<PAGE>   1
                                                                    EXHIBIT 13.1


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

GENERAL


    Affiliated Computer Services, Inc. (the "Company" or "ACS") derives its
revenues from information technology services including technology outsourcing,
business process outsourcing, professional services and electronic commerce. A
substantial portion of the Company's revenues is derived from recurring monthly
charges to its customers under service contracts with initial terms that vary
from one to ten years. For the year ended June 30, 1998, approximately 89% of
the Company's revenues were recurring. Recurring revenues are defined by the
Company as revenues derived from services that are used by the Company's
customers each year in connection with their ongoing businesses, and accordingly
exclude conversion and deconversion fees, software license fees, short-term
contract programming engagements, product installation fees and hardware sales.
From inception through June 30, 1998, the Company has purchased 38 information
processing companies, which has resulted in geographic expansion, growth and
diversification of the Company's customer base, expansion of services offered
and increased economies of scale. Approximately half of the increase in revenues
since June 30, 1993 has been attributable to these acquisitions.

    In December 1997, the Company acquired ACS Government Solutions, formerly
known as Computer Data Systems, Inc., through the merger of a wholly-owned
subsidiary of the Company with and into ACS Government Solutions, a provider of
information technology solutions to government and private industry customers in
a transaction accounted for as a pooling of interests (the "Merger"). As a
result, the Company has restated its historical financial statements to reflect
the combined operations of the two companies.

FORWARD-LOOKING STATEMENTS

    Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of historical facts
included in this MD&A regarding the Company's financial position, business
strategy and plans and objectives of management of the Company for future
operations, are forward-looking statements including statements regarding the
Company's Year 2000 exposure. These forward-looking statements rely on a number
of assumptions concerning future events and are subject to a number of
uncertainties and other factors, many of which are outside of the Company's
control, that could cause actual results to materially differ from such
statements. While the Company believes that the assumptions concerning future
events are reasonable, it cautions that there are inherent difficulties in
predicting certain important factors, especially the timing and magnitude of
technological advances; the performance of recently acquired businesses; the
prospects for future acquisitions; the possibility that a current customer could
be acquired or otherwise be affected by a future event that would diminish its
information technology requirements; the competition in the information
technology industry and the impact of such competition on pricing, revenues and
margins; the degree to which business entities continue to outsource information
technology and business processes; uncertainties surrounding budget reductions
or changes in funding priorities or existing government programs; and the cost
of attracting and retaining highly skilled personnel.



                                       1
<PAGE>   2

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


RESULTS OF OPERATIONS

    The following table sets forth certain items from the Company's Consolidated
Statements of Income expressed as a percentage of revenues:


<TABLE>
<CAPTION>
                                                            Percentage of Revenues
                                                             Year ended June 30,
                                                --------------------------------------------
                                                   1998              1997              1996
                                                --------          --------          --------
Revenues                                           100.0%            100.0%            100.0%
                                                --------          --------          --------
<S>                                                 <C>               <C>               <C> 
Operating expenses:
    Wages and benefits                              42.4              42.6              46.1
    Services and supplies                           30.6              28.5              28.7
    Rent, lease and maintenance                     12.6              14.3              12.7
    Depreciation and amortization                    4.0               3.8               2.9
    Merger costs                                     1.1                --                --
    Other operating expenses                         1.0               1.1               0.9
                                                --------          --------          --------
Total operating expenses                            91.7              90.3              91.3
                                                --------          --------          --------
Operating income                                     8.3               9.7               8.7
Interest expense                                     1.0               0.8               0.5
Other non-operating income, net                     (0.6)             (0.1)             (0.4)
                                                --------          --------          --------
Pretax profit                                        7.9               9.0               8.6
Income tax expense                                   3.3               3.7               3.4
                                                --------          --------          --------
Net income                                           4.6%              5.3%              5.2%
                                                ========          ========          ========
</TABLE>

COMPARISON OF FISCAL 1998 TO FISCAL 1997

    Revenues increased $260.2 million, or 28%, to $1,189.1 million for fiscal
year 1998. Revenues from acquisitions contributed $132.2 million, while revenues
from internally generated sales contributed $128.0 million to the overall
increase. Technology outsourcing revenues increased 11% over fiscal 1997 to
$330.7 million which can be attributed primarily to new contracts signed in
fiscal 1998 and the effect of a full year's contribution from contracts signed
in fiscal 1997. Revenues from business process outsourcing increased 17% to
$343.4 million due primarily to an increase in volumes at Business Process
Solutions (formerly known as Unibase) and increased requirements from the
Department of Education contract. Revenues from professional services increased
59% to $390.2 million primarily as a result of the full year effect of the five
acquisitions completed in fiscal 1997 and four acquisitions completed in fiscal
1998. Revenues generated by the electronic commerce services increased 34% to
$124.8 million due primarily to a 27% increase in the number of transactions
processed.

    During fiscal 1998, the Company recorded a non-recurring charge of $6.0
million to rent, lease and maintenance expense resulting from a binding
commitment to a hardware lessor to terminate a computer lease obligation prior
to the expiration of its term. Also during fiscal 1998 the Company recorded a
non-recurring charge of $13.0 million ($8.9 million, net of tax) related to
specific and identifiable costs associated with the Merger. Before these
non-recurring charges, total operating expenses increased $233.1 million, or
28%, to $1,071.8 million for fiscal 1998, as a result of the Company's higher
revenues, and as a percentage of revenue decreased from 90.3% in fiscal 1997 to
90.1% in fiscal 1998. This decrease is a result of the synergies realized from
the Merger, as well as the data center consolidations which were completed in
the second quarter of fiscal 1998. Wages and benefits expense, as a percentage
of revenues, decreased slightly from fiscal 1997. The decrease is primarily a
result of growth in the electronic commerce business line which offset the
growth in the Company's more labor intensive professional services business.
Services and supplies increased as a percentage of revenue from 28.5% in fiscal
1997 to 30.6% in fiscal 1998 due to growth in the electronic commerce business
unit and subcontractor expenses in the government service business unit. Rent,
lease and maintenance expense, as a percentage of revenues, 



                                        2
<PAGE>   3

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


decreased from 14.3% in fiscal 1997 to 12.6% in fiscal 1998 despite the $6.0
million non-recurring lease termination charge. This decrease is due primarily
to the data center consolidations completed in fiscal 1998 and the growth in our
professional services business which contains a smaller component of rent, lease
and maintenance expense. Depreciation and amortization expense, as a percentage
of revenues, increased from 3.8% in fiscal 1997 to 4.0% in fiscal 1998 due
mainly to acquisition cost amortization.

    Before the non-recurring charges mentioned previously, operating income for
fiscal 1998 increased $27.0 million, or 30%, to $117.3 million, and as a
percentage of revenues for fiscal 1998 was 9.9% compared with 9.7% for fiscal
1997. Interest expense increased as a percentage of revenues as a result of the
March 1998 issuance of $230 million of 4% Convertible Subordinated Notes due
March 15, 2005 (the "Notes") (see Note 6 to the Company's Consolidated Financial
Statements). Other non-operating income for fiscal 1998 includes the recognition
of a $6.7 million gain upon the redemption of the Company's investment in a
customer's preferred stock. The Company's effective tax rate increased to
approximately 42% for fiscal 1998 due in part to certain non-deductible merger
costs. Excluding merger costs and the related tax benefit, the effective tax
rate was approximately 41%, exceeding the federal statutory rate of 35% due
primarily to the amortization of certain acquisition-related costs that are
non-deductible for tax purposes, plus the net effect of state income taxes.

COMPARISON OF FISCAL 1997 TO FISCAL 1996

    Revenues increased $281.3 million, or 43%, to $928.9 million for fiscal
1997. Revenues from acquisitions contributed $170.2 million, while revenues from
internally generated sales contributed $111.1 million to the overall increase.
Technology outsourcing revenues increased 60% over fiscal 1996 to $297.3
million, primarily as a result of the effect of a full year's contribution of
The Genix Group, Inc. ("Genix") which was acquired in June 1996. In addition, a
portion of the increase was attributable to new contracts signed in fiscal 1997
and the effect of a full year's contribution from contracts signed in fiscal
1996. Revenues from business process outsourcing increased 53% to $293.0
million, as a result of the effect of a full year's contribution of Business
Process Solutions which was acquired in February 1996, the subsequent revenue
growth in that business and increased requirements on the Department of
Education contract. Revenues from professional services increased 22% to $245.7
million primarily due to five acquisitions completed in fiscal 1997. Revenues
generated by electronic commerce services increased 36% to $92.9 million due to
a 22% increase in the number of transactions processed as well as an increase in
the average revenue per transaction.

    Total operating expenses increased $247.6 million, or 42%, to $838.7 million
for fiscal 1997 as a result of the Company's higher revenues. The changes from
fiscal 1996 to fiscal 1997 in the various operating expense categories, as a
percentage of revenues, are primarily due to the mix of acquired companies
across the Company's four business lines. Acquisitions in the professional
services and business process outsourcing business lines are relatively more
labor intensive, such that wages and benefits as a percentage of revenues will
generally increase while the other operating expense categories will reflect a
corresponding decrease. Acquisitions in the outsourcing business line will have
a larger proportion of expenses related to computer hardware and software and,
therefore, rent, lease and maintenance as a percentage of revenues will
increase, while the other operating expense categories will reflect a
corresponding decrease. Wages and benefits expense, as a percentage of revenues,
decreased from fiscal 1996 due primarily to acquisitions. Rent, lease and
maintenance expense, as a percentage of revenues, increased due to acquisitions
and increased demand for data processing in the outsourcing services business
line. Depreciation and amortization expense, as a percentage of revenues,
increased due to the acquisition late in fiscal 1996 as well as the seven
acquisitions completed in fiscal 1997. During fiscal 1997, the Company recorded
a charge of $6.0 million ($4.6 million in other operating expenses and $1.4
million in depreciation and amortization) relating to the consolidation of two
of its mainframe data centers and the upgrading of certain computer hardware and
software to newer technology. Also, during fiscal 1997, the Texas Supreme Court,
in a unanimous decision, overturned a lower court's judgment against the Company
for which the Company had previously accrued approximately $6 million. During
the third quarter of fiscal 1997, the Company reversed this accrual to other
operating expenses.




                                       3
<PAGE>   4

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



    Operating income for fiscal 1997 increased $33.7 million, or 60%, to $90.3
million. Operating income as a percentage of revenues for fiscal 1997 was 9.7%
compared with 8.7% for fiscal 1996. Interest expense increased as a percentage
of revenues as a result of debt incurred to finance acquisitions. The effective
tax rates for fiscal 1997 and fiscal 1996 were 41% and 40%, respectively, and
exceeded the federal statutory rate of 35% due to certain non-deductible
acquisition-related costs and the net effect of state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

    At June 30, 1998, the Company's liquid assets, consisting of cash and cash
equivalents, totaled $84.0 million compared to $25.6 million at June 30, 1997.
These liquid assets included $8.1 million and $6.7 million borrowed under a
revolving credit facility (the "ATM Cash Facility") for use in the Company's
automated teller machines ("ATMs") at June 30, 1998 and 1997, respectively.
Working capital increased from $110.9 million at June 30, 1997 to $198.1 million
at June 30, 1998 due primarily to the remaining proceeds from the sale of the
Notes after repayment of the outstanding credit facility.

    Net cash provided by operating activities of $66.7 million for fiscal 1998
increased from $64.9 million in fiscal 1997 due primarily to increased earnings
and improved collections of accounts receivable. In addition, net cash provided
by operating activities in fiscal 1998 was negatively impacted by approximately
$14.3 million as a result of costs incurred with the Merger and data center
consolidations. Net cash used in investing activities decreased from $154.4
million in fiscal 1997 to $110.6 million in fiscal 1998 due primarily to less
cash expended for acquisitions. Also, in fiscal 1998 the Company received $12.6
million in proceeds from the redemption of a preferred stock investment. Net
cash from financing activities increased by $21.5 million from fiscal 1997 due
primarily to an increase in proceeds from stock option exercises and the related
tax benefit, as well as the remaining proceeds from the sale of the Notes after
repayment of the Company's revolving credit facility.

    Net cash provided by operating activities of $64.9 million for fiscal 1997
increased from $18.4 million in fiscal 1996 due primarily to increased earnings,
improved collections of accounts receivable, reduction of inventory and tax
savings generated by the fiscal 1996 acquisitions. Net cash used in investing
activities decreased in fiscal 1997 by $70.2 million due primarily to $84.0
million paid for seven acquisitions, compared to $162.6 million paid for eight
acquisitions in fiscal 1996. Also in fiscal 1997, investing activities included
$31.6 million in payments relating to prior year acquisitions, including a
one-time cash settlement of $23 million to resolve a software license dispute.
In addition, capital expenditures decreased $9.8 million from the prior year
because fiscal 1996 capital expenditures included $20.0 million for the purchase
and renovation of the Company's headquarters. Net cash from financing activities
decreased by $113.6 million from fiscal 1996 as a result of the $170.2 million
in net proceeds received from the Company's secondary stock offerings in fiscal
1996, which offset the $50 million in debt incurred to acquire Analytical
Systems Engineering Corporation in June 1997.

    In March 1998 the Company issued $230 million of Notes. The Notes are
convertible into the Company's common stock at a conversion rate of 23.4432
shares of Class A common stock for each $1,000 principal amount of Notes,
subject to adjustments in certain events. Interest on the Notes is payable
semi-annually on March 15 and September 15 of each year commencing on September
15, 1998. The Notes may be redeemed at the option of the Company on or after
March 15, 2002, in whole or in part, at the redemption prices set forth in the
Notes (see Note 6 to the Company's Consolidated Financial Statements).

    During the first quarter of fiscal 1998, the Company expanded its unsecured
revolving credit agreement (the "Credit Facility") from $125 million to $200
million and amended the terms to extend through July 2002. The Company used
$173.7 million of the proceeds from the sale of the Notes to repay the Credit
Facility; therefore, there were no outstanding borrowings under the Credit
Facility as of June 30, 1998. After considering outstanding letters of credit,
the Company has approximately $197.7 million available for use under the Credit
Facility at June 30, 1998. The Company has an ATM Cash Facility of $11.0
million, of which $8.1 million was outstanding at June 30, 1998. This facility
expires December 1998. The 


                                       4
<PAGE>   5

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


Company also has two vault cash custody agreements with financial institutions
which provide up to $52.0 million in cash for use in the Company-owned ATMs. The
amount of cash outstanding under the cash custody agreements at June 30, 1998
was approximately $40.6 million and is not an asset or liability of the Company,
and therefore is not recorded on the accompanying consolidated balance sheet.
Recently enacted federal regulations governing financial institutions' cash
requirements have allowed financial institutions to significantly reduce their
vault cash reserves. Accordingly, this may limit the Company's ability to secure
similar cash custody agreements when its largest cash custody agreement for
$50.0 million expires in February 2001.

    Subsequent to June 30, 1998, the Company acquired Betac International
Corporation and Document Acquisition Services for total cash consideration of
approximately $47.0 million which was funded with existing cash (see Note 15 to
the Company's Consolidated Financial Statements).

    The Company's management believes that available cash and cash equivalents,
together with cash generated from operations and available borrowings under its
various credit facilities, will provide adequate funds for the Company's
anticipated needs, including working capital expenditures and ATM cash
requirements. Management also believes that cash provided by operations will be
sufficient to satisfy all existing debt obligations as they become due. The
Company intends to continue its growth through acquisitions and from time to
time to engage in discussions with potential acquisition candidates. As the size
and financial resources of the Company increase, however, additional acquisition
opportunities requiring significant commitments of capital may arise. In order
to pursue such opportunities, the Company may be required to incur debt or to
issue additional potentially dilutive securities in the future. No assurance can
be given as to the Company's future acquisition and expansion opportunities and
how such opportunities would be financed.

YEAR 2000

    The Year 2000 issue encompasses the cost to make the Company's internal
systems Year 2000 compliant as well as the cost to make the Company's clients
Year 2000 compliant, in the few instances where obligated. The Company has
assembled a team dedicated solely for the purpose of managing the Year 2000
project. The Year 2000 project of the Company is segregated in five phases:
awareness, assessment, renovation, validation and implementation. With respect
to its internal systems, the Company has begun the renovation phase. With
respect to the Company's obligation to ensure that its customers' applications
are Year 2000 compliant, the Company has not generally undertaken responsibility
for application systems maintenance and therefore, it is the customers'
responsibility to renovate these systems. However, in certain limited cases, ACS
is contractually responsible for renovating certain customer application
software and in these instances, the Company is in the renovation phase. The
Company projects that final implementation of all these changes will be
substantially complete by the end of fiscal year 1999. The Company estimates the
cost of Year 2000 remediation on its internal systems to be approximately $12.0
million.

    The failure to successfully complete the Year 2000 conversion process on the
Company's internal systems as well as any client's systems, where obligated, or
for the Company's vendors and clients to successfully complete the Year 2000
conversion process where they are responsible could have a materially adverse
impact on the Company. However, ACS believes this project will be substantially
completed by the end of fiscal year 1999 and will not have a materially adverse
impact on the Company.

NEW ACCOUNTING STANDARDS

    In April 1998, Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-up Activities", was issued. This SOP provides guidance on the financial
reporting of start-up and organization costs and requires that these costs be
expensed as incurred. The provisions of SOP 98-5 are effective for financial
statements for fiscal years beginning after December 15, 1998, although early
adoption is allowed. 


                                       5
<PAGE>   6

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


Adoption of SOP 98-5 is not expected to have a material impact on the Company's
financial statements. The Company will adopt the provisions of this SOP on July
1, 1999.

    In June 1997, Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", were issued. SFAS No. 130 establishes
standards for reporting comprehensive income and its components with the same
prominence as other financial statements. SFAS No. 131 establishes standards for
reporting information about operating segments in annual and interim financial
statements, although this statement need not be applied to interim financial
statements in the initial year of its application. Both statements are effective
for fiscal years beginning after December 15, 1997 and, therefore, will be
adopted by the Company July 1, 1998.

                                       6

<PAGE>   7
               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


<TABLE>
<CAPTION>
                                     ASSETS
                                                                                        June 30,
                                                                              ----------------------------
                                                                                 1998              1997
                                                                              ----------        ----------
<S>                                                                           <C>               <C>       
Current assets:
    Cash and cash equivalents                                                 $   75,888        $   18,997
    ATM cash                                                                       8,100             6,650
    Accounts receivable, net of allowance for doubtful
      accounts of $2,840 and $1,964, respectively                                236,523           199,302
    Inventory                                                                      9,911             9,915
    Prepaid expenses and other current assets                                     24,455            21,343
    Deferred taxes                                                                10,210            12,860
                                                                              ----------        ----------
       Total current assets                                                      365,087           269,067

Property and equipment, net                                                      142,717           135,160
Software, net of accumulated amortization of
  $11,029 and $9,436, respectively                                                 9,947             4,554
Goodwill, net of accumulated amortization of
  $25,846 and $15,504, respectively                                              373,236           312,732
Other intangible assets, net of accumulated amortization of
  $14,414 and $7,100, respectively                                                38,073            24,829
Long-term investments and other assets                                            20,738            15,135
                                                                              ----------        ----------
       Total assets                                                           $  949,798        $  761,477
                                                                              ==========        ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                          $   27,953        $   24,167
    Accrued compensation and benefits                                             40,595            36,054
    Other accrued liabilities                                                     74,789            72,115
    Income taxes payable                                                           5,554              --
    Current portion of long-term debt                                             10,624            17,546
    Current portion of unearned revenue                                            7,454             8,319
                                                                              ----------        ----------
       Total current liabilities                                                 166,969           158,201

Convertible notes due 2005                                                       230,000              --
Long-term debt                                                                     4,848           130,680
Unearned revenue                                                                     707             1,191
Deferred taxes                                                                    24,103            14,089
Other long-term liabilities                                                       19,501            29,835
                                                                              ----------        ----------
       Total liabilities                                                         446,128           333,996
                                                                              ----------        ----------

Stockholders' equity:
    Class A common stock, $.01 par value,
      500,000 shares authorized, 44,938 shares and
      40,508 shares outstanding, respectively                                        449               405
    Class B common stock, $.01 par value, 14,000 shares authorized,
      3,300 shares and 6,406 shares outstanding, respectively                         33                64
    Additional paid-in capital                                                   298,393           275,922
    Retained earnings                                                            204,795           151,090
                                                                              ----------        ----------
       Total stockholders' equity                                                503,670           427,481
                                                                              ----------        ----------

Commitments and contingencies (Notes 2, 6, 12, 13 and 14)

       Total liabilities and stockholders' equity                             $  949,798        $  761,477
                                                                              ==========        ==========
</TABLE>

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




                                       1
<PAGE>   8


               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                               Year ended June 30,
                                                               ---------------------------------------------------
                                                                  1998                1997                1996
                                                               -----------         -----------         -----------
<S>                                                            <C>                 <C>                 <C>        
Revenues                                                       $ 1,189,123         $   928,925         $   647,608
Operating expenses:
    Wages and benefits                                             504,284             395,780             298,659
    Services and supplies                                          364,285             264,104             185,550
    Rent, lease and maintenance                                    150,253             132,837              82,314
    Depreciation and amortization                                   47,475              35,510              18,450
    Merger costs                                                    12,974                --                  --
    Other operating expenses                                        11,533              10,428               6,052
                                                               -----------         -----------         -----------
       Total operating expenses                                  1,090,804             838,659             591,025
                                                               -----------         -----------         -----------
    Operating income                                                98,319              90,266              56,583

Interest expense                                                    12,059               7,121               3,417
Other non-operating income, net                                     (7,832)               (425)             (2,751)
                                                               -----------         -----------         -----------
    Pretax profit                                                   94,092              83,570              55,917

Income tax expense                                                  39,670              33,904              22,392
                                                               -----------         -----------         -----------

    Net income                                                 $    54,422         $    49,666         $    33,525
                                                               ===========         ===========         ===========

Earnings per common share:
    Basic                                                      $      1.14         $      1.08         $       .88
                                                               ===========         ===========         ===========

    Diluted                                                    $      1.11         $      1.05         $       .85
                                                               ===========         ===========         ===========

Shares used in computing earnings per common share:
    Basic                                                           47,599              46,136              38,228
    Diluted                                                         50,487              47,452              39,320
</TABLE>






















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




                                       2
<PAGE>   9


               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                     Common Stock
                                  -------------------------------------------------------
                                             Class A                    Class B                 
                                  -------------------------     -------------------------      Paid-in      Retained
                                    Shares         Amount         Shares         Amount        Capital      Earnings       Total
                                  ----------     ----------     ----------     ----------    ----------    ----------    ----------
<S>                               <C>           <C>             <C>            <C>           <C>          <C>           <C>
Balance at June 30, 1995              18,647     $      186          4,804     $       48    $   85,800    $   70,652    $  156,686
Conversion of shares                   1,602             16         (1,602)           (16)
Net proceeds of secondary
  stock offerings                      4,072             41                                     169,740                     169,781
Exercise of stock options
  and related tax benefits               480              5                                       4,650          (572)        4,083
Cash dividends                                                                                                   (735)         (735)
Other, net                                                                                                                     (136)
Net income                                                                                         (136)       33,525        33,525
                                  ----------     ----------     ----------     ----------    ----------    ----------    ----------

Balance at June 30, 1996              24,801            248          3,202             32       260,054       102,870       363,204
Stock split                           14,538            145          3,204             32          (177)
Exercise of stock options
  and related tax benefits               399              3                                       4,502          (722)        3,783
Stock issued in connection
  with acquisitions                      770              9                                      11,748                      11,757
Cash dividends                                                                                                   (717)         (717)
Other, net                                                                                         (205)           (7)         (212)
Net income                                                                                                     49,666        49,666
                                  ----------     ----------     ----------     ----------    ----------    ----------    ----------

Balance at June 30, 1997              40,508            405          6,406             64       275,922       151,090       427,481
Conversion of shares                   3,106             31         (3,106)           (31)
Exercise of stock options
  and related tax benefits               706              7                                      10,951          (340)       10,618
Stock issued in connection
  with acquisitions                      618              6                                      11,917                      11,923
Cash dividends                                                                                                   (377)         (377)
Other, net                                                                                         (397)                       (397)
Net income                                                                                                     54,422        54,422
                                  ----------     ----------     ----------     ----------    ----------    ----------    ----------

Balance at June 30, 1998              44,938     $      449          3,300     $       33    $  298,393    $  204,795    $  503,670
                                  ==========     ==========    ===========     ==========    ==========    ==========    ==========
</TABLE>
  



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




                                       3
<PAGE>   10


               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                   Year ended June 30,
                                                                                       -------------------------------------------
                                                                                         1998              1997            1996
                                                                                       ---------        ---------        ---------
<S>                                                                                    <C>              <C>              <C>      
Cash flows from operating activities:
    Net income                                                                         $  54,422        $  49,666        $  33,525
                                                                                       ---------        ---------        ---------
    Adjustments to reconcile net income to net cash provided
      by operating activities:
       Depreciation and amortization                                                      47,475           35,510           18,450
       Non-cash portion of merger costs                                                    2,484             --               --
       Gain on redemption of preferred stock                                              (6,742)            --               --
       Other                                                                                --                 44               38
       Changes in assets and liabilities, net of effects from acquisitions:
          (Increase) decrease in ATM cash                                                 (1,450)           2,450             (850)
          Increase in accounts receivable                                                (29,066)         (16,150)         (28,567)
          (Increase) decrease in inventory                                                     4            4,220           (4,886)
          Increase in prepaid expenses and other current assets                           (4,995)          (1,875)          (3,105)
          Change in deferred taxes                                                        13,967           17,160            4,692
          Increase in other long-term assets                                              (5,521)          (1,376)          (1,280)
          Increase (decrease) in accounts payable                                          2,605           (7,827)           3,874
          Decrease in accrued compensation and benefits                                     (397)          (2,871)            (511)
          Increase (decrease) in other accrued liabilities                                (3,563)          (1,697)           6,042
          Increase (decrease) in income taxes payable                                     11,281           (3,315)           3,087
          Decrease in other long-term liabilities                                        (12,462)          (6,345)          (4,814)
          Decrease in unearned revenue                                                    (1,349)          (2,696)          (7,324)
                                                                                       ---------        ---------        ---------
              Total adjustments                                                           12,271           15,232          (15,154)
                                                                                       ---------        ---------        ---------
              Net cash provided by operating activities                                   66,693           64,898           18,371
                                                                                       ---------        ---------        ---------
Cash flows from investing activities:
    Purchases of property, equipment and software, net                                   (43,800)         (42,978)         (52,816)
    Payments for acquisitions, net of cash acquired                                      (69,928)        (115,607)        (162,630)
    Proceeds from redemption of preferred stock                                           12,596             --               --
    Additions to other intangible assets                                                  (9,121)          (2,921)          (6,629)
    Proceeds from note receivable                                                           --              4,611             --
    Proceeds from sale of banking units                                                     --              2,704             --
    Other, net                                                                              (303)            (194)          (2,523)
                                                                                       ---------        ---------        ---------
              Net cash used in investing activities                                     (110,556)        (154,385)        (224,598)
                                                                                       ---------        ---------        ---------
Cash flows from financing activities:
    Proceeds from issuance of long-term debt, net of debt issuance costs                 329,926          109,211          197,800
    Repayments of long-term debt                                                        (240,461)         (29,732)        (178,973)
    Proceeds from issuance of common stock, net of issuance costs                           --               --            170,228
    Proceeds from the exercise of stock options and related tax benefits                  10,611            4,008            4,198
    Net borrowings (repayments) of ATM debt                                                1,450           (2,450)             850
    Dividends paid                                                                          (377)            (717)            (633)
    Other, net                                                                              (395)          (1,103)            (689)
                                                                                       ---------        ---------        ---------
              Net cash provided by financing activities                                  100,754           79,217          192,781
                                                                                       ---------        ---------        ---------
Net increase (decrease) in cash and cash equivalents                                      56,891          (10,270)         (13,446)
Cash and cash equivalents at beginning of year                                            18,997           29,267           42,713
                                                                                       ---------        ---------        ---------
Cash and cash equivalents at end of year                                               $  75,888        $  18,997        $  29,267
                                                                                       =========        =========        =========
</TABLE>




       See supplemental cash flow information in Notes 2, 4, 6, 7 and 12.
              The accompanying notes are an integral part of these
                       consolidated financial statements.




                                       4
<PAGE>   11

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business and basis of presentation

    Affiliated Computer Services, Inc. (the "Company" or "ACS"), which was
incorporated on June 8, 1988, is engaged in a full range of business services
including business process outsourcing, electronic commerce, technology
outsourcing, professional services and systems integration primarily in North
America, as well as Central America, South America, Europe and the Middle East.

    In December 1997, the Company acquired ACS Government Solutions, formerly
known as Computer Data Systems, Inc. ("CDSI") through the merger of a
wholly-owned subsidiary of the Company with and into ACS Government Solutions, a
provider of information technology solutions primarily to government customers
(the "Merger"). The transaction was accounted for as a pooling of interests;
therefore, all periods presented have been restated to include the combined
operations of both companies. Certain reclassifications were made to the ACS
Government Solutions financial statements to conform to ACS presentations.

    The consolidated financial statements are comprised of the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Company's fiscal year
ends on June 30. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from these
estimates.

Cash, cash equivalents and ATM cash

    Cash and cash equivalents consist primarily of short-term investments in
commercial paper, Eurodollars, securities purchased under agreements to resell
and short-term U.S. treasury bills. Such investments have an initial maturity of
three months or less. ATM cash represents cash borrowed under a revolving credit
agreement and restricted for use in Company-owned automated teller machines
("ATMs").

Inventory

    Inventories consist primarily of micrographics supplies and equipment,
network computer hardware and ATM and computer maintenance parts, which are
generally recorded at the lower of cost or market (net realizable value) using
the first-in, first-out method.

Property and equipment

    Property and equipment are recorded at cost. The cost of property and
equipment held under capital leases, primarily computer equipment, is equal to
the lower of the net present value of the minimum lease payments or the fair
value of the leased property at the inception of the lease. Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets, which for equipment range primarily from three to ten years and for
buildings and improvements up to forty years.

Software

    Purchased computer software and internally developed computer software
purchased through acquisitions are amortized using the straight-line method over
expected useful lives which range from two to five years. With respect to costs
incurred to develop computer software to be sold as a separate product, the
Company's policy is to capitalize such costs only after technological
feasibility has been established.

    In March 1998, Statement of Position ("SOP") 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use", was issued. This SOP
requires that certain costs related to the development or purchase of
internal-use software be capitalized and amortized over the estimated useful
life of the software. The provisions of SOP 98-1 are effective for financial
statements issued for fiscal years beginning after December 15, 1998, although
early adoption is allowed. The Company early adopted the provisions of this SOP
in fiscal 1998.

Goodwill

    Goodwill represents the excess of the purchase price over the fair value of
net assets acquired and is amortized using the straight-line method over the
expected useful lives which range from ten to forty years. It is the Company's
policy to periodically review the net realizable value of its intangible assets,
including goodwill, through an assessment of the estimated future cash flows
related to such assets. Each business unit to which these intangible assets
relate is reviewed to determine whether future cash flows over the remaining
estimated useful lives of the assets provide for recovery of the assets. In the
event that assets are found to be carried at amounts which are in 


                                       5
<PAGE>   12

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


excess of estimated undiscounted future cash flows, then the intangible assets
are adjusted for impairment to a level commensurate with a discounted cash flow
analysis of the underlying assets.

Other intangible assets

    Other intangible assets consist primarily of customer contracts, which are
recorded at cost and amortized using the straight-line method over the contract
terms, which range from two to ten years.

Long-term investments and other assets

    Long-term investments consist primarily of equity investments and are
accounted for using either the cost or the equity method, as appropriate.
Deferred annuity contracts included in long-term investments are carried at cost
plus accrued interest, which approximates fair market value. It is the Company's
policy to periodically review the net realizable value of its long-term
investments through an assessment of the recoverability of the carrying amount
of each investment. Each investment is reviewed to determine if events or
changes in circumstances of the issuer have occurred which indicate that the
recoverability of the carrying amount may be uncertain. In the event that an
investment is found to be carried at an amount in excess of its recoverable
amount, the asset is adjusted for impairment to a level commensurate with the
recoverable amount of the underlying asset.

    Other assets consist primarily of deferred debt costs and a long-term
software maintenance agreement. The deferred debt costs are being amortized over
the life of the related debt. The software maintenance agreement is being
amortized over the five year term of the related contract.

Revenue recognition

    Information processing revenue is recorded as services are performed.
Revenue from annual maintenance contracts is deferred and recognized ratably
over the maintenance period. Revenues earned in excess of related billings are
accrued, whereas billings in excess of revenues earned are deferred until the
related services are provided.

    Revenue on time and material contracts are recorded at the contractual rates
as the labor hours and direct expenses are incurred. Revenues on cost-type
contracts are recorded as reimbursable costs are incurred. Revenues on
fixed-price contracts are recorded on the percentage of completion basis,
determined by the ratio of total incurred costs to anticipated total costs of
the project. Revenues on unit-price contracts are recorded at the contractual
selling prices of work completed and accepted by the customer. Contract award
fees are recorded based on estimated current performance levels and historical
experience. Revenues on equipment and software sales are recorded when the units
are delivered. Immediate recognition is made of any anticipated losses.

    Revenues earned from the five largest customers of ACS each year together
comprised 25%, 26% and 30% of ACS revenues for the years ended June 30, 1998,
1997 and 1996, respectively. Trade accounts receivable from these customers
aggregated $67,246,000 at June 30, 1998 and $54,577,000 at June 30, 1997.

Income taxes

    Deferred income taxes provided in the accompanying financial statements are
determined based on the difference between financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the years in which
such differences are expected to reverse.

Earnings per common share

    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
The Statement specifies new standards for the computation and presentation of
earnings per share and has been adopted by the Company for the accompanying
financial statements. SFAS 128 replaces the previously reported primary and
fully diluted earnings per share with "basic" and "diluted" earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. Earnings per share amounts for all periods presented have
been restated to conform to the requirements of SFAS 128. See Note 10 for the
computation of earnings per share.

    During fiscal 1997, the Company issued additional Class A and Class B common
stock in connection with a two-for-one stock split in the form of a 100% stock
dividend. As a result, all references to the number of shares and per share
amounts in the accompanying financial statements for fiscal 1996 have been
restated to reflect the stock split (see Note 8).


                                       6
<PAGE>   13

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Stock-based compensation

    The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which establishes accounting and reporting standards
for stock-based employee compensation plans. As permitted by the standard, the
Company has elected not to adopt the fair value based method of accounting for
stock-based employee compensation and will continue to account for such
arrangements under Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees" ("APB 25") and apply SFAS 123 on a disclosure basis
only. Accordingly, adoption of the standard has not affected the Company's
results of operations or financial position (see Note 9).




2. BUSINESS COMBINATIONS

    In December 1997, ACS completed the Merger by exchanging 11.1 million shares
of its common stock, excluding unexercised options, for all of the common stock
of ACS Government Solutions. Stockholders of ACS Government Solutions received
1.759 shares of ACS Class A common stock for each share of its common stock in
the Merger, which has been accounted for as a pooling of interests. All data
presented in the accompanying consolidated financial statements has been
restated to reflect the merger.

    From inception through June 30, 1998, the Company has acquired 38 businesses
in the information technology services industry under the purchase accounting
method. The Company's recent acquisition activity is summarized as follows:

<TABLE>
<CAPTION>
                                                                  Year ended June 30,
                                                         --------------------------------------
                                                           1998           1997           1996
                                                         --------       --------       --------
<S>                                                      <C>            <C>            <C>     
Acquisitions completed:
     Technology outsourcing                                  --             --                1
     Business process outsourcing                            --                2              4
     Professional services                                      4              5              3
                                                         --------       --------       --------
       Total                                                    4              7              8
                                                         ========       ========       ========

Purchase consideration (in thousands):
     Cash paid                                           $ 64,918       $ 82,607       $153,849
     Amounts due sellers of acquired businesses              --            2,002          6,700
     Stock issued                                           1,180         11,270           --
     Liabilities assumed                                   10,140         24,008         95,144
     Other                                                    745            560          1,800
                                                         --------       --------       --------
       Fair value of assets acquired
            (including intangibles)                      $ 76,983       $120,447       $257,493
                                                         ========       ========       ========
</TABLE>

    In December 1997, the Company acquired 100% of the stock of CARA Corporation
("CARA"), a professional services business. The Company made three other
acquisitions during fiscal 1998 which have also been included in the Company's
consolidated financial statements from the effective date of the acquisition.
Fiscal 1998 revenues and earnings of the acquirees prior to the effective dates
of the four acquisitions are not material to the financial results of ACS. As a
result, proforma disclosures related to the pre-acquisition operations are not
presented. The Company financed a portion of the aggregate purchase price for
these acquisitions through the issuance of 57,000 shares of unregistered Class A
common stock. All of the acquisitions made by the Company, excluding ACS
Government Solutions, have been accounted for using the purchase accounting
method.

    In addition to these acquisitions, the Company also purchased the remaining
30% ownership in two existing subsidiaries, Technical Directions, Inc. and
Business Process Solutions, Inc (formerly known as Unibase Technologies, Inc).
The Company financed a portion of the aggregate purchase price for these
acquisitions through the issuance of 561,000 shares of unregistered Class A
common stock.



                                       7
<PAGE>   14

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



    In June 1997, ACS Government Solutions acquired 100% of the stock of
Analytical Systems Engineering Corporation ("ASEC"), which provides systems
engineering and engineering services primarily to the Department of Defense and
certain intelligence agencies, both domestically and abroad. The purchase
consideration included approximately 185,000 shares of its common stock (326,000
shares of ACS Class A common stock adjusted for the Merger).

    In November 1996, ACS Government Solutions combined its student loan
guaranty agency services business with that of InTuition, Inc. and formed a new
commercial company called GuaranTec, LLP, of which it is a 51% owner and
InTuition is a 49% owner. In connection with the formation of this company, ACS
Government Solutions contributed cash, 20,000 shares of its common stock (35,000
shares of ACS Class A common stock adjusted for the Merger) and assets to
InTuition and GuaranTec. ACS Government Solutions and InTuition also contributed
their interests in their licensing agreements and guaranty agency servicing
contracts and certain related assets and liabilities to GuaranTec.

    The Company made six other acquisitions during fiscal 1997 which have also
been included in the Company's consolidated financial statements from the
effective date of the acquisition. The Company financed a portion of the
aggregate purchase price for these acquisitions through the issuance of
approximately 409,000 shares of unregistered Class A common stock.

    The Company is obligated to make certain contingent payments to former
owners based on the achievement of specified profit levels in conjunction with
certain of its acquisitions. During fiscal 1998, the Company paid $846,000 in
contingent consideration related to acquisitions made in prior years. As of June
30, 1998, the maximum aggregate amount of the outstanding contingent obligations
is approximately $7,180,000, none of which has been earned to date. Any such
payments would result in a corresponding increase in goodwill.

3. ACCOUNTS RECEIVABLE
    The components of accounts receivable are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                June 30,
                                                                        --------------------------
                                                                           1998             1997
                                                                        ---------        ---------
<S>                                                                     <C>              <C>      
Amounts billed:
    Commercial companies and state and local governments                $  82,305        $  79,525
    U.S. government                                                        56,764           47,278
                                                                        ---------        ---------
                                                                          139,069          126,803
                                                                        ---------        ---------
Amounts unbilled:
    Amounts currently billable                                             98,927           69,903
    Excess of actual indirect costs over amounts currently
       billable under cost reimbursable contracts                             989            1,663
    Contract retainages not currently billable                                378              364
    Fixed price work not currently billable                                  --              2,533
                                                                        ---------        ---------
                                                                          100,294           74,463
                                                                        ---------        ---------

Total accounts receivable                                                 239,363          201,266
Allowance for doubtful accounts                                            (2,840)          (1,964)
                                                                        ---------        ---------
                                                                        $ 236,523        $ 199,302
                                                                        =========        =========
</TABLE>

    To the extent not currently billable at June 30, 1998 and 1997, unbilled
costs and accrued profits above are billable upon delivery or acceptance of
services, upon receipt of contract funding, or upon contract completion. Of the
above unbilled costs and accrued profits at June 30, 1998, approximately
$1,367,000 are not expected to be billed and collected within one year.


                                       8
<PAGE>   15

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4. PROPERTY AND EQUIPMENT

    Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                            June 30,
                                                    --------------------------
                                                       1998             1997
                                                    ---------        ---------
<S>                                                 <C>              <C>      
Land                                                $  20,186        $  20,456
Buildings and improvements                             50,729           43,926
Computer equipment and software                       112,498           93,750
Furniture and fixtures                                 45,107           38,119
Construction in progress                                4,293            5,211
                                                    ---------        ---------
                                                      232,813          201,462
Accumulated depreciation and amortization             (90,096)         (66,302)
                                                    ---------        ---------
                                                    $ 142,717        $ 135,160
                                                    =========        =========
</TABLE>

    In connection with an outsourcing contract signed in December 1996, the
Company acquired assets with a fair market value of $1,433,000, including
property and equipment of $1,045,000, and assumed liabilities of the same
amount.

    The Company acquired three host data centers in June 1996. Pursuant to a
consolidation plan, the Company closed one of these facilities, located in
Dearborn, Michigan in fiscal year 1998. This facility is held for sale and has a
net book value of $7,450,000, which approximates fair value.


5. LONG-TERM INVESTMENTS

    Long-term investments consist primarily of investments in preferred stock
accounted for at cost, as these securities are not considered marketable equity
securities, and deferred annuity contracts carried at cost plus accrued interest
which approximates fair market value. The preferred stock investments accrue
cumulative dividends of approximately 5%. Dividend income recognized from such
securities, which is reflected in the consolidated financial statements as a
component of other non-operating income, was approximately $415,000, $1,285,000
and $1,513,000 during fiscal 1998, 1997 and 1996, respectively.

    In September 1997, a customer of the Company redeemed their preferred stock,
including accumulated dividends, for $12,694,000 in cash. The redemption
resulted in a $6,742,000 gain which is reported as other non-operating income,
net in the accompanying consolidated statement of income for the year ended June
30, 1998.







                                       9
<PAGE>   16



               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6. NOTES PAYABLE AND LONG-TERM DEBT

    A summary of notes payable and long-term debt follows (in thousands):

<TABLE>
<CAPTION>
                                                                                     June 30,
                                                                             --------------------------
                                                                                1998             1997
                                                                             ---------        ---------
<C>                                                                          <C>              <C>    
4% convertible subordinated notes due March 2005 (A)                         $ 230,000        $    --
Unsecured $125,000 revolving credit agreement, payable to banks,
          due in June 1999 (B)                                                    --             82,700
Unsecured $50,000 term loan, payable to a bank, due in quarterly
          installments through June 2002 (C)                                      --             48,000
Secured $11,000 ATM cash credit agreement ("ATM Cash Facility")
       payable to a bank, due in December 1998 (D)                               8,100            6,650
10% junior subordinated debentures, payable to former shareholders
          of a subsidiary, due January 2000                                        184              507
Other notes payable to individuals and corporations, interest rates
          ranging from 6% to 10%, due through 2002                               3,979            5,978
Capitalized lease obligations at various interest rates, payable
          through 2001                                                           3,209            4,391
                                                                             ---------        ---------
                                                                               245,472          148,226
Less current portion                                                           (10,624)         (17,546)
                                                                             ---------        ---------
                                                                             $ 234,848        $ 130,680
                                                                             =========        =========
</TABLE>




    Maturities of notes payable and long-term debt at June 30, 1998 follows (in
thousands):

<TABLE>
       Year ending June 30:
<S>                                                             <C>       
       1999                                                     $   10,624
       2000                                                          2,259
       2001                                                          1,782
       2002                                                            714
       2003                                                             93
       Thereafter                                                  230,000
                                                                ----------
                                                                $  245,472
                                                                ==========
</TABLE>


   (A) On March 20, 1998 the Company sold $230 million of 4% Convertible
       Subordinated Notes due March 15, 2005 (the "Notes"). The Notes are
       convertible into the Company's Class A common stock at a conversion rate
       of 23.4432 shares of Class A common stock for each $1,000 principal
       amount of Notes (equivalent to a conversion price of $42.66 per share of
       Class A common stock), subject to adjustments in certain events. Interest
       on the Notes is payable semi-annually on March 15 and September 15 of
       each year commencing on September 15, 1998. The Notes may be redeemed at
       the option of the Company on or after March 15, 2002, in whole or in
       part, at the redemption prices set forth in the Notes.

   (B) The Company amended its revolving credit agreement ("Credit Facility") in
       July 1997 to increase available commitments from $125 million to $200
       million, extend the due date from June 1999 to July 2002 and lower the
       interest rate. Interest on the Credit Facility is payable monthly at
       LIBOR (5.66% at June 30, 1998) plus 0.3% to 0.875%, or the bank's base
       rate, as elected by the Company. In March 1998, the Company used
       $173,700,000 of the proceeds from the sale of the Notes to repay the
       Credit Facility; therefore, there were no outstanding borrowings under
       the Credit Facility as of June 30, 1998. 

       The Credit Facility contains covenants which require that the Company
       comply with certain negative, affirmative, and financial covenants
       customary in notes of this nature, including but not limited to the


                                       10
<PAGE>   17



               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


       maintenance of fixed charge ratios, limitations on acquisitions and
       minimum net worth requirements. The agreement also has provisions which
       would permit acceleration of the maturity of the borrowings after the
       occurrence of certain defined events of default. At June 30, 1998, the
       Company had outstanding letters of credit of approximately $2,279,000.

   (C) In June 1997, ACS Government Solutions borrowed $50 million under a term
       loan to finance the ASEC acquisition (see Note 2). Upon consummation of
       the Merger with ACS in December 1997, the ACS Government Solutions term
       loan was repaid and the revolving line of credit was canceled. The
       Company utilized borrowing availability under the Credit Facility to fund
       the paydown of the debt.

   (D) Interest on the ATM cash facility is due quarterly at prime less 2.35%
       (6.15% at June 30, 1998), collateralized by cash restricted for use in
       Company-owned ATMs. On December 10, 1997, the term of the ATM Cash
       Facility was extended to December 1998.

    Cash payments for interest for the years ended June 30, 1998, 1997 and 1996
were $9,813,000, $7,045,000, and $3,617,000, respectively. Interest income was
$2,404,000, $1,459,000 and $2,349,000 for the years ended June 30, 1998, 1997
and 1996, respectively.

    The Company's cash custody agreements with two financial institutions
provide the Company with up to $52,000,000 of the financial institutions' vault
cash for use in Company-owned ATMs. At June 30, 1998, approximately $40,590,000
was in use under the agreements. The cash is owned by the financial institutions
and is consequently not recorded on the Company's accompanying balance sheets.
The cash custody agreement in the amount of $50,000,000 expires in February 2001
and the cash custody agreement in the amount of $2,000,000 expires in January
1999.





                                       11
<PAGE>   18

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7. INCOME TAXES

    Income tax expense is comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  Year ended June 30,
                                                         -----------------------------------
                                                          1998          1997          1996
                                                         -------       -------       -------
<S>                                                      <C>           <C>           <C>    
Current:
    U.S. Federal                                         $15,598       $13,160       $11,925
    Foreign                                                  248            39          --
    State                                                  2,296         2,749         2,133
    Tax reduction credited to paid-in capital
           from exercise of stock options                  5,647         2,893         3,101
                                                         -------       -------       -------
        Total current expense                             23,789        18,841        17,159
                                                         -------       -------       -------
Deferred:
    U.S. Federal                                          14,001        13,299         4,441
    Foreign                                                 --            --            --
    State                                                  1,880         1,764           792
                                                         -------       -------       -------
        Total deferred expense                            15,881        15,063         5,233
                                                         -------       -------       -------
        Total expense for income taxes                   $39,670       $33,904       $22,392
                                                         =======       =======       =======
</TABLE>

    At June 30, 1998, the Company had available unused domestic net operating
loss carryforwards ("NOLs"), net of Internal Revenue Code Section 382
limitations, of approximately $7,229,000, which expire in years 2002 through
2017. In addition, the Company had foreign NOLs of $2,765,000, which will expire
in years 2000 through 2003. The Company had an unused capital loss carryforward,
net of Section 382 limitations, of approximately $842,000, which expired as of
June 30, 1998. The capital loss carryforward was fully reserved due to Section
382 and capital loss restrictions.

    The Company's deferred tax assets (liabilities) consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                          June 30,
                                                                   ------------------------
                                                                     1998            1997
                                                                   --------        --------
<S>                                                                <C>             <C>     
Deferred tax assets:
   Accrued expenses not yet deductible for tax purposes            $  9,732        $ 10,235
   Loss carryforwards                                                 3,974           6,008
   Deferred compensation                                                915           1,836
   Stock option compensation expense                                    558             767
   Investment basis differences                                        --               532
   Other                                                                 13             453
                                                                   --------        --------
     Total deferred tax assets                                       15,192          19,831
                                                                   --------        --------
Deferred tax liabilities:
   Depreciation and amortization                                    (27,346)        (18,773)
   Interest in partnership                                           (1,049)           (909)
   Annuity interest                                                    (458)           (432)
   Other                                                               --              (433)
                                                                   --------        --------
      Total deferred tax liabilities                                (28,853)        (20,547)

Deferred tax assets valuation allowance                                (232)           (513)
                                                                   --------        --------
      Net deferred tax liabilities                                 $(13,893)       $ (1,229)
                                                                   ========        ========
</TABLE>

    The significant increase in the deferred tax liability for depreciation and
amortization is due to the Genix acquisition in June 1996. For tax purposes,
both parties elected to treat the sale as if it were a sale of assets under
Internal Revenue Code Section 338(h)(10). As a result, ACS is able to amortize
the intangible assets over substantially shorter lives for tax than for book
purposes.



                                       12
<PAGE>   19
               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The valuation allowance at June 30, 1998 exists principally due to tax
benefits of acquired corporations for which realization of any future benefit is
uncertain due to Section 382 limitations. The valuation allowance for deferred
tax assets decreased by $281,000 and $150,000 during the years ended June 30,
1998 and 1997, respectively. The decrease was due to the utilization of
previously reserved NOLs, expiration of the capital loss carryforward which was
fully reserved and changes in facts and circumstances with respect to the
realization of future tax benefits of certain investments which caused such
realizations to be more likely than not.

    Income tax expense varies from the amount computed by applying the statutory
federal income tax rate to income before income taxes as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           Year ended June 30,
                                                                   -----------------------------------
                                                                     1998          1997          1996
                                                                   -------       -------       -------
<S>                                                                <C>           <C>           <C>    
Income tax expense at the U.S. Federal statutory rate              $32,932       $29,250       $19,572
Increase resulting from:
    Excess of book basis over tax basis of
      companies                                                      1,887           864           711
    State income taxes (net of federal benefit)                      3,110         3,130         1,953
    Merger costs                                                       912          --            --
    Other                                                              829           660           156
                                                                   -------       -------       -------
Total expense for income taxes                                     $39,670       $33,904       $22,392
                                                                   =======       =======       =======

</TABLE>


    Current year undistributed earnings of non-U.S. subsidiaries for which U.S.
taxes have not been provided are included in consolidated retained earnings in
the amount of $544,000 at June 30, 1998. If such earnings were distributed, U.S.
income taxes would be partially reduced by available credits for taxes paid to
the jurisdictions in which the income was earned.

    Federal and state income tax payments during the years ended June 30, 1998,
1997, and 1996 were approximately $12,426,000, $18,534,000, and $10,595,000,
respectively.


8. COMMON STOCK

    The Company's Class B common stock is entitled to ten votes per share. Class
B shares are convertible, at the holder's option, into Class A shares, but until
converted carry significant transfer restrictions.

    In January 1989, the Company issued warrants to purchase 793,188 additional
shares of Class A common stock to a data processing customer. The warrants are
exercisable at an aggregate price of $4,700,000 plus $230,000 for each year that
elapses after December 31, 1988, plus interest at 10% per annum. At June 30,
1998, the exercise price was $15.34 per share. Shares may be purchased in
increments through January 1999, the date on which the warrant agreement
expires. However, there have been no shares purchased to date.

    In November 1996, the Company issued additional Class A and Class B common
stock in connection with a two-for-one stock split in the form of a 100% stock
dividend. The stated par value of each share was not changed from $.01. All
references in the accompanying financial statements to the number of shares and
per share amounts for fiscal 1996 have been restated to reflect the stock split.

    On March 20, 1998 the Company completed the sale of a new issue of $230
million aggregate principal amount of Notes due March 15, 2005 (See Note 6). The
Notes are convertible into the Company's Class A common stock at a conversion
rate of 23.4432 shares of Class A common stock for each $1,000 principal amount
of Notes (equivalent to a conversion price of $42.66 per share of Class A common
stock), subject to adjustments in certain events, none of which have occurred as
of June 30, 1998.





                                       13
<PAGE>   20
               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9. EMPLOYEE BENEFIT PLANS

    Under the Company's 1997 employee stock option plan, the Company has
reserved 3,675,000 shares of Class A common stock for issuance to key employees
at exercise prices determined by the Board of Directors. The company's 1988
employee stock option plan, which originally reserved 6,000,000 shares of Class
A common stock for issuance, was discontinued for new grants during fiscal 1998
and terminated (except for the exercise of then existing option grants in
September 1997) and subsequently, 1,593,231 unissued shares expired. Generally,
the options under each plan vest in varying increments over a five year period,
expire ten years from the date of grant and are issued at exercise prices no
less than 100% of the fair market value of the Company's Class A common stock at
the time of the grant. As reported in Note 1, the Company has elected to adopt
the disclosure-only provisions of SFAS 123 and will continue to account for
stock-based employee compensation plans in accordance with APB 25. As a result,
no compensation cost has been recognized in fiscal 1998 for its stock option or
employee stock purchase plans.

    The Long-term Incentive Plan approved in 1991 (the "1991 Plan") provides for
the granting of options to various employees, officers and directors of ACS
Government Solutions. This plan was discontinued for new grants effective with
the Merger. All options issued under the 1991 Plan were fully vested as of the
Merger date. Exercise prices of options awarded in all years were equal to the
market price of the stock on the date of the grant; therefore, no compensation
costs have been recognized for awards under this plan.

    Pro forma information regarding net income and earnings per share is
required by SFAS 123 and has been determined as if the Company had accounted for
its stock-based compensation plans under the fair value method. The fair value
of each option grant was estimated at the date of grant using a separate
Black-Scholes option pricing model for each plan. The following weighted average
assumptions were used for grants in fiscal 1998, 1997 and 1996: dividend yield
of 0% in all years for the 1997 and 1988 plans and .40% for the 1991 plan
applicable to fiscal 1997 and 1996; volatility of 30.95% for fiscal 1998 for all
plans and 37.6% for the 1988 plan in fiscal 1997 and fiscal 1996 and 50% for the
1991 plan in fiscal 1997 and fiscal 1996; risk-free interest rates of 5.64%,
6.42% and 6.07% for 1998, 1997 and 1996, respectively, in the 1997 and 1988
plans and 6.14% for fiscal 1997 and fiscal 1996 years in the 1991 plan; and
weighted average expected option life of 5.5 years for the 1997 and 1988 plans
and three years for the 1991 plan for all years presented. The average fair
values of the options granted during fiscal 1998, 1997 and 1996 are estimated at
$9.48, $9.47 and $7.93, respectively for the combined plans.

    Had compensation cost for the Company's stock-based compensation plans been
determined in accordance with SFAS 123, the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                               Year ended June 30,
                                                                   --------------------------------------------
                                                                      1998             1997             1996
                                                                   ----------       ----------       ----------
<S>                                                                <C>              <C>              <C>       
Net income
     As reported                                                   $   54,422       $   49,666       $   33,525
     Pro forma                                                         50,718           47,803           32,343

Basic earnings per common share
     As reported                                                   $     1.14       $     1.08       $      .88
     Pro forma                                                           1.07             1.04              .85

Diluted earnings per common and common equivalent share
     As reported                                                   $     1.11       $     1.05       $      .85
     Pro forma                                                           1.05             1.01              .82
</TABLE>

    Since stock-based compensation issued prior to fiscal 1996 is not included
in the pro forma calculation, the effects of applying SFAS 123 in this pro forma
disclosure will not be comparable with those in subsequent years. 


                                       14
<PAGE>   21

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The pro forma impact on earnings can be expected to increase as a greater
percentage of outstanding stock options represent awards made after fiscal 1995.



    Option activity for the years ended June 30, 1996, 1997 and 1998 is
summarized as follows:

<TABLE>
<CAPTION>
                                                        Option Price
                                     Options             per Share
                                     -------         ------------------
<S>                                 <C>              <C>           
Outstanding at June 30, 1995        2,708,379        $  .01  -- $11.25
    Granted                         1,559,228          5.97  --  23.13
    Exercised                        (767,006)          .01  --   8.03
    Canceled                          (77,242)         2.38  --  14.75
                                    ---------
Outstanding at June 30, 1996        3,423,359           .01  --  23.13
    Granted                           935,014         12.51  --  26.87
    Exercised                        (522,560)          .01  --  12.36
    Canceled                         (323,204)         4.97  --  20.62
                                    ---------
Outstanding at June 30, 1997        3,512,609           .07  --  26.87
    Granted                         1,933,117         17.77  --  32.63
    Exercised                        (796,370)          .07  --  17.77
    Canceled                         (249,172)         6.40  --  31.88
                                    ---------
Outstanding at June 30, 1998        4,400,184           .07  --  32.63
                                    =========
Exercisable at June 30, 1998          749,819           .07  --  20.18
                                    =========
</TABLE>

    Further information regarding the Company's outstanding and exercisable
stock options by exercise price range as of June 30, 1998 is disclosed below:

<TABLE>
<CAPTION>
                                   Options Outstanding                                     Options Exercisable
                         --------------------------------------------                  ---------------------------
                                             Weighted
                                              Average       Weighted                                       Weighted
                                             Remaining       Average                                        Average
    Range of               Number           Contractual     Exercise                     Number            Exercise
  Exercise Prices        Outstanding           Life           Price                    Exercisable           Price
------------------       -----------       ----------       ---------                  -----------          ------
<C>                          <C>               <C>          <C>                          <C>                <C>    
$   .07 - $    .72           235,430           1.84         $     .62                    235,430            $   .62
   4.97 -    11.25           756,934           6.18              9.69                     63,593               6.67
  12.15 -    21.50         1,625,320           6.86             17.76                    450,796              16.73
  23.13 -    32.63         1,782,500           9.26             26.54                         --                 --
------------------       -----------       ----------       ---------                 -----------           -------
$  .07 -  $  32.63         4,400,184           7.45         $   19.01                    749,819            $ 10.82
==================       ===========       ==========       =========                 ===========           =======
</TABLE>

    Under the Company's 1995 Employee Stock Purchase Plan, a maximum of
1,000,000 shares of Class A common stock can be issued to substantially all
full-time employees. Through payroll deductions, eligible participants may
purchase Company stock at a 15% discount to market value. The stock is purchased
by the plan in the open market, and Company contributions for the years ended
June 30, 1998, 1997 and 1996, which were charged to additional paid-in capital,
were $395,000, $205,000 and $135,000, respectively.

    The Company has contributory retirement and savings plans which cover all
employees and meet the requirements of Section 401(k) of the Internal Revenue
Code. The plans also allow for discretionary matching contributions by the
Company as determined by the Company's Board of Directors. Contributions made by
the Company to certain plans during the years ended June 30, 1998, 1997 and 1996
were $2,524,000, $2,286,000 and $2,079,000, respectively.





                                       15
<PAGE>   22
               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10. EARNINGS PER SHARE

    Earnings per share amounts for all periods presented have been restated to
conform to the requirements of SFAS 128. The following table sets forth the
computation of basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                                           Year ended June 30,
                                                                   -----------------------------------
                                                                    1998          1997          1996
                                                                   -------       -------       -------
<S>                                                                <C>           <C>           <C>    
Numerator:
   Numerator for earnings per share (basic) -
     income available to common stockholders                       $54,422       $49,666       $33,525
   Effect of dilutive securities:
     Interest on 4% convertible debt                                 1,714          --            --
                                                                   -------       -------       -------
   Numerator for earnings per share assuming dilution -
     income available to common stockholders                       $56,136       $49,666        33,525
                                                                   -------       -------       -------

Denominator:
   Weighted average shares outstanding (basic)                      47,599        46,136        38,228

   Effect of dilutive securities:
     4% convertible debt                                             1,528          --            --
     Stock options                                                   1,062         1,028           938
     Warrants and other                                                298           288           154
                                                                   -------       -------       -------
     Total potential common shares                                   2,888         1,316         1,092
                                                                   -------       -------       -------

   Denominator for earnings per share assuming dilution             50,487        47,452        39,320
                                                                   -------       -------       -------

Earnings per common share (basic)                                  $  1.14       $  1.08       $   .88
                                                                   =======       =======       =======

Earnings per common share assuming dilution                        $  1.11       $  1.05       $   .85
                                                                   =======       =======       =======
</TABLE>


11. FINANCIAL INSTRUMENTS

    As of June 30, 1998 and 1997, the fair values of the Company's revolving
credit balances and other variable-rate debt instruments approximated the
related carrying values. The fair values of the Company's fixed-rate debt
instruments also approximated the related carrying values, as determined based
upon relative changes in the Company's variable borrowing rates, whether the
borrowings occurred recently or if the borrowings were repaid after the fiscal
year ended. The Company estimated the fair value of the 4% convertible debt as
of June 30, 1998 at approximately $251,850,000 based on the trading price on
that day.


12. RELATED PARTY TRANSACTIONS

    In July 1994, the Company completed the spin-off of Precept Business
Products, Inc. ("Precept") to the Company's stockholders on a pro-rata basis.
The businesses distributed consisted of various business support services
unrelated to information processing and were accounted for as discontinued
operations. Precept continues to sell business forms and supplies and provide
courier and other services to the Company. Trade accounts between the Company
and Precept were immaterial for all years presented.

    Effective April 1996, the Company sold ACS Merchant Services, Inc.
("Merchant Services"), a start-up operation of the electronic commerce business
line, to a former officer and director of the Company for consideration in the
form of a note receivable of $500,000. There was no gain or loss recognized on
the sale. Simultaneous with the sale, the Company contributed an additional
$1,500,000 and the unpaid balance of an intercompany note due from Merchant
Services of approximately $712,000 in exchange for 1,000 shares of Merchant
Services 5% cumulative convertible preferred stock, which is convertible after 5
years into approximately 


                                       16
<PAGE>   23
               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



55% of Merchant Services common stock on a fully diluted basis. The Company
provides guarantees to two banks on Merchant Services debt up to $7,500,000.

    In December 1997, the Company purchased $100,000 of the preferred stock in
DDH Aviation ("DDH"), a start-up corporate airplane brokerage firm, which
represents less than 5% ownership. The Company also acts as a guarantor for up
to $7,000,000 of DDH's $15,000,000 line of credit in exchange for warrants
convertible into 1,500 shares of DDH Class A common stock.


13. COMMITMENTS AND CONTINGENCIES

    The Company has various operating lease agreements for information
technology equipment and facilities. A summary of the lease commitments under
noncancelable operating leases at June 30, 1998 is as follows (in thousands):

<TABLE>
<CAPTION>
       Year ending June 30,
<S>                                                               <C>       
       1999                                                       $   62,520
       2000                                                           42,936
       2001                                                           24,632
       2002                                                           10,263
       2003                                                            5,400
       Thereafter                                                     36,078
                                                                  ----------
                                                                  $  181,829
                                                                  ==========
</TABLE>

    Lease expense for information technology equipment and facilities was
$78,712,000, $61,176,000 and $46,481,000 for the years ended June 30, 1998, 1997
and 1996, respectively.

    In connection with an outsourcing agreement signed in May 1997, the Company
assumed operating leases totaling $3,541,000 for equipment and computer
software.

    During fiscal 1997 the Texas Supreme Court, in a unanimous decision,
overturned a lower court's judgment against the Company for which the Company
had previously accrued approximately $6 million. During the third quarter of
fiscal 1997, the Company reversed this accrual to other operating expenses.

     Twenty-one former employees of Gibraltar Savings Association and/or First
Texas Savings Association (collectively, "GSA/FTSA") have brought suit in Texas
state court alleging entitlement to 401,532 shares of the Company's Class A
common stock pursuant to options issued to GSA/FTSA employees in 1988 in
connection with a former data processing services agreement between GSA/FTSA and
the Company. The per share exercise price for each of these options, as adjusted
for the Company's 1994 reclassification and its 1996 two-for-one stock split, is
alleged to be $.38. The Company believes that it has meritorious defenses to all
or substantial portions of these matters and plans to vigorously defend against
them. However, should the proceedings not be favorably resolved, the Company may
be subject to a material charge. The case is currently set for trial in late
September 1998.

    Government contracts are subject to review and audit by various governmental
authorities in the normal course of the Company's business. Cost audits have
been completed through fiscal 1996, with the exception of ASEC operations, which
have been audited through calendar year 1995. In management's opinion, any such
reviews and the results of cost audits for subsequent fiscal years will not have
a material effect on the Company's financial position or results of operations.

    The Company is subject to certain other legal proceedings, claims and
disputes which arise in the ordinary course of its business. Although the
Company cannot predict the outcomes of these legal proceedings, the Company's
management does not believe these actions will have a material adverse effect on
the Company's financial position, results of operations or liquidity. However,
if unfavorably resolved, these proceedings could have a material adverse effect
on the Company's financial position, results of operations and liquidity.



                                       17
<PAGE>   24
               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



14. MERGER EXPENSES AND OTHER CHARGES

    During the first quarter of fiscal 1998, the Company recorded a
non-recurring charge of $6,040,000 to rent, lease and maintenance expense
resulting from a binding commitment to a hardware lessor to terminate a computer
lease obligation prior to the expiration of its term in December 1999. The
payment to the lessor was made during the fourth quarter of fiscal 1998. This
computer was replaced with newer technology which will provide better service to
the Company's clients.

    During the second quarter of fiscal 1998, the Company recorded a
non-recurring charge of $12,974,000 ($8,880,000 net of taxes) related to
specific and identifiable costs associated with the Merger. These costs included
direct transaction expenses such as investment banking, legal, accounting,
financial printing and related fees as well as integration expenses such as
severance and costs associated with operating redundant facilities and
equipment.

    During the third quarter of fiscal 1997, the Company recorded a charge of
$6,019,000 ($4,577,000 in other operating expenses and $1,442,000 in
depreciation and amortization) relating to the consolidation of two of its
mainframe data centers and the upgrading of certain computer hardware and
software to newer technology. The charge included the write-down of related
assets and the recognition of obligations for which the Company would derive no
future benefit.

    In fiscal 1996, the Company recorded a charge of $3,800,000 relating to
planned divestitures of certain community bank processing groups within Texas
and Louisiana. These groups were part of the Company's financial services
outsourcing business and had historical annual revenues of approximately
$18,000,000. These divestitures were substantially completed in fiscal 1997 and
resulted in net cash proceeds of approximately $2,704,000. An additional charge
of $250,000 was included in other non-operating income, net in fiscal 1997 to
complete the dispositions.


15. SUBSEQUENT EVENTS

    In July 1998, the Company acquired 100% of the outstanding stock of Betac
International Corporation ("Betac") of Alexandria, Virginia. Betac, founded in
1977, is an advanced technology services company providing solutions primarily
to the Department of Defense, government intelligence and defense contractors
and other federal agencies. Betac, with trailing twelve months revenue of
approximately $49,000,000, employs 400 information technology professionals
across the United States and Europe.

    In July 1998, the Company also acquired substantially all of the Document
Acquisition Services ("DAS") unit of First Image Management Company, a division
of First Financial Management Corporation. DAS, with trailing twelve months
revenue of approximately $35,000,000, is based in London, Kentucky and provides
data capture, imaging and retrieval services to customers in the healthcare,
financial institution and insurance industries.





                                       18
<PAGE>   25

               AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


16.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (in thousands, except per share
     amounts)

<TABLE>
<CAPTION>
                                            Quarter ended                                  Quarter ended
                             ----------------------------------------------   ------------------------------------------
                                             Fiscal 1998                                     Fiscal 1997
                             ----------------------------------------------   ------------------------------------------
                              June 30,   Mar. 31,   Dec. 31,      Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,
                               1998        1998       1997          1997       1997        1997       1996        1996
                             --------    --------   --------      --------    --------   --------   --------   ---------
<S>                          <C>         <C>        <C>           <C>         <C>        <C>        <C>        <C>
Revenues                     $333,949    $304,945   $285,235      $264,994    $257,140   $232,221   $225,159   $214,405
Operating income               33,601      31,333     14,480        18,905      25,611     23,214     21,061     20,380
Net income                     18,520      16,850      5,602        13,450      13,934     12,738     11,676     11,318
Earnings per common share
  (basic)                    $    .38    $    .35   $    .12(a)   $    .29    $    .30   $    .28   $    .25   $    .25
Weighted average shares
  outstanding                  48,221      47,858     47,383        46,947      46,611     46,133     46,004     45,835
Earnings per common share
  assuming dilution          $    .36    $    .34   $    .12(a)   $    .28    $    .29   $    .27   $    .25   $    .24
Weighted average shares
  outstanding assuming
  dilution                     55,184      50,011     48,584        48,247      47,898     47,222     47,395     47,223
</TABLE>


    (a) Includes merger costs associated with the Merger of approximately $.18
per share




                                       19