                             NUMBER OF                                             NUMBER OF
                                             SHARES OF          COMMON          ADDITIONAL         SHARES OF         TREASURY
                                               COMMON          STOCK AT          PAID-IN           TREASURY          STOCK AT
                                               STOCK              PAR            CAPITAL             STOCK             COST
                                            -------------     ------------    ---------------    --------------     ------------
                                                                     (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                        <C>                <C>               <C>               <C>               <C>
BALANCE- JUNE 30, 1998 ................    56,364,839         $       564       $   492,109       (963,295)         $    (4,362)
  Net income ..........................          --                  --                --             --                   --
  Stock options exercised .............       354,758                   3             1,605           --                   --
  Employee stock purchases ............        48,748                   1               968         48,631                1,070
  401(k) match ........................          --                  --                --           74,981                  963
  Treasury stock acquired .............          --                  --                --       (4,709,698)             (31,336)
  Treasury stock retired ..............    (5,549,381)                (55)          (33,610)     5,549,381               33,665
  Issuance of common stock pursuant
          to acquisition ..............       537,314                   5            17,995           --                   --
  Tax benefit associated with exercise
          of stock options ............          --                  --               1,318           --                   --
                                         ------------         -----------       -----------    -----------          -----------
BALANCE- JUNE 30, 1999 ................    51,756,278                 518           480,385           --                   --
 Net loss .............................          --                  --                --             --                   --
 Stock options and warrants exercised .     1,795,785                  18            35,224           --                   --
 Employee stock purchases .............        99,010                   1             2,285           --                   --
 401(k) match .........................        36,226                --               1,059           --                   --
  Issuance of common stock pursuant
           to acquisition .............     4,713,736                  47           239,447           --                   --

  Issuance of restricted stock ........        13,000                --                 333           --                   --
 Amortization of unearned
           compensation ...............          --                  --                --             --                   --

 Tax benefit associated with exercise
          of stock options and warrants          --                  --              13,159           --                   --
                                          -----------         -----------       -----------    -----------          -----------
BALANCE- JUNE 30, 2000 ................    58,414,035                 584           771,892           --                   --

 Net loss .............................          --                  --                --             --                   --

 Stock options and warrants exercised .     1,369,885                  14            22,609           --                   --
 Employee stock purchases .............        92,721                   1             3,623           --                   --
 401(k) match .........................        51,834                --               2,487           --                   --
  Issuance of common stock pursuant
           to acquisition .............    27,000,000                 270         1,601,723           --                   --
 Amortization of unearned
           compensation ...............          --                  --                --             --                   --
 Tax benefit associated with exercise
          of stock options and warrants          --                  --              18,623           --                   --
                                          -----------         -----------       -----------    -----------          -----------
BALANCE- JUNE 30, 2001 ................    86,928,475         $       869       $ 2,420,957           --                   --
                                          ===========         ===========       ===========    ===========          ===========
</TABLE>



<TABLE>
<CAPTION>

                                                                                        TOTAL
                                             UNEARNED           ACCUMULATED         STOCKHOLDERS'
                                           COMPENSATION           DEFICIT              EQUITY
                                         ------------------    ---------------     ----------------
                                                      (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                        <C>                  <C>                 <C>
BALANCE- JUNE 30, 1998 ................    $      --            $  (304,457)        $   183,854
  Net income ..........................           --                 10,457              10,457
  Stock options exercised .............           --                   --                 1,608
  Employee stock purchases ............           --                   --                 2,039
  401(k) match ........................           --                   --                   963
  Treasury stock acquired .............           --                   --               (31,336)
  Treasury stock retired ..............           --                   --                  --
  Issuance of common stock pursuant
          to acquisition ..............           --                   --                18,000
  Tax benefit associated with exercise
          of stock options ............           --                   --                 1,318
                                           -----------          -----------         -----------
BALANCE- JUNE 30, 1999 ................           --               (294,000)            186,903
 Net loss .............................           --                (32,320)            (32,320)
 Stock options and warrants exercised .           --                   --                35,242
 Employee stock purchases .............           --                   --                 2,286
 401(k) match .........................           --                   --                 1,059
  Issuance of common stock pursuant
           to acquisition .............           --                   --               239,494

  Issuance of restricted stock ........           (333)                --                  --
 Amortization of unearned
           compensation ...............             71                 --                    71

 Tax benefit associated with exercise
          of stock options and warrants           --                   --                13,159
                                           -----------          -----------         -----------
BALANCE- JUNE 30, 2000 ................           (262)            (326,320)            445,894

 Net loss .............................           --               (363,135)           (363,135)

 Stock options and warrants exercised .           --                   --                22,623
 Employee stock purchases .............           --                   --                 3,624
 401(k) match .........................           --                   --                 2,487
  Issuance of common stock pursuant
           to acquisition .............           --                   --             1,601,993
 Amortization of unearned
           compensation ...............             77                 --                    77
 Tax benefit associated with exercise
          of stock options and warrants           --                   --                18,623
                                           -----------          -----------         -----------
BALANCE- JUNE 30, 2001 ................    $      (185)         $  (689,455)        $ 1,732,186
                                           ===========          ===========         ===========
</TABLE>


                 See notes to consolidated financial statements


                                      F-4

<PAGE>   21


                     CHECKFREE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED JUNE 30,
                                                                           -------------------------------------------------
                                                                               1999               2000             2001
                                                                           --------------     -------------    -------------
                                                                                             (IN THOUSANDS)
<S>                                                                        <C>                 <C>              <C>
OPERATING ACTIVITIES:
     Net income (loss) .................................................   $  10,457           $ (32,320)       $(363,135)
     Adjustments to reconcile net income (loss) to net cash provided
         by (used in) operating activities:
     Write off of in-process research and development ..................       2,201               6,900           18,600
     Loss on investments ...............................................        --                  --             16,077
     Depreciation and amortization .....................................      24,630              42,830          427,495
     Deferred income tax provision .....................................     (11,437)           (115,362)             854
     Net (gain) loss on dispositions of assets .........................      (4,576)               --               --
     Net loss on sale of property and equipment ........................        --                  --                 56
     Purchases of investments- Trading .................................     (10,416)            (19,002)         (12,369)
     Proceeds from maturities and sales of investments, net- Trading ...      24,683              22,608           19,029
     Change in certain assets and liabilities (net of acquisitions and
          dispositions):
          Accounts receivable ..........................................      (6,976)            (14,499)         (30,510)
          Prepaid expenses and other ...................................       1,434                 644            1,688
          Accounts payable .............................................         988              (4,153)           8,926
          Accrued liabilities and other ................................      (2,194)             20,259           16,808
          Deferred revenue .............................................       1,739               9,188           10,698
          Income tax accounts ..........................................     (17,253)                 (2)           1,765
                                                                           ---------           ---------        ---------
                    Net cash provided by (used in) operating activities       25,571              21,016             (234)
INVESTING ACTIVITIES:
    Purchase of property and software ..................................     (40,444)            (39,495)         (41,701)
    Proceeds from sale of assets .......................................      18,435                --              2,257
    Proceeds from repayment of note receivable .........................      14,882                --               --
    Capitalization of software development costs .......................      (8,031)             (7,576)          (4,927)
    Purchase of business, net of cash acquired .........................        (190)              9,152           96,599
    Capitalization of strategic agreement costs ........................        --                  --            (10,279)
    Purchases of investments- Held to maturity .........................      (1,875)            (70,796)        (145,997)
    Proceeds from maturities and sales of investments- Held to maturity        1,006               9,780           79,041
    Purchase of other investments ......................................        --               (10,000)          (1,881)
                                                                           ---------           ---------        ---------
                    Net cash provided by (used in) investing activities      (16,217)           (108,935)         (26,888)
FINANCING ACTIVITIES:
     Principal payments under capital lease obligations ................      (3,327)             (1,495)          (3,847)
     Escrow deposit associated with capital lease obligation ...........      (3,637)               --               --
     Proceeds from stock options exercised .............................       2,926               9,721            6,940
     Proceeds from employee stock purchase plan ........................       1,931               2,903            4,374
     Purchase of treasury stock ........................................     (31,336)               --               --
     Proceeds from sale of stock and exercise of warrants ..............        --                25,515           15,703
     Proceeds from issuance of convertible subordinated notes ..........        --               166,903             --
                                                                           ---------           ---------        ---------
                    Net cash provided by (used in) financing activities      (33,443)            203,547           23,170
                                                                           ---------           ---------        ---------
NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS ..................................................     (24,089)            115,628           (3,952)
CASH AND CASH EQUIVALENTS:
     Beginning of period ...............................................      36,535              12,446          128,074
                                                                           ---------           ---------        ---------
     End of period .....................................................   $  12,446           $ 128,074        $ 124,122
                                                                           =========           =========        =========
</TABLE>


                 See notes to consolidated financial statements


                                      F-5

<PAGE>   22



                     CHECKFREE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           AS OF AND FOR THE YEARS ENDED JUNE 30, 1999, 2000 AND 2001


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - CheckFree Corporation (the "Company") is the parent company of
CheckFree Services Corporation ("CFSC"), the principal operating company of the
business. In April, 2000, CFSC changed its name from CheckFree Corporation to
CheckFree Services Corporation. Following that change, in August 2000, CheckFree
Holdings Corporation changed its name to CheckFree Corporation. CFSC was
organized in 1981 and is a leading provider of transaction processing services,
software and related products to financial institutions and businesses and their
customers throughout the United States. See Note 19 for a description of the
Company's business segments.

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

USE OF ESTIMATES - The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States ("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.

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

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

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

INVESTMENTS - The Company has certain investments in debt and equity securities
that are classified as either available-for-sale, trading or held-to-maturity
securities in accordance with Statement of Financial Accounting Standards
("SFAS") 115, "Accounting for Certain Investments in Debt and Equity
Securities". At June 30, 2000 and 2001, the Company does not have any
investments classified as available-for-sale. Trading securities are carried at
market value and unrealized holding gains and losses are included in income.
Held-to-maturity securities are carried at amortized cost.

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

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



                                      F-6
<PAGE>   23


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


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

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

PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Property and
equipment are depreciated using the straight-line method over the estimated
useful lives as follows: land improvements, building and building improvements,
15 to 30 years; computer equipment, software, and furniture, 3 to 7 years.
Equipment under capital leases are amortized using the straight-line method over
the lesser of their estimated useful lives or the terms of the leases. Leasehold
improvements are amortized over the lesser of the estimated useful lives or
remaining lease periods.

CAPITALIZED SOFTWARE COSTS - On July 1, 1999, the Company adopted Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use." The Statement distinguishes accounting for costs
of computer software developed or obtained for internal use from guidance under
SFAS 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." The Company determines whether software costs fall under
the provisions of SFAS 86 or SOP 98-1 and accounts for them as follows:

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

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

INTANGIBLE ASSETS - The costs of identified intangible assets are generally
amortized on a straight-line basis over periods from 8 months to 10 years.
Goodwill is amortized on a straight-line basis over 5 to 10 years. In accordance
with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", the Company periodically reviews
long-lived assets, including identifiable intangibles and goodwill related to
those assets, to evaluate whether events or changes in circumstances have
occurred that would indicate that the carrying amount of the asset may not be
recoverable. If this review indicates that the remaining useful life of goodwill
or other intangible assets requires revision or that the asset is not
recoverable, the carrying amount is reduced by the estimated shortfall of cash
flows on a discounted basis.



                                      F-7
<PAGE>   24


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


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

ADVERTISING COSTS - The Company expenses advertising costs as incurred in
accordance with SOP 97-3, "Reporting on Advertising Costs". Advertising expenses
were not significant for the years ended June 30, 1999 and 2000. Advertising
expense for the year ended June 30, 2001 was $29,925,000 and includes
$25,000,000 provided to Bank of America in connection with the Strategic
Agreement described in Note 3.

COMPREHENSIVE INCOME - Where applicable, the Company reports comprehensive
income in accordance with SFAS 130, "Reporting Comprehensive Income." The
Statement requires disclosure of total non-shareowner changes in equity and its
components. Total non-shareowner changes in equity include all changes in equity
during a period except those resulting from investments by and distributions to
shareowners. The components of other comprehensive income applicable to the
Company would be unrealized holding gains or losses on the Company's
available-for-sale securities and certain transactions associated with
derivative instruments. There were no available-for-sale securities held or
derivative instrument transactions during the years ended June 30, 1999, 2000
and 2001. As a result, there were no components of comprehensive income
applicable to the Company during the years ending June 30, 1999, 2000 and 2001.

BUSINESS SEGMENTS - The Company reports information about its business segments
in accordance with SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information". The Statement defines how operating segments are
determined and requires disclosure of certain financial and descriptive
information about a company's operating segments. See Note 19 for the Company's
segment information.

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

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

SFAS 142 becomes effective for the Company on July 1, 2002. The Company is still
assessing the impact of all the Statement provisions on its financial position
and results of operations, however, based on its review to date, the Company
expects the following significant impacts:

     -    Upon adoption, the Company will be required to reclassify
          approximately $2 million of unamortized workforce in place intangible
          assets into goodwill.



                                      F-8
<PAGE>   25



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


     -    Upon adoption, the balance of goodwill and workforce in place is
          expected to be $624 million and the Company will discontinue
          amortizing these assets at that time. The resulting reduction in
          amortization expense is estimated at approximately $200 million for
          each of the Company's fiscal years 2003 and 2004, and approximately
          $192 million for the Company's 2005 fiscal year.

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

          At this time, the Company does not anticipate any charge resulting
          from the transitional impairment test, however, due to the
          extensiveness of the efforts involved, that test has not yet been
          performed. Under the provisions of SFAS 142, the Company is required
          to complete the test before December 31, 2002.

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

RECLASSIFICATIONS - Certain amounts in the prior years' financial statements
have been reclassified to conform to the 2001 presentation.

REVENUE RECOGNITION

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

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

     As part of processing certain types of transactions, the Company earns
     interest from the time money is collected from its customers until the time
     payment is made to the applicable merchants. These revenues, which are
     generated from trust account balances not included on the Company's balance
     sheet, are included in processing and servicing and totaled $11,846,000,
     $21,485,000 and $30,186,000 for the years ended June 30, 1999, 2000 and
     2001, respectively.

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

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

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



                                      F-9
<PAGE>   26



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


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

EXPENSE CLASSIFICATION

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

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

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

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

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

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

NOTE 2. ACQUISITIONS AND DISPOSITIONS

TRANSPOINT

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

                                                   INTANGIBLE        USEFUL
                                                     ASSET            LIFE
                                                   ----------       -------
                                                         (IN THOUSANDS)
Goodwill ......................................    $780,545         5.0 yrs
Strategic agreements ..........................     495,000         5.0 yrs
Existing product technology ...................     209,300         3.0 yrs
Customer list .................................      29,000         3.0 yrs

Tradename .....................................      28,300         1.0 yr


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



                                      F-10
<PAGE>   27


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


At the acquisition date, TransPoint had four technologies under development that
had not demonstrated technological feasibility. These technologies include
Biller Integration System and Communications, Service Center, Delivery
Applications and Payment Systems Interface. The in-process technologies have no
alternative use in the event that the proposed technologies do not prove to be
feasible. These development efforts fall within the definition of In-Process
Research and Development ("IPR&D") contained in SFAS No. 2.

BIS / COMMUNICATIONS TECHNOLOGY - The Biller Integration System ("BIS") is
provided to the biller to run on-site and supplies the web-hosting for the
biller. The BIS helps implement the templates and develop the look and feel for
marketing components. The BIS also includes automation interfaces, EI
interfaces, and the console. The following features of the BIS / Communications
technology were under development:

     -    Remote access or the Remote BIS Console, which will allow Biller
          operators and administrators to perform selected gateway operations
          from remote machines using a Web-based interface to the BIS;

     -    International enhancements, which are fixes to the BIS system to
          correct incompatibilities with international currency and date
          settings; and

     -    Platform updates that will support installation of the BIS gateway on
          the Windows 2000 Server platform.

SERVICE CENTER TECHNOLOGY - The Service Center connects the TransPoint servers
to the BIS on the biller site, the automated clearinghouse, other third-party
servers, and the individual consumer. The Service Center includes the database
and operational functions as well. The following features of the Service Center
were under development:

     -    E-mail notification currently uses an internal Microsoft server. The
          system is being modified to incorporate the industry standard allowing
          the use of any server environment to send data over the Internet. In
          addition, service-generated e-mail messages will be in HTML format
          (rather than plain text) for a richer customer experience.

     -    SysAdmiral upgrade, in which the installation scripts for the service
          center are being upgraded to support the latest version of SysAdmiral.

DELIVERY APPLICATIONS - The Delivery Applications generate the actual web pages
through its user interface. This technology creates not only the TransPoint
consumer site, but also the operations, corporate, and support sites. The
following features of the Delivery Applications were under development:

     -    Passport Integration / Authorization, in which the security and
          authentication systems of the TransPoint service will be modified to
          use Microsoft Passport for user authentication. In addition, the user
          interface will be modified to allow migration of existing user
          accounts to Microsoft Passport.

     -    User Registration Improvement, in which consumer registration is being
          modified significantly, with the goal of retaining new consumers.
          Changes include sending consumers to the Microsoft Passport Web site
          to obtain a Passport account, and condensing the number of screens in
          registration. In addition, new consumers are permitted greater access
          to the system and features as they await identity and payment account
          verification.

     -    Recurring Payments, whereby consumers will now be able to set up
          automatic "pay anyone" payments recurring at set intervals, and
          automatic rules-based handling of electronic bills by payee.

     -    Batch Enabling, whereby biller operators and administrators will now
          be able to enable statement batches directly from the TransPoint
          Operations site. A new "Enable Batch" button will be added to the
          Preview Statements screen on the TransPoint Operations site.

     -    Reporting Upgrades, in which a variety of user-interface upgrades are
          underway to improve performance of the reporting subsystem, improve
          the reporting content available to billers, and increase the overall
          reliability of the TransPoint system.



                                      F-11
<PAGE>   28



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


     -    Payment Center User Interface Improvements, which includes a variety
          of user interface improvements to fix minor UI issues, enhance
          accessibility options, and improve overall site usability.

PAYMENT/INTERFACE - The Payment Interface technology connects the Service Center
to the ACH, Original Depository Financial Institutions, and other third-party
servers as well as processing all payment and settlement information. The
following features of the Payment / Interface technology were under development:

     -    Microsoft Money Download, in which this feature is being rearchitected
          and reimplemented in its entirety to correct incompatibilities between
          the existing Microsoft Money download feature and the newest version
          of Microsoft Money.

     -    Credit Card Payments, which provides code that allows the TransPoint
          system to support the use of credit cards for payment settlement.

There are risks and uncertainties associated with the completion of these
in-process technologies. These risks include:

     -    Not Technologically Feasible. - The acquired IPR&D had not
          demonstrated technological or commercial feasibility as of the
          transaction date for TransPoint. Significant risks exist because
          TransPoint is unsure of the obstacles it will encounter in the form of
          market acceptance, time and cost necessary to produce a
          technologically feasible product. SFAS No. 2 does not specifically
          require an analysis of the development effort expended relative to an
          acquisition date. It is reasonable to assume, however, that an IPR&D
          project would require a significant amount of time and cost in order
          to modify for the Company's use in the marketplace. Should the
          proposed technology fail to become viable, it is unlikely that the
          Company would realize any value from the sale of the technology to
          another party.

     -    No Alternative Future Use. - The acquired IPR&D consists of
          TransPoint's work to date on its products. The products are very
          specific to the tasks and markets for which it is intended. As is
          typically the case with software, there are no alternative uses for
          the in-process work in the event that the product does not become
          feasible for the Company. The development effort for the acquired
          IPR&D does not possess an alternative future use for the Company under
          the terms of SFAS No. 2.

If the TransPoint project underway fails, there will be very limited life to the
existing product because the continuing pace of technological developments in
the marketplace will have rendered them non-competitive. In the event of a
failure, the technology acquired, as embodied in either current or in-process
products, will have no alternative use and would be written off as a loss by the
Company.

The following table represents information regarding the status of the various
in-process research and development projects acquired (as of the date of
acquisition):

<TABLE>
<CAPTION>

                                             ESTIMATED                             EXPECTED
                                             STAGE OF            ESTIMATED          COST TO
                                            COMPLETION        COMPLETION DATE      COMPLETE      VALUATION
                                          ----------------    -----------------    ----------    ----------
                                                                                        (IN THOUSANDS)
<S>                                             <C>                    <C>          <C>           <C>
        BIS / Communications .........          80%            October 2000         $   100       $ 1,200
        Service Center ...............          80%            October 2000             121         5,900
        Delivery Applications ........          80%            October 2000             396         9,500
        Payment / Interface ..........          80%            October 2000             100         2,000
                                                                                    -------       -------
              Total ..................                                              $   717       $18,600
                                                                                    =======       =======
</TABLE>



                                      F-12
<PAGE>   29


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


The method used to allocate the purchase consideration to IPR&D was the modified
income approach. Under the income approach, fair value reflects the present
value of the projected free cash flows that will be generated by the IPR&D
projects and that is attributable to the acquired technology, if successfully
completed. The modified income approach takes the income approach, modified to
include the following factors:

     -    analysis of the stage of completion of each project;

     -    exclusion of value related to research and development yet-to-be
          completed as part of the on going IPR&D projects; and

     -    the contribution of existing technologies and applications.

The projected revenues used in the income approach are based upon the
incremental revenues associated with a portion of the project related to
TransPoint's technology likely to be generated upon completion of the project
and the beginning of commercial sales, as estimated by management. The
projections assume that the projects will be successful and the projects'
development and commercialization are as set forth by management. The discount
rate used in this analysis is an after tax rate of 24%.

BLUEGILL

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

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


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

In connection with the acquisition of BlueGill Technologies, the Company
recorded a charge of $6.9 million for purchased IPR&D. This charge related to
five technologies which had not demonstrated technological or commercial
feasibility as of the transaction date. They were print and extraction
technology, data management engine technology, API technology, web application
technologies and payment/OFX technology. As of the acquisition date, the Company
estimated that these projects ranged from 10% to 50% complete, that an aggregate
of $2.1 million would be required to complete these five projects, and that,
depending upon the project, product revenues would begin in mid-to-late 2000. An
after-tax discount rate of 25% was used in this analysis. As of June 30, 2001,
these projects were substantially complete.



                                      F-13
<PAGE>   30




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


MOBIUS

On March 8, 1999, the Company acquired Mobius Group, Inc. ("Mobius Group") for a
total of $19.1 million, consisting of 537,314 shares of common stock valued at
$18 million, $0.2 million of acquisition costs, and $0.9 million of assumed
debt. The acquisition was treated as a purchase for accounting purposes, and,
accordingly, the assets and liabilities were recorded based on their fair values
at the date of the acquisition. The values ascribed to acquired intangible
assets and their respective useful lives are as follows:

                                              INTANGIBLE       USEFUL
                                                ASSET           LIFE
                                             --------------   ---------
                                             (IN THOUSANDS)
Goodwill ...............................       $10,552         10.0 yrs
Customer base ..........................         4,429         8.0 yrs
Tradenames .............................         3,709         10.0 yrs
Existing product technology ............         1,864         5.0 yrs
Workforce ..............................           940         3.0 yrs


Amortization of intangible assets is on a straight-line basis over the assets'
respective useful life. Mobius Group's operations are included in the
consolidated statements of operations from the date of acquisition.

At the acquisition date, Mobius Group had four products under development that
had not demonstrated technological or commercial feasibility. These products
included M-Plan Retirement & Estate Planning Modules, M-Plan Cash Flow, Tax and
Education Planning Modules, and new version of M-Search and a new version of
M-Vest. As of the acquisition date, the Company estimated that these projects
ranged from 20% to 92% complete, that an aggregate of $0.7 million would be
necessary to complete these four projects, and product revenues would begin on
dates ranging from May 1999 to December 1999. An after-tax discount rate of 20%
was used in this analysis. As of June 30, 2001, these projects were
substantially complete.

PRO FORMA INFORMATION

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


                                                    YEAR ENDED JUNE 30,
                                                  --------------------------
                                                     2000            2001
                                                  ----------      ----------

Total revenues .............................      $ 316,830       $ 433,329
Net income (loss) ..........................      $(406,582)      $(402,193)
Basic and Diluted earnings per share:
     Net income (loss) per common share ....      $   (5.42)      $   (4.80)
                                                  =========       =========
     Equivalent number of shares ...........         75,078          83,797
                                                  =========       =========

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

DISPOSITIONS

On October 1, 1998 the Company sold certain software and other assets related to
its imaging line of business for $0.8 million consisting of a note receivable of
$0.5 million and future services of $0.3 million. Loss on the sale amounted to
$2.9 million.



                                      F-14
<PAGE>   31




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


On September 11, 1998 the Company sold certain software and other assets related
to its mortgage line of business for $19.1 million, net of a working capital
adjustment. As part of the sales agreement, the Company retained responsibility
for certain customer obligations and agreed to subcontract with the acquiring
company to perform consulting services at retail hourly rates for these retained
obligations. The Company received cash of $15 million, net of $4.0 million of
prepaid subcontract services due the acquiring company. Net gain on the sale
amounted to $6.4 million.

The gain or loss on sale of assets described above is included in Net Gain on
Dispositions of Assets in the Company's Consolidated Statements of Operations.

NOTE 3. STRATEGIC AGREEMENT

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

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

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

The agreement provides for a revenue guarantee of $500 million to the Company
over the next 10 years. Bank of America also has the ability to earn warrants on
up to 10 million additional shares upon achievement of certain milestones more
fully described in Note 16.

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

                                                           JUNE 30,
                                                     -------------------
                                                       2000         2001
                                                     -------     -------
Current assets:
        Accounts receivable, net ...............     $2,219       $9,655
                                                     ------       ------
               Total current assets ............     $2,219       $9,655
                                                     ======       ======
Current liabilities:
        Accounts payable .......................     $ --         $5,983
        Accrued liabilities ....................       --          2,111
        Deferred revenues ......................        241          477
                                                     ------       ------
               Total current liabilities .......     $  241       $8,571
                                                     ======       ======



                                      F-15

<PAGE>   32



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


                                                          YEAR ENDED JUNE 30,
                                                     --------------------------
                                                        1999     2000      2001
                                                     -------   -------   ------
Revenues:
    Processing and servicing ....................   $10,369   $14,796   $42,503
    License fees ................................       109         2     1,187
    Maintenance fees ............................       112       209       460
    Other .......................................       122       142       337
                                                    -------   -------   -------
              Total revenues ....................   $10,712   $15,149   $44,487
                                                    =======   =======   =======
Expenses:
     Cost of processing, servicing and support ..   $  --     $  --     $23,154
     Sales and marketing ........................      --        --      25,000
                                                    -------   -------   -------
              Total expenses ....................   $  --     $  --     $48,154
                                                    =======   =======   =======


Revenues and accounts receivable relate primarily to electronic billing and
payment services provided to Bank of America. Accounts payable, accrued
liabilities and cost of processing expenses relate to reimbursements to Bank of
America in connection with a transition services agreement in place while the
Company completes the conversion of Bank of America customers to its processing
platform.

NOTE 4. INVESTMENTS

Investments consist of the following (in thousands):

                                                              JUNE 30,
                                                     ------------------------
                                                        2000           2001
                                                     ----------     ---------
Held-to-Maturity .................................   $ 162,989      $ 239,507
Trading ..........................................       6,660           --
Other investments ................................      11,171          3,296
Less:  Amounts classified as cash equivalents ....    (101,269)      (110,831)
                                                     ---------      ---------
                    Total investments ............   $  79,551      $ 131,972
                                                     =========      =========



                                      F-16
<PAGE>   33




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


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

<TABLE>
<CAPTION>

                                                                             GROSS UNREALIZED
                                                    AMORTIZED       --------------------------------        FAIR
                                                       COST             GAINS             LOSSES            VALUE
                                                   -------------    ---------------    -------------     ------------
<S>                                                <C>               <C>                <C>              <C>
JUNE 30, 2000:
     Corporate bonds ....................          $  50,824         $    --            $    (148)       $  50,676
     Asset-backed securities ............               --                --                 --               --
     Commercial paper ...................             68,886               211               --             69,097
     Certificates of deposit ............             29,981              --                  (86)          29,895
     U.S. Government and federal agency
        obligations .....................              2,824                 4                (18)           2,810
     Money market funds .................             10,474              --                 --             10,474
                                                   ---------         ---------          ---------        ---------
    Held-to-Maturity investments ........            162,989               215               (252)         162,952
    Less:  amounts classified as cash
        equivalents .....................           (101,269)             (215)                19         (101,465)
                                                   ---------         ---------          ---------        ---------
Total Held-to-Maturity Investments ......          $  61,720         $    --            $    (233)       $  61,487
                                                   =========         =========          =========        =========

JUNE 30, 2001:
     Corporate bonds ....................          $  75,627         $     226          $    (404)       $  75,449
     Asset-backed securities ............             29,259                74               --             29,333
     Commercial paper ...................             51,186                43                 (9)          51,220
     Certificates of deposit ............               --                --                 --               --
     U.S. Government and federal agency
        obligations .....................             22,466               254               --             22,720
     Money market funds .................             60,969              --                 --             60,969
                                                   ---------         ---------          ---------        ---------
    Held-to-Maturity investments ........            239,507               597               (413)         239,691
    Less:  amounts classified as cash
        equivalents .....................           (110,831)             --                 --           (110,831)
                                                   ---------         ---------          ---------        ---------
Total Held-to-Maturity Investments ......          $ 128,676         $     597          $    (413)       $ 128,860
                                                   =========         =========          =========        =========
</TABLE>


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

The amortized cost and fair value of held-to-maturity investment securities at
June 30, 2001 by contractual maturity or repricing date are as follows (in
thousands):


                                                   AMORTIZED        FAIR
                                                     COST           VALUE
                                                   ---------       --------

Due in one year or less .....................       $ 35,930       $ 36,097
Due after one year through five years .......         92,746         92,763
                                                    --------       --------
                                                    $128,676       $128,860
                                                    ========       ========


Expected maturities may differ from contractual maturities because debt issuers
may have the right to call or prepay obligations with or without call or
prepayment penalties.

Other investments are accounted for under the cost method and include the
following (in thousands):

                                                              JUNE 30,
                                                       ---------------------
                                                        2000           2001
                                                       -------       -------

Common stock and warrants ......................       $11,171       $ 2,198
Convertible debenture ..........................          --           1,000
Preferred stock ................................          --              98
                                                       -------       -------
                   Total other investments .....       $11,171       $ 3,296
                                                       =======       =======



                                      F-17

<PAGE>   34
                     CHECKFREE CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Common stock and warrants consist primarily of the Company's strategic
investment in BillServ.com common stock, which is subject to certain trading
restrictions. The remainder of common stock and warrants, convertible debenture,
and preferred stock investments are in non-publicly traded e-billing related
companies. The convertible debenture bears interest at 6.5% per annum and is
payable in full on September 12, 2003. Interest is paid on December 31 and June
30 each year. The debenture agreement allows the Company, at its option, to
convert the note into common shares of the issuer, the number of which is
dependent upon the valuation of the issuer at that time. Conversion into common
stock is automatic if the issuer completes an initial public offering.

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

NOTE 5. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following (in thousands):


                                                                  JUNE 30,
                                                          ----------------------
                                                              2000        2001
                                                          -----------   --------
Trade accounts receivable ............................      $46,609      $76,973
Unbilled trade accounts receivable ...................       10,302        8,875
Other receivables.....................................        5,400        5,933
                                                            -------      -------
                   Total .............................       62,311       91,781
Less allowance for doubtful accounts..................        4,003        2,963
                                                            -------      -------
                    Accounts receivable, net .........      $58,308      $88,818
                                                            =======      =======


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

NOTE 6. INCOME TAXES

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



                                      F-18
<PAGE>   35



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



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


                                                      YEAR ENDED JUNE 30,
                                            -----------------------------------
                                               1999         2000         2001
                                            ---------    ---------    ---------
     Current:
     Federal ............................   $ (10,555)   $    --      $    --
     State and local ....................      (2,308)        --           --
                                            ---------    ---------    ---------
               Total current ............     (12,863)        --           --
Deferred federal and state ..............         854      (11,437)    (115,362)
                                            ---------    ---------    ---------
               Total income tax benefit..   $ (12,009)   $ (11,437)   $(115,362)
                                            =========    =========    =========

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


<TABLE>
<CAPTION>
                                                             YEAR ENDED JUNE 30,
                                                 ---------------------------------------
                                                      1999         2000          2001
                                                 ------------- ------------ ------------
<S>                                                <C>          <C>          <C>
Computed "expected" tax benefit ................   $    (543)   $ (15,315)   $(167,243)
 Nondeductible in-process research and
   development of acquired businesses ..........         770        2,415        6,510
Nondeductible intangible amortization ..........      60,346        1,137        3,572
State and local taxes, net of federal
   income tax benefits .........................      (1,741)      (1,636)     (14,917)
Loss from medical benefits subsidiary ..........     (10,665)        --           --
Other, net .....................................        (967)        (473)         (58)
                                                   ---------    ---------    ---------
               Total income tax benefit ........   $ (12,009)   $ (11,437)   $(115,362)
                                                   =========    =========    =========
</TABLE>


The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at June 30, 2000 and
2001 are as follows (in thousands):


<TABLE>
<CAPTION>
                                                                    JUNE 30,
                                                           ------------------------
                                                                2000        2001
                                                           ------------ -----------
<S>                                                         <C>          <C>
Deferred tax assets:
     Federal and state net operating loss carryforwards..   $  32,219    $  72,972
     Federal and state tax credit carryforwards..........       3,867        4,300
     Allowance for bad debts and returns.................       1,774        1,278
     Accrued compensation and related items..............       5,429        1,420
     Stock warrants .....................................      19,331       21,484
     Property and equipment..............................        --            602
     Other investments...................................        --          3,335
     Deferred revenue....................................        --          2,749
     Reserve accruals....................................       3,558        8,172
                                                            ---------    ---------
                    Total deferred tax assets ...........      66,178      116,312
Deferred tax liabilities:
     Capitalized software ...............................     (12,792)     (69,864)
     Property and equipment..............................      (1,850)        --
     Deferred revenue....................................         (49)        --
     Intangible assets ..................................     (11,526)    (174,482)
     Prepaid expenses....................................        (980)         (94)
                                                            ---------    ---------
                    Total deferred tax liabilities ......     (27,197)    (244,440)
                                                            ---------    ---------
                     Net deferred tax asset (liabilities)   $  38,981    $(128,128)
                                                            =========    =========
</TABLE>


                                      F-19
<PAGE>   36


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


At June 30, 2001, the Company has approximately $187,693,000 of state and
$181,672,000 of federal net operating loss carryforwards available, expiring in
2009 to 2015 and 2009 to 2021, respectively. Additionally, at June 30, 2001, the
Company has approximately $812,000 of state and $3,723,000 of federal tax credit
carryforwards available, expiring in 2008 to 2011 and 2009 to 2021,
respectively.

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

NOTE 7. PROPERTY AND EQUIPMENT

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



                                                                 JUNE 30,
                                                       ------------------------
                                                           2000         2001
                                                       -----------   ----------
Land and land improvements ...........................   $  4,944     $  4,944
Building and building improvements ...................     39,992       50,732
Computer equipment and software licenses .............    101,662      132,850
Furniture and equipment ..............................     14,071       16,894
                                                         --------     --------
               Total .................................    160,669      205,420
Less accumulated depreciation and amortization .......     67,455       96,194
                                                         --------     --------
                Property and equipment, net ..........   $ 93,214     $109,226
                                                         ========     ========

Depreciation expense totaled $17,801,000, $22,915,000 and $30,442,000 for the
years ended June 30, 1999, 2000 and 2001, respectively.

NOTE 8. INTANGIBLE ASSETS

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


<TABLE>
<CAPTION>
                                                                              JUNE 30,
                                                                      -----------------------
                                                                         2000         2001
                                                                      ----------   ----------
<S>                                                                   <C>          <C>
Capitalized Software:
       Product technology from acquisitions and strategic agreement   $   35,427   $  252,378
       Internal development costs .................................       16,799       21,771
                                                                      ----------   ----------
                Total .............................................       52,226      274,149
       Less:  accumulated amortization ............................       15,037       87,128
                                                                      ----------   ----------
                Capitalized software, net .........................   $   37,189   $  187,021
                                                                      ==========   ==========

Goodwill:
       Goodwill ...................................................   $  230,550   $1,009,834
       Less:  accumulated amortization ............................      189,665       17,245
                                                                      ----------   ----------
                  Goodwill, net ...................................   $  213,305   $  820,169
                                                                      ==========   ==========

Strategic agreements:
       Strategic agreements .......................................   $     --     $  744,424
       Less:  accumulated amortization ............................         --        101,212
                                                                      ----------   ----------
                  Strategic agreements, net .......................   $     --     $  643,212
                                                                      ==========   ==========
</TABLE>


                                      F-20
<PAGE>   37


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


Other intangible assets:
     Workforce ....................................    $  8,771       $ 11,944
     Tradenames ...................................      19,668         47,968
     Customer base ................................      16,358         45,358
     Covenants not to compete .....................       1,200          1,200
                                                       --------       --------
              Total ...............................      45,997        106,470
     Less accumulated amortization ................       8,022         59,352
                                                       --------       --------
              Other intangible assets, net ........    $ 37,975       $ 47,118
                                                       ========       ========


Significant additions to intangible assets resulted from the acquisitions and
strategic agreement described in Notes 2 and 3, respectively.

Amortization of intangible assets totaled $6,829,000, $19,915,000 and
$397,053,000 for the years ended June 30, 1999, 2000 and 2001, respectively.

NOTE 9. ACCRUED LIABILITIES

The components of accrued liabilities are as follows (in thousands):


                                                               JUNE 30,
                                                      --------------------------
                                                          2000           2001
                                                      -----------    -----------
Compensation and benefits ....................          $25,288        $33,141
Other ........................................           18,670         26,949
                                                        -------        -------
                Total ........................          $43,958        $60,090
                                                        =======        =======

NOTE 10. LINE OF CREDIT

On October 25, 1999, the Company executed an amendment to its working capital
line-of-credit agreement. The amendment extended the term of the line through
December 31, 1999, and changed certain financial covenants contained in the
agreement.

In January 2000, the Company completed a new line-of credit agreement, which
matures on December 30, 2002. The agreement, which carries an interest rate of
LIBOR plus 200 basis points or Prime, enables the Company to borrow up to $30
million and contains certain financial and operating covenants.

On February 20, 2001, the Company executed an amendment to the working capital
line-of-credit agreement dated January 2000 to extend the term of the line
through December 30, 2003. In addition, certain financial covenants contained in
the agreement were changed to reflect acquisitions made during the fiscal year.

No amounts were outstanding under the line at June 30, 2000 and 2001.

NOTE 11. CONVERTIBLE SUBORDINATED NOTES

On November 29, 1999, the Company issued $172.5 million of 6.5% convertible
subordinated notes that are due on December 1, 2006. Interest on the notes is
payable on June 1 and December 1 of each year, commencing June 1, 2000. The
notes may be converted, at the holder's option, into 13.6612 shares of common
stock per $1,000 of note value and the Company may redeem the notes at any time
on or after December 1, 2002. At June 30, 2001, none of the notes had been
converted to common stock. Interest expense on the notes for the years ended
June 30, 2000 and 2001 was $7,307,000 and $12,119,000, respectively.


                                      F-21
<PAGE>   38


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


NOTE 12. OBLIGATIONS UNDER CAPITAL LEASES

During 1993, the Company entered into a 20-year lease with the Department of
Development of the State of Ohio for land and an office building located in
Columbus, Ohio. The Company had the option to purchase the land and building for
$1 at the termination of the lease and thus, the Company recorded the
transaction as a capital lease. In June 1999, the Company completed a tax-free
exchange of property involving the land and building under this capital lease.
In order to exercise its purchase option and complete the transaction, the
Company paid $2.5 million of principal obligations under the lease, and placed
an additional $3.6 million in escrow. The Company and the State of Ohio entered
into an escrow agreement whereby the funds deposited were used to make scheduled
principal and interest payments through September 1, 2000, and retire the
remaining principal obligation at that date. The net gain resulting from the
sale of the property amounted to $1.1 million and is included in the Net Gain on
Dispositions of Assets in the Company's 1999 Consolidated Statement of
Operations. Amounts deposited with the escrow trustee are included in current
and noncurrent assets and liabilities, based on the respective principal
repayment dates, in the Company's June 30, 2000 Consolidated Balance Sheet.

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

The following is a summary of property under capital leases included in the
accompanying consolidated balance sheets (in thousands):


                                                                    JUNE 30,
                                                               -----------------
                                                                2000       2001
                                                               ------     ------
Equipment and software licenses ..........................     $3,654     $8,122
Less accumulated depreciation and amortization ...........      2,585      3,190
                                                               ------     ------
                Property under capital leases, net .......     $1,069     $4,932
                                                               ======     ======


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


FISCAL YEAR ENDING JUNE 30,
2002 .............................................................        $1,610
2003 .............................................................         1,610
2004 .............................................................         1,610
2005 .............................................................         1,364
2006 .............................................................           177
Thereafter .......................................................          --
                                                                          ------
               Total future minimum lease payments ...............         6,371
Less amount representing interest ................................         1,231
                                                                          ------
               Net future minimum lease payments .................        $5,140
                                                                          ======


      NOTE 13.  OPERATING LEASES

      The Company leases certain office space and equipment under operating
      leases. Certain leases contain renewal options and generally provide that
      the Company shall pay for insurance, taxes and maintenance. In addition,
      certain leases include rent escalations throughout the terms of the
      leases. Total expense under all operating lease agreements for the years
      ended June 30, 1999, 2000 and 2001, was $13,413,000, $19,095,000 and
      $26,519,000, respectively.


                                      F-22
<PAGE>   39


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


Minimum future rental payments under these leases are as follows (in thousands):

FISCAL YEAR ENDING JUNE 30,
2002 ...........................................................        $ 23,625
2003 ...........................................................          20,159
2004 ...........................................................          14,465
2005 ...........................................................           8,866
2006 ...........................................................           8,077
Thereafter .....................................................          44,703
                                                                        --------
               Net future minimum lease payments ...............        $119,895
                                                                        ========


NOTE 14. EMPLOYEE BENEFIT PLANS

RETIREMENT PLAN - The Company has a defined contribution 401(k) retirement plan
covering substantially all of its employees. Under the plan eligible employees
may contribute a portion of their salary until retirement and the Company, at
its discretion, may match a portion of the employee's contribution. Total
expense under the plan amounted to $1,218,000, $2,886,000 and $3,528,000, for
the years ended June 30, 1999, 2000 and 2001, respectively.

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

GROUP MEDICAL PLANS - Effective January 1, 2000, the Company converted all of
its employees to a group medical self-insurance plan. The Company has employed
an administrator to manage this plan. Under terms of this plan, both the Company
and eligible employees are required to make contributions. The administrator
reviews all claims filed and authorizes the payment of benefits. The Company has
stop-loss insurance coverage on all individual claims exceeding $150,000. Prior
to January 1, 2000, the Company had a group medical self-insurance plan covering
certain of its employees, and medical insurance coverage under managed care
health plans covering the remaining employees. Total expense for medical
insurance coverage amounted to $4,430,000, $7,359,000, and $11,116,000 for the
years ended June 30, 1999, 2000 and 2001, respectively. Under the self-insurance
plans, the Company expenses amounts as claims are incurred and recognizes a
liability for incurred but not reported claims. At June 30, 2000 and 2001, the
Company accrued $2,513,000 and $4,061,000, respectively, as a liability for
costs incurred but not paid under these plans.

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

NOTE 15. CAPITAL STOCK

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

                                      F-23
<PAGE>   40


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


In January 1997, the Company's Board of Directors declared a dividend
distribution of Preferred Share Purchase Rights to protect its stockholders in
the event of an unsolicited attempt to acquire the Company. On February 14,
1997, the Rights were issued to the Company's stockholders of record, with an
expiration date of 10 years. Until a person or group acquires 15% or more of the
Company's Common Stock, the Rights will automatically trade with the shares of
Common Stock. Only when a person or group has acquired 15% or more of the
Company's Common Stock, will the Rights become exercisable and separate
certificates issued. Prior to the acquisition by a person or group of beneficial
ownership of 15% or more of the Company's Common Stock, the Rights are
redeemable for $.001 per Right at the option of the Board of Directors.

NOTE 16. TRANSACTIONS INVOLVING EQUITY INSTRUMENTS

EMPLOYEE PLANS

During 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan).
The 1995 Plan replaces in its entirety the 1993 Stock Option Plan (the "1993
Plan"). The options granted under the 1995 and 1993 Plans may be either
incentive stock options or non-statutory stock options. The terms of the options
granted under the 1995 and 1993 Plans are at the sole discretion of a committee
of members of the Company's Board of Directors, not to exceed ten years.
Generally, options vest at either 33% or 20% per year from the dated of grant.
The 1995 Plan originally provided that the Company may grant options for not
more than 5,000,000 shares of common stock to certain key employees, officers
and directors. In November of 1998 and again in November of 2000, the 1995 Plan
was amended by a vote of the Company's shareholders to extend the maximum option
grants to not more than 8,000,000 shares and not more than 12,000,000 shares,
respectively. Options granted under the 1995 and 1993 Plans are exercisable
according to the terms of each option, however, in the event of a change in
control or merger as defined, the options shall become immediately exercisable.
At June 30, 2001, 4,100,085 additional shares are available for grant in the
aggregate for all Plans.

Previously, the Company had adopted the 1983 Incentive Stock Option Plan and the
1983 Non-Statutory Stock Option Plan (collectively, the "1983 Plans"), which
provided that the Board of Directors may grant options for shares of common
stock to certain employees and directors. Under the terms of the 1983 Plans,
options are exercisable over a period up to ten years from the grant date. In
the event the Company is sold, options outstanding under the 1983 Plans must be
repurchased at a price calculated as if the options had been fully exercised.

All options granted under the 1983 Plans, the 1993 Plan and the 1995 Plan were
granted at exercise prices not less than the fair market value of the underlying
common stock at the date of grant. In the event that shares purchased through
the exercise of incentive stock options are sold within one year of exercise,
the Company is entitled to a tax deduction. The tax benefit of the deduction is
not reflected in the consolidated statements of operations but is reflected as
an increase in additional paid-in capital.

The following table summarizes stock option activity from July 1, 1998 to June
30, 2001:

<TABLE>
<CAPTION>
                                                                          YEAR ENDED
                                         ------------------------------------------------------------------------------
                                              JUNE 30, 1999               JUNE 30, 2000             JUNE 30, 2001
                                         ----------------------- ------------------------------------------------------
                                                       WEIGHTED                    WEIGHTED                   WEIGHTED
                                                       AVERAGE                     AVERAGE                    AVERAGE
                                          NUMBER OF    EXERCISE       NUMBER       EXERCISE     NUMBER OF     EXERCISE
                                           SHARES        PRICE      OF SHARES       PRICE        SHARES        PRICE
                                         ------------ ---------- ---------- -------------------------------------------
<S>                                       <C>          <C>           <C>          <C>           <C>          <C>
Outstanding - Beginning of period ....    4,365,562    $   15.23     5,196,600    $   18.69     6,161,785    $   30.86
Granted ..............................    1,575,057        36.40     1,476,957        74.45     2,049,049        46.71
Assumed with BlueGill acquisition ....           --           --       637,746         4.31            --           --
Exercised ............................     (354,758)        4.56      (794,778)       12.32      (635,205)       10.92
Cancelled ............................     (389,261)       16.12      (354,740)       27.16      (447,488)       34.24
                                          ---------                  ---------                  ---------
Outstanding - End of period ..........    5,196,600    $   18.69     6,161,785    $   30.86     7,128,141    $   36.96
                                          =========    =========     =========    =========     =========    =========
Options  exercisable  at end of period    1,394,269    $    9.00     1,850,887    $   13.58     2,588,418        26.40
                                          =========    =========     =========    =========     =========    =========
Weighted average per share value of
options granted during the year ......                 $   17.65                  $   48.16                  $   32.06
                                                       =========                  =========                  =========
</TABLE>


                                      F-24
<PAGE>   41

      The following table summarizes information about options outstanding at
June 30, 2001:

<TABLE>
<CAPTION>
                                                    OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                                          ----------------------------------------- ----------------------
                                                            WEIGHTED AVERAGE          WEIGHTED AVERAGE
                                                       ---------------------------- ----------------------
      RANGE OF EXERCISE PRICE                              REMAINING
                                                          CONTRACTUAL     EXERCISE                EXERCISE
                                            NUMBER           LIFE           PRICE      NUMBER       PRICE
                                          -----------  ----------------  ---------- ----------- ----------
<S>                                       <C>                <C>       <C>          <C>         <C>
$ 0.01 - $ 15...........................   2,401,968          5.5       $    8.55    1,353,596   $    6.16
$15.01 - $ 30.00........................     461,833          6.7           22.24      308,218       22.49
$30.01 - $ 60.00........................   3,467,498          8.8           45.24      702,933       43.95
$60.01 - $ 90.00........................     275,050          8.6           77.43       48,070       79.54
$90.01 - $120.00........................     521,792          8.5          104.50      175,601      104.50
                                           ---------                                 ---------
                                           7,128,141                    $   36.96    2,588,418   $   26.40
                                           =========                    =========    =========   =========
</TABLE>


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in the years ended June 30, 1999, 2000 and 2001,
respectively: dividend yield of 0% in all periods; expected volatility of 49%,
83% and 98%; risk-free interest rates of 5.87%, 6.30%, and 5.62%; and expected
lives of two to seven years.

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


In September 1998, the Company offered an option repricing program to its
employees. Under the terms of the offer, employees had one week to return any
outstanding option grant in its entirety and replace it on a share-for-share
basis for an option grant with an exercise price equal to the fair market value
of the Company's Common Stock at the new grant date. Only those exchanges
received within one day of the designated grant date were accepted and any
vested options in such returned grants were forfeited. The lives of returned
historical grants typically ranged from three to five years with straight line
vesting beginning one year from the original grant date. All newly issued option
grants had a life of five years with vesting to occur at 40% beginning two years
from the new grant date and 20% for each year thereafter. A total of 1,418,403
options were returned and had the offer taken place at June 30, 1998, the
options exercisable would have decreased by 95,614.

Under the 1997 Associate Stock Purchase Plan, effective for the six-month period
beginning January 1, 1997, the Company is authorized to issue up to 1,000,000
shares of Common Stock to its full-time employees, nearly all of whom are
eligible to participate. Under the terms of the Plan, employees can choose,
every six months, to have up to 15% of their salary withheld to purchase the
Company's Common Stock. The purchase price of the stock is 85% of the lower of
its beginning-of-period or end-of-period market price. Participation in the plan
by eligible employees has ranged from 30% to 50% in any given six-month period.
Under the Plan, 48,748 shares were issued in January of 1999, 46,819 in July of
1999, 52,191 in January of 2000 and 34,941 in July of 2000, 56,901 in January of
2001 and 79,058 in July of 2001 from employees' salary withholdings from the
respective previous six-month period. As of June 30, 2001 there were 601,973
shares available for future issuance to the Associate Stock Purchase Plan.
Following is a summary of the weighted average fair market value of this
look-back option estimated on the grant date using the Black-Scholes option
pricing model, and the related assumptions used:



                                      F-25
<PAGE>   42


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


<TABLE>
<CAPTION>
                               December 31,   June 30,    December 31,   June 30,    December 31,    June 30,
                                   1998        1999          1999          2000         2000           2001
                               -------------------------------------------------------------------------------
<S>                            <C>           <C>           <C>           <C>           <C>           <C>
Fair value of options ....     $    7.18     $    5.51     $    8.93     $   29.15     $   11.63     $    9.28
Assumptions:
   Risk-free interest rate          4.9%          4.9%          5.8%          5.8%          4.4%          4.4%
   Expected life .........      3 months      3 months      3 months      3 months      3 months      3 months
   Volatility ............         49.0%         49.0%         83.4%         83.4%         98.2%         98.2%
   Dividend yield ........          0.0%          0.0%          0.0%          0.0%          0.0%          0.0%
</TABLE>

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

                                                    YEAR ENDED JUNE 30,
                                        ----------------------------------------
                                            1999          2000          2001
                                        -----------  ------------   -----------
Pro forma net income (loss) ..........  $     1,032  $    (54,030)  $  (402,340)
                                        ===========  ============   ===========
Pro forma net income (loss) per share;
      Basic and Diluted ..............  $      0.02  $      (1.01)  $     (4.98)
                                        ===========  ============   ===========

The pro forma amounts are not representative of the effects on reported net
income (loss) for future years.

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

In January 1997 the Board of Directors approved an amendment to the Company's
401(k) plan, which authorized up to 1,000,000 shares of Common Stock for the
Company's matching contribution. The Company issued 74,981 shares in August
1998, 36,226 shares in August of 1999 and 51,834 shares in August 2000 to fund
its 401(k) match that had accrued during the years ended June 30, 1998, 1999 and
2000, respectively. As of June 30, 2001 there were 758,702 shares available for
future contributions to the 401(k) plan.

STOCK RELATED TRANSACTIONS WITH THIRD PARTIES

As described below, the Company has issued certain stock warrants to third
parties and has accounted for the issuance of such warrants in accordance with
the provisions of EITF 96-18, "Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."

In October 2000, the Company completed an agreement to acquire various
electronic billing and payment assets from Bank of America in exchange for 10
million shares of the Company's common stock. Bank of America has the ability to
earn warrants on up to 10 million additional shares, eight million of which vest
upon achievement of specific levels of subscriber adoption of electronic billing
and payment services and separately, two million upon achievement of specific
levels of electronic bills presented to those subscribers. Upon the vesting of
these warrants becoming probable, the Company will record a charge for the fair
value of the warrants, based on a Black-Scholes valuation which will take into
consideration the market value of our stock, the $32.50 strike price of the
warrants, the volatility of our stock and the applicable risk-free interest rate
at that time.


                                      F-26
<PAGE>   43


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

In October 1999, the Company entered into an agreement with one of its
customers. Under the terms of the agreement, the customer purchased 250,000
shares of the Company's stock, has been issued warrants on one million shares,
and has the ability to earn warrants on up to two million additional shares. All
warrants are exercisable on September 15, 2002 contingent upon achievement of
various annual revenue targets and maintaining the continued existence of the
agreement through that date. Upon the vesting becoming probable, the Company
will record a charge for the fair value of the warrants, based on a
Black-Scholes valuation which will take into consideration the market value of
our stock, the $39.25 strike price, the volatility of our stock and the
applicable risk-free interest rate at that time.

In January 1998 the Company entered into a 10-year processing agreement with a
strategic partner. Under the terms of the agreement, the partner acquired
10-year warrants exercisable at $20 15/16 for 10 million shares of the Company's
Common Stock. Three million warrants vested upon the execution of a related
processing outsourcing agreement on March 9, 1998 which resulted in the Company
recording a non-cash charge of $32.4 million. The charge was based on a
Black-Scholes option pricing model valuation of $10.80 per share using the
following assumptions: risk-free rate of 5.7%, expected life of 10 years, and
volatility rate of 56.4%. Any shares acquired by the strategic partner under the
terms of this agreement are subject to certain transfer and other restrictions.
During each of the fiscal years ended June 30, 2000 and 2001 the strategic
partner exercised 750,000 of the vested options and 1,500,000 remain
outstanding. During the year ended June 30, 2001, the strategic partner's
business was dissolved and therefore does not have the ability to earn any of
the remaining seven million warrants.

In March 1997 the Company entered into a consulting agreement with a third
party. Under the terms of the agreement the consultant acquired 5-year options
exercisable at $13.00 for up to 50,000 shares of the Company's Common Stock. In
June of 1998, upon the execution of a processing agreement with a key customer,
25,000 of the options vested, which resulted in the Company recording a non-cash
charge of $418,000. The charge was based on a Black-Scholes option pricing model
valuation of $16.73 per vested share using the following assumptions: risk-free
rate of 5.6%, expected life of 4 years, and volatility rate of 56.4%. The
remaining 25,000 options are to vest upon achievement of specific performance
targets by key customers set forth in the agreement. Any shares acquired by the
consultant under the terms of the agreement are subject to certain transfer
restrictions.

In accordance with the terms of a joint marketing agreement, a strategic partner
has warrants to purchase up to 650,000 shares of the Company's Common Stock
should the partner attain certain customer acquisition targets.

CONVERTIBLE SUBORDINATED NOTES

In November 1999 the Company issued $172.5 million of convertible subordinated
notes. Each $1,000 note may be converted, at the holder's option, into 13.6612
shares of common stock at a conversion rate of $73.20 per share. The fair market
value of the Company's stock on June 30, 2001 was $35.07 per share. Please refer
to Note 11 for further information regarding the convertible subordinated notes.

NOTE 17. EARNINGS PER SHARE

The following table reconciles the differences in income and shares outstanding
between basic and dilutive for the periods indicated (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                      Year Ended June 30, 1999        Year Ended June 30, 2000          Year Ended June 30, 2001
                                 --------------------------------  --------------------------------  ------------------------------
                                   Income      Shares    Per-Share   Income      Shares    Per-Share  Income      Shares   Per-Share
                                (Numerator) (Denominator) Amount  (Numerator) (Denominator) Amount  (Numerator) (Denominator) Amount
                                 ---------- ------------ --------- ---------- ------------- -------- ----------  -----------  -----
<S>                               <C>           <C>      <C>       <C>           <C>     <C>         <C>           <C>        <C>
Basic EPS ....................... $  10,457     52,444   $   0.20  $  (32,320)   53,367  $  (0.61)   (363,135)     80,863     (4.49)
                                                         ========                        ========                            ======
Effective of dilutive securities:
    Options and warrants ........      --        4,085                  --        --                    --          --
    Convertible notes ...........      --         --                    --        --                    --          --
                                  ---------  ---------             ----------    ------             ---------   ---------
Diluted EPS ..................... $  10,457     56,529   $   0.18  $  (32,320)   53,367  $  (0.61)  $(363,135)     80,863  $  (4.49)
                                  =========  =========   ========  ==========    ======  =========  =========   =========  ========
</TABLE>


                                      F-27
<PAGE>   44


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


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

      NOTE 18.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION


<TABLE>
<CAPTION>
                                                                 YEAR ENDED JUNE 30,
                                                     -----------------------------------------
                                                                   (IN THOUSANDS)
                                                         1999           2000           2001
                                                     -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>
Interest paid ....................................   $       618    $     5,982    $    12,119
                                                     ===========    ===========    ===========
Income taxes paid (received), net ................   $     1,688    $      (229)   $    (1,442)
                                                     ===========    ===========    ===========
Supplemental disclosure of non-cash investing and
     financing activities:
     Capital lease additions and purchase of other
          long-term assets .......................   $     3,379    $     5,688    $     5,716
                                                     ===========    ===========    ===========
     Stock funding of 401(k) match ...............   $       963    $     1,059    $     2,487
                                                     ===========    ===========    ===========
     Purchase price of business acquisitions .....   $    19,100    $   239,900    $ 1,351,649
          Issuance of common stock and stock
            options pursuant to acquisitions .....       (18,000)      (240,000)    (1,350,083)
          Liabilities assumed ....................          (887)          --
          Cash acquired in acquisitions ..........           (23)        (9,052)       (97,200)
          Acquisition costs paid in prior period
                                                            --             --             (965)
                                                     -----------    -----------    -----------
               Net cash paid (received) ..........   $       190    $    (9,152)   $   (96,599)
                                                     ===========    ===========    ===========
</TABLE>

NOTE 19. BUSINESS SEGMENTS

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

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

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

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

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



                                      F-28
<PAGE>   45
                     CHECKFREE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


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

The following sets forth certain financial information attributable to the
Company's business segments for the years ended June 30, 1999, 2000 and 2001 (in
thousands):

<TABLE>
<CAPTION>

                                                           YEAR ENDED JUNE 30,
                                             ---------------------------------------------
                                                  1999           2000           2001
                                             -----------    -----------    ---------------
<S>                                          <C>            <C>            <C>
Revenues:
     Electronic Commerce ...........         $   169,443    $   213,391    $   301,532
     Software ......................              41,384         42,012         62,175
     Investment Services ...........              39,304         54,792         69,613
                                             -----------    -----------    -----------
              Total ................         $   250,131    $   310,195    $   433,320
                                             ===========    ===========    ===========

Operating income (loss):
      Electronic Commerce ..........         $    (3,126)   $   (18,248)   $   (13,083)
      Software .....................              15,931         10,536            837
      Investment Services ..........              11,250         15,830         20,347
      Corporate ....................             (23,348)       (26,120)       (35,746)
Purchase accounting amortization ...              (6,815)       (18,517)      (393,436)
One time marketing charge ..........                --             --          (25,000)
In-process research and development               (2,201)        (6,900)       (18,600)
Net gain on disposition of assets ..               4,576           --             --
                                             ===========    ===========    ===========
                Total Operating Loss         $    (3,733)   $   (43,419)   $  (464,681)
                                             ===========    ===========    ===========


Identifiable assets:
     Electronic Commerce ...........         $    80,223    $   102,220    $ 1,603,069
     Software ......................              34,194        273,120        206,746
     Investment Services ...........              49,098         47,246         50,113
     Corporate .....................              89,246        290,528        324,025
                                             -----------    -----------    -----------
           Total ...................         $   252,761    $   713,114    $ 2,183,953
                                             ===========    ===========    ===========

Capital expenditures:
      Electronic Commerce ..........         $     9,258    $    18,299    $    28,355
      Software .....................               1,189          1,773          2,938
      Investment Services ..........               4,764          2,868          6,771
      Corporate ....................              25,233         16,555          9,317
                                             -----------    -----------    -----------
            Total ..................         $    40,444    $    39,495    $    47,381
                                             ===========    ===========    ===========

Depreciation and amortization:
       Electronic Commerce .........         $    14,214    $    19,282    $   350,277
       Software ....................               2,069         12,317         62,485
       Investment Services .........               5,336          7,634          9,421
       Corporate ...................               3,011          3,597          5,312
                                             -----------    -----------    -----------
              Total ................         $    24,630    $    42,830    $   427,495
                                             ===========    ===========    ===========
</TABLE>



                                      F-29

<PAGE>   46



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


No single customer accounted for 10% or more of consolidated revenues for the
years ended June 30, 1999 and 2000. For the year ended June 30, 2001, one
customer accounted for $44.5 million of consolidated revenues. Revenues for that
customer were generated through the Electronic Commerce and Software segments.
Foreign sales for the years ended June 30, 1999 and 2000 were insignificant.
Foreign sales, based on the location of the customer, for the year ended
June 30, 2001 were $7,636,000.

Long-lived assets by geographic area are as follows (in thousands):

                                          YEAR ENDED JUNE 30,
                                     ------------------------
                                         2000        2001
                                     ----------   -----------
               United States .....   $  380,695   $1,804,275
               Other .............          988        2,471
                                     ----------   ----------
                        Total.....   $  381,683   $1,806,746
                                     ==========   ==========


NOTE 20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly financial information for the years ended June 30, 2000
and 2001 includes all adjustments necessary for a fair presentation of quarterly
results of operations: (In thousands, except per share data):

<TABLE>
<CAPTION>

                                                                            QUARTER ENDED
                                                 --------------------------------------------------------------------

                                                  SEPTEMBER 30       DECEMBER 31         MARCH 31          JUNE 30
                                                 ---------------    ---------------    -------------     ------------
<S>                                              <C>                 <C>                <C>               <C>
FISCAL 2000
Total revenue .......................            $  69,020           $  72,969          $  79,706         $  88,500
Loss from operations ................               (6,365)             (6,275)            (5,773)          (25,006)
Net loss ............................               (3,936)             (3,969)            (3,873)          (20,542)
Basic earnings per share:
     Net loss per common share ......            $   (0.08)          $   (0.08)         $   (0.07)        $   (0.36)
                                                 =========           =========          =========         =========
     Equivalent number of shares ....               51,848              52,200             52,716            56,721
                                                 =========           =========          =========         =========
Diluted earnings per share:
     Net loss per common share ......            $   (0.08)          $   (0.08)         $   (0.07)        $   (0.36)
                                                 =========           =========          =========         =========
     Equivalent number of shares ....               51,848              52,200             52,716            56,721
                                                 =========           =========          =========         =========

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


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

NOTE 21. COMMITMENTS

In March 2001 the Company amended an existing agreement for software to be used
in conjunction with its electronic commerce business. The software is to be
licensed in incremental units over the term of the agreement to coincide with
the growth of the Company's business. Total commitments under the amended
agreement amount to $11 million over the next five years.



                                      F-30
<PAGE>   47




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


NOTE 22. GUARANTOR FINANCIAL INFORMATION

CheckFree Management Corporation is a guarantor of the Company's $172,500,000
convertible subordinated notes that were issued November 29, 1999. CheckFree
Management Corporation was formed as a medical claims management subsidiary in
order to appropriately minimize, control, and manage the medical claims
liabilities of the Company and its subsidiaries. As of June 30, 2000 and 2001,
the Company and its subsidiaries own approximately 89% of CheckFree Management
Corporation. In previous years, due to the relative value of the total assets of
CheckFree Management Corporation to the total consolidated assets of the
Company, we were required to provided separate financial statements for and
disclose certain financial information about CheckFree Management Corporation.
As of June 30, 2001, the assets of CheckFree Management Corporation represent
less than 2% of the total consolidated assets of the Company, and therefore,
separate financial statements and financial disclosures are not deemed
significant.



                                      F-31