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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



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FORM 10-K



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|             |  |                                                                                                                              |  | 
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------- |  | 
|Mark One
[X] |  | Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended June 30, 2002 |  | 
|             |  | OR                                                                                                                           |  | 
|[   ]        |  | Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934                                     |  | 
|            
|            
|            
|            
|            
|            
|            
|            
|             |  | For the transition period from
 to .
Commission file number 0-24787                                                          |  | 

AFFILIATED COMPUTER SERVICES, INC.(Exact name of registrant as specified in its charter)

|                                                             |  |                                     
|------------------------------------------------------------ |  | ------------------------------------
|Delaware                                                     |  | 51-0310342                          
|                                                             |  |                                     
|State or other jurisdiction of
incorporation or organization |  | (I.R.S. Employer Identification No.)

2828 North Haskell
Dallas, Texas 75204
(Address of principal executive offices)
(Zip Code)

214-841-6111
(Registrants telephone number, including area code)



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Securities Registered Pursuant to Section 12(b) of the Act:

|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Title of each class                            |  | Name of exchange on
which registered
|                                               |  |                                     
|Class A common stock, par
value $.01 per share |  | New York Stock Exchange             

Securities Registered Pursuant to Section 12(g) of the Act:
NONE



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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements the past 90 days.

| |     |  |     |  |    |  |        | 
| | --- |  | --- |  | -- |  | ------ | 
| | Yes |  | [X] |  | No |  | [    ] | 

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

As of September 16, 2002, 125,499,389 shares of Class A common stock were
outstanding. The aggregate market value of the Class A common voting stock
held by nonaffiliates of Affiliated Computer Services, Inc. as of such date,
approximated $5,667,702,000.

DOCUMENTS INCORPORATED BY REFERENCE:Proxy Statement for 2002 Annual Meeting -
Part III.



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TABLE OF CONTENTS



|                                              |                                                                                               |  |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                       
|                                              | Item 1. Business                                                                             
|                                              | Item 2. Properties                                                                           
|                                              | Item 3. Legal Proceedings                                                                    
|                                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                      
|                                              | Item 5. Market for Our Common Equity and Related Stockholder Matters                         
|                                              | Item 6. Selected Consolidated Financial Data                                                 
|                                              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                              | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                          
|                                              | Item 8. Financial Statements and Supplementary Data                                          
|                                              | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                                     
|PART IV                                      
|                                              | Item 15. Exhibits, Financial Statements, Financial Schedules and Reports on Form 8-K         
|EX-10.25 Revolving Credit Agreement          
|EX-21.1 Subsidiaries of the Company          
|EX-23.1 Consent of PricewaterhouseCoopers LLP



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##### Table of Contents



AFFILIATED COMPUTER SERVICES, INC.

FORM 10-K
June 30, 2002

|         |                                                                                               |  |    |    | 
|-------- | --------------------------------------------------------------------------------------------- |  | -- | -- | 
|Part I   |                                                                                               |  |    |   
|         | Item 1. Business                                                                              |  |    | 1  | 
|         | Item 2. Properties                                                                            |  |    | 8  | 
|         | Item 3. Legal Proceedings                                                                     |  |    | 9  | 
|         | Item 4. Submission of Matters to a Vote of Security Holders                                   |  |    | 9  | 
|Part II  |                                                                                               |  |    |   
|         | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters             |  |    | 10 | 
|         | Item 6. Selected Consolidated Financial Data                                                  |  |    | 11 | 
|         | Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |    | 12 | 
|         | Item 8. Financial Statements and Supplementary Data                                           |  |    | 25 | 
|         | Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure  |  |    | 56 | 
|Part III |                                                                                               |  |    |   
|         | Item 10. Directors and Executive Officers of the Registrant                                   |  |    | 56 | 
|         | Item 11. Executive Compensation                                                               |  |    | 56 | 
|         | Item 12. Security Ownership of Certain Beneficial Owners and Management                       |  |    | 56 | 
|         | Item 13. Certain Relationships and Related Transactions                                       |  |    | 56 | 
|Part IV  |                                                                                               |  | 56 |   
|         | Item 15. Exhibits, Financial Statements, Financial Statement Schedule and Reports
on Form 8-K |  |    | 56 | 





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PART I




Item 1. Business

General

We are a global, Fortune 1000 company delivering comprehensive business process
outsourcing and information technology outsourcing solutions, as well as system
integration services, to commercial clients, state and local government
clients, and federal government clients. We are based in Dallas, Texas and have
offices primarily in North America, as well as Central America, Europe, Africa,
and the Middle East. Our clients have time-critical, transaction-intensive
business and information processing needs, and we typically service these needs
through long-term contracts. Approximately 90%, 89% and 88% of our revenues for
fiscal years 2002, 2001 and 2000, respectively, were recurring, which are
revenues derived from services that our clients use each year in connection
with their ongoing businesses.

Our services enable businesses to focus on core operations, respond to rapidly
changing technologies and reduce expenses associated with business processes
and information processing. Our business strategy is to expand our client base
and enhance our service offerings through both internal marketing and the
acquisition of complementary companies. Our marketing efforts focus on
developing long-term relationships with clients that choose to outsource
mission critical business processes and information technology requirements.
Our business expansion has been accomplished both from internal growth as well
as through acquisition. Since inception through June 30, 2002, we have
completed several acquisitions, which have resulted in geographic expansion,
growth and diversification of our client base, expansion of services and
products offered, and increased economies of scale. Our revenues have
increased from $534 million in fiscal year 1995 to approximately $3.1 billion
in fiscal year 2002, a compound annual growth rate of 28%. Of this growth,
approximately 42% resulted from internal growth and 58% resulted from growth
through acquisitions.

We serve three primary markets, which include state and local governments,
commercial clients, and the federal government. We are a leading provider of
business process outsourcing and information technology services to state and
local governments. During fiscal year 2002, revenues from our state and local
government segment accounted for approximately $1.24 billion, or 41% of our
revenues. Of this $1.24 billion, approximately 58% is derived from services
provided to local municipalities, approximately 25% is derived from state
healthcare programs, and the remainder is derived from services provided to
states, primarily child support payment processing. We provide
technology-based services with a focus on transaction processing and program
management services such as child support payment processing, electronic toll
collection, welfare to workforce services, and traffic violations processing.
We also design, develop, implement, and operate large-scale health and human
services programs and the information technology solutions that support those
programs.

Our commercial sector accounted for approximately $1.01 billion, or 33% of our
fiscal year 2002 revenues. We provide business process outsourcing, technology
outsourcing, and systems integration services to our commercial sector clients.
These services are provided to a variety of clients nationwide, including
healthcare providers, retailers, wholesale distributors, manufacturers,
utilities, financial institutions, insurance and transportation companies. Our
business process outsourcing services include claims processing, finance and
accounting, loan processing and document processing. Our technology
outsourcing services include mainframe, midrange, desktop, network, and
web-hosting solutions. Our commercial systems integration services include
application development and implementation, applications outsourcing, technical
support and training, as well as network design and installation services.

We also serve the federal government market, which during fiscal year 2002
accounted for approximately $811 million, or 26% of our annual revenues. Our
services in this market are comprised of business process outsourcing services,
which consist primarily of loan processing services and human resources
services, and systems integration services, which include application
development and outsourcing, network implementation and maintenance, desktop
services, technical staff augmentation, and training under long-term contracts.
Approximately 55% of revenues within our federal government business are
derived from civilian agencies with the remaining 45% from Department of
Defense agencies.

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Market Overview

The demand for our services has grown substantially in recent years, and we
believe that this will continue to increase in the future as a result of
strategic, financial and technological factors. These factors include:



| |  |  | the desire of organizations to focus on their core competencies;                                                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the increasing desire by organizations to drive process
improvements and improve the speed of and reduce the cost of execution;                                     
|
| |  |  | the desire by organizations to have a workforce that is able to
expand and contract in relation to their business volumes;                                          
|
| |  |  | the increasing acceptance by organizations to utilize offshore
resources for business process outsourcing;                                                          
|
| |  |  | the increasing complexity of information technology systems and the
need to connect electronically with clients, suppliers, and other
external and internal systems;
|
| |  |  | the increasing requirements for rapid processing of information and
the instantaneous communication of large amounts of data to multiple
locations; and             
|
| |  |  | the desire by organizations to take advantage of the latest
advances in technology without the cost and resource commitment
required to maintain in-house systems.  

Business Strategy

The key components of our business strategy include the following:



| |  |  | Expand Client Base We seek to develop long-term relationships
with new clients by leveraging our subject matter expertise, world-wide
data manufacturing capabilities and infrastructure of information
technology products and services. Our primary focus is to increase our
revenues by obtaining new clients with recurring requirements for
business process and information technology services.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Expand Existing Client Relationships We seek to expand existing
client relationships by increasing the scope and breadth of services we
provide.                                                                                                                                                                                                                                                      
|
| |  |  | Build Recurring Revenues- We seek to enter into long-term
relationships with clients to provide services that meet their ongoing
business requirements while supporting their mission critical business
process or information technology needs.                                                                                                                                                       
|
| |  |  | Provide Flexible Solutions We offer custom-tailored business
process and information technology solutions using a variety of
proprietary and third-party licensed software on multiple hardware and
systems software platforms and domestic and international workforces
that are able to expand and contract in relation to clients business
volumes.                                               
|
| |  |  | Invest in Technology We respond to technological advances and the
rapid changes in the requirements of our clients by committing
substantial amounts of our resources to the operation of multiple
hardware platforms, the customization of products and services that
incorporate new technology on a timely basis and the continuous
training of our personnel.                                     
|
| |  |  | Maximize Economies of Scale- Our strategy is to develop and
maintain a significant client and account/transaction base to create
sufficient economies of scale that enable us to achieve competitive
costs.                                                                                                                                                                                            

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| |  |  | Complete Strategic and Tactical Acquisitions- Our acquisition
strategy is to acquire companies to expand the products and services we
offer to existing clients, to obtain a presence in new, complementary
markets and to expand our geographic presence.                                                                                                                                               
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Attract, Train and Retain Employees We believe that attracting,
training, and retaining high quality employees are essential to our
growth. We seek to hire motivated individuals with strong character
and leadership traits and provide them with ongoing technological and
leadership skills training. We emphasize retaining our employees with
challenging work assignments and incentive programs.

During the last three fiscal years, our revenues by market were as follows (in
thousands):

|                            |                |   |                     |           |      |   |         |           |  |   |           |           | 
|--------------------------- | -------------- | - | ------------------- | --------- | ---- | - | ------- | --------- |  | - | --------- | --------- | 
|                            |                |   | Year ended June 30,
|                            |                |   |                    
|                            |                |   | 2002                |           | 2001 |   | 2000   
|                            |                |   |                     |           |      |   |        
|State and Local Governments |                | $ | 1,242,817           |           |      | $ | 351,199 |           |  | $ | 239,913   |          
|Commercial(1)               |                |   | 1,008,766           |           |      |   | 964,694 |           |  |   | 1,104,758 |          
|Federal Government          |                |   | 811,335             |           |      |   | 747,666 |           |  |   | 617,871   |          
|                            |                |   |                     |           |      |   |         |           |  |   |           |          
|                            | Total Revenues |   | $                   | 3,062,918 |      |   | $       | 2,063,559 |  |   | $         | 1,962,542 | 
|                            |                |   |                     |           |      |   |         |           |  |   |           |          



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|(1) |  | Includes $0, $37.3 million, and $313.3 million of revenues from
divested companies for the fiscal years 2002, 2001 and 2000,
respectively.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------

State and Local Governments

We are a leading provider of business process outsourcing services to state and
local governments. Our services help state and local agencies reduce operating
costs, increase revenue streams and increase the quality of services to
citizens. Approximately 41% of our fiscal 2002 revenues were derived from
contracts with state and local governments and their agencies. State and local
governments may terminate most of these contracts at any time, without cause,
for convenience or lack of funding. Additionally, government contracts are
generally subject to audits and investigations by government agencies. If the
government finds that we improperly charged any costs to a contract, the costs
are not reimbursable or, if already reimbursed, the cost must be refunded to
the government.

Pricing for our services in the state and local market is generally determined
based on the number of transactions processed, human services cases managed or,
in instances where a systems development project is required in our state
healthcare unit, we price our services on a fixed fee basis for the development
work. We currently focus on six primary services and our acquisition of
Lockheed Martin IMS Corporation (IMS) in fiscal year 2002 significantly
expanded our business process outsourcing offerings.

State Healthcare

We design, develop, implement, and operate large-scale health and human
services programs and the information technology solutions that support those
programs. Today, we operate 13 state Medicaid programs and five state Child
Health Insurance Programs that cover approximately 6.5 million recipients,
process over 250 million Medicaid healthcare claims annually and disburse over
$17 billion in provider payments. We also operate 16 state pharmacy benefits
management programs that assist states in controlling prescription drug costs,
pharmacy intervention and surveillance and the processing of drug claims. We
operate 11 state decision support systems that assist states with data
collection, fraud and abuse detection and case management. We also assist
states in bringing their health programs into compliance with the Health
Insurance Portability and Accountability Act (HIPAA).

Children and Family Services

We are a major provider of child support and payment processing with high
volume remittance processing and service center operations that handle 44% of
the nations payment transactions. We also provide locate and

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collection
services to find delinquent parents and collect past due child support and
other payments. Within the
Children and Family Services area we provide electronic benefits transfer,
which is the issuance of food stamps and cash benefits through magnetic stripe
cards with redemption through point of sale device (POS) and automated teller
machines (ATM).

Welfare and Workforce Services

We provide management, operations and systems service offerings to local
Workforce Development Boards and Coalitions, thereby creating a
government-mandated, integrated One-Stop system linking job seekers and job
providers. Through the operation of approximately 100 One-Stop centers across
the country, we use technology innovations and re-engineered service delivery
models to provide job-related service to assist low-income families in securing
and retaining employment and help employers find and retain potential
employees.

Transportation Systems and Services

We focus on three areas within our Transportation Systems and Services:
Electronic Toll Collection, Motor Vehicle Services and Commercial Vehicle
Operations. Within Electronic Toll Collection we offer toll agencies a
complete array of services including the operation of the back-office customer
service center as well as lane installation and integration. We currently
operate the largest electronic toll collection program in the world, E-Z Pass
New York. Within Motor Vehicle Services, we assist states in the processing of
fuel tax and registration revenues. We process more than 25% of state-issued
operating credentials and support the operations of more than 30% of the motor
carriers operating in the United States. Within Commercial Vehicle Operations
we offer a nationwide network that electronically checks safety credentials and
weighs trucks at highway speed, granting participating truckers authorization
to bypass open weigh stations and ports-of-entry without stopping.

Municipal Services

We serve large cities and counties in the United States by focusing on
revenue-generating transactions that involve interfacing with citizens. These
services are focused in two areas: parking management and violations
processing; and photo enforcement. For our violations processing clients, we
provide complete management, technical and operational support throughout the
entire timeline of a violation, from issuance to final disposition. In photo
enforcement, we use cameras to photograph traffic violations and identify the
registered owner of the vehicle so that the citation can be mailed.

Information Technology Outsourcing

We are a leading provider of full-service IT outsourcing services to cities and
counties throughout the United States. We also provide justice information
systems for state and municipal courts, finance and tax systems for local
governments, and application outsourcing services, homeland security, and
e-government solutions for state and local customers.

Commercial

Within the commercial sector, which comprises 33% of our fiscal year 2002
revenues, we provide our clients with business process outsourcing, technology
outsourcing and systems integration services.

Business Process Outsourcing

Business process outsourcing is defined as the delegation of one or more
information technology intensive business processes to an external provider who
owns and manages the selected processes based on measurable performance
metrics. Clients outsource business processes to gain efficiencies, increase
productivity and lower costs. More and more companies are concluding that it is
more efficient to focus on their core competencies and to outsource their
non-core but mission-critical business processes. We developed our business
process outsourcing services to capitalize on a growing trend by business to
outsource entire processes, including the technology requirements of the
business function.

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Pricing for business process outsourcing services is
typically determined on the basis of the number of accounts or transactions
processed.

Our commercial business process outsourcing practice is focused in four major
categories: claims processing, finance and accounting, loan processing, and
document processing. We provide healthcare claims processing for many of the
top healthcare payers in the United States. Within finance and accounting we
provide revenue/invoicing accounting, disbursement processing, expense
reporting, procurement, payroll, cash management, and other services
associated with finance and accounting that are transaction-intensive. We
handle loan processing services such as collections, account reconciliations
and borrower correspondence for third-party student loan programs. We handle
the processing and storage of documents for banks, mortgage companies and other
corporations that desire electronic access and storage of their documents.

We receive client information in all media formats such as over the web, EDI,
fax, voice, paper, microfilm, computer tape, optical disk, or CD ROM.
Information is typically digitized upon receipt and sent through our
proprietary workflow software, which is tailored to our clients process
requirements. Utilizing satellite technology, we have developed expertise in
transmitting data around the world to our international workforce. We have
approximately 8,500 full-time equivalent employees in Mexico; Guatemala; Ghana,
West Africa; Jamaica; the Dominican Republic, and Barcelona, Spain that support
our commercial business process outsourcing services. A majority of our
business process outsourcing workforce is compensated using performance-based
metrics, and as a result, varies with our clients transaction volumes.

During fiscal year 2002, we acquired AFSA Data Corporation (AFSA) from FleetBoston
Financial Corporation. AFSA had been performing loan servicing to the
Department of Educations Direct Student Loan program as our subcontractor
since 1994. In addition, AFSA provides loan servicing to the third-party
student loan market.

Technology Outsourcing

We offer a complete range of technology outsourcing solutions to commercial
businesses desiring to improve the performance of their information technology
organizations. Our technology outsourcing solutions include the delivery of
information processing services on a remote basis from host data centers that
provide processing capacity, network management and desktop support.
Information processing services include mainframe, mid-range, desktop, network,
and web-hosting solutions.

We provide our technology outsourcing solutions through an extensive data
center network, which is comprised of three host data centers and ten remote
data centers. Our data centers and clients are connected via an extensive
telecommunications network. We monitor and maintain local and wide area
networks on a seven-day, 24hour basis and provide shared hub satellite
transmission service as an alternative to multi-drop and point-to-point hard
line telecommunications networks.

Our target market for technology outsourcing services consists of
medium-to-large-sized commercial organizations with time-critical,
transaction-intensive information processing needs. We typically provide our
technology outsourcing services pursuant to multi-year contracts, which are
normally priced on a resource utilization basis. Resources utilized include
processing time, the number of desktops managed, professional services, data
storage and retrieval utilization, and output media utilized.

Systems Integration Services

Our systems integration services include application development and
implementation, applications outsourcing, technical support and training, as
well as network design and installation services. Our systems integration
services include the development of web-based applications and web-enablement
of information technology assets, allowing our clients to conduct business with
their customers and business partners via the Internet. We also provide
systems integration services to clients who are deploying client/server
architectures, advanced networks and outsourcing legacy applications
maintenance. We believe our ability to deliver high-level skill sets and
proven methodologies across a variety of technologies enhances our ability to
help clients and prospects deal with technological change. Due to the

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nature
of the work, we generally offer our systems integration services on a time and
materials basis to a changing client base under short-term contractual
arrangements.

Federal Government

Within the federal government sector, we provide business process outsourcing
and systems integration services. Approximately 26% of our revenues are derived
from contracts and subcontracts with federal government agencies. Our
allowable federal government contract costs and fees are subject to audit by
the Defense Contract Audit Agency (DCAA). These audits may result in
non-reimbursement of some contract costs and fees. To date, we have
experienced no material adjustments as a result of audits by the DCAA. The
DCAA has completed audits of the Companys federal contracts through fiscal
year 1999 for a majority of the federal government contracts.

Business Process Outsourcing

Our federal business process outsourcing services consist primarily of loan
servicing and human resource services for federal agencies. Our loan services
generally include billing, lock-box payment processing, related accounting and
reconciliation, and client service call center and web-site operations. In
addition to the Department of Education contract discussed below, we have
contracts with the Small Business Administration, Housing and Urban
Development, and Ginnie Mae.

Our largest contract for loan services is with the Department of Education, for
which we service student loans under the Department of Educations Direct
Student Loan program administered by its Office of Federal Student Aid (FSA).
Under this contract, we currently provide loan servicing to over 5.7 million
borrowers, or over 16.2 million loans with an aggregate value of $78 billion.
During fiscal year 2002, revenue from this contract was approximately $161
million, or 5% of consolidated revenues. This contract was scheduled to run
through September 30, 2003. In November 2001, the Department extended the
contract term through September 30, 2006, with an option for further extension
through September 30, 2007. This contract extension was to ensure that the
Departments current program and systems modernization initiative remains on
schedule and to minimize cost and disruption to the program. In December 2001,
Sallie Mae challenged the Departments sole-source extension in a protest filed
with the Department. The FSA took the position that the Sallie Mae protest was
without merit and that the contract extension was lawful. In July 2002, the
Departments deciding official sustained the protest, concluding that further
market research was needed to support the sole-source extension of our
contract. However, the deciding official declined to rescind our contract
extension and directed the FSA to analyze its direct loan servicing needs and
procure the services in compliance with law. The deciding officials decision
stated that the Department could make a sole-source award to ACS if legally and
factually justified. We have been advised that the FSA intends to provide the
appropriate support for the contract extension. In any case, we expect that
the FSA will have broad discretion in how it chooses to comply with any further
decisions in this matter and it could, among other things, elect to modify the
contract extension term or conduct a competitive bid process. We believe we
would be positioned very favorably in any competitive bid process as a result
of our strong relationship with the Department. However, there can be no
assurance that the contract extension granted in 2001 will be sustained or that
we would be awarded an extension in any competitive bid process.

Systems Integration Services

We provide applications development, applications outsourcing, network
implementation and maintenance, desktop services, technical staff support, and
training under long-term contracts to the Department of Defense and civilian
agencies, who generally either contract directly with us or through the General
Services Administration for these services. The General Services
Administration performs the procurement function for many civilian and
Department of Defense agencies. Approximately 28% of these services for fiscal
year 2002 were provided pursuant to twelve contracts with the General Services
Administration. We also provide our services directly to a variety of civilian
agencies such as the Departments of Labor, Treasury, Transportation and Energy,
as well as NASA, FAA, the U.S. Postal Service, and the Federal Energy
Regulatory Commission. In addition to the above services, we provide command
and control, communications, computer and intelligence, surveillance, and
reconnaissance (C4 and ISR) systems integration services to a variety of
Department of Defense agencies such as Air Force Materiel Command, the U.S.
Unified Commands, and the National Security Agency. We generally price these
services on a time and materials basis.

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Revenues

Our revenues by service line over the past five years are shown in the
following table (in thousands):

|                             |       |   |                     |           |      |   |         |           |      |   |         |           |  |   |         |           |  |   |         |           | 
|---------------------------- | ----- | - | ------------------- | --------- | ---- | - | ------- | --------- | ---- | - | ------- | --------- |  | - | ------- | --------- |  | - | ------- | --------- | 
|                             |       |   | Year ended June 30,
|                             |       |   |                    
|                             |       |   | 2002                |           | 2001 |   | 2000    |           | 1999 |   | 1998   
|                             |       |   |                     |           |      |   |         |           |      |   |        
|Business process outsourcing |       | $ | 1,942,865           |           |      | $ | 974,244 |           |      | $ | 948,010 |           |  | $ | 696,976 |           |  | $ | 468,175 |          
|Systems integration services |       |   | 678,804             |           |      |   | 648,244 |           |      |   | 604,841 |           |  |   | 570,168 |           |  |   | 390,221 |          
|Technology outsourcing       |       |   | 441,249             |           |      |   | 441,071 |           |      |   | 409,691 |           |  |   | 375,072 |           |  |   | 330,727 |          
|                             |       |   |                     |           |      |   |         |           |      |   |         |           |  |   |         |           |  |   |         |          
|                             | Total |   | $                   | 3,062,918 |      |   | $       | 2,063,559 |      |   | $       | 1,962,542 |  |   | $       | 1,642,216 |  |   | $       | 1,189,123 | 
|                             |       |   |                     |           |      |   |         |           |      |   |         |           |  |   |         |           |  |   |         |          

Our systems integration services include application development and
implementation, applications outsourcing, technical support and training, as
well as network design and installation services. Technology outsourcing
services include the delivery of information processing services on a remote
basis from host data centers that provide customer application processing
capacity and related services and network management.

Client Base

We achieve growth in our client base through internal marketing and
acquisitions of other business process and information technology services
companies. We have a diverse client base. Within the state and local
government segment, our clients include a wide variety of state governments,
municipal governments and agencies for each group. Within the commercial
segment, we serve all of the major vertical markets that spend heavily on
technology including the healthcare, retail, transportation and financial
industries. Within the federal government segment, our clients are divided
between the Department of Defense agencies and the civilian agencies. Clients
may be lost due to merger, business failure, or conversion to a competing
processor or to an in-house system. Our business with federal government
clients is subject to various risks, including the reduction or modification of
contracts due to changing government needs and requirements. Government
contracts, by their terms, generally can be terminated for convenience by the
government, which means that the government may terminate the contract at any
time, without cause, and in certain instances we would be entitled to receive
compensation only for the services provided or stranded asset costs incurred at
the time of termination.

Approximately 90%, 89% and 88% of our revenues for fiscal years 2002, 2001 and
2000, respectively, were recurring. We define recurring revenues as revenues
derived from services that are used by our clients 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.

Our five largest clients accounted for approximately 14%, 18% and 18% of our
fiscal years 2002, 2001 and 2000 revenues, respectively. Our largest client
represents 5% of our consolidated revenues. In addition, over 99% of our
consolidated revenues are derived from domestic clients.

Competition

The markets for our services are intensely competitive and highly fragmented.
The most significant competitive factors are the reliability and quality of
services, technical competence and the price of our services.

We compete successfully in the state and local market by offering a full range
of outsourcing services and by leveraging our technical skills and
infrastructure to achieve economies of scale. Competition in the state and
local market is fragmented by line of services and we are a leading provider in
these areas. Competition for our state healthcare services, municipal services
and IT outsourcing is primarily Electronic Data Systems, Inc. (EDS).
Competition for our welfare and workforce services is primarily Maximus. In
child and family services, our primary competitors are Tier Technologies,
Citibank and Bank One. Competition for our electronic toll collection services
is primarily Transcore. In addition, there are numerous local competitors that
we face in our state and local segment.

We believe we compete successfully in the commercial market by offering
technology outsourcing services that leverage our data center infrastructure,
value added business process outsourcing services which leverage our technical
skills,

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proprietary workflow software, offshore workforce, and economies of
scale. The competition for our commercial technology outsourcing services
include EDS, Computer Sciences Corp. (CSC), IBM, CGI, Perot Systems, Siemens,
and in-house departments performing the function we are seeking to outsource.
We may be required to purchase
technology assets from prospective clients or to provide financial assistance
to prospective clients in order to obtain their contracts. Many of our
competitors have substantially greater resources and thus, may have a greater
ability to obtain client contracts where sizable asset purchases or investments
are required. To maintain competitive prices, we operate with efficient and
low overhead and maintain a significant client base and account/transaction
base to achieve sufficient economies of scale. The competition for our
commercial business process outsourcing services is EDS and Accenture, as well
as clients in-house departments currently performing the function that they
are seeking to outsource. Other niche competitors for commercial business
process outsourcing services include Exult, Sourcecorp, Inc., and Sallie Mae.

In the federal government market, we actively compete with small specialized
firms as well as with large competitors with a wider range of systems
integration services. We believe that the key competitive factors in obtaining
and retaining clients include the ability to understand project requirements,
deliver appropriate skill sets in a timely manner and price services
effectively. We must also compete for qualified personnel through competitive
wages and by maintaining a consistent demand for the skills recruited. Our
competition in the federal government market includes EDS, CSC, Science
Applications International Corporation, Lockheed Martin, and numerous other
government contractors.

In the future, competition could emerge from large computer hardware providers
as they shift their business strategy from hardware to both services and
hardware. Competition could also emerge from European service providers
seeking to expand into North America, and from large consulting companies
seeking operations outsourcing opportunities. We are also beginning to see the
convergence of technology outsourcing and business process outsourcing. We
believe that vendors who have the infrastructure and capabilities to provide
both services will benefit the greatest from this emerging trend.

Sales and Marketing

We market our services through subject matter experts and field sales forces
located throughout the United States. In order to enhance our sales and
marketing efforts, we seek to hire sales representatives who have significant
technical and subject matter expertise in the industries to which they will be
marketing. Many of our existing subject matter experts have served in the
industries in which they are servicing. Our sales forces are focused on
specific service offerings or vertical markets, allowing our representatives to
keep abreast of technology and industry developments.

Employees

We believe that our success depends on our continuing ability to attract and
retain skilled technical, marketing and management personnel. As of June 30,
2002, we had approximately 36,200 full-time equivalent employees, including
approximately 27,600 employed domestically, with the balance employed in our
international operations. Of the domestic employees, approximately 300 are
represented by a union. Approximately 1,700 of our international full-time
equivalent employees are represented by unions, primarily in Mexico. We have
had no work stoppages or strikes by our employees. Management considers its
relations with employees and union officials to be good.

As of June 30, 2002, approximately 19,700 full-time equivalent employees
provide business process, technology outsourcing and systems integration
services to our commercial clients, approximately 10,700 full-time equivalent
employees provide business process outsourcing services to our state and local
government clients and approximately 5,800 full-time equivalent employees
provide business process outsourcing and systems integration services to our
federal government clients. Approximately 1,900 of our employees have federal
government security clearances.




Item 2. Properties

As of June 30, 2002, we have approximately 379 locations in the United States
and 17 locations in nine other countries. Approximately 1.2 million square
feet is owned and approximately 4.4 million square feet is leased. In addition,
our employees are in numerous client locations where we neither own nor lease
the occupied space. The leases expire from calendar years 2002 to 2018 and we
do not anticipate any significant difficulty in obtaining lease renewals or
alternate

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space. Our executive offices are located in Dallas, Texas at a
company-owned facility of approximately 630,000 square feet, which also houses
a host data center and other operations. We believe that our current facilities
are suitable and adequate for our business.




Item 3. Legal Proceedings

On December 16, 1998, a state district court in Houston, Texas entered final
judgment against us in a lawsuit brought by 21 former employees of Gibraltar
Savings Association and/or First Texas Savings Association (collectively,
GSA/FTSA). The GSA/FTSA employees alleged that they were entitled to the
value of 803,082 shares of our stock (adjusted for February 2002 stock split)
pursuant to options issued to the GSA/FTSA employees in 1988 in connection with
a former technology outsourcing services agreement between GSA/FTSA and us.
The judgment against us was for approximately $17 million, which includes
attorneys fees and pre-judgment interest, but excludes additional attorneys
fees of approximately $0.9 million and post-judgment interest at the
statutorily mandated rate of 10% per annum, which could be awarded in the event
the plaintiffs are successful upon appeal and final judgment. The judgment was
appealed by the plaintiffs and us.

On August 29, 2002, the Fourteenth Court of Appeals, Houston, Texas, reversed
the trial courts judgment and remanded the case to the trial court for further
proceedings. However, the court of appeals affirmed the trial court judgment
in part as to one of the plaintiffs. The court of appeals also held that the
trial court did not err in dismissing certain of our affirmative defenses at a
pretrial conference. We intend to file a motion for rehearing with the court of
appeals in September 2002, and, if necessary, to file an appeal with the Texas
Supreme Court. We expect the plaintiffs to file such motions and appeals as
well. We continue to believe that we have a meritorious defense to all or a
substantial portion of the plaintiffs claims, and accordingly, have not
accrued any amount on our balance sheet related to the lawsuit. We would be
subject to a material charge if the Texas Supreme Court upon appeal were to
reverse the decision of the court of appeals and affirm the trial court
judgment.




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

During the fiscal fourth quarter covered by this report, no matter was
submitted to a vote of our security holders.

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PART II




Item 5. Market for Our Common Equity and Related Stockholder Matters

Our Class A common stock is traded on the New York Stock Exchange (NYSE)
under the symbol ACS. The following table sets forth the high and low sales
prices of our Class A common stock for the last two fiscal years as reported on
NYSE. All share and per share information is presented giving effect to the
two-for-one stock split of our Class A and Class B common shares that occurred
February 22, 2002.

|                                |  |      |       |     |  |   |       | 
|------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|Fiscal year ended June 30, 2002 |  | High |       | Low
|                                |  |      |       |    
|First Quarter                   |  | $    | 43.70 |     |  | $ | 35.10 | 
|Second Quarter                  |  |      | 53.62 |     |  |   | 39.25 | 
|Third Quarter                   |  |      | 57.05 |     |  |   | 43.75 | 
|Fourth Quarter                  |  |      | 56.65 |     |  |   | 44.30 | 

|                                |  |      |       |     |  |   |       | 
|------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|Fiscal year ended June 30, 2001 |  | High |       | Low
|                                |  |      |       |    
|First Quarter                   |  | $    | 25.66 |     |  | $ | 16.31 | 
|Second Quarter                  |  |      | 31.31 |     |  |   | 23.25 | 
|Third Quarter                   |  |      | 34.30 |     |  |   | 26.81 | 
|Fourth Quarter                  |  |      | 38.84 |     |  |   | 29.75 | 

On September 16, 2002, the last reported sales price of our Class A common
stock as reported on the New York Stock Exchange was $46.22 per share.

Except for the cash dividends paid by ACS Government Solutions Group, Inc.
prior to its becoming part of our company by a December 1997 merger, we have
not paid any cash dividends to date on our common stock. We intend to continue
to retain earnings for use in the operation of our business and, therefore, do
not anticipate paying any cash dividends in the foreseeable future. Under the
terms of our unsecured revolving credit agreement we are prohibited from paying
cash dividends in any fiscal year in a total amount that would exceed 50% of
our net income for the preceding fiscal year. Any future determination to pay
dividends will be at the discretion of our Board of Directors and will be
dependent upon our financial condition, results of operations, contractual
restrictions, capital requirements, business prospects and such other factors
as the Board of Directors deems relevant.

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Item 6. Selected Consolidated Financial Data

The following selected consolidated financial data are qualified by reference
to and should be read in conjunction with our Consolidated Financial Statements
and Notes thereto and Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in this document. All
share and per share information is presented giving effect to the two-for-one
stock split of our Class A and Class B common shares that occurred February 22,
2002 (in thousands, except per share amounts).

|                                                      |  |                                       |           |      |  |      |           |      |  |      |           |     |  |   |           |  |  |   |           |    
|----------------------------------------------------- |  | ------------------------------------- | --------- | ---- |  | ---- | --------- | ---- |  | ---- | --------- | --- |  | - | --------- |  |  | - | --------- | ---
|                                                      |  | As of and for the year ended June 30,
|                                                      |  |                                      
|                                                      |  | 2002                                  |           | 2001 |  | 2000 |           | 1999 |  | 1998
|                                                      |  |                                       |           |      |  |      |           |      |  |     
|Results of Operations Data:                           |  |                                       |           |      |  |      |           |      |  |      |           |     |  |   |           |  |  |   |           |    
|Revenues                                              |  | $                                     | 3,062,918 |      |  | $    | 2,063,559 |      |  | $    | 1,962,542 |     |  | $ | 1,642,216 |  |  | $ | 1,189,123 |    
|Net income(4)                                         |  | $                                     | 229,596   |      |  | $    | 134,292   |      |  | $    | 109,312   | (1) |  | $ | 86,230    |  |  | $ | 54,422    | (3)
|Earnings per common share - basic                     |  | $                                     | 1.94      |      |  | $    | 1.35      |      |  | $    | 1.11      | (1) |  | $ | .88       |  |  | $ | .57       | (3)
|Earnings per common share -
assuming dilution         |  | $                                     | 1.76      |      |  | $    | 1.23      |      |  | $    | 1.03      | (1) |  | $ | .83       |  |  | $ | .56       | (3)
|Weighted average shares outstanding -
basic           |  |                                       | 118,646   |      |  |      | 99,758    |      |  |      | 98,487    |     |  |   | 97,678    |  |  |   | 95,198    |    
|Weighted average shares outstanding
assuming dilution |  |                                       | 137,464   |      |  |      | 116,456   |      |  |      | 111,613   |     |  |   | 111,336   |  |  |   | 100,974   |    
|Balance Sheet Data:                                   |  |                                       |           |      |  |      |           |      |  |      |           |     |  |   |           |  |  |   |           |    
|Working capital                                       |  | $                                     | 388,576   |      |  | $    | 528,563   |      |  | $    | 413,632   | (2) |  | $ | 194,226   |  |  | $ | 198,118   |    
|Total assets                                          |  | $                                     | 3,403,567 |      |  | $    | 1,891,687 |      |  | $    | 1,656,446 |     |  | $ | 1,223,600 |  |  | $ | 949,798   |    
|Total long-term debt
(less current portion)           |  | $                                     | 708,233   |      |  | $    | 649,313   |      |  | $    | 525,619   |     |  | $ | 349,106   |  |  | $ | 234,848   |    
|Stockholders equity                                  |  | $                                     | 2,095,420 |      |  | $    | 885,515   |      |  | $    | 711,377   |     |  | $ | 607,421   |  |  | $ | 503,670   |    



---

|(1) |  | Net income for fiscal year 2000 includes $1.1 million, or $.01 per
share, of net non-operating gains resulting from divestiture and
restructuring activities.                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Working capital at June 30, 2000 included $180.3 million of
receivables from the divestiture of business units prior to June 30,
2000, and $43.4 million of net assets held-for-sale from business units
to be divested subsequent to June 30, 2000.                                                                                           
|   
|(3) |  | Net income for fiscal year 1998 included $13.0 million ($8.9
million net of tax), or $.09 per basic and diluted share, of merger
costs we incurred in connection with the December 1997 Government
Solutions Group merger.                                                                                                                     
|   
|(4) |  | We adopted Statement of Financial Accounting Standards No. 142
Goodwill and Other Intangible Assets (SFAS 142) effective July 1,
2001. Please refer to Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of the
impact of the adoption of SFAS 142 on our fiscal 2002 results.

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Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations

Forward-looking Statements

All statements in this Managements Discussion and Analysis of Financial
Condition and Results of Operations that are not based on historical fact are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and the provisions of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended (which Sections were adopted as part of Private
Securities Litigation Reform Act of 1995). While management has based any
forward-looking statements contained herein on its current expectations, the
information on which such expectations were based may change. These
forward-looking statements rely on a number of assumptions concerning future
events and are subject to a number of risks, uncertainties, and other factors,
many of which are outside of our control, that could cause actual results to
materially differ from such statements. Such risks, uncertainties, and other
factors include, but are not necessarily limited to, those set forth under the
caption Risks Related to our Business. In addition, we operate in a highly
and rapidly changing environment, and new risks may arise. Accordingly,
investors should not place any reliance on forward-looking statements as a
prediction of actual results. We disclaim any intention to, and undertake no
obligation to, update or revise any forward-looking statement.

General

We derive our revenues from delivering comprehensive business process
outsourcing and information technology outsourcing solutions as well as system
integration services to commercial, state and local, and federal government
clients. A substantial portion of our revenues is derived from recurring
monthly charges to our customers under service contracts with initial terms
that vary from one to ten years. For the fiscal year ended June 30, 2002,
approximately 90% of our revenues were recurring. We define recurring revenues
as revenues derived from services that are used by our clients 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. Since the inception
of our company, we have purchased several information technology services and
business process outsourcing companies, resulting in geographic expansion,
growth and diversification of our client base, expansion of services offered,
and increased economies of scale. Approximately 58% of the increase in our
revenues since fiscal year 1995 is attributable to these acquisitions.

Significant Developments  Fiscal Year 2002

During fiscal 2002, we signed significant new contracts with new clients and
incremental business with existing clients representing $554 million of annual
recurring new revenue. We acquired eight companies in fiscal year 2002, two of
which serve our state and local segment, four of which serve our commercial
segment, one of which serves our federal segment, and AFSA, which serves all
three segments. All share and per share information is presented giving effect
to the two-for-one stock split of our Class A and Class B common shares that
occurred February 22, 2002.

In August 2001, we acquired IMS, now known as ACS State and Local Solutions, a
wholly-owned subsidiary of Lockheed Martin Corporation for $825 million plus
transaction costs. ACS State and Local Solutions, with its principal offices
located in Washington, D.C. and approximately 4,800 employees primarily
throughout the United States, provides services to state and local government
agencies in child support enforcement, welfare and workforce services, child
care management, electronic toll collection, and other intelligent
transportation services involving the trucking industry, photo enforcement of
red-light and speeding violations, parking management, and information
technology outsourcing. ACS State and Local Solutions operating results are
included in our financial statements from the effective date of the
acquisition, August 1, 2001.

In August 2001, we acquired the business process outsourcing services unit of
National Processing Company (NPC). NPC provides healthcare claims
processing, credit card application processing, and airline lift ticket
processing. As part of the transaction, we acquired all of NPCs offshore
operations in Jamaica, the Dominican Republic, Barbados and a majority of NPCs
Mexican operations. The transaction value was $43 million plus

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related transaction costs. NPCs operating results are included in our
financial statements from the effective date of the acquisition, August 1,
2001.

On October 10, 2001, we completed our offering of 18.4 million shares of our
Class A common stock (adjusted for stock split). The shares were issued at
$40.50 per share yielding proceeds of $714.3 million (net of underwriters fees
and other costs), which were used to repay the $550 million 18-month interim
credit facility incurred to fund the IMS acquisition and a portion of the
amount outstanding under our revolving credit facility.

In December 2001, we received an extension of our contract with the Department
of Education for its Direct Student Loan program, our largest contract, through
September 2006, with an option for extension through September 2007. This
extension has been protested by Sallie Mae, and their protest was upheld
although our contract extension was not rescinded. (See Item 1. Business.
Federal Government. Business Process Outsourcing for further discussion of this
contract.)

In February 2002, we completed a two-for-one stock split of our outstanding
Class A common stock and Class B common stock implemented in the form of a 100%
stock dividend (Stock Split). Each holder of record of our Class A common
stock and Class B common stock as of the close of business on February 15, 2002
received an additional share of such stock held by them at that time.

On March 15, 2002, we completed the redemption of our 4% Convertible
Subordinated Notes due March 15, 2005 (the 4% Notes). Holders of all of the
outstanding 4% Notes converted their 4% Notes to shares of our Class A common
stock in accordance with Article XII of the Indenture dated as of March 20,
1998 between ACS and U.S. Trust Company of Texas, N.A., as trustee prior to the
March 15, 2002 redemption date. As a result of such conversions, approximately
10.8 million shares of our Class A common stock were issued to such holders.

In the third quarter of fiscal 2002, we recorded a $7.4 million write-down in
other non-operating expense, associated with a write-down of a cost-basis
investment to its estimated realizable value. Included in tax expense in the
third quarter of fiscal 2002 is a one-time tax benefit of approximately $4.3
million resulting primarily from recently enacted federal income tax rules that
provide for a larger tax deduction associated with our June 2000 divestitures
and deferred tax adjustments to reflect realization of tax deductions for which
their probability is no longer uncertain.

In May 2002, we acquired the finance and accounting business process
outsourcing unit of Andersen Worldwide (Andersen). Included in this
acquisition are contracts with General Motors (GM) and the University of
Phoenix (the University). Under a new 10-year agreement with GM, we will
provide transactional accounting services such as payroll processing,
disbursement processing, dealer accounting, accounts receivable processing,
lease and subsidiary accounting, and expense reporting in the United States and
Europe. Under the arrangement with the University, we will provide student
financial aid business process outsourcing services to the University including
federal eligibility determinations, loan and grant processing, and disbursement
of student aid as well as other support services related to student financial
aid processing. The transaction was valued at approximately $65 million plus
related transaction costs. Andersens operating results are included in our
financial statements from the effective date of the acquisition, May 1, 2002
for the domestic operations, and June 1, 2002 for the foreign operations.

In June 2002, we acquired AFSA, a subsidiary of FleetBoston Financial
Corporation, for approximately $410 million plus related transaction costs.
AFSA is the nations largest educational services company, servicing a student
loan portfolio of 8.1 million borrowers with outstanding loans of approximately
$85 billion. Additionally, AFSA is a leading business process outsourcer for
federal, state, and local governments for a variety of health and human
services programs, including Medicare, Medicaid, childrens health insurance
programs (CHIP), and welfare-to-workforce services. AFSAs operating results
are included in our financial statements from the effective date of the
acquisition, June 1, 2002.

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Significant Developments  Fiscal Year 2001

During fiscal year 2001, we signed new contracts with new clients and
incremental business with existing clients totaling $345 million of annual
recurring new revenue. We also acquired five companies, three of which serve
our state and local government segment and two of which serve our commercial
segment.

During the first quarter of fiscal year 2001, we recorded a $12.8 million gain
in other non-operating income related to the sale of a non-strategic minority
investment in ACS Merchant Services, Inc. Also during the quarter, we recorded
a $10.4 million charge in connection with the termination of certain hardware
leases and disaster recovery contracts (reflected in rent, lease and
maintenance expense) and a $2.1 million charge for non-recurring litigation
costs and the write-down of property held-for-sale (reflected in other
operating expense).

In the third quarter of fiscal year 2001, we sold a new issue of $317 million
of 3.5% Convertible Subordinated Notes due February 15, 2006 (the 3.5%
Notes). The 3.5% Notes are convertible at any time prior to the maturity date,
unless redeemed or repurchased, into our Class A common stock at a conversion
rate of 23.0234 shares of Class A common stock for each $1,000 principal amount
of 3.5% Notes (equivalent to a conversion price of $43.44 per share of Class A
common stock), subject to adjustments in certain events. The 3.5% Notes may be
redeemed at our option on or after February 18, 2004, in whole or in part, at
the redemption prices set forth in the 3.5% Notes.

Significant Developments  Fiscal Year 2000

During fiscal year 2000, we signed new contracts with new clients and
incremental business with existing clients of $232 million of annual recurring
revenue. During fiscal year 2000, we acquired three companies, two serving our
commercial segment and one serving the federal government segment. All of
these acquisition transactions expanded our existing market expertise.

In the second quarter of fiscal 2000, we recorded a $3.0 million pretax charge
in connection with the consolidation of certain business process outsourcing
operations. These expenses include approximately $2.6 million related to
duplicate software and production facilities (reflected in rent, lease and
maintenance expense), $0.2 million of unamortized leasehold improvements and
write-offs of excess equipment (reflected in depreciation and amortization
expense), and $0.2 million for severance payments for reductions in staff
(reflected in wages and benefits expense).

In May 2000, we entered into a formal plan to divest certain non-strategic
units consisting primarily of our ATM processing business and our commercial
staffing business. These business units, which were no longer considered
strategic to our long-term goal of providing information technology and
business process outsourcing services, along with other smaller divested
business units, accounted for approximately 15% of our fiscal year 2000
revenues. In June 2000, we sold the ATM processing business for cash proceeds
of approximately $179.8 million. The proceeds from this transaction were
received in July 2000. In June 2000, we also completed the sale of two small
professional services and systems integration businesses resulting in cash
proceeds of approximately $0.8 million. As a result of these divestiture
transactions, we recorded a net pretax gain of $85.8 million during the fourth
quarter of fiscal year 2000. The cash proceeds from these divestitures were
used to pay down amounts outstanding under our existing credit facility.

During the fourth quarter of fiscal year 2000, we initiated a formal plan to
divest the commercial staffing business and two other smaller business units.
As a result, we recorded a $43.9 million pretax impairment charge for goodwill
associated with the commercial staffing business, and the net assets were
reclassified into the balance sheet caption Net Assets Held for Sale.
Subsequently, the sale of these units was completed in the first quarter of
fiscal year 2001 with proceeds of approximately $47.0 million. We recorded
other non-recurring pretax charges of approximately $23.7 million related to
the impairment of certain other intangibles, primarily customer relationship,
charges associated with loss contracts, a contractual dispute with a client,
non-recurring litigation, and severance. At June 30, 2000, we recorded a $4.4
million pretax impairment charge for software and other intangibles associated
with two other smaller businesses.

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Results of Operations

The following table sets forth certain items from our Consolidated Statements
of Income expressed as a percentage of revenues and includes the non-recurring
charges mentioned previously in Significant Developments:

|                                |                               |  |                        |      |      |  |       |      |  |  |       |      | 
|------------------------------- | ----------------------------- |  | ---------------------- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- | 
|                                |                               |  | Percentage of Revenues
|                                |                               |  | Year ended June 30,   
|                                |                               |  |                       
|                                |                               |  | 2002                   |      | 2001 |  | 2000 
|                                |                               |  |                        |      |      |  |      
|Revenues                        |                               |  | 100.0                  | %    |      |  | 100.0 | %    |  |  | 100.0 | %   
|                                |                               |  |                        |      |      |  |       |      |  |  |       |     
|Operating expenses:             |                               |  |                        |      |      |  |       |      |  |  |       |     
|                                | Wages and benefits            |  |                        | 44.1 |      |  |       | 43.8 |  |  |       | 43.5 | 
|                                | Services and supplies         |  |                        | 29.0 |      |  |       | 29.0 |  |  |       | 31.0 | 
|                                | Rent, lease and maintenance   |  |                        | 9.1  |      |  |       | 10.8 |  |  |       | 10.5 | 
|                                | Depreciation and amortization |  |                        | 3.6  |      |  |       | 4.5  |  |  |       | 4.3  | 
|                                | Impairment charges            |  |                        |     |      |  |       |     |  |  |       | 2.9  | 
|                                | Other operating expenses      |  |                        | 1.1  |      |  |       | 0.9  |  |  |       | 1.5  | 
|                                |                               |  |                        |      |      |  |       |      |  |  |       |     
|Total operating expenses        |                               |  | 86.9                   |      |      |  | 89.0  |      |  |  | 93.7  |     
|                                |                               |  |                        |      |      |  |       |      |  |  |       |     
|Operating income                |                               |  | 13.1                   |      |      |  | 11.0  |      |  |  | 6.3   |     
|                                |                               |  |                       
|Interest expense                |                               |  | 1.0                    |      |      |  | 1.2   |      |  |  | 1.2   |     
|Net gain from divestitures      |                               |  |                       |      |      |  |      |      |  |  | (4.4  | )   
|Other non-operating income, net |                               |  | 0.3                    |      |      |  | (1.0  | )    |  |  | (0.5  | )   
|                                |                               |  |                        |      |      |  |       |      |  |  |       |     
|Pretax profit                   |                               |  | 11.8                   |      |      |  | 10.8  |      |  |  | 10.0  |     
|Income tax expense              |                               |  | 4.3                    |      |      |  | 4.2   |      |  |  | 4.4   |     
|                                |                               |  |                        |      |      |  |       |      |  |  |       |     
|Net income                      |                               |  | 7.5                    | %    |      |  | 6.6   | %    |  |  | 5.6   | %   
|                                |                               |  |                        |      |      |  |       |      |  |  |       |     

Comparison of Fiscal 2002 to Fiscal 2001

Revenues
Revenues increased $1.0 billion, or 48%, to $3.1 billion from $2.1 billion in
fiscal years 2002 and 2001, respectively. Internal growth for fiscal year 2002
was 14%, and growth from acquisitions was 34%. Revenues in our state and local
government segment increased $891.6 million to $1.2 billion in fiscal 2002 from
$351.2 million in fiscal 2001. Internal revenue growth was 64% due primarily
to increased revenue in new and existing contracts in Georgia, Mississippi, and
Florida, and increased revenues from transportation systems and services and
welfare and workforce services contracts. Acquisition growth is primarily due
to the IMS acquisition in early fiscal 2002 (see Significant Developments 
Fiscal 2002). Excluding revenues from units whose divestitures were completed
in fiscal year 2001 of $37.3 million (see Significant Developments  Fiscal
2001), revenues in our commercial segment increased $81.4 million, or
approximately 9% with 8% from acquisitions and 1% from internal growth.
Acquisition growth in our commercial segment was related to the AFSA, Andersen
and NPC acquisitions in fiscal 2002 (see Significant Developments  2002).
Revenues in our federal government segment increased $63.7 million, or
approximately 9%, primarily due to internal growth related to increases in new
and existing defense and desktop services contracts as well as the Department
of Education.

Operating expenses
As a percentage of revenue, operating expenses decreased 0.5% to 86.9% in
fiscal year 2002 from 87.4% in fiscal year 2001. Operating expenses increased
$822.5 million to $2.7 billion in fiscal year 2002. Excluding the effect of
non-recurring charges of $12.5 million (see Significant Developments  Fiscal
2001) and the application of SFAS 142 (see New Accounting Standards), operating
expenses increased $859.5 million, or 48%, to $2.7 billion in fiscal 2002.

Wages and benefits increased $445.4 million, or 49%. As a percentage of
revenues, wages and benefits increased 0.3% to 44.1% in fiscal year 2002 from
43.8% in fiscal year 2001 due to increased business process outsourcing
services in our revenue mix. BPO services have a higher component of wages and
benefits than traditional outsourcing. BPO services accounted for
approximately 63% of our fiscal year 2002 revenues.

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Services and supplies increased $289.7 million, or 48%, and remained constant
as a percentage of revenue.

Rent, lease and maintenance expense increased $54.9 million to $278.6 million
in fiscal 2002. Excluding the effect of non-recurring charges (see Significant
Developments  Fiscal 2001), rent, lease and maintenance increased $65.3
million. As a percentage of revenue, rent, lease and maintenance decreased
1.2% due to increased revenue from BPO services in our revenue mix which has a
lower component of rent, lease and maintenance.

After adjusting for the application of SFAS 142, depreciation and amortization
increased $41.3 million or 0.2% as a percentage of revenue due to increased
amortization of intangible assets. Goodwill amortization was $24.5 million, or
1.2% of revenue, in 2001. No goodwill amortization was recorded in fiscal year
2002 (see New Accounting Standards).

Other operating expenses increased $15.6 million to $34.6 million in fiscal
2002. Excluding the effect of non-recurring charges (see Significant
Developments  Fiscal 2001), other operating expenses increased $17.7 million,
or 105%. As a percentage of revenue other operating expenses increased 0.3%
due to increased marketing efforts and legal expenses in fiscal year 2002.

Operating Margins
Excluding the effect of non-recurring charges of $12.5 million (see Significant
Developments  Fiscal 2001) and the application of SFAS 142, our operating
margins increased 0.5% to 13.1% in fiscal year 2002 due to the items discussed
above.

Interest Expense
Interest expense increased $6.9 million due primarily to the full year impact
of our new issue 3.5% Notes offset by a decrease in interest expense on the 4%
Notes that were converted in the third quarter of fiscal year 2002 (see
Significant Developments  Fiscal 2002).

Other non-operating (income) expense
Other non-operating expense in fiscal 2002 includes a $7.4 million write-down
of a cost basis investment, a $2.3 million loss on the sale of business unit,
and a $1.0 million loss on a long-term investment we received in the December
1998 acquisition of BRC Holdings, Inc. Other non-operating income in fiscal
2001 consisted of a non-recurring gain on sale of an investment (see
Significant Developments  Fiscal 2001) and a gain on a note receivable.
Excluding these items, other non-operating income decreased $5.1 million due to
a decrease in interest income as a result of the use of excess cash held at
June 30, 2001 to fund in part the IMS acquisition in early fiscal 2002.

Tax Expense
Tax expense in fiscal year 2002 includes a one-time tax benefit of $4.3 million
(see Significant Developments  Fiscal 2002). Excluding this benefit, our
effective tax rate of approximately 37.5% exceeded the federal statutory rate
of 35% due primarily to the net effect of state income taxes. Our effective
tax rate decreased 1.75% from 39.25% in fiscal 2001 due to the application of
SFAS 142.

Comparison of Fiscal 2001 to Fiscal 2000

Revenues
Revenues for fiscal year 2001 were $2.1 billion, compared to approximately $2.0
billion in fiscal year 2000. Excluding revenues from divested units of $37.3
million and $313.3 million in fiscal years 2001 and 2000, respectively,
revenues increased $377.1 million, or 23%, from $1.65 billion to $2.03 billion.
Internal growth for fiscal year 2001 was 14%, and the remainder was related to
acquisitions. Revenues in our commercial segment, excluding the fiscal year
2000 divestitures, rose 17%, or $135.9 million, primarily due to growth from
new and existing business process outsourcing and technology outsourcing
contracts. Revenue in our state and local government segment increased $111.3
million, or 46%, primarily due to new contracts in state Medicaid and welfare
benefit program management. Revenues from our federal segment increased $129.8
million, or 21%, due to the full year impact of the acquisition of
Intellisource in the fourth quarter of fiscal year 2000 and growth in our
Department of Education contract.

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Operating Expenses
Total operating expenses for fiscal years 2001 and 2000 were $1.8 billion.
Excluding the non-recurring charges of $12.5 million (see Significant
Developments  Fiscal Year 2001) and $75.0 million (see Significant
Developments  Fiscal Year 2000) in fiscal years 2001 and 2000, respectively,
total operating expenses increased $63.2 million, or 3.6%, to $1.8 billion due
to our growth in new business.

As a percentage of revenues, wages and benefits increased from 43.5% to 43.8%
primarily as a result of the fiscal year 2000 divestitures, which had a smaller
component of wages and benefits. In addition, the growth of our business
process outsourcing services, which has a higher labor component, increased
this percentage.

Services and supplies decreased as a percentage of revenues from 31.0% to 29.0%
as a result of the divestiture of the ATM processing business, which had a
large component of interchange fees paid to ATM distributors.

Rent, lease and maintenance expense was $224 million in fiscal year 2001
compared to $206 million in fiscal year 2000. However, excluding the
non-recurring items in fiscal year 2001, rent, lease and maintenance remained
relatively constant as a percentage of revenues at 10.3% and 10.5% in fiscal
years 2001 and 2000, respectively.

Other operating expenses decreased to $19.1 million in fiscal year 2001
compared to $28.9 million in fiscal year 2000. However, excluding non-recurring
items, other operating expenses decreased from 1.1% to 0.8% as a percentage of
revenues due to legal and other expenses recorded in June 2000.

Operating Margins
Excluding the effect of non-recurring charges (see Significant Developments 
Fiscal Year 2001 and 2000), our operating margins increased to 11.5% in fiscal
year 2001 from 10.1% in fiscal year 2000 due to the divestiture of the ATM
processing business, which had lower operating margins than technology
outsourcing and business process outsourcing services. Goodwill amortization
expense for fiscal years 2001 and 2000 is included in the calculation of
operating expense and operating margins.

Interest Expense
Interest expense remained constant at approximately $24 million, or 1.2% of
revenue, in fiscal years 2001 and 2000.

Other Non-operating (Income) Expense, net
In fiscal year 2001, other non-operating income, net includes a non-recurring
gain of $12.8 million related to the sale of an investment (see Significant
Developments  Fiscal Year 2001). Net gain from divestitures represents an
$85.8 million gain in fiscal year 2000 as a result of the divestiture program
completed in early fiscal year 2001 (see Significant Developments  Fiscal Year
2000).

Tax Expense
Our effective tax rate of approximately 39.25% in fiscal year 2001 exceeded 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.

Liquidity and Capital Resources

We finance our business through cash flows from operations and the issuance of
debt and equity. One of our primary financial goals is to maintain an adequate
level of liquidity through active management of assets and liabilities.

During the twelve months ended June 30, 2002, we generated approximately $372
million in cash flow from operations versus the fiscal year 2001 amount of
approximately $142 million. Free cash flow, defined as cash provided (used) by
operating activities less property, equipment and purchased software additions,
was approximately $228 million for fiscal year 2002 versus approximately $43
million for fiscal year 2001. Fiscal year 2001 cash flow from operations was
adversely impacted by the payments of approximately $50 million in income taxes
related to the net gain from our divestiture activity in June 2000 and
approximately $10 million of non-recurring lease termination charges. After
adjusting for these items, cash flow from operations and free cash flow

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increased 84% and 121%, respectively. During fiscal year 2002 versus fiscal
year 2001, our operating cash flow was enhanced by current year net income that
increased from $134 million in fiscal year 2001 to $230 million in fiscal year
2002, a 71% increase.

During the fiscal year 2002, we used $1.6 billion in investing activities.
Investing activities included the purchase of property, equipment and software,
net, which increased from approximately $99 million in fiscal year 2001 to
approximately $144 million in fiscal year 2002. Our capital expenditures
remain at less than 5% of total revenues, which we believe is adequate to
support our growing business and to meet contractual requirements. We expended
over $1.4 billion in cash for acquisitions, primarily for IMS and NPC in August
2001 (approximately $825 million and $43 million, respectively, plus related
transaction costs), Andersen in May 2002 (approximately $65 million plus
related transaction costs), and AFSA in June 2002 (approximately $410 million
plus related transaction costs).

During fiscal year 2002, approximately $1.0 billion was provided by financing
activities. We financed the IMS acquisition through a combination of a $550
million 18-month interim credit facility, available cash on hand, and
borrowings under our existing credit facility. This interim credit facility
was repaid in October 2001 with proceeds from an equity offering of 18.4
million shares of our Class A common stock at $40.50 per share, that raised
$714.3 million, net of transaction costs. We used borrowings under our
existing credit facility to purchase NPC and existing cash on hand to purchase
Andersen. We secured interim financing in the amount of $375 million for the
AFSA acquisition that was supplemented by our revolving credit facility and
cash on hand. In September 2002, we entered into a new three and one-half year
$875 million credit facility on terms generally similar to our existing credit
facility, which was partially used to refinance the AFSA interim facility.

On March 15, 2002, all the outstanding 4% Notes ($229.9 million) were converted
to Class A common stock. As the result of such conversions, 10.8 million
shares of our Class A common stock were issued to shareholders. This relieved
the Company of approximately $2.7 million in interest expense for fiscal year
2002 related to the 4% Notes. In the third quarter of fiscal year 2001, we
completed the issuance of $317 million of our 3.5% Notes, which allowed us to
repay borrowings from our existing credit facility and to fund current and
future acquisitions.

At June 30, 2002, we had $266 million of availability under our $450 million
revolving credit facility, after giving effect to outstanding letters of credit
of $169 million that secure certain contractual performance and other
obligations. These letters of credit reduce the availability of our revolving
credit facility. We had $15 million outstanding on our credit facility, which
is reflected in long-term debt.

At June 30, 2002, we had cash and cash equivalents totaling $33.8 million
compared to $242.5 million at June 30, 2001. The decrease is primarily due to
the use of cash for the IMS acquisition and other acquisitions. Included in
the cash balances at June 30, 2002 and 2001, are $5.4 million and $4.9 million,
respectively, of restricted cash held on behalf of government clients.

Working capital decreased to $388.6 million at June 30, 2002 from $528.6
million at June 30, 2001 primarily due to the decrease in cash and cash
equivalents to fund acquisitions. Our current ratio, defined as total current
assets divided by total current liabilities, was 1.8 and 2.9, and our debt to
capitalization ratio was 25.3% and 42.4% at June 30, 2002 and 2001,
respectively.

Certain of our state and local government contracts require we execute surety
bonds or letters of credit to ensure that the project is administered and
completed as provided for in the contract. Prior to September 11 and the
well-documented bankruptcies of several large companies (e.g. Enron, Kmart, and
WorldCom), surety bonds were obtainable on relatively favorable terms at
minimal pricing. In late 2001, the market for surety bonds changed
dramatically with capacity tightening and prices increasing. The long-term
outlook of the surety market, while improving, remains unclear. As of June 30,
2002, we have outstanding surety bonds and letters of credit of $316.6 million
and $100.9 million, respectively, to secure our performance of contractual
obligations with our clients.

Notwithstanding the existing condition of the surety bond market, management
believes that we have sufficient liquidity from our cash flow and under our
revolving credit facility to meet ongoing business needs and to respond to
future requests for proposals from state and local governments.

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As of June 30, 2002, we held a minority preferred stock interest in DDH
Aviation, Inc. (DDH), a corporate airplane brokerage company organized in
1997. DDH has a $48 million line of credit with Citicorp USA, Inc., for which
we and our Chairman, in exchange for warrants to acquire additional voting
stock, acted as guarantors. In addition, we obtained access to aircraft at
favorable rates in consideration of our guaranty. ACS guaranteed up to $11.5
million of the line of credit, and our Chairman guaranteed up to $17.5 million
of the line of credit. Subsequent to June 30, 2002, our Chairman assumed in
full ACS guaranty obligations to Citicorp, and our guaranty to Citicorp was
released in full at no cost to us. We have no further contingent liability
related to DDH indebtedness.

Our management believes that available cash and cash equivalents, together with
cash generated from operations and available borrowings under our revolving
credit facility, will provide adequate funds for our anticipated internal
growth needs, including working capital expenditures. Our management also
believes that cash provided by operations will be sufficient to satisfy all
existing debt obligations as they become due. However, we intend to continue
our growth through acquisitions and from time to time to engage in discussions
with potential acquisition candidates. In order to pursue such opportunities,
which could require significant commitments of capital, we may be required to
incur debt or to issue additional potentially dilutive securities in the
future. No assurance can be given as to our future acquisition and expansion
opportunities and how such opportunities will be financed.

Related Party Transactions

In August 2001, we purchased a Challenger 600 aircraft from DDH for a purchase
price of $8.5 million, which included interior and exterior refurbishment of
the aircraft. As of June 30, 2002, the purchase price for the aircraft was
paid in full, and refurbishment was near completion. Subsequent to June 30,
2002, the aircraft was delivered to us.

Disclosures about Contractual Obligations and Commercial Commitments as of June
30, 2002 (in thousands):

|                            |                                    |       |         |         |  |           |                        |           |  |               |         |         |  |   |         |         |  |   |        |        | 
|--------------------------- | ---------------------------------- | ----- | ------- | ------- |  | --------- | ---------------------- | --------- |  | ------------- | ------- | ------- |  | - | ------- | ------- |  | - | ------ | ------ | 
|                            |                                    |       |         |         |  |           | Payments Due by Period
|                            |                                    |       |         |         |  |           |                       
|                            |                                    |       |         |         |  |           | Less than 1            |           |  |               |         |         |  |   |         |         |  |   |       
|Contractual Obligations     |                                    | Total |         | Year    |  | 1-3 Years |                        | 4-5 Years |  | After 5 Years
|                            |                                    |       |         |         |  |           |                        |           |  |              
|Long-term debt              |                                    | $     | 706,990 |         |  | $         |                       |           |  | $             | 390,000 |         |  | $ | 316,990 |         |  | $ |       |       
|Capital lease obligations   |                                    |       | 2,281   |         |  |           | 1,038                  |           |  |               | 1,243   |         |  |   |        |         |  |   |       |       
|Operating leases            |                                    |       | 286,681 |         |  |           | 74,630                 |           |  |               | 97,601  |         |  |   | 56,733  |         |  |   | 57,717 |       
|Other long-term obligations |                                    |       | 292     |         |  |           | 292                    |           |  |               |        |         |  |   |        |         |  |   |       |       
|                            |                                    |       |         |         |  |           |                        |           |  |               |         |         |  |   |         |         |  |   |        |       
|                            | Total Contractual Cash
Obligations |       | $       | 996,244 |  |           | $                      | 75,960    |  |               | $       | 488,844 |  |   | $       | 373,723 |  |   | $      | 57,717 | 
|                            |                                    |       |         |         |  |           |                        |           |  |               |         |         |  |   |         |         |  |   |        |       

|                          |                              |           |         |             |  |           |                                            |           |  |               |        |        |  |   |       |       |  |   |       |       | 
|------------------------- | ---------------------------- | --------- | ------- | ----------- |  | --------- | ------------------------------------------ | --------- |  | ------------- | ------ | ------ |  | - | ----- | ----- |  | - | ----- | ----- | 
|                          |                              |           |         |             |  |           | Amount of Commitment Expiration per Period
|                          |                              |           |         |             |  |           |                                           
|                          |                              |           | Total   |             |  |           |                                            |           |  |               |        |        |  |   |       |       |  |   |      
|Other Commercial          |                              | Amounts   |         | Less than 1 |  |           |                                            |           |  |               |        |        |  |   |       |      
|Commitments               |                              | Committed |         | Year        |  | 1-3 Years |                                            | 4-5 Years |  | After 5 Years
|                          |                              |           |         |             |  |           |                                            |           |  |              
|Standby letters of credit |                              | $         | 169,000 |             |  | $         | 169,000                                    |           |  | $             |       |        |  | $ |      |       |  | $ |      |      
|Guaranty                  |                              |           | 11,500  |             |  |           | 11,500                                     |           |  |               |       |        |  |   |      |       |  |   |      |      
|Surety Bonds              |                              |           | 316,622 |             |  |           | 287,096                                    |           |  |               | 25,019 |        |  |   | 3,007 |       |  |   | 1,500 |      
|                          |                              |           |         |             |  |           |                                            |           |  |               |        |        |  |   |       |       |  |   |       |      
|                          | Total Commercial
Commitments |           | $       | 497,122     |  |           | $                                          | 467,596   |  |               | $      | 25,019 |  |   | $     | 3,007 |  |   | $     | 1,500 | 
|                          |                              |           |         |             |  |           |                                            |           |  |               |        |        |  |   |       |       |  |   |       |      

Critical Accounting Policies

The preparation of our financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
relating to the reporting of assets and liabilities, the disclosure of
contingent

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assets and liabilities, and the reported amounts of revenues and
expenses. We base our estimates on historical
experience and on various other assumptions or conditions that are believed to
be reasonable under the circumstances. Actual results could differ from those
estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties and may result in materially different
results under different assumptions and conditions. We believe that the
following critical accounting policies involve significant judgments and
estimates used in the preparation of our consolidated financial statements.

Revenue recognition. During fiscal year 2001, we adopted Staff Accounting
Bulletin 101 Revenue Recognition in Financial Statements (SAB 101). SAB 101
provides guidance on the recognition, presentation, and disclosure of revenue
in financial statements. We recognize revenues when persuasive evidence of an
arrangement exists, the product has been shipped or the services have been
provided to the client, the sales price is fixed or determinable, and
collectibility is reasonably assured. The adoption of SAB 101 did not have a
material impact on our results of operations.

Generally, information technology processing revenues are recognized as
services are provided to the client. Revenues from annual maintenance contracts
are deferred and recognized ratably over the maintenance period. Revenues from
hardware sales are recognized upon delivery to the client and when
uncertainties regarding customer acceptance have expired.

Revenues for business process outsourcing services are normally determined on
the basis of the number of accounts or transactions processed.

In the federal government segment, our contracts are typically cost
reimbursable, fixed price, unit price, or time and material contracts. Revenues
on cost reimbursable contracts are recognized by applying an estimated factor
to costs as incurred, such factor being determined by the contract provisions
and prior experience. Revenues on unit-price contracts are recognized at the
contractual selling prices of work completed and accepted by the client.
Revenues on time and material contracts are recognized at the contractual rates
as the labor hours and direct expenses are incurred.

Revenues on fixed price contracts are recognized over the contract term based
on the percentage of services that are provided during the period compared with
the total estimated services to be provided over the entire contract using
Statement of Position 81-1, Accounting for Performance of Construction-Type
and Certain Production-Type Contracts (SOP 81-1), which requires the use of
percentage-of-completion accounting for long-term contracts that are binding
agreements between ACS and our customers in which we agree, for compensation,
to perform a service to the customers specifications. Performance will often
extend over long periods, and our right to receive payment depends on our
performance in accordance with the agreement.

The percentage-of-completion methodology involves recognizing revenue using the
percentage of services completed, on a current cumulative cost to total cost
basis, using a reasonably consistent profit margin over the period. Due to the
long-term nature of these contracts, developing the estimates of costs often
requires significant judgment. Factors that must be considered in estimating
the progress of work completed and ultimate cost of the contract include, but
are not limited to, the availability of labor and labor productivity, the
nature and complexity of the work to be performed, the impact of delayed
performance, and availability and timing of funding from the client. If
changes occur in delivery, productivity or other factors used in developing the
estimates of costs or revenues, we revise our cost and revenue estimates, and
any revisions are charged to income in the period in which the facts that give
rise to that revision become known. During the fiscal year ended June 30, 2002,
less than 5% of our revenues were derived from percentage-of-completion
contracts.

Revenues earned in excess of related billings are accrued, whereas billings in
excess of revenues earned are deferred until the related services are provided.
Immediate recognition is made of any anticipated losses.

Valuation of goodwill and intangibles. Our business acquisitions typically
result in goodwill and other intangible assets, which affect the amount of
future period amortization expense and possible impairment expense that we
could incur.

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The determination of the value of goodwill and other intangibles
requires us to make estimates and assumptions about
future business trends and growth. For the IMS, Andersen, and AFSA
acquisitions in 2002, we obtained a third- party valuation of the intangible
assets. If an event occurs which would cause us to revise our estimates and
assumptions used in analyzing the value of our goodwill or other intangibles,
such revision could result in an impairment charge that could have a material
impact on our financial results.

Allowance for doubtful accounts. We make estimates of the collectibility of our
accounts receivable. We specifically analyze accounts receivable and
historical bad debts, customer credit-worthiness, current economic trends, and
changes in our customer payment terms and collection trends when evaluating the
adequacy of our allowance for doubtful accounts. Any change in the assumptions
used in analyzing a specific account receivable may result in additional
allowance for doubtful accounts being recognized in the period in which the
change occurs.

New Accounting Standards

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146 (SFAS 146), Accounting
for Costs Associated with Exit or Disposal Activities, which changes the rules
for how companies must account for costs associated with exit or disposal
activities. Costs typically associated with exit or disposal activities include
one-time employee termination costs, contract cancellation provisions, and
relocation costs. SFAS 146 nullifies EITF Issue 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The provisions of the
new standard are effective for exit or disposal activities initiated after
December 31, 2002, with early application encouraged. We do not believe that
SFAS 146 will have a material impact on our future earnings and financial
condition.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145 (SFAS 145), Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections. Among other things, SFAS
145 rescinds both Statement of Financial Accounting Standards No. 4 (SFAS 4),
Reporting Gains and Losses from Extinguishment of Debt, and the amendment to
SFAS 4, Statement of Financial Accounting Standards No. 64 (SFAS 64),
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. Through
this rescission, SFAS 145 eliminates the requirement (in both SFAS 4 and SFAS
64) that gains and losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related income tax
effect. Generally, SFAS 145 is effective for transactions occurring after May
15, 2002. We do not believe SFAS 145 will have a material impact on our future
earnings and financial position.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 (SFAS 144), Accounting for the Impairment or Disposal of Long-Lived
Assets. SFAS 144 retains the fundamental provisions of existing generally
accepted accounting principles with respect to the recognition and measurement
of long-lived asset impairment contained in Statement of Financial Accounting
Standards No. 121 (SFAS 121), Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. However, SFAS No. 144
provides new guidance intended to address certain significant implementation
issues associated with SFAS 121, including expanded guidance with respect to
appropriate cash flows to be used to determine whether recognition of any
long-lived asset impairment is required and if required, how to measure the
amount of the impairment. SFAS 144 also requires that any net assets to be
disposed of by sale be reported at the lower of carrying value or fair market
value less cost to sell, and expands the reporting of discontinued operations
to include any component of an entity with operations and cash flows that can
be clearly distinguished from the rest of the entity. SFAS 144 is effective
for financial statements issued for fiscal years beginning after December 15,
2001 and interim periods within those fiscal years. We do not believe SFAS 144
will have a material impact on our future earnings and financial position.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 142 addresses
the accounting and reporting of acquired goodwill and other intangible assets.
SFAS 142 discontinues amortization of acquired goodwill and instead requires
annual impairment testing of acquired goodwill. Intangible assets will be
amortized over their useful economic life and tested for impairment in
accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. Intangible assets with an
indefinite useful economic life should not be amortized until the life of the
asset is determined to be finite. We adopted SFAS 142 effective July 1, 2001.
SFAS 142 has had

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a significant favorable impact on our fiscal year 2002 financial results
through the elimination of goodwill amortization. See Note 6 of the Notes to
Consolidated Financial Statements for further discussion of the impact of SFAS
142.

Also in June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, Business Combinations (SFAS 141). SFAS 141 requires that all
business combinations be accounted for under the purchase method and defines
the criteria for identifying intangible assets for recognition apart from
goodwill. SFAS 141 applies to all business combinations initiated after June
30, 2001 and all business combinations accounted for using the purchase method
for which the acquisition date is July 1, 2001 or later. We have adopted SFAS
141 effective July 1, 2001. We do not believe SFAS 141 will have a material
impact on our future earnings or financial position.

Risks Related to our Business

The risks described below should not be considered to be comprehensive and
all-inclusive. Additional risks that we do not yet know of or that we
currently think are immaterial may also impair our business operations. If any
of the following risks actually occur, our business, financial condition, or
results of operations could be materially and adversely affected, and as a
result, the trading price of our Class A common stock could be materially and
adversely impacted. These risk factors should be read in conjunction with other
information set forth in this report, including our Consolidated Financial
Statements and the related notes.

Loss of, or reduction of business from, significant clients. The loss of
clients and/or the reduction of volumes and services provided to our clients
could materially affect our profitability and cash flows. In addition, we incur
a high level of fixed costs related to our technology outsourcing and business
process outsourcing clients, therefore the loss of any one of our significant
clients could leave us with a significantly higher level of fixed costs than is
necessary to serve our remaining clients, thereby reducing our profitability
and cash flow.

Termination of a contract by a client or deterioration of the financial
condition of a client. We must make significant capital investments in order to
attract and retain large outsourcing agreements. The termination of a client
contract or the deterioration of the financial condition or prospects of a
client has in the past, and may in the future, result in an impairment of the
net book value of the assets recorded and a reduction in our earnings.

Competition. We expect to encounter additional competition as we address new
markets and new competitors enter our existing markets. If we are forced to
lower our pricing or if demand for our services decreases, our business,
financial condition, results of operations, and cash flow may be materially and
adversely affected. Many of our competitors have greater resources, and they
may be able to use their resources to adapt more quickly to new or emerging
technologies or to devote greater resources to the promotion and sale of their
products and services. In addition, we must frequently compete with a clients
own internal business process and information technology capabilities, which
may constitute a fixed cost for the client.

Difficulties in executing our acquisition strategy. We intend to continue to
expand our business through the acquisition of complementary companies. We
cannot, however, make any assurances that we will be able to identify any
potential acquisition candidates or consummate any additional acquisitions or
that any future acquisitions will be successfully integrated or will be
advantageous to us. Without additional acquisitions, we are unlikely to
maintain historical growth rates.

Rapid technological changes. The markets for our information technology
services are subject to rapid technological changes and rapid changes in client
requirements. We may be unable to timely and successfully customize products
and services that incorporate new technology or to deliver the services and
products demanded by the marketplace.

Loss of significant software vendor relationships. Our ability to service our
clients depends to a large extent on our use of various software programs that
we license from a small number of primary software vendors. If our significant
software vendors were to terminate or refuse to renew our contracts with them,
we might not be able to

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replace the related software programs and would be unable to serve our clients,
which could have a material adverse effect on our revenues and profitability.

Exercise of commercial contract termination provisions. Some of our commercial
contracts with our clients permit termination in the event our performance is
not consistent with service levels specified in those contracts, or provide for
credits to our clients for failure to meet service levels. In addition, if
clients are not satisfied with our level of performance, our reputation in the
industry may suffer, which could materially and adversely affect our business,
financial condition, results of operations, and cash flow.

Exercise by government clients of termination rights. Approximately 26% of our
fiscal 2002 revenues were derived from contracts with the United States
government and its agencies, and approximately 41% of our fiscal 2002 revenues
were derived from contracts with state and local governments and their
agencies. Governments may terminate most of these contracts at any time,
without cause. Additionally, government contracts are generally subject to
audits and investigations by government agencies. If the government finds that
we improperly charged any costs to a contract, the costs are not reimbursable
or, if already reimbursed, the cost must be refunded to the government.

Budget deficits at state and local governments and their agencies.
Approximately 41% of our revenues in fiscal year 2002 were derived from
contracts with state and local governments and their agencies. Currently, many
state and local governments that we have contracts with are facing potential
budget deficits. While this has not had a material adverse impact on our
results of operations through fiscal 2002, it is unclear what impact, if any,
these deficits may have on our future results of operations.

Inability to provide contract performance guarantees. Certain of our state and
local government contracts require we execute surety bonds or letters of credit
to ensure that the project is administered and completed as provided for in the
contract. Prior to September 11 and the well-documented bankruptcies of several
large companies (e.g. Enron, Kmart, and WorldCom), surety bonds were obtainable
on relatively favorable terms at minimal pricing. In late 2001, the market for
surety bonds changed dramatically with capacity tightening and prices
increasing. In certain situations, we have found it more economical to satisfy
our obligations under certain state and local contracts with letters of credit
under our revolving credit facility. The long-term outlook of the surety
market, while improving, remains unclear. We may not have enough capacity under
our revolving credit facility to continue doing this in the future, and
therefore, profitability under our existing contracts may deteriorate, and we
may not be able to bid on state and local contracts in the future.

Terrorist attacks. Terrorist attacks and further acts of violence or war may
cause major instability in the U.S. and other financial markets in which we
operate. In addition, armed hostilities and further acts of terrorism may
directly impact our physical facilities and operations, which are located in
North America, Central America, South America, Europe, Africa, Australia, and
the Middle East, or those of our clients. These developments subject our
worldwide operations to increased risks and, depending on their magnitude,
could have a material adverse effect on our business.

Failure to attract and retain necessary technical personnel and skilled
management. Our success depends to a significant extent upon our ability to
attract, retain and motivate highly skilled and qualified personnel. If we
fail to attract, train, and retain, sufficient numbers of these
technically-skilled people, our business, financial condition, and results of
operations will be materially and adversely affected. Our success also depends
on the skills, experience, and performance of key members of our management
team. The loss of any key employee could have an adverse effect on our
business, financial condition, and results of operations and prospects.




Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We have fixed rate and variable rate debt instruments. Our variable rate debt
instruments are subject to market risk from changes in interest rates. During
the first half of fiscal year 2002, in order to manage interest costs and
exposure to changing interest rates related to our $450 million revolving line
of credit, we held two interest rate hedges initiated in December 1998. These
hedges expired in December 2001. Each hedge was designated a cash flow hedge
and was structured such that we paid a fixed rate of interest of 4.54% on
amounts owed under the revolving

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line of credit up to the notional amount, and received a floating rate of
interest based on one month LIBOR. The notional amount of the two hedges
totaled $100 million and expired in December 2001. Changes in the fair value
of the interest rate hedges, net of tax effect, is reflected in accumulated
other comprehensive income.

We held a single investment in a marketable security during fiscal year 2002.
To protect ourselves from the volatility of the value of this marketable
security investment, we entered into a no-cost collar agreement in June 2001,
which matured in June 2002. The collar, a fair value hedge, is structured so
that all fluctuations in the price of the marketable security above or below
100% or 102.5% of its value on the date the collar was entered into are hedged.
This marketable security investment was liquidated as of June 30, 2002, and the
related collar was terminated.

We do not hold or issue derivative financial instruments for trading purposes
and are not a party to any leveraged derivative transactions. Sensitivity
analysis is one technique used to measure the impact of changes in the interest
rates on the value of market-risk sensitive financial instruments. A
hypothetical 10% movement in interest rates would not have a material impact on
our future earnings, fair value, or cash flows.

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|                                                                   |  |      |    | 
|------------------------------------------------------------------ |  | ---- | -- | 
|Item 8. Financial Statements and Supplementary Data                |  | Page
|                                                                   |  |     
|Report of Independent Accountants                                  |  |      | 26 | 
|Consolidated Balance Sheets                                        |  |      | 27 | 
|Consolidated Statements of Income                                  |  |      | 28 | 
|Consolidated Statements of Changes in Stockholders Equity         |  |      | 29 | 
|Consolidated Statements of Cash Flows                              |  |      | 30 | 
|Notes to the Consolidated Financial Statements                     |  |      | 31 | 
|Report of Independent Accountants on Financial Statement Schedules |  |      | 54 | 
|Schedule II  Valuation and Qualifying Accounts                    |  |      | 55 | 

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of     Affiliated
Computer Services, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, changes in stockholders equity and cash
flows present fairly, in all material respects, the financial position of
Affiliated Computer Services, Inc. and its subsidiaries at June 30, 2002 and
2001, and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 2002 in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Companys management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Notes 1 and 6 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets in connection with its adoption of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets, effective July 1,
2001.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
July 30, 2002

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except per share amounts)

|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |         |         |           |  | 
|---------------------------------------- | ----------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | --------- | --------- | ------- | ------- | ------- | --------- |  | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           | June 30, 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |          
|                                         |                                           |                                                                                                                      |                                            |                                      |           | 2002      |         | 2001   
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      |                                            | ASSETS                               |           |           |         |         |         |           |  | 
|Current assets:                          |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         | Cash and cash equivalents                 |                                                                                                                      | $                                          | 33,814                               |           |           | $       | 242,458 |        
|                                         | Accounts receivable, net                  |                                                                                                                      |                                            | 736,471                              |           |           |         | 472,042 |        
|                                         | Inventory                                 |                                                                                                                      |                                            | 9,740                                |           |           |         | 8,591   |        
|                                         | Prepaid expenses and other current assets |                                                                                                                      |                                            | 94,464                               |           |           |         | 77,572  |        
|                                         | Deferred taxes                            |                                                                                                                      |                                            |                                     |           |           |         | 8,952   |        
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      | Total current assets                       |                                      |           | 874,489   |         |         |         | 809,615   | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |         |         |           |  | 
|Property and equipment and software, net |                                           |                                                                                                                      | 394,830                                    |                                      |           |           | 237,563 |        
|Goodwill                                 |                                           |                                                                                                                      | 1,846,482                                  |                                      |           |           | 697,760 |        
|Other intangibles, net                   |                                           |                                                                                                                      | 234,287                                    |                                      |           |           | 97,160  |        
|Other assets                             |                                           |                                                                                                                      | 53,479                                     |                                      |           |           | 49,589  |        
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      | Total assets                               |                                      | $         | 3,403,567 |         |         | $       | 1,891,687 | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |           |           |         |         |         |           |  | 
|Current liabilities:                     |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         | Accounts payable                          |                                                                                                                      | $                                          | 72,858                               |           |           | $       | 40,265  |        
|                                         | Accrued compensation and benefits         |                                                                                                                      |                                            | 125,290                              |           |           |         | 82,043  |        
|                                         | Other accrued liabilities                 |                                                                                                                      |                                            | 210,003                              |           |           |         | 126,875 |        
|                                         | Income taxes payable                      |                                                                                                                      |                                            | 20,452                               |           |           |         | 7,742   |        
|                                         | Deferred taxes                            |                                                                                                                      |                                            | 7,344                                |           |           |         |        |        
|                                         | Current portion of long-term debt         |                                                                                                                      |                                            | 1,330                                |           |           |         | 3,362   |        
|                                         | Current portion of unearned revenue       |                                                                                                                      |                                            | 48,636                               |           |           |         | 20,765  |        
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      | Total current liabilities                  |                                      |           | 485,913   |         |         |         | 281,052   | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |         |         |           |  | 
|Convertible notes                        |                                           |                                                                                                                      | 316,990                                    |                                      |           |           | 546,927 |        
|Long-term debt                           |                                           |                                                                                                                      | 391,243                                    |                                      |           |           | 102,386 |        
|Deferred taxes                           |                                           |                                                                                                                      | 95,394                                     |                                      |           |           | 55,601  |        
|Other long-term liabilities              |                                           |                                                                                                                      | 18,607                                     |                                      |           |           | 20,206  |        
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      | Total liabilities                          |                                      |           | 1,308,147 |         |         |         | 1,006,172 | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|Commitments and contingencies            |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|Stockholders equity:                    |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           | Class A common stock, $.01 par value, 500,000 shares authorized,
125,424 and 94,564 shares outstanding, respectively |                                            |                                      | 1,254     |           |         |         | 473     |          
|                                         |                                           | Class B common stock, $.01 par value, 14,000 shares authorized,
6,600 shares outstanding                             |                                            |                                      | 66        |           |         |         | 33      |          
|                                         |                                           | Additional paid-in capital                                                                                           |                                            |                                      | 1,330,533 |           |         |         | 350,767 |          
|                                         |                                           | Retained earnings                                                                                                    |                                            |                                      | 763,567   |           |         |         | 534,374 |          
|                                         |                                           | Accumulated other comprehensive income, net                                                                          |                                            |                                      |          |           |         |         | (132    | )        
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      | Total stockholders equity                 |                                      |           | 2,095,420 |         |         |         | 885,515   | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        
|                                         |                                           |                                                                                                                      | Total liabilities and stockholders equity |                                      | $         | 3,403,567 |         |         | $       | 1,891,687 | 
|                                         |                                           |                                                                                                                      |                                            |                                      |           |           |         |        

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

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share amounts)

|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |         |           | 
|--------------------------------------------------- | ----------------------------- | ------------------------ | --------- | ------------------- | --------- | ---- | --------- | ------- | --------- | - | --------- | ------- | --------- | 
|                                                    |                               |                          |           | Year ended June 30,
|                                                    |                               |                          |           |                    
|                                                    |                               |                          |           | 2002                |           | 2001 |           | 2000   
|                                                    |                               |                          |           |                     |           |      |           |        
|Revenues                                            |                               | $                        | 3,062,918 |                     |           | $    | 2,063,559 |         |           | $ | 1,962,542 |        
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |         |           | 
|Operating expenses:                                 |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    | Wages and benefits            |                          |           | 1,350,057           |           |      |           | 904,684 |           |   |           | 854,162 |          
|                                                    | Services and supplies         |                          |           | 888,497             |           |      |           | 598,797 |           |   |           | 608,401 |          
|                                                    | Rent, lease and maintenance   |                          |           | 278,621             |           |      |           | 223,679 |           |   |           | 206,330 |          
|                                                    | Depreciation and amortization |                          |           | 110,486             |           |      |           | 93,617  |           |   |           | 84,752  |          
|                                                    | Impairment charges            |                          |           |                    |           |      |           |        |           |   |           | 56,571  |          
|                                                    | Other operating expenses      |                          |           | 34,625              |           |      |           | 19,056  |           |   |           | 28,918  |          
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    |                               | Total operating expenses |           |                     | 2,662,286 |      |           |         | 1,839,833 |   |           |         | 1,839,134 | 
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|Operating income                                    |                               |                          | 400,632   |                     |           |      | 223,726   |         |           |   | 123,408   |        
|Interest expense                                    |                               |                          | 30,619    |                     |           |      | 23,742    |         |           |   | 23,979    |        
|Net gain on divestitures                            |                               |                          |          |                     |           |      |          |         |           |   | (85,846   | )      
|Other non-operating (income) expense                |                               |                          | 9,557     |                     |           |      | (21,076   | )       |           |   | (9,995    | )      
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    | Pretax profit                 |                          |           | 360,456             |           |      |           | 221,060 |           |   |           | 195,270 |          
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|Income tax expense                                  |                               |                          | 130,860   |                     |           |      | 86,768    |         |           |   | 85,958    |        
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    | Net income                    |                          | $         | 229,596             |           |      | $         | 134,292 |           |   | $         | 109,312 |          
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|Earnings per common share:                          |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    | Basic                         |                          | $         | 1.94                |           |      | $         | 1.35    |           |   | $         | 1.11    |          
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    | Diluted                       |                          | $         | 1.76                |           |      | $         | 1.23    |           |   | $         | 1.03    |          
|                                                    |                               |                          |           |                     |           |      |           |         |           |   |           |        
|Shares used in computing earnings per common share: |                               |                          |           |                     |           |      |           |         |           |   |           |        
|                                                    | Basic                         |                          |           | 118,646             |           |      |           | 99,758  |           |   |           | 98,487  |          
|                                                    | Diluted                       |                          |           | 137,464             |           |      |           | 116,456 |           |   |           | 111,613 |          

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

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

|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |         |  
|---------------------------------------------------- | ----------------------------------------- |  | ------------ | - | ------ | - | ------ | - | ------- |  | ------- | - | -------- | - | ------- | - | -------- | - | ------------- | - | -------- | - | ------- | ------- | ----- | - | ----------- | ---- | - |  | ---- | - |  | - | ------- | - |  | - | --------- | ------- | -
|                                                     |                                           |  | Common Stock |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |            
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |            
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   | Accumulated |      |   |  |      |   |  |   |         |   |  |   |          
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   | Additional    |   |          |   |         |         | Other |   |             |      |   |  |      |   |  |   |         |   | 
|                                                     |                                           |  | Class A      |   |        |   |        |   | Class B |  |         |   |          |   | Paid-in |   | Retained |   | Comprehensive |   | Treasury |   |         |         |       |   |             |      |  
|                                                     |                                           |  | Shares       |   | Amount |   | Shares |   | Amount  |  | Capital |   | Earnings |   | Income  |   | Shares   |   | Amount        |   | Total   
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |         
|Balance at June 30, 1999                             |                                           |  | 45,945       |   |        | $ | 460    |   |         |  | 3,300   |   |          | $ | 33      |   |          | $ | 316,202       |   |          | $ | 291,029 |         |       | $ |            |      |   |  | (8   | ) |  | $ | (303    | ) |  | $ | 607,421   |        
|Comprehensive income:                                |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|                                                     | Net income                                |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         | 109,312 |       |   |             |     |   |  |      |  |  |   |         |  |  |   |           | 109,312 |  
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Total comprehensive income                           |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   | 109,312   |        
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Employee stock
transactions and related
tax benefits |                                           |  | 332          |   |        |   | 3      |   |         |  |        |   |          |   |        |   |          |   | 5,157         |   |          |   |        |         |       |   |            |      |   |  | 38   |   |  |   | 1,576   |   |  |   | 6,736     |        
|Stock issued in connection
with an acquisition       |                                           |  |             |   |        |   |       |   |         |  |        |   |          |   |        |   |          |   |              |   |          |   |        |         |       |   |            |      |   |  | (273 | ) |  |   | (12,020 | ) |  |   | (12,020   | )      
|Purchase of treasury shares                          |                                           |  |             |   |        |   |       |   |         |  |        |   |          |   |        |   |          |   | (2            | ) |          |   |        |         |       |   |            |      |   |  | (3   | ) |  |   | (97     | ) |  |   | (99       | )      
|Other, net                                           |                                           |  | 4            |   |        |   |       |   |         |  |        |   |          |   |        |   |          |   | 168           |   |          |   | (141    | )       |       |   |            |      |   |  |     |   |  |   |        |   |  |   | 27        |        
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Balance at June 30, 2000                             |                                           |  | 46,281       |   |        |   | 463    |   |         |  | 3,300   |   |          |   | 33      |   |          |   | 321,525       |   |          |   | 400,200 |         |       |   |            |      |   |  | (246 | ) |  |   | (10,844 | ) |  |   | 711,377   |        
|Comprehensive income:                                |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|                                                     | Unrealized gains on
marketable securities |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         |        |       |   |             | 84   |   |  |      |  |  |   |         |  |  |   |           | 84      |  
|                                                     | Interest rate hedge                       |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         |        |       |   |             | (216 | ) |  |      |  |  |   |         |  |  |   |           | (216    | )
|                                                     | Net income                                |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         | 134,292 |       |   |             |     |   |  |      |  |  |   |         |  |  |   |           | 134,292 |  
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Total comprehensive income                           |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   | 134,160   |        
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Employee stock
transactions and related
tax benefits |                                           |  | 1,000        |   |        |   | 10     |   |         |  |        |   |          |   |        |   |          |   | 29,179        |   |          |   |        |         |       |   |            |      |   |  | 246  |   |  |   | 10,844  |   |  |   | 40,033    |        
|Conversion of 4%
Convertible
Subordinated
Notes      |                                           |  | 1            |   |        |   |       |   |         |  |        |   |          |   |        |   |          |   | 63            |   |          |   |        |         |       |   |            |      |   |  |     |   |  |   |        |   |  |   | 63        |        
|Other, net                                           |                                           |  |             |   |        |   |       |   |         |  |        |   |          |   |        |   |          |   |              |   |          |   | (118    | )       |       |   |            |      |   |  |     |   |  |   |        |   |  |   | (118      | )      
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Balance at June 30, 2001                             |                                           |  | 47,282       |   |        |   | 473    |   |         |  | 3,300   |   |          |   | 33      |   |          |   | 350,767       |   |          |   | 534,374 |         |       |   | (132        | )    |   |  |     |   |  |   |        |   |  |   | 885,515   |        
|Comprehensive income:                                |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|                                                     | Unrealized gains on
Marketable securities |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         |        |       |   |             | (84  | ) |  |      |  |  |   |         |  |  |   |           | (84     | )
|                                                     | Interest rate hedge                       |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         |        |       |   |             | 216  |   |  |      |  |  |   |         |  |  |   |           | 216     |  
|                                                     | Net income                                |  |              |  |        |   |        |  |         |  |         |  |          |   |         |  |          |   |               |  |          |   |         | 229,596 |       |   |             |     |   |  |      |  |  |   |         |  |  |   |           | 229,596 |  
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Total comprehensive income                           |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   | 229,728   |        
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Employee stock
transactions and related
tax benefits |                                           |  | 1,137        |   |        |   | 11     |   |         |  |        |   |          |   |        |   |          |   | 38,993        |   |          |   |        |         |       |   |            |      |   |  |     |   |  |   |        |   |  |   | 39,004    |        
|Equity offering                                      |                                           |  | 9,200        |   |        |   | 92     |   |         |  |        |   |          |   |        |   |          |   | 714,200       |   |          |   |        |         |       |   |            |      |   |  |     |   |  |   |        |   |  |   | 714,292   |        
|Two-for-one stock dividend                           |                                           |  | 57,024       |   |        |   | 570    |   |         |  | 3,300   |   |          |   | 33      |   |          |   | (603          | ) |          |   |        |         |       |   |            |      |   |  |     |   |  |   |        |   |  |   |          |        
|Conversion of 4%
Convertible Subordinated
Notes      |                                           |  | 10,781       |   |        |   | 108    |   |         |  |        |   |          |   |        |   |          |   | 227,176       |   |          |   |        |         |       |   |            |      |   |  |     |   |  |   |        |   |  |   | 227,284   |        
|Other, net                                           |                                           |  |             |   |        |   |       |   |         |  |        |   |          |   |        |   |          |   |              |   |          |   | (403    | )       |       |   |            |      |   |  |     |   |  |   |        |   |  |   | (403      | )      
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        
|Balance at June 30, 2002                             |                                           |  | 125,424      |   |        | $ | 1,254  |   |         |  | 6,600   |   |          | $ | 66      |   |          | $ | 1,330,533     |   |          | $ | 763,567 |         |       | $ |            |      |   |  |     |   |  | $ |        |   |  | $ | 2,095,420 |        
|                                                     |                                           |  |              |   |        |   |        |   |         |  |         |   |          |   |         |   |          |   |               |   |          |   |         |         |       |   |             |      |   |  |      |   |  |   |         |   |  |   |           |        

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

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AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)

|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |          |         |         |          |  
|------------------------------------- | --------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------------- | ------- | ------------------- | ---------- | -------- | ------- | ------- | ------- | -------- | ------- | ------- | -------- | -
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         | Year ended June 30,
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                    
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         | 2002                |            | 2001     |         | 2000   
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |        
|Cash flows from operating activities: |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      | Net income                                                                        |                                                                      | $                                                                | 229,596                                   |         |                     | $          | 134,292  |         |         | $       | 109,312  |        
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |          |        
|                                      |                                                                                   | Depreciation and amortization                                        |                                                                  |                                           | 110,486 |                     |            |          | 93,617  |         |         |          | 84,752  |        
|                                      |                                                                                   | Impairment charges                                                   |                                                                  |                                           |        |                     |            |          |        |         |         |          | 56,571  |        
|                                      |                                                                                   | Net loss on divestitures                                             |                                                                  |                                           |        |                     |            |          |        |         |         |          | (85,846 | )      
|                                      |                                                                                   | Gain on collection of note receivable                                |                                                                  |                                           |        |                     |            |          | (1,713  | )       |         |          | (3,000  | )      
|                                      |                                                                                   | Gain on sale of investment                                           |                                                                  |                                           |        |                     |            |          | (12,785 | )       |         |          | (1,892  | )      
|                                      |                                                                                   | Loss on sale of business unit                                        |                                                                  |                                           | 1,841   |                     |            |          |        |         |         |          |        |        
|                                      |                                                                                   | Impairment of long-term investment                                   |                                                                  |                                           | 8,449   |                     |            |          |        |         |         |          |        |        
|                                      |                                                                                   | Other                                                                |                                                                  |                                           | 1,899   |                     |            |          | 526     |         |         |          | (1,483  | )      
|                                      |                                                                                   | Changes in assets and liabilities, net of effects from
acquisitions: |                                                                  |                                           |         |                     |            |          |         |         |         |          |         |        
|                                      |                                                                                   |                                                                      | Decrease in ATM cash                                             |                                           |         |                    |            |          |         |        |         |          |         | 100     |         
|                                      |                                                                                   |                                                                      | Increase in accounts receivable                                  |                                           |         | (112,523            | )          |          |         | (45,745 | )       |          |         | (49,436 | )       
|                                      |                                                                                   |                                                                      | (Increase) decrease in inventory                                 |                                           |         | (744                | )          |          |         | (1,160  | )       |          |         | 3       |         
|                                      |                                                                                   |                                                                      | (Increase) decrease in prepaid expenses and other
current assets |                                           |         | 2,762               |            |          |         | (2,965  | )       |          |         | (28,747 | )       
|                                      |                                                                                   |                                                                      | Change in deferred taxes                                         |                                           |         | 55,821              |            |          |         | 37,359  |         |          |         | (14,612 | )       
|                                      |                                                                                   |                                                                      | (Increase) decrease in other long-term assets                    |                                           |         | (6,570              | )          |          |         | 3,449   |         |          |         | (418    | )       
|                                      |                                                                                   |                                                                      | Increase (decrease) in accounts payable                          |                                           |         | 26,252              |            |          |         | (11,273 | )       |          |         | 9,929   |         
|                                      |                                                                                   |                                                                      | Increase (decrease) in accrued compensation and benefits         |                                           |         | 7,209               |            |          |         | 13,190  |         |          |         | (4,018  | )       
|                                      |                                                                                   |                                                                      | Increase (decrease) in other accrued liabilities                 |                                           |         | 12,975              |            |          |         | (23,357 | )       |          |         | 22,565  |         
|                                      |                                                                                   |                                                                      | Increase (decrease) in income taxes payable                      |                                           |         | 35,069              |            |          |         | (32,258 | )       |          |         | 62,978  |         
|                                      |                                                                                   |                                                                      | Decrease in other long-term liabilities                          |                                           |         | (638                | )          |          |         | (1,069  | )       |          |         | (54     | )       
|                                      |                                                                                   |                                                                      | Increase (decrease) in unearned revenue                          |                                           |         | 130                 |            |          |         | (8,194  | )       |          |         | 1,119   |         
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      |                                                                                   |                                                                      |                                                                  | Total adjustments                         |         |                     | 142,418    |          |         |         | 7,622   |          |         |         | 48,511   |  
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      |                                                                                   |                                                                      |                                                                  | Net cash provided by operating activities |         |                     | 372,014    |          |         |         | 141,914 |          |         |         | 157,823  |  
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|Cash flows from investing activities: |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      | Purchases of property, equipment and software, net                                |                                                                      |                                                                  | (144,406                                  | )       |                     |            | (99,070  | )       |         |         | (71,548  | )      
|                                      | Payments for acquisitions, net of cash acquired                                   |                                                                      |                                                                  | (1,425,529                                | )       |                     |            | (173,402 | )       |         |         | (232,888 | )      
|                                      | Additions to other intangible assets                                              |                                                                      |                                                                  | (19,317                                   | )       |                     |            | (21,695  | )       |         |         | (9,100   | )      
|                                      | Proceeds from divestitures, net of transaction costs                              |                                                                      |                                                                  | (5,887                                    | )       |                     |            | 202,718  |         |         |         | 99       |        
|                                      | Payment for investments                                                           |                                                                      |                                                                  | (4,129                                    | )       |                     |            | (500     | )       |         |         | (12,620  | )      
|                                      | Proceeds from sale of investments                                                 |                                                                      |                                                                  | 700                                       |         |                     |            | 17,100   |         |         |         | 2,731    |        
|                                      | Additions to notes receivable                                                     |                                                                      |                                                                  | (3,577                                    | )       |                     |            | (3,781   | )       |         |         | (2,038   | )      
|                                      | Proceeds from notes receivable                                                    |                                                                      |                                                                  | 3,981                                     |         |                     |            | 9,492    |         |         |         | 9,586    |        
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      |                                                                                   |                                                                      |                                                                  | Net cash used in investing activities     |         |                     | (1,598,164 | )        |         |         | (69,138 | )        |         |         | (315,778 | )
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|Cash flows from financing activities: |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      | Proceeds from issuance of long-term debt, net                                     |                                                                      |                                                                  | 1,279,210                                 |         |                     |            | 674,893  |         |         |         | 657,040  |        
|                                      | Payments of long-term debt                                                        |                                                                      |                                                                  | (992,510                                  | )       |                     |            | (566,912 | )       |         |         | (485,116 | )      
|                                      | Proceeds from equity offering, net of transaction costs                           |                                                                      |                                                                  | 714,292                                   |         |                     |            |         |         |         |         |         |        
|                                      | Employee stock transactions                                                       |                                                                      |                                                                  | 17,901                                    |         |                     |            | 17,829   |         |         |         | 3,185    |        
|                                      | Net payments of ATM debt                                                          |                                                                      |                                                                  |                                          |         |                     |            |         |         |         |         | (100     | )      
|                                      | Other, net                                                                        |                                                                      |                                                                  | (1,387                                    | )       |                     |            | (649     | )       |         |         | (1,113   | )      
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      |                                                                                   |                                                                      |                                                                  | Net cash provided by financing activities |         |                     | 1,017,506  |          |         |         | 125,161 |          |         |         | 173,896  |  
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      | Net increase (decrease) in cash and cash equivalents                              |                                                                      |                                                                  | (208,644                                  | )       |                     |            | 197,937  |         |         |         | 15,941   |        
|                                      | Cash and cash equivalents at beginning of year                                    |                                                                      |                                                                  | 242,458                                   |         |                     |            | 44,521   |         |         |         | 28,580   |        
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         
|                                      | Cash and cash equivalents at end of year                                          |                                                                      | $                                                                | 33,814                                    |         |                     | $          | 242,458  |         |         | $       | 44,521   |        
|                                      |                                                                                   |                                                                      |                                                                  |                                           |         |                     |            |          |         |         |         |         

See supplemental cash flow information in Notes 2, 5, 6, 7, 8, and 9.
The accompanying notes are an integral part of these consolidated financial statements.

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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
We are a Fortune 1000 company comprised of more than 36,000 people serving
clients in 46 countries. We operate in three business segments: commercial,
federal government, and state and local governments, and provide business
process, technology outsourcing, and system integration solutions to our
clients. We were incorporated on June 8, 1988.

The consolidated financial statements are comprised of our accounts and our
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Our fiscal year ends on
June 30. The accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States of America that require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, the reported amount of revenues and expenses
during the reporting period, as well as the accompanying notes. These estimates
are based on information available to us as of the date of the financial
statements. Actual results could differ from these estimates.

All share and per share information is presented giving effect to the
two-for-one stock split of our Class A and Class B common shares that occurred
February 22, 2002 (see Note 10 for further discussion).

Cash and cash equivalents
Cash and cash equivalents consist primarily of cash, short-term investments in
commercial paper, and money market investments that have an initial maturity of
three months or less. Cash equivalents are valued at cost, which approximates
market. Included in cash and cash equivalents are approximately $5.4 million
and $4.9 million at June 30, 2002 and 2001, respectively, of restricted cash
held on behalf of governmental customers.

Allowance for doubtful accounts
We make estimates of the collectibility of our accounts receivables. We
specifically analyze accounts receivables and historical bad debts, customer
credit-worthiness, current economic trends, and changes in our customer payment
terms and collection trends when evaluating the adequacy of our allowance for
doubtful accounts. Any change in the assumptions used in analyzing a specific
account receivable may result in additional allowance for doubtful accounts
being recognized in the period in which the change occurs. Our allowance for
doubtful accounts was approximately $7.0 million and $5.6 million at June 30,
2002 and 2001, respectively.

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

Marketable Securities
Marketable securities were recorded in prepaid expenses and other current
assets at June 30, 2001 and consisted of a single corporate equity security
investment that was classified as available-for-sale and was sold in June 2002.
The investment was recorded at fair market value, and changes in unrealized
holding gains or losses were reported as a component of other comprehensive
income in stockholders equity until sold, at which time a gain of $52 thousand
was realized.

Property and equipment, net
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 ranges primarily from three to ten years and for buildings and
improvements up to forty years. Leasehold improvements are depreciated over
the shorter of the term of the lease or the estimated life. Depreciation
expense on property and equipment was approximately $74.5 million, $50.7
million, and $43.5 million for the fiscal years ended June 30, 2002, 2001 and
2000, respectively.

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

Software
Costs incurred to develop computer software to be sold as a separate product
are capitalized only after technological feasibility has been established.
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. Amortization of
computer software was approximately $13.9 million, $6.0 million, and $6.5
million in fiscal 2002, 2001 and 2000, respectively. The increase in fiscal
year 2002 compared to 2001 is due to the acquisitions completed in fiscal years
2002 and 2001. The decrease in fiscal year 2001 compared to 2000 is primarily
related to our June 2000 divestitures.

In accordance with Statement of Position 98-1, Accounting for Costs of
Computer Software Developed or Obtained for Internal Use (SOP 98-1), certain
costs related to the development or purchase of internal-use software are
capitalized and amortized over the estimated useful life of the software.
During fiscal 2002 and 2001, we capitalized approximately $15.8 million and
$7.7 million, respectively, in software costs under SOP 98-1, which are being
amortized over a three-year life. These capitalized amounts include internal
costs of approximately $12.1 million and $1.3 million and external costs of
approximately $3.7 million and $6.4 million for fiscal years 2002 and 2001,
respectively. These costs were incurred in the development of our proprietary
software used in connection with our long-term client relationships, primarily
in the state and local business process outsourcing market.

Goodwill
In June 2001, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 142 addresses the accounting and
reporting of acquired goodwill and other intangible assets. SFAS 142
discontinues amortization of acquired goodwill and instead requires annual
impairment testing of acquired goodwill. Intangible assets are amortized over
their useful economic life and tested for impairment in accordance with
Statement of Financial Accounting Standards No. 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of 
(SFAS 121).

We adopted SFAS 142 effective July 1, 2001. SFAS 142 has had a significant
positive impact on our financial results based on the historical amortization
of goodwill. During fiscal years 2001 and 2000, we had after-tax goodwill
amortization expense of approximately $20.7 million and $18.8 million,
respectively. There is no goodwill amortization expense for fiscal year 2002
in accordance with the adoption of SFAS 142.

Our business acquisitions typically result in goodwill and other intangible
assets, which affect the amount of future period amortization expense and
possible expense we could incur as a result of an impairment. The
determination of the value of goodwill and other intangibles requires us to
make estimates and assumptions about future business trends and growth. If an
event occurs that could cause us to revise our estimate and assumptions used in
analyzing the value of our goodwill or other intangibles, such revision could
result in an impairment charge that could have a material impact on our
financial results.

Other intangible assets
Other intangible assets consist primarily of customer and migration costs,
which are recorded at cost and amortized using the straight-line method over
the contract terms. Customer related intangibles are amortized over a weighted
average of approximately 8 years, and all other intangibles are amortized over
a weighted average of 9 years. The determination of the value of other
intangibles requires us to make estimates and assumptions about future business
trends and growth. For the IMS, Andersen, and AFSA acquisitions (as defined in
Note 2) in 2002, we obtained a third-party valuation of the intangible assets.
If an event occurs which would cause us to revise our estimates and assumptions
used in analyzing the value of our other intangibles, such revision could
result in an impairment charge that could have a material impact on our
financial results.

Derivative financial instruments
We use derivative financial instruments for the purpose of hedging specific
exposures and hold all derivatives for purposes other than trading. All
derivative financial instruments held reduce the risk of the underlying hedged
item and are designated at inception as hedges with respect to the underlying
hedged item. Such instruments to date have

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

been limited to interest rate swap contracts and a no-cost equity collar (see
Note 13). As of June 30, 2002, we no longer hold any derivative financial
instruments.

Other assets
Other assets consists of equity investments accounted for using the cost
method, deferred debt issuance costs, and long-term receivables. Deferred
annuity contracts included in long-term investments are carried at cost plus
accrued interest, which approximates fair market value. It is our policy to
periodically review the net realizable value of our 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. During fiscal year 2002, we
recorded a $7.4 million loss ($4.7 million, net of tax) associated with a
write-down of a cost-basis investment to its estimated realizable value. The
deferred debt issuance costs are being amortized using the straight-line method
over the life of the related debt, which approximates the effective interest
method.

Revenue recognition
During fiscal year 2001, we adopted Staff Accounting Bulletin 101 Revenue
Recognition in Financial Statements (SAB 101). SAB 101 provides guidance on
the recognition, presentation, and disclosure of revenue in financial
statements. We recognize revenues when persuasive evidence of an arrangement
exists, the product has been shipped or the services have been provided to the
client, the sales price is fixed or determinable, and collectibility is
reasonably assured. The adoption of SAB 101 did not have a material impact on
our results of operations.

Generally, information technology processing revenues are recognized as
services are provided to the client. Revenues from annual maintenance contracts
are deferred and recognized ratably over the maintenance period. Revenues from
hardware sales are recognized upon delivery to the client and uncertainties
regarding customer acceptance have expired.

Revenues for business process outsourcing services are normally determined on
the basis of the number of accounts or transactions processed.

In the federal government segment, our contracts are typically cost
reimbursable, fixed price, unit price, or time and material contracts. Revenues
on cost reimbursable contracts are recognized by applying an estimated factor
to costs as incurred, such factor being determined by the contract provisions
and prior experience. Revenues on unit-price contracts are recognized at the
contractual selling prices of work completed and accepted by the client.
Revenues on time and material contracts are recognized at the contractual rates
as the labor hours and direct expenses are incurred.

Revenues on fixed price contracts are recognized over the contract term based
on the percentage of services that are provided during the period compared with
the total estimated services to be provided over the entire contract using
Statement of Position 81-1, Accounting for Performance of Construction-Type
and Certain Production-Type Contracts (SOP 81-1), which requires the use of
percentage-of-completion accounting for long-term contracts that are binding
agreements between ACS and our clients in which we agree, for compensation, to
perform a service to the clients specifications. Performance will often
extend over long periods, and our right to receive payment depends on our
performance in accordance with the agreement.

The percentage-of-completion methodology involves recognizing revenue based on
using the percentage of services completed, on a current cumulative cost to
total cost basis, using a reasonably consistent profit margin over the period.
Due to the long-term nature of these contracts, developing the estimates of
costs often requires significant judgment. Factors that must be considered in
estimating the progress of work completed and ultimate cost of the contract
include, but are not limited to, the availability of labor and labor
productivity, the nature and complexity of the work to be performed, the impact
of delayed performance, and availability and timing of funding from the client.
If changes occur in delivery, productivity, or other factors used in
developing the estimates of costs or revenues, we revise our cost and revenue
estimates, and any revisions are charged to income in the period in which the
facts that give rise to that

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

revision become known. During the fiscal year ended June 30, 2002, less than
5% of our revenues were derived from percentage-of-completion contracts.

Revenues earned in excess of related billings are accrued, whereas billings in
excess of revenues earned are deferred until the related services are provided.
Immediate recognition is made of any anticipated losses.

Revenues earned from our five largest customers each year together comprised
14%, 18%, and 18% of revenues for the years ended June 30, 2002, 2001, and
2000, respectively. Trade accounts receivable from these customers aggregated
approximately $88.6 million at June 30, 2002 and $43.7 million at June 30,
2001.

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
Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the combination of dilutive common share equivalents and the
weighted average number of common shares outstanding during the period. All
share and per share information is presented giving effect to the two-for-one
stock split of our Class A and Class B common shares that occurred February 22,
2002. See Note 12 for the computation of earnings per share.

Stock-based compensation
We 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, we have 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. See Note 11 for discussion of
the impact on earnings and earnings per share of our stock-based compensation
plans.

Reclassifications
Certain reclassifications have been made to prior period financial statements
to conform to current presentation.

2.     Business Combinations

From our inception through June 30, 2002, we have acquired several businesses
in the information technology services and business process outsourcing
industries that were accounted for under the purchase accounting method. Our
recent acquisition activity is summarized as follows:

|                                       |                       |                                                       |   |           |           |      |   |         |         |  |   |         |         | 
|-------------------------------------- | --------------------- | ----------------------------------------------------- | - | --------- | --------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|Year ended June 30,                    |                       | 2002                                                  |   | 2001      |           | 2000
|                                       |                       |                                                       |   |           |           |     
|Purchase consideration (in thousands): |                       |                                                       |   |           |           |      |   |         |         |  |   |        
|                                       | Net cash paid         |                                                       | $ | 1,405,009 |           |      | $ | 166,108 |         |  | $ | 211,355 |        
|                                       | Amounts due to seller |                                                       |   | 14,740    |           |      |   | 1,536   |         |  |   | 708     |        
|                                       | Liabilities assumed   |                                                       |   | 188,699   |           |      |   | 19,220  |         |  |   | 59,759  |        
|                                       |                       |                                                       |   |           |           |      |   |         |         |  |   |        
|                                       |                       | Fair value of assets acquired
(including intangibles) |   | $         | 1,608,448 |      |   | $       | 186,864 |  |   | $       | 271,822 | 
|                                       |                       |                                                       |   |           |           |      |   |         |         |  |   |        

During fiscal year 2002, we acquired eight companies, the most significant of
which were the acquisitions of Lockheed Martin IMS Corporation (IMS) in
August 2001 and AFSA Data Corporation (AFSA) in June 2002.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We acquired 100% of the stock of IMS (now known as ACS State and Local
Solutions) a wholly-owned subsidiary of Lockheed Martin Corporation for
approximately $825 million plus related transaction costs. The acquisition was
funded from a $550 million 18-month interim credit facility, borrowings from
our existing revolving credit facility, and existing cash on hand. This
interim credit facility was repaid in October 2001 with the proceeds from the
equity offering of 18.4 million shares of our Class A common stock at $40.50
per share (see Note 10). IMS results have been included in our consolidated
financial statements from the effective date of the acquisition, August 1,
2001. IMS provides business process outsourcing services to more than 230
state and local government agencies in 45 U.S. states, the District of
Columbia, Canada, Australia, and Europe. IMS specializes in child support
enforcement, welfare and workforce services, child care management, electronic
toll collection, and other intelligent transportation services involving the
trucking industry, photo enforcement of red-light and speeding violations,
parking management, and information technology outsourcing. We believe the
acquisition of IMS solidifies ACS as a leader in technology-based outsourcing
solutions to state and local government agencies.

The acquisition was accounted for under the purchase method of accounting with
assets acquired of $934.1 million and liabilities of $109.1 million. The
purchase price was allocated to assets acquired and liabilities assumed based
on the estimated fair value at July 31, 2001 as follows (in thousands):

|                                 |                           |   |         |         | 
|-------------------------------- | ------------------------- | - | ------- | ------- | 
|Current assets                   |                           | $ | 111,561 |        
|Property, equipment and software |                           |   | 50,972  |        
|Other long-term assets           |                           |   | 2,826   |        
|Intangible assets                |                           |   | 64,300  |        
|Goodwill                         |                           |   | 704,392 |        
|                                 |                           |   |         |        
|                                 | Total assets acquired     |   |         | 934,051 | 
|Current liabilities              |                           |   | 109,051 |        
|                                 |                           |   |         |        
|                                 | Total liabilities assumed |   |         | 109,051 | 
|                                 |                           |   |         |        
|                                 | Net assets acquired       |   | $       | 825,000 | 
|                                 |                           |   |         |        

The total amount of goodwill is expected to be fully deductible for tax
purposes. Software of $41.5 million is included in property, equipment and
software and has an anticipated useful life ranging from 2 to 10 years. The
$64.3 million of acquired intangible assets is attributable to customer
relationships with an aggregate anticipated useful life of approximately 11
years.

In June 2002 we acquired AFSA, a subsidiary of FleetBoston Financial
Corporation, for approximately $410 million plus related transaction costs.
The acquisition was funded with a combination of a $375 million 18-month
interim credit facility, borrowings from our existing revolving credit
facility, and existing cash on hand. AFSA is the nations largest educational
services company, servicing a student loan portfolio of 8.1 million borrowers
with outstanding loans of approximately $85 billion. Additionally, AFSA is a
leading business process outsourcer for federal, state, and local governments
for a variety of health and human services programs, including Medicare,
Medicaid, childrens health insurance programs (CHIP), and welfare-to-workforce
services.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The acquisition was accounted for under the purchase method of accounting with
assets acquired of $488.6 million and liabilities of $54.7 million. The
purchase price was allocated to assets acquired and liabilities assumed based
on the estimated fair value at June 1, 2002 as follows (in thousands):

|                                 |                           |   |         |         | 
|-------------------------------- | ------------------------- | - | ------- | ------- | 
|Current assets                   |                           | $ | 83,855  |        
|Property, equipment and software |                           |   | 37,440  |        
|Other long-term assets           |                           |   | 5,475   |        
|Intangible assets                |                           |   | 48,331  |        
|Goodwill                         |                           |   | 313,487 |        
|                                 |                           |   |         |        
|                                 | Total assets acquired     |   |         | 488,588 | 
|Current liabilities              |                           |   | 54,678  |        
|                                 |                           |   |         |        
|                                 | Total liabilities assumed |   |         | 54,678  | 
|                                 |                           |   |         |        
|                                 | Net assets acquired       |   | $       | 433,910 | 
|                                 |                           |   |         |        

The total amount of goodwill is expected to be fully deductible for tax
purposes. Software of $17.6 million is included in property, equipment and
software and has an anticipated useful life of approximately 6 years. The
$48.3 million of acquired intangible assets is primarily attributable to
customer relationships with an aggregate anticipated useful life of
approximately 11 years and non-compete agreements with amortization periods of
approximately 5 years.

In May 2002, we acquired the finance and accounting business process
outsourcing unit of Andersen Worldwide (Andersen). This business generated
revenue of approximately $55 million for the year ended December 31, 2001.
Included in this acquisition are contracts with General Motors (GM) and the
University of Phoenix (the University). Under a new 10-year agreement with
GM, we will provide transactional accounting services such as payroll
processing, disbursement processing, dealer accounting, accounts receivable
processing, lease and subsidiary accounting, and expense reporting in the
United States and Europe. Under the arrangement with the University, we will
provide student financial aid business process outsourcing services to the
University including federal eligibility determinations, loan and grant
processing, and disbursement of student aid as well as other support services
related to student financial aid processing. The acquisition was valued at
$65.2 million plus related transaction costs, with assets acquired of $79.0
million and liabilities assumed of $13.8 million. We recorded goodwill of
$58.7 million (which is fully deductible for tax purposes) and $9.1 million in
intangible assets. The $9.1 million of intangible assets are attributable to
customer relationships with lives of three to ten years. Andersens operating
results are included in our financial statements from the effective date of the
acquisition, May 1, 2002 for the domestic operations and June 1, 2002 for the
foreign operations. This acquisition is not considered material to our results
of operations; therefore, no pro forma information is presented.

We acquired the business process outsourcing services unit of National
Processing Company (NPC). NPC provides healthcare claims processing, credit
card application processing, and airline lift ticket processing. As part of the
transaction, we acquired all of NPCs offshore operations in Jamaica, the
Dominican Republic, Barbados, and a majority of NPCs Mexican operations. The
transaction value was $43 million plus related transaction costs, with assets
acquired of $50.3 million and liabilities assumed of $7.3 million. We recorded
goodwill of $25.8 million of which 61% is fully deductible for tax purposes and
$2.8 million in intangible assets. The $2.8 million intangible assets are
attributable to customer relationships with an aggregate anticipated useful
life of approximately 3 years. NPCs operating results are included in our
financial statements from the effective date of the acquisition, August 1,
2001. This acquisition is not considered material to our results of
operations; therefore, no pro forma information is presented.

We completed four other acquisitions during fiscal 2002, two of which were
included in our commercial segment, one in our state and local governments
segment, and one in our federal government segment. These acquisitions are not
considered material to our results of operations; therefore, no pro forma
information is presented.

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

During fiscal year 2001, we acquired five companies. The most significant of
these increased our presence in the state and local government sector. We
acquired the Global Government Solutions division of Systems & Computer
Technology Corporation, which delivers state and local government outsourcing
solutions. We also acquired Business Resources Corporation, which provides
outsourced records management, document workflow imaging systems and services,
and real estate title plant services to state and local governments. These
acquisitions are not considered material to our results of operations;
therefore, no pro forma information is presented.

During fiscal year 2000, we acquired three companies, two serving our state and
local government markets and one serving the federal government market. The
Intellisource Group, Inc. is a leading provider of information technology
solutions to the federal, state, and local government and utility markets.
Birch & Davis Holdings, Inc. provides program management operations and
consulting services related to healthcare delivery and reform issues, primarily
to federal and state government agencies. Consultec, LLC provides design,
development, and operation of decision support, claims administration, and
managed care support systems to over twenty state Medicaid programs.

We are obligated to make certain contingent payments to former owners based on
the achievement of specified profit levels in conjunction with certain
acquisitions. During fiscal 2002, we made no contingent consideration payments
related to acquisitions completed in prior years. As of June 30, 2002, the
maximum aggregate amount of the outstanding contingent obligations is
approximately $19 million, none of which has been earned to date. Any such
payments result in a corresponding increase in goodwill.

Pro forma Financial Information

The following unaudited pro forma financial information presents a summary of
our consolidated results of operations as if the IMS and AFSA acquisitions had
occurred at the beginning of the periods presented and are not necessarily
indicative of future results or actual results that would have been achieved
had the acquisitions occurred at the beginning of the periods presented (in
thousands, except per share amounts).

|                           |  |                     |           |      |  |   |           | 
|-------------------------- |  | ------------------- | --------- | ---- |  | - | --------- | 
|                           |  | For the years ended
|                           |  | June 30,           
|                           |  |                    
|                           |  | 2002                |           | 2001
|                           |  |                     |           |     
|Revenue                    |  | $                   | 3,267,517 |      |  | $ | 2,835,551 | 
|Net income                 |  |                     | 256,268   |      |  |   | 181,811   | 
|Earnings per common share: |  |                     |           |      |  |   |           | 
|Basic                      |  | $                   | 2.16      |      |  | $ | 1.82      | 
|Diluted                    |  | $                   | 1.96      |      |  | $ | 1.64      | 

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

3.     Accounts Receivable

The components of accounts receivable are as follows (in thousands):

|                                           |                                                                                                   |   |          |         |      |   |         |         | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------- | - | -------- | ------- | ---- | - | ------- | ------- | 
|                                           |                                                                                                   |   | June 30,
|                                           |                                                                                                   |   |         
|                                           |                                                                                                   |   | 2002     |         | 2001
|                                           |                                                                                                   |   |          |         |     
|Amounts Billable:                          |                                                                                                   |   |          |         |      |   |         |        
|                                           | State and local governments                                                                       |   | $        | 245,136 |      |   | $       | 72,669  | 
|                                           | Commercial                                                                                        |   |          | 207,444 |      |   |         | 168,309 | 
|                                           | Federal government                                                                                |   |          | 185,764 |      |   |         | 171,377 | 
|                                           |                                                                                                   |   |          |         |      |   |         |        
|                                           |                                                                                                   |   | 638,344  |         |      |   | 412,355 |        
|                                           |                                                                                                   |   |          |         |      |   |         |        
|Amounts Unbilled:                          |                                                                                                   |   |          |         |      |   |         |        
|                                           | Amounts not yet billable                                                                          |   |          | 100,174 |      |   |         | 59,691  | 
|                                           | Excess of actual indirect costs over amounts currently
billable under cost reimbursable contracts |   |          | 3,608   |      |   |         | 4,912   | 
|Contract retainages not currently billable |                                                                                                   |   | 1,301    |         |      |   | 704     |        
|                                           |                                                                                                   |   |          |         |      |   |         |        
|                                           |                                                                                                   |   | 105,083  |         |      |   | 65,307  |        
|                                           |                                                                                                   |   |          |         |      |   |         |        
|Total accounts receivable                  |                                                                                                   |   | 743,427  |         |      |   | 477,662 |        
|Allowances for doubtful accounts           |                                                                                                   |   | (6,956   | )       |      |   | (5,620  | )      
|                                           |                                                                                                   |   |          |         |      |   |         |        
|                                           |                                                                                                   | $ | 736,471  |         |      | $ | 472,042 |        
|                                           |                                                                                                   |   |          |         |      |   |         |        

Unbilled amounts reflect those amounts that are associated with percentage of
completion accounting, governmental holdbacks, and other unbilled amounts not
currently billable due to contractual provisions. To the extent not currently
billable at June 30, 2002 and 2001, 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, 2002, approximately $4.9 million are not expected to be
billed and collected within one year.

Billable and unbilled amounts at June 30, 2001 have been reclassified to
conform with current year presentation and industry practice. Amounts to be
invoiced in the subsequent month for current month services are included in
billable. Billable amounts at June 30, 2002 and 2001 include approximately
$236.0 million and $132.6 million, respectively, for services which have been
completed and will be billed in the succeeding month.

4.     Marketable Securities

As of June 30, 2002, we did not hold any investments in marketable securities.
As of June 30, 2001, we had a marketable security that consisted of a single
investment in a corporate equity security that was classified as available for
sale and recorded at its fair value of approximately $1.3 million. This
marketable security was sold in June 2002.

We entered into a no-cost equity collar related to this equity security to
ensure protection from the volatility of its fair value. The collar was
accounted for as a fair value hedge, and all gains or losses of the hedge were
recognized in earnings in the period of change together with the offsetting
gains or losses on the equity security outside the collar. Unrealized gains or
losses on the equity security within the collar were recorded in accumulated
other comprehensive income. At June 30, 2001, unrealized gains of $84
thousand were recorded as a component of accumulated other comprehensive
income. In June 2002, we sold the marketable security, recognizing a gain on
investment of $52 thousand.

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

5.     Property, Equipment and Software

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

|                                          |  |          |          |      |  |   |          |  
|----------------------------------------- |  | -------- | -------- | ---- |  | - | -------- | -
|                                          |  | June 30,
|                                          |  |         
|                                          |  | 2002     |          | 2001
|                                          |  |          |          |     
|Land                                      |  | $        | 21,907   |      |  | $ | 19,753   |  
|Buildings and improvements                |  |          | 98,709   |      |  |   | 73,814   |  
|Computer equipment and software           |  |          | 434,620  |      |  |   | 268,899  |  
|Furniture and fixtures                    |  |          | 120,324  |      |  |   | 89,455   |  
|Construction in progress                  |  |          | 2,121    |      |  |   | 2,452    |  
|                                          |  |          |          |      |  |   |          |  
|                                          |  |          | 677,681  |      |  |   | 454,373  |  
|Accumulated depreciation and amortization |  |          | (282,851 | )    |  |   | (216,810 | )
|                                          |  |          |          |      |  |   |          |  
|                                          |  | $        | 394,830  |      |  | $ | 237,563  |  
|                                          |  |          |          |      |  |   |          |  

6.     Goodwill and Other Intangible Assets

We adopted SFAS 142 effective July 1, 2001. The following table reflects the
effect of SFAS 142 on net income and earnings per share as if SFAS 142 had been
in effect for all periods presented (in thousands except per share amounts):

|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |        | 
|--------------------------- | -------------------------------------------------------------------------------------------- | - | ------------------- | ---- | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                            |                                                                                              |   | Year ended June 30,
|                            |                                                                                              |   |                    
|                            |                                                                                              |   | 2002                |      | 2001 |   | 2000   
|                            |                                                                                              |   |                     |      |      |   |        
|Net income                  |                                                                                              | $ | 229,596             |      |      | $ | 134,292 |        |  | $ | 109,312 |       
|                            | Add back goodwill amortization,
Net of related tax benefit
($3,757 and $2,749, respectively) |   |                     |     |      |   |         | 20,711 |  |   |         | 18,824 | 
|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|Adjusted net income         |                                                                                              | $ | 229,596             |      |      | $ | 155,003 |        |  | $ | 128,136 |       
|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|Basic earnings per share:   |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|                            | Reported net income                                                                          |   | $                   | 1.94 |      |   | $       | 1.35   |  |   | $       | 1.11   | 
|                            | Add back goodwill amortization
(net of tax benefit)                                          |   |                     |     |      |   |         | 0.21   |  |   |         | 0.19   | 
|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|                            | Adjusted net income                                                                          |   | $                   | 1.94 |      |   | $       | 1.56   |  |   | $       | 1.30   | 
|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|Diluted earnings per share: |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|                            | Reported net income                                                                          |   | $                   | 1.76 |      |   | $       | 1.23   |  |   | $       | 1.03   | 
|                            | Add back goodwill amortization
(net of tax benefit)                                          |   |                     |     |      |   |         | 0.18   |  |   |         | 0.17   | 
|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       
|                            | Adjusted net income                                                                          |   | $                   | 1.76 |      |   | $       | 1.41   |  |   | $       | 1.20   | 
|                            |                                                                                              |   |                     |      |      |   |         |        |  |   |         |       

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

The changes in the carrying amount of goodwill for the year ended June 30, 2002
are as follow (in thousands):

|                                  |  |            |         |            |  |            |           |         |  |   |         |  |  |   |           | 
|--------------------------------- |  | ---------- | ------- | ---------- |  | ---------- | --------- | ------- |  | - | ------- |  |  | - | --------- | 
|                                  |  |            |         |            |  | State and  |           |         |  |   |         |  |  |  
|                                  |  |            |         |            |  | Local      |           | Federal |  |   |         | 
|                                  |  | Commercial |         | Government |  | Government |           | Total  
|                                  |  |            |         |            |  |            |           |        
|Balance as of June 30, 2001       |  | $          | 266,178 |            |  | $          | 308,709   |         |  | $ | 122,873 |  |  | $ | 697,760   | 
|Goodwill activity during the year |  |            | 399,968 |            |  |            | 735,403   |         |  |   | 13,351  |  |  |   | 1,148,722 | 
|                                  |  |            |         |            |  |            |           |         |  |   |         |  |  |   |           | 
|Balance as of June 30, 2002       |  | $          | 666,146 |            |  | $          | 1,044,112 |         |  | $ | 136,224 |  |  | $ | 1,846,482 | 
|                                  |  |            |         |            |  |            |           |         |  |   |         |  |  |   |           | 

The goodwill activity during the year is primarily due to our fiscal 2002
acquisition activity (see Note 2).

The following table reflects the balances of our other intangibles as of June
30, 2002 (in thousands):

|                              |                                       |       |   |                |         |              |   |         |         |  
|----------------------------- | ------------------------------------- | ----- | - | -------------- | ------- | ------------ | - | ------- | ------- | -
|                              |                                       |       |   | Gross Carrying |         | Accumulated 
|                              |                                       |       |   | Amount         |         | Amortization
|                              |                                       |       |   |                |         |             
|Amortized intangible assets:  |                                       |       |   |                |         |              |   |        
|                              | Acquired customer related
intangibles |       | $ | 143,769        |         |              | $ | (14,567 | )      
|                              | Other customer related intangibles    |       |   | 91,232         |         |              |   | (38,953 | )      
|                              | All other                             |       |   | 3,808          |         |              |   | (1,802  | )      
|                              |                                       |       |   |                |         |              |   |        
|                              |                                       | Total |   | $              | 238,809 |              |   | $       | (55,322 | )
|                              |                                       |       |   |                |         |              |   |        
|Unamortized intangible asset: |                                       |       |   |                |         |              |   |        
|                              | Title plant                           |       | $ | 50,800         |         |              |   |         |        
|                              |                                       |       |   |                |         |              |   |        
|                              |                                       | Total |   | $              | 50,800  |              |   |         |         |  
|                              |                                       |       |   |                |         |              |   |        
|Aggregate amortization:       |                                       |       |   |                |         |              |   |        
|                              | For the year ended June 30, 2002      |       |   |                |         |              | $ | 22,994  |        
|Estimated amortization:       |                                       |       |   |                |         |              |   |        
|                              | For the year ended June 30, 2003      |       |   |                |         |              | $ | 30,293  |        
|                              | For the year ended June 30, 2004      |       |   |                |         |              | $ | 26,613  |        
|                              | For the year ended June 30, 2005      |       |   |                |         |              | $ | 23,249  |        
|                              | For the year ended June 30, 2006      |       |   |                |         |              | $ | 19,905  |        
|                              | For the year ended June 30, 2007      |       |   |                |         |              | $ | 17,137  |        

Amortization includes amounts charged to amortization expense for customer
related intangibles and other intangibles, other than contract inducements,
which amortization ($0.9 million) is recorded as a reduction to related
contract revenue. Amortization of approximately $23 million for fiscal year
2002 includes approximately $9.0 million related to acquired customer related
intangibles. Customer related intangibles are amortized over a weighted average
of approximately 8 years. All other intangibles are amortized over a weighted
average of 9 years.

7.     Other Assets

Included in other assets are long-term investments, which consist primarily of
investments in preferred stock accounted for at cost, as these securities are
not considered marketable equity securities. Also included in long-term
investments are deferred annuity contracts carried at cost plus accrued
interest, which approximates fair market value and various bonds, carried at
cost. Dividend income recognized from such securities, which is reflected in
the consolidated financial statements as a component of other non-operating
income, was approximately $110 thousand during fiscal 2000. No amounts were
received in fiscal 2002 or 2001.

During the third quarter of fiscal 2002, we recorded a $7.4 million loss ($4.7
million, net of tax) in other non-operating expense associated with a
write-down of a cost basis investment to its estimated realizable value of $5.0
million. In the

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

second quarter of fiscal 2002, we recorded a $1.0 million loss on a long-term
investment we received in the December 1998 acquisition of BRC Holdings, Inc.
We had approximately $8.0 million in long-term investments as of June 30, 2002.

8.     Notes Payable and Long-term Debt

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

|                                                                                                                 |  |          |         |      |  |   |         |  
|---------------------------------------------------------------------------------------------------------------- |  | -------- | ------- | ---- |  | - | ------- | -
|                                                                                                                 |  | June 30,
|                                                                                                                 |  |         
|                                                                                                                 |  | 2002     |         | 2001
|                                                                                                                 |  |          |         |     
|3.5% Convertible Subordinated Notes due February 2006 (3.5% Notes) (a)                                         |  | $        | 316,990 |      |  | $ | 316,990 |  
|4% Convertible Subordinated Notes due March 2005 (4% Notes) (b)                                                |  |          |        |      |  |   | 229,937 |  
|Unsecured $450 million revolving credit agreement (Credit Facility)
payable to banks, due in December 2004 (c) |  |          | 15,000  |      |  |   | 100,000 |  
|Interim credit facility due December 2003 (d)                                                                    |  |          | 375,000 |      |  |   |        |  
|Capitalized lease obligations at various interest rates,
payable through 2005                                    |  |          | 2,281   |      |  |   | 4,483   |  
|Other                                                                                                            |  |          | 292     |      |  |   | 1,265   |  
|                                                                                                                 |  |          |         |      |  |   |         |  
|                                                                                                                 |  |          | 709,563 |      |  |   | 652,675 |  
|Less current portion                                                                                             |  |          | (1,330  | )    |  |   | (3,362  | )
|                                                                                                                 |  |          |         |      |  |   |         |  
|                                                                                                                 |  | $        | 708,233 |      |  | $ | 649,313 |  
|                                                                                                                 |  |          |         |      |  |   |         |  

Maturities of notes payable and long-term debt at June 30, 2002 are as follows
(in thousands):

|                     |  |   |         | 
|-------------------- |  | - | ------- | 
|Year ending June 30, |  |   |         | 
|                     |  |   |         | 
|2003                 |  | $ | 1,330   | 
|2004                 |  |   | 375,702 | 
|2005                 |  |   | 15,541  | 
|2006                 |  |   | 316,990 | 
|2007                 |  |   |        | 
|                     |  |   |         | 
|Total                |  | $ | 709,563 | 
|                     |  |   |         | 



---

|(a) |  | The 3.5% Notes are convertible at any time prior to the maturity date,
unless redeemed or repurchased, into Class A common stock at a conversion
rate of 23.0234 shares of Class A common stock for each $1,000 principal
amount of 3.5% Notes (equivalent to a conversion price of $43.44 per
share of Class A common stock), subject to adjustments in certain events.
Interest on the 3.5% Notes is payable semi-annually on February 15 and
August 15 of each year commencing August 15, 2001. The 3.5% Notes may be
redeemed at our option on or after February 18, 2004, in whole or in
part, at the redemption prices set forth in the 3.5% Notes. The
redemption price set forth in the 3.5% Notes is 101.4% and 100.7% of the
principal amount for the twelve-month periods beginning February 15, 2004
and 2005, respectively.                                
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | All the outstanding 4% Notes were converted to Class A common stock on
March 15, 2002 in accordance with Indenture dated March 20, 1998 between
ACS and U.S. Trust Company of Texas, N.A., as trustee prior to the March
15, 2002 redemption date. As the result of such conversions, 10.8
million shares of our Class A common stock were issued to such holders.
The 4% Notes were convertible, at any time prior to the maturity date,
unless redeemed or repurchased, into Class A common stock at a conversion
rate of 46.8864 shares of Class A common stock for each $1,000 principal
amount of 4% Notes (equivalent to a conversion price of $21.33 per share
of Class A common stock), subject to adjustments in certain events.
Interest on the 4% Notes was payable semi-annually on March 15 and
September 15 of each year commencing on September 15, 1998.
|   
|(c) |  | Interest on the Credit Facility is payable monthly at LIBOR (1.84% at
June 30, 2002) plus a range of .625% to 1.125% depending on a defined
debt to EBITDA ratio. The Credit Facility contains covenants which
require that we comply with certain negative, affirmative and financial
covenants customary in facilities of this nature, including but not
limited to the 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.
During fiscal 2000, we entered into this Credit Facility, which increased
the amount of availability from $200 million to $450 million.                                                                                   
|   
|(d) |  | The interim credit facility was entered into with Goldman Sachs Credit
Partners L.P. and Wells Fargo Bank Texas, N.A to fund a portion of the
AFSA Data Corporation acquisition. Interest on the interim credit
facility is payable monthly at LIBOR (1.84% at June 30, 2002) plus a
range of 0.850% to 1.875% depending on a defined debt to EBITDA ratio.
The interim credit facility contains covenants which require that we
comply with certain negative, affirmative and financial covenants
customary in facilities of this nature, including but not limited to the
maintenance of fixed charge ratios, limitations on acquisitions and
minimum net worth requirements. The interim credit
facility also has provisions that would permit acceleration of the maturity
of the borrowings after the occurrence of certain defined events of
default.             

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

On March 15, 2002, we completed the redemption of our 4% Convertible
Subordinated Notes due March 15, 2005 (the 4% Notes). Holders of all of the
outstanding 4% Notes converted their 4% Notes to shares of our Class A common
stock in accordance with Article XII of the Indenture dated as of March 20,
1998 between ACS and U.S. Trust Company of Texas, N.A., as trustee prior to the
March 15, 2002 redemption date. As the result of such conversions, 10.8
million shares of our Class A common stock were issued to such holders.

In August 2001, we entered into a $550 million 18-month interim credit facility
due January 2003 led by Bear, Stearns & Co., Inc. and Wells Fargo Bank Texas,
N.A. The proceeds from this debt were used to fund a portion of the IMS
acquisition in August 2001. Interest on this interim credit facility was
payable monthly at LIBOR (1.84% at June 30, 2002) plus 1.425% in the case of
LIBOR borrowings or prime plus 0.425% in the case of base-rate borrowings. The
balance of this credit facility was repaid with the proceeds from our October
2001 stock offering (see Note 10).

In June 2002, we entered into a $375 million 18-month interim credit facility
due December 2003 with Goldman Sachs Credit Partners, L.P. and Wells Fargo Bank
Texas, N.A. to fund a portion of the AFSA acquisition. Interest on this
interim credit facility is payable monthly at LIBOR (1.84% at June 30, 2002)
plus a range of 0.85% to 1.875% depending on a defined debt to EBITDA ratio.
The balance on this credit facility at June 30, 2002 was $375 million.

During the year ended June 30, 2001, $63 thousand of the 4% Notes were redeemed
and converted into 2,952 shares of common stock.

Cash payments for interest for the years ended June 30, 2002, 2001, and 2000
were approximately $27.5 million, $19.3 million, and $21.5 million,
respectively. Interest income was approximately $2.7 million, $8.7 million,
and $3.1 million for the years ended June 30, 2002, 2001, and 2000,
respectively.

At June 30, 2002, we have approximately $266 million available for use under
the $450 million revolving credit agreement after considering outstanding
letters of credit.

In September 2002, we entered into a new three and one-half year $875 million
credit facility on terms generally similar to our existing Credit Facility,
which was partially used to refinance the AFSA interim facility.

9.     Income Taxes

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

|         |           |              |                       |                                  |        |                     |         |      |        |        |        |   |         |        |         |  
|-------- | --------- | ------------ | --------------------- | -------------------------------- | ------ | ------------------- | ------- | ---- | ------ | ------ | ------ | - | ------- | ------ | ------- | -
|         |           |              |                       |                                  |        | Year ended June 30,
|         |           |              |                       |                                  |        |                    
|         |           |              |                       |                                  |        | 2002                |         | 2001 |        | 2000  
|         |           |              |                       |                                  |        |                     |         |      |        |       
|Current: |           |              |                       |                                  |        |                     |         |      |        |        |        |  
|         |           | U.S. Federal |                       | $                                | 74,112 |                     |         | $    | 50,022 |        |        | $ | 88,439  |       
|         |           | Foreign      |                       |                                  | 2,727  |                     |         |      | 1,689  |        |        |   | 1,480   |       
|         |           | State        |                       |                                  | 8,934  |                     |         |      | 6,131  |        |        |   | 6,913   |       
|         |           |              |                       |                                  |        |                     |         |      |        |        |        |  
|         |           |              | Total current expense |                                  |        | 85,773              |         |      |        | 57,842 |        |   |         | 96,832 |        
|         |           |              |                       |                                  |        |                     |         |      |        |        |        |  
|         | Deferred: |              |                       |                                  |        |                     |         |      |        |        |        |   |        
|         |           | U.S. Federal |                       |                                  | 42,150 |                     |         |      | 27,417 |        |        |   | (11,210 | )     
|         |           | Foreign      |                       |                                  |       |                     |         |      | 24     |        |        |   | 151     |       
|         |           | State        |                       |                                  | 2,937  |                     |         |      | 1,485  |        |        |   | 185     |       
|         |           |              |                       |                                  |        |                     |         |      |        |        |        |  
|         |           |              |                       | Total deferred expense (benefit) |        |                     | 45,087  |      |        |        | 28,926 |   |         |        | (10,874 | )
|         |           |              |                       |                                  |        |                     |         |      |        |        |        |  
|         |           |              |                       | Total expense for income taxes   |        | $                   | 130,860 |      |        | $      | 86,768 |   |         | $      | 85,958  |  
|         |           |              |                       |                                  |        |                     |         |      |        |        |        |  

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

Deferred tax assets (liabilities) consist of the following (in thousands):

|                          |                                                      |          |                                |          |          |          |      |         |        |         |  
|------------------------- | ---------------------------------------------------- | -------- | ------------------------------ | -------- | -------- | -------- | ---- | ------- | ------ | ------- | -
|                          |                                                      |          |                                |          | June 30,
|                          |                                                      |          |                                |          |         
|                          |                                                      |          |                                |          | 2002     |          | 2001
|                          |                                                      |          |                                |          |          |          |     
|Deferred tax assets:      |                                                      |          |                                |          |          |          |      |        
|                          | Accrued expenses not yet deductible
for tax purposes |          | $                              | 7,117    |          |          | $    | 10,663  |       
|                          | Loss carrybacks                                      |          |                                |         |          |          |      | 6,596   |       
|                          | Loss carryforwards                                   |          |                                | 2,428    |          |          |      | 1,468   |       
|                          | Divestiture-related accruals                         |          |                                | 4,356    |          |          |      | 5,078   |       
|                          | Unearned revenue                                     |          |                                | 4,481    |          |          |      | 6,352   |       
|                          | Other                                                |          |                                | 873      |          |          |      |        |       
|                          |                                                      |          |                                |          |          |          |      |        
|                          |                                                      | Subtotal |                                |          | 19,255   |          |      |         | 30,157 |        
|                          | Deferred tax assets valuation allowance              |          |                                | (105     | )        |          |      | (135    | )     
|                          |                                                      |          |                                |          |          |          |      |        
|                          |                                                      |          | Total deferred tax assets      |          |          | 19,150   |      |         |        | 30,022  |  
|Deferred tax liabilities: |                                                      |          |                                |          |          |          |      |        
|                          | Depreciation and amortization                        |          |                                | (106,666 | )        |          |      | (62,050 | )     
|                          | Section 481 adjustment                               |          |                                |         |          |          |      | (603    | )     
|                          | Unbilled revenue                                     |          |                                | (9,301   | )        |          |      | (6,556  | )     
|                          | Prepaid and receivables                              |          |                                | (5,921   | )        |          |      | (5,785  | )     
|                          | Other                                                |          |                                |         |          |          |      | (1,678  | )     
|                          |                                                      |          |                                |          |          |          |      |        
|                          |                                                      |          | Total deferred tax liabilities |          |          | (121,888 | )    |         |        | (76,672 | )
|                          |                                                      |          |                                |          |          |          |      |        
|                          |                                                      |          | Net deferred tax liabilities   |          | $        | (102,738 | )    |         | $      | (46,650 | )
|                          |                                                      |          |                                |          |          |          |      |        

At June 30, 2002, the Company had available unused domestic net operating loss
carryforwards (NOLs), net of Internal Revenue Code Section 382 limitations,
of approximately $3.0 million which will expire over various periods through
2022. The valuation allowance at June 30, 2002 exists principally due to tax
benefits of acquired corporations for which realization of any future benefit
is uncertain due to taxable income limitations. The valuation allowance for
deferred tax assets decreased by approximately $30 thousand and $564 thousand
during the years ended June 30, 2002 and 2001, respectively. The decrease in
2001 was due to the disposition of the stock of a subsidiary. The depreciation
and amortization related deferred tax liabilities significantly increased in
June 30, 2002 predominantly due to current tax deductions for acquired
intangibles and goodwill. Generally, as the adoption of SFAS 142 eliminates
the book goodwill amortization, the difference between the cumulative book and
tax bases of these intangibles will continue to grow.

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):

|                                   |  |                     |         |      |  |      |        |  |  |   |        | 
|---------------------------------- |  | ------------------- | ------- | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                   |  | Year ended June 30,
|                                   |  |                    
|                                   |  | 2002                |         | 2001 |  | 2000
|                                   |  |                     |         |      |  |     
|Statutory U.S. Federal income tax  |  | $                   | 126,160 |      |  | $    | 77,371 |  |  | $ | 68,345 | 
|Goodwill amortization              |  |                     |        |      |  |      | 4,305  |  |  |   | 12,405 | 
|State income taxes, net            |  |                     | 7,716   |      |  |      | 4,950  |  |  |   | 4,614  | 
|Capital loss on sale of subsidiary |  |                     | (2,104  | )    |  |      |       |  |  |   |       | 
|Other                              |  |                     | (912    | )    |  |      | 142    |  |  |   | 594    | 
|                                   |  |                     |         |      |  |      |        |  |  |   |        | 
|Total expense for income taxes     |  | $                   | 130,860 |      |  | $    | 86,768 |  |  | $ | 85,958 | 
|                                   |  |                     |         |      |  |      |        |  |  |   |        | 

Cumulative 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 approximately $8.0 million as of June 30, 2002. 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.

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

Federal, state and foreign income tax payments, net of refunds, during the
years ended June 30, 2002, 2001, and 2000 were approximately $39.5 million,
$80.3 million and $36.8 million respectively.

10.     Common Stock

Our Class A common stock trades publicly on the New York Stock Exchange (symbol
ACS) and is entitled to one vote per share. Our 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 March 2002, we completed the redemption of our 4% Notes. Holders of all of
the outstanding 4% Notes converted their Notes to shares of our Class A common
stock in accordance with Article XII of the Indenture dated as of March 20,
1998 between ACS and U.S. Trust Company of Texas, N.A., as trustee prior to the
March 15, 2002 redemption date. As the result of such conversions, 10.8
million shares of our Class A common stock were issued to such holders. In
fiscal 2001, prior to conversion, $63 thousand of our 4% Notes were converted
into 2,952 shares of Class A common stock.

In February 2002, we completed a two-for-one stock split of our outstanding
Class A common stock and Class B common stock implemented in the form of a 100%
stock dividend (Stock Split). Each holder of record of our Class A common
stock and Class B common stock as of the close of business on February 15, 2002
received an additional share of such stock held by them at that time. In
connection with the Stock Split, the number of shares of Class A common stock
reserved for issuance or subject to outstanding options granted under our
employee stock option or other benefit plans, as well as the number of shares
reserved for issuance under our 4% Convertible Subordinated Notes due March 15,
2005 and 3.5% Convertible Subordinated Notes due February 15, 2006, were
proportionately increased in accordance with the terms of such options, plans
and other instruments.

On October 10, 2001, we completed our offering of 18.4 million shares of our
Class A common stock. The shares were issued at $40.50 per share. Net
proceeds of $714.3 million (net of underwriters fees and other costs) were
used to repay the $550 million 18-month interim credit facility incurred to
fund the IMS acquisition and a portion of the amount outstanding under our
revolving credit facility.

In February 2001, we completed the sale of a new issue of approximately $317
million aggregate principal amount of our 3.5% Notes due February 15, 2006. The
3.5% Notes are convertible into Class A common stock at a conversion rate of
23.0234 shares for each $1,000 principal amount of the 3.5% Notes (equivalent
to a conversion price of $43.44 per share of Class A common stock), subject to
adjustments in certain events, none of which have occurred as of June 30, 2002.
We used $65 million of the proceeds to pay down our $450 million credit
facility. The remaining proceeds were used to fund our fourth quarter fiscal
2001 and first quarter fiscal 2002 acquisitions.

11.     Employee Benefit Plans

Under our 1997 Employee Stock Option Plan (the 1997 Plan), we have reserved
approximately 7.4 million shares of Class A common stock for issuance to key
employees at exercise prices determined by the Board of Directors. In May
2000, February 2001 and October 2001, the Board of Directors approved the
additional allotment of approximately 1.7 million, 1.6 million, and 4.1 million
shares, respectively, to the 1997 Plan in accordance with the terms and
conditions of the November 14, 1997 Proxy Statement under which the 1997 Plan
was authorized. Options granted under the 1997 Plan to our current employees
cannot exceed 12.8% of our issued and outstanding shares. Our 1988 Employee
Stock Option Plan (the 1988 Plan), which originally reserved 12 million
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, 3.2 million 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 Class A common
stock at the time of the grant. As reported in Note 1, we have 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 the periods presented for stock
option or employee stock purchase plans.

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

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 December 1997 Government Solutions merger. All options issued under the
1991 Plan were fully vested as of the effective date of the merger. 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.

The following table summarizes certain information related to our stock option
plans.

|                                                                |  |                      |            |                      |  |                              |       |                         |  |                      |           | 
|--------------------------------------------------------------- |  | -------------------- | ---------- | -------------------- |  | ---------------------------- | ----- | ----------------------- |  | -------------------- | --------- | 
|                                                                |  |                      |            |                      |  |                              |       |                         |  | Number of securities
|                                                                |  | Number of securities |            |                      |  |                              |       | remaining available for
|                                                                |  | to be issued upon    |            |                      |  |                              |       | future issuance under  
|                                                                |  | exercise of          |            | Weighted average     |  | equity compensation plans   
|                                                                |  | outstanding options, |            | exercise price of    |  | (excluding securities       
|                                                                |  | warrants and rights  |            | outstanding options, |  | reflected in initial column)
|Plan Category                                                   |  | as of June 30, 2002  |            | warrants and rights  |  | as of June 30, 2002         
|                                                                |  |                      |            |                      |  |                             
|Equity compensation
plans approved by
security
shareholders     |  |                      | 11,130,500 |                      |  | $                            | 22.88 |                         |  |                      | 3,849,686 | 
|Equity compensation
plans not approved
by security
shareholders |  |                      |           |                      |  |                              |      |                         |  |                      |          | 
|                                                                |  |                      |            |                      |  |                              |       |                         |  |                      |           | 
|Total                                                           |  |                      | 11,130,500 |                      |  | $                            | 22.88 |                         |  |                      | 3,849,686 | 
|                                                                |  |                      |            |                      |  |                              |       |                         |  |                      |           | 

Pro forma information regarding net income and earnings per share is required
by SFAS 123 and has been determined as if we had accounted for our 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 calculation for each grant. The following weighted average assumptions
were used for grants in fiscal 2002, 2001 and 2000: dividend yield of 0% in all
years for the 1997 and 1988 Plans; volatility of 34.94%, 35.84%, and 36.11% for
fiscal 2002, 2001, and 2000, respectively, for all Plans; risk-free interest
rates of 4.36%, 4.76%, and 6.25% for fiscal 2002, 2001, and 2000, respectively,
in the 1997 and 1988 Plans; and weighted average expected option life of 5.5
years for the 1997 and 1988 Plans and 3 years for the 1991 Plan for all years
presented. The average fair values of the options granted during fiscal 2002,
2001, and 2000 are estimated at $16.01, $9.93, and $7.58 respectively, for the
combined Plans. The fair values have been adjusted to reflect the February
2002 two-for-one stock dividend.

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

|                                                          |             |             |   |                     |         |      |   |      |         |  |   |      |         | 
|--------------------------------------------------------- | ----------- | ----------- | - | ------------------- | ------- | ---- | - | ---- | ------- |  | - | ---- | ------- | 
|                                                          |             |             |   | Year ended June 30,
|                                                          |             |             |   |                    
|                                                          |             |             |   | 2002                |         | 2001 |   | 2000
|                                                          |             |             |   |                     |         |      |   |     
|Net income:                                               |             |             |   |                     |         |      |   |      |         |  |   |     
|                                                          |             | As reported |   | $                   | 229,596 |      |   | $    | 134,292 |  |   | $    | 109,312 | 
|                                                          |             | Pro forma   |   |                     | 217,660 |      |   |      | 125,430 |  |   |      | 102,027 | 
|Basic earnings per common share:                          |             |             |   |                     |         |      |   |      |         |  |   |     
|                                                          | As reported |             | $ | 1.94                |         |      | $ | 1.35 |         |  | $ | 1.11 |        
|                                                          | Pro forma   |             |   | 1.83                |         |      |   | 1.26 |         |  |   | 1.04 |        
|Diluted earnings per common and
common equivalent shares: |             |             |   |                     |         |      |   |      |         |  |   |     
|                                                          | As reported |             | $ | 1.76                |         |      | $ | 1.23 |         |  | $ | 1.03 |        
|                                                          | Pro forma   |             |   | 1.68                |         |      |   | 1.16 |         |  |   | .97  |        

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

Option activity for the years ended June 30, 2002, 2001, and 2000 is summarized
as follows:

|                             |           |  |            |            |              |   |                  |       | 
|---------------------------- | --------- |  | ---------- | ---------- | ------------ | - | ---------------- | ----- | 
|                             |           |  |            |            |              |   | Weighted Average
|                             |           |  | Options    |            | Option Price
|                             |           |  |            |            |             
|Outstanding at June 30, 1999 |           |  | 10,513,750 |            |              | $ | 12.09            |      
|                             | Granted   |  |            | 2,365,924  |              |   |                  | 16.96 | 
|                             | Exercised |  |            | (664,920   | )            |   |                  | 4.79  | 
|                             | Canceled  |  |            | (1,003,414 | )            |   |                  | 14.89 | 
|                             |           |  |            |            |              |   |                  |      
|Outstanding at June 30, 2000 |           |  | 11,211,340 |            |              |   | 13.31            |      
|                             | Granted   |  |            | 2,648,000  |              |   |                  | 23.85 | 
|                             | Exercised |  |            | (2,388,016 | )            |   |                  | 7.46  | 
|                             | Canceled  |  |            | (759,234   | )            |   |                  | 18.18 | 
|                             |           |  |            |            |              |   |                  |      
|Outstanding at June 30, 2001 |           |  | 10,712,090 |            |              |   | 16.87            |      
|                             | Granted   |  |            | 2,543,000  |              |   |                  | 39.82 | 
|                             | Exercised |  |            | (1,679,390 | )            |   |                  | 10.66 | 
|                             | Canceled  |  |            | (445,200   | )            |   |                  | 21.11 | 
|                             |           |  |            |            |              |   |                  |      
|Outstanding at June 30, 2002 |           |  | 11,130,500 |            |              |   | 22.88            |      
|                             |           |  |            |            |              |   |                  |      
|Exercisable at June 30, 2002 |           |  | 633,100    |            |              | $ | 8.16             |      

Further information regarding outstanding and exercisable stock options by
exercise price range as of June 30, 2002 is disclosed below:

|                |               |             |                     |             |                     |          |           |             |          |          |       |       |  |  |          |         |  |   |      |       | 
|--------------- | ------------- | ----------- | ------------------- | ----------- | ------------------- | -------- | --------- | ----------- | -------- | -------- | ----- | ----- |  |  | -------- | ------- |  | - | ---- | ----- | 
|                |               |             | 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   
|                |               |             |                     |             |                     |          |           |             |          |         
|$  4.00 - 8.44  |               |             | 447,100             |             |                     |          | 3.25      |             |          | $        | 7.16  |       |  |  | 447,100  |         |  | $ | 7.16 |      
|                | 10.31 - 18.38 |             |                     | 4,725,400   |                     |          |           | 6.70        |          |          |       | 14.65 |  |  |          | 186,000 |  |   |      | 17.28 | 
|                | 19.25 - 35.48 |             |                     | 3,802,000   |                     |          |           | 7.71        |          |          |       | 24.93 |  |  |          |        |  |   |      |      | 
|                | 38.66 - 50.23 |             |                     | 2,156,000   |                     |          |           | 9.32        |          |          |       | 40.55 |  |  |          |        |  |   |      |      | 
|                |               |             |                     |             |                     |          |           |             |          |          |       |       |  |  |          |         |  |   |      |      
|                |               |             | 11,130,500          |             |                     |          | 7.41      |             |          |          | 22.88 |       |  |  | 633,100  |         |  | $ | 8.16 |      
|                |               |             |                     |             |                     |          |           |             |          |          |       |       |  |  |          |         |  |   |      |      

Under our 1995 Employee Stock Purchase Plan, a maximum of 2 million shares of
Class A common stock can be issued to substantially all full-time employees.
Through payroll deductions, eligible participants may purchase our stock at a
15% discount to market value. The stock is purchased by the Plan in the open
market, and our contributions for the years ended June 30, 2002, 2001, and 2000
which were charged to additional paid-in capital, were approximately $1.4
million, $1.3 million, and $1.4 million, respectively.

We have contributory retirement and savings plans, which cover all employees
and allow for discretionary matching contributions by us as determined by our
Board of Directors. Contributions made by us to certain plans during the years
ended June 30, 2002, 2001, and 2000 were approximately $22.6 million, $10.5
million, and $10.0 million, respectively.

12.     Earnings Per Share

Basic earnings per share of common stock is computed using the weighted average
number of our common shares outstanding during the period. Diluted earnings
per share is adjusted for the after-tax impact of interest on the 3.5% Notes
and the 4% Notes and reflects the incremental shares available for issue upon
the assumed exercise of stock

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

options and conversion of the 3.5% Notes and the 4% Notes. All shares are
presented after giving effect to the two-for-one stock split paid on February
22, 2002 (see Note 10).

The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share amounts):

|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |         |        |       | 
|------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------------- | ---------------------------- | ------- | ------------------- | ------ | ------- | ------- | ------ | ----- | ------- | ------- | ------ | ----- | 
|                                                                                            |                                                                                    |                               |                              |         | Year ended June 30,
|                                                                                            |                                                                                    |                               |                              |         |                    
|                                                                                            |                                                                                    |                               |                              |         | 2002                |        | 2001    |         | 2000  
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |       
|Numerator:                                                                                  |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|                                                                                            | Numerator for earnings per share (basic) -
income available to common stockholders |                               | $                            | 229,596 |                     |        | $       | 134,292 |        |       | $       | 109,312 |       
|                                                                                            | Effect of dilutive securities:                                                     |                               |                              |         |                     |        |         |         |        |       |         |         |       
|                                                                                            |                                                                                    |                               | Interest on convertible debt |         |                     | 12,610 |         |         |        | 9,036 |         |         |        | 6,155 | 
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|Numerator for earnings per share assuming dilution-
Income available to common stockholders |                                                                                    | $                             | 242,206                      |         |                     | $      | 143,328 |         |        | $     | 115,467 |        
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|Denominator:                                                                                |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|                                                                                            | Weighted average shares outstanding (basic)                                        |                               |                              | 118,646 |                     |        |         | 99,758  |        |       |         | 98,487  |       
|                                                                                            | Effect of dilutive securities:                                                     |                               |                              |         |                     |        |         |         |        |       |         |         |       
|                                                                                            |                                                                                    | Convertible debt              |                              |         | 14,851              |        |         |         | 13,354 |       |         |         | 10,784 |      
|                                                                                            |                                                                                    | Stock options                 |                              |         | 3,967               |        |         |         | 3,344  |       |         |         | 2,342  |      
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|                                                                                            |                                                                                    | Total potential common shares |                              |         | 18,818              |        |         |         | 16,698 |       |         |         | 13,126 |      
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|Denominator for earnings per share assuming dilution                                        |                                                                                    |                               | 137,464                      |         |                     |        | 116,456 |         |        |       | 111,613 |        
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|Earnings per common share (basic)                                                           |                                                                                    | $                             | 1.94                         |         |                     | $      | 1.35    |         |        | $     | 1.11    |        
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        
|Earnings per common share assuming dilution                                                 |                                                                                    | $                             | 1.76                         |         |                     | $      | 1.23    |         |        | $     | 1.03    |        
|                                                                                            |                                                                                    |                               |                              |         |                     |        |         |         |        |       |         |        

Options to purchase approximately 1.4 million shares of common stock were
outstanding during fiscal year 2000 but were not included in the computation of
diluted earnings per share because the options exercise price was greater than
the average market price during the period. There were no antidilutive shares
in fiscal years 2002 or 2001.

13.     Financial Instruments

As of June 30, 2002 and 2001, the fair values of our revolving credit balances
and other variable-rate debt instruments approximated the related carrying
values. The fair values of our fixed-rate debt instruments also approximated
the related carrying values, as determined based upon relative changes in our
variable borrowing rates, whether the borrowings occurred recently or if the
borrowings were repaid after the fiscal year ended. As of June 30, 2002, we
estimated the fair value of our 3.5% Notes at approximately $406 million, based
on the trading price on that day.

In June 1998, Statement of Financial Accounting Standards No. 133, Accounting
for Derivatives and Hedging Activities (SFAS 133) was issued. The statement
requires us to record all derivatives on the balance sheet at fair value. If
the derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivatives are either recognized in earnings or are
recognized in other comprehensive income until the hedged item is recognized in
earnings. We adopted SFAS 133 effective July 1, 2000.

In order to manage interest costs and exposure to changing interest rates
related to our $450 million revolving line of credit, we held two interest rate
hedges initiated in December 1998. Each hedge was designated a cash flow hedge
and was structured such that we paid a fixed rate of interest of 4.54% on
amounts owed under the revolving line of credit up to the notional amount, and
received a floating rate of interest based on one month LIBOR. The notional
amount of the two hedges totaled $100 million, and expired in December 2001.
Changes in the fair value of the interest rate hedges, net of tax effect, is
reflected in accumulated other comprehensive income as of June 30, 2001.

We held a single investment in a marketable security during fiscal year 2002.
To protect ourselves from the volatility of the value of this marketable
security investment, we entered into a no-cost collar agreement in June 2001,
which

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

matured in June 2002. The collar, a fair value hedge, was structured so that
all fluctuations in the price of the marketable security above or below 100% or
102.5% of its value on the date the collar was entered into were hedged. This
marketable security investment was liquidated in June 2002, and the related
collar was terminated.

14.     Related Party Transactions

Effective April 1996, we sold ACS Merchant Services, Inc. (Merchant
Services), a start-up operation of the electronic commerce business line, to a
former officer and director for consideration in the form of a note receivable
of $0.5 million. There was no gain or loss recognized on the sale. Simultaneous
with the sale, we contributed an additional $1.5 million and the unpaid balance
of an intercompany note due from Merchant Services of approximately $0.7
million in exchange for 1,000 shares of Merchant Services 5% cumulative
convertible preferred stock, which was convertible after five years into
approximately 55% of the ownership of Merchant Services on a fully diluted
basis, with 44% of the voting common stock and 100% of the non-voting common
stock. During fiscal year 2000, we provided guarantees to two banks on
Merchant Services debt up to $9.0 million. In July 2000, we completed the
sale of our convertible preferred stock investment in Merchant Services for
$15.0 million, resulting in a non-operating pretax gain of approximately $12.8
million.

As of June 30, 2002, we held a minority preferred stock interest in DDH
Aviation, Inc., a corporate airplane brokerage company organized in 1997
(DDH). Our Chairman owns a majority voting interest in DDH and two of our
officers, our President and our General Counsel, along with our Chairman were
directors of DDH. DDH has a $48 million line of credit with Citicorp USA,
Inc., for which we and our Chairman, in exchange for warrants to acquire
additional voting stock, acted as guarantors. In addition, we obtained access
to corporate aircraft at favorable rates in consideration of our guaranty. ACS
guaranteed up to $11.5 million of the line of credit and our Chairman
guaranteed up to $17.5 million of the line of credit.

Subsequent to June 30, 2002, our Chairman assumed in full ACS guaranty
obligations to Citicorp and our guaranty to Citicorp was released in full at no
cost to us. Our minority preferred stock interest and warrants (with a
recorded value of $100 thousand at June 30, 2002) in DDH were cancelled. We
have no further contingent liability related to DDH debt and no ownership
interest in DDH. Our officers, other than the Chairman, are no longer
directors of DDH.

In August 2001 we purchased a Challenger 600 aircraft from DDH for a purchase
price of $8.5 million, which included interior and exterior refurbishment of
the aircraft. As of June 30, 2002, the purchase price for the aircraft was
paid in full and refurbishment was near completion, and subsequent to June 30,
2002, this aircraft was delivered to us. During fiscal year 2002, we paid DDH
approximately $1.0 million for chartered aircraft flights at favorable rates.
In July 2002, we purchased $1.0 million in prepaid charter flights at favorable
rates from DDH.

15.     Commitments and Contingencies

We have various operating lease agreements for information technology equipment
and facilities. A summary of the lease commitments under noncancelable
operating leases at June 30, 2002 is as follows (in thousands):

|                     |  |   |         | 
|-------------------- |  | - | ------- | 
|Year ending June 30, |  |   |         | 
|                     |  |   |         | 
|2003                 |  | $ | 74,630  | 
|2004                 |  |   | 55,365  | 
|2005                 |  |   | 42,236  | 
|2006                 |  |   | 33,375  | 
|2007                 |  |   | 23,358  | 
|Thereafter           |  |   | 57,717  | 
|                     |  |   |         | 
|                     |  | $ | 286,681 | 
|                     |  |   |         | 

Lease expense for information technology equipment and facilities was
approximately $117.6 million, $81.2 million, and $80.8 million for the years
ended June 30, 2002, 2001 and 2000, respectively.

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

On December 16, 1998, a state district court in Houston, Texas entered final
judgment against us in a lawsuit brought by 21 former employees of Gibraltar
Savings Association and/or First Texas Savings Association (collectively,
GSA/FTSA). The GSA/FTSA employees alleged that they were entitled to the
value of 803,082 shares of our stock (adjusted for February 2002 stock split)
pursuant to options issued to the GSA/FTSA employees in 1988 in connection with
a former technology outsourcing services agreement between GSA/FTSA and us.
The judgment against us was for approximately $17 million, which includes
attorneys fees and pre-judgment interest, but excludes additional attorneys
fees of approximately $0.9 million and post-judgment interest at the
statutorily mandated rate of 10% per annum, which could be awarded in the event
the plaintiffs are successful upon appeal and final judgment. The judgment was
appealed by the plaintiffs and us.

On August 29, 2002, the Fourteenth Court of Appeals, Houston, Texas, reversed
the trial courts judgment and remanded the case to the trial court for further
proceedings. However, the court of appeals affirmed the trial court judgment
in part as to one of the plaintiffs. The court of appeals also held that the
trial court did not err in dismissing certain of our affirmative defenses at a
pretrial conference. We intend to file a motion for rehearing with the court of
appeals in September 2002, and, if necessary, to file an appeal with the Texas
Supreme Court. We expect the plaintiffs to file such motions and appeals as
well. We continue to believe that we have a meritorious defense to all or a
substantial portion of the plaintiffs claims, and accordingly, have not
accrued any amount on our balance sheet related to the lawsuit. We would be
subject to a material charge if the Texas Supreme Court upon appeal were to
reverse the decision of the court of appeals and affirm the trial court
judgment.

Government contracts are subject to review and audit by various governmental
authorities in the normal course of our business. Cost audits have been
completed through fiscal 1999 for a majority of the federal government business
operations. In managements opinion, any such reviews and the results of cost
audits for subsequent fiscal years will not have a material effect on our
financial position or results of operations.

We are subject to certain other legal proceedings, claims and disputes that
arise in the ordinary course of business. Although we cannot predict the
outcomes of these legal proceedings, management does not believe these actions
will have a material adverse effect on our financial position, results of
operations or liquidity. However, if unfavorably resolved, these proceedings
could have a material adverse effect on our financial position, results of
operations and liquidity.

16.     Impairment, Merger Expenses, and Other Charges

During the third quarter of fiscal 2002, we recorded a $7.4 million loss ($4.7
million, net of tax) in other non-operating expense associated with a
write-down of a cost basis investment to its estimated realizable value. In
the second quarter of fiscal 2002, we recorded a $1.0 million loss on a
long-term investment we received in the December 1998 acquisition of BRC
Holdings, Inc.

Included in tax expense in the third quarter of fiscal 2002 is a one-time tax
benefit of approximately $4.3 million resulting primarily from recently enacted
federal income tax rules that provide for a larger tax deduction associated
with our June 2000 divestitures and deferred tax adjustments to reflect
realization of tax deductions for which their probability is no longer
uncertain.

During the first quarter of fiscal 2001, we recorded a $12.8 million gain in
other non-operating income related to the sale of a non-strategic minority
investment in ACS Merchant Services, Inc. (see Note 14). Also, during the
quarter, we recorded a $10.4 million charge in connection with the termination
of certain hardware leases and disaster recovery contracts (reflected in rent,
lease and maintenance expense) and a $2.1 million charge for non-recurring
litigation and the writedown of property held-for-sale (reflected in other
operating expenses).

During the fourth quarter of fiscal 2000 and as a result of our periodic review
of the net realizable value of intangible assets, we recorded a pretax
impairment charge of approximately $8.3 million for certain intangible assets,
primarily customer relationships. The impairment charge was calculated based
on discounted net cash flows.

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

During the fourth quarter of fiscal 2000, we recorded a pretax charge of
approximately $15.4 million for estimated losses on contracts, a non-recurring
charge related to a contractual dispute with a client, non-recurring
litigation, and severance. These losses were recorded in the following income
statement categories: Wages and benefits  approximately $5.0 million; services
and supplies  approximately $3.0 million; rent, lease and maintenance 
approximately $0.1 million; depreciation and amortization  approximately $0.3
million; and other operating expenses  approximately $7.1 million.

In the third quarter of fiscal 2000, we recorded a $1.8 million net gain
related to the divestiture of a minority investment, which was recorded in
other non-operating income.

In the second quarter of fiscal 2000, we recorded a $3.0 million pretax charge
in connection with the consolidation of certain business process outsourcing
operations. These expenses include approximately $2.6 million related to
duplicate software and production facilities (reflected in rent, lease and
maintenance expense), $0.2 million of unamortized leasehold improvements and
write-offs of excess equipment (reflected in depreciation and amortization
expense) and $0.2 million for severance payments for reductions in staff
(reflected in wages and benefits expense).

17.     Divestitures, Assets Held for Sale, and Associated Impairments

During the first quarter of fiscal 2001, we received proceeds of $15.0 million
and recorded a $12.8 million gain in other non-operating income related to the
sale of a non-strategic minority investment in ACS Merchant Services, Inc.

In May 2000, we completed and executed a plan to divest certain non-strategic
operations in order to focus on our core information technology outsourcing and
business process outsourcing operations. When completed, this plan resulted in
divestitures comprising approximately 15% of fiscal year 2000 revenues.

In June 2000, we completed the sale of business units consisting primarily of
our ATM processing business and two other smaller professional services
businesses. The total cash proceeds from these transactions were approximately
$180.6 million and resulted in a net pretax gain of approximately $85.8
million. The proceeds from these transactions were fully collected during July
and August 2000. We also signed a letter of intent to sell our commercial
staffing business for cash proceeds of approximately $46 million and initiated
plans to sell two other business units with expected cash consideration of
approximately $1.3 million. In connection with the sale of our commercial
staffing business, we recorded an approximately $43.9 million pretax
impairment charge for goodwill. In addition, we recorded an approximately
$4.4 million pretax impairment charge for software and other intangibles
associated with the other pending divestitures. As these divestitures were not
final at June 30, 2000, we reclassified the net assets into the balance sheet
caption Net Assets Held for Sale. The assets of these businesses were
recorded at the expected proceeds less costs associated with the transactions.
The sale of the commercial staffing business and two other business units were
completed in the first quarter of fiscal year 2001.

18.     Comprehensive Income

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS 130), establishes standards for reporting and display of
comprehensive income and its components in financial statements. The objective
of SFAS 130 is to report a measure of all changes in equity of an enterprise
that result from transactions and other economic events of the period other
than transactions with owners. Comprehensive income is the total of net income
and all other non-owner changes within a companys equity.

In order to manage interest costs and exposure to changing interest rates, we
held two interest rate hedges, designated as cash flow hedges, initiated in
December 1998 and expired in December 2001. Each hedge was structured such
that we paid a fixed rate of interest of 4.54%, and received a floating rate of
interest based on one month LIBOR. The notional amount of the two hedges
totaled $100 million, and the fair market value of the two hedges at June 30,
2002 and 2001 is approximately $0 and ($0.4 million), respectively. The fair
value of each interest rate hedge reflects termination cash value. As of June
30, 2001, the fair value of the interest rate hedges, net of tax benefit, is
reflected in accumulated other comprehensive income.

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

We entered into a no-cost collar agreement in relation to our investment in a
marketable security in June 2001, which was terminated in June 2002. The
collar, a fair value hedge, was structured so that all fluctuations in the
price of the marketable security above or below 100% or 102.5% of its value on
the date the collar was entered into were hedged. We liquidated our investment
in a marketable security as of June 30, 2002, and the related collar was
terminated. As of June 30, 2002 and 2001, the collar had a fair market value
of approximately $0 and $27 thousand, respectively, and is recorded in other
current assets.

Our marketable security investment, which had a fair market value of
approximately $1.3 million as of June 30, 2001, was sold in June 2002.
Unrealized gains of approximately $84 thousand as of June 30, 2001 are recorded
as a component of accumulated other comprehensive income. We recorded a $52
thousand gain on the sale in June 2002.

The components of comprehensive income are as follows (in thousands):

|                                                                               |  |                     |         |      |  |      |         |   |  |   |         | 
|------------------------------------------------------------------------------ |  | ------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | 
|                                                                               |  | Year ended June 30,
|                                                                               |  |                    
|                                                                               |  | 2002                |         | 2001 |  | 2000
|                                                                               |  |                     |         |      |  |     
|Net income                                                                     |  | $                   | 229,596 |      |  | $    | 134,292 |   |  | $ | 109,312 | 
|Change in fair value of derivatives (net of ($139) and
$139 tax, respectively) |  |                     | 216     |      |  |      | (216    | ) |  |   |        | 
|Unrealized gain on marketable security                                         |  |                     | (84     | )    |  |      | 84      |   |  |   |        | 
|                                                                               |  |                     |         |      |  |      |         |   |  |   |         | 
|Comprehensive income                                                           |  | $                   | 229,728 |      |  | $    | 134,160 |   |  | $ | 109,312 | 
|                                                                               |  |                     |         |      |  |      |         |   |  |   |         | 

19.     Segment Information

We are organized into commercial, state and local government, and the federal
government segments due to the different operating environments of each
segment, caused by different types of customers, differing economic
characteristics, and the nature of regulatory environments. Within the
commercial segment, we provide technology outsourcing, business process
outsourcing, and systems integration services to clients in such industries as
insurance, utilities, manufacturing, financial institutions,
telecommunications, healthcare, retail, and transportation. In the state and
local government segment, we are a business process outsourcing provider to
state and local governments. In the federal government segment, we provide
systems integration services, business process outsourcing, and technology
outsourcing to federal agencies.

The segments presented in fiscal year 2002 differ and are expanded from the
segments previously presented. In fiscal year 2001 and prior, we reported our
results of operations in two segments: commercial and federal government. The
commercial segment included our state and local government customers. In
fiscal year 2002, the acquisition of IMS and the growth in our state and local
government business necessitated the review of whether our former segments met
the reporting criteria under Statement of Financial Accounting Standards No.
131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). We determined that our state and local government operations
met the definition of a segment in accordance with SFAS 131. Prior period
reporting has been restated to conform to the new segment reporting.

The accounting policies of each segment are the same as those described in the
summary of significant accounting policies (see Note 1). Intersegment sales
and transfers are priced as if the sales or transfers were to third parties.
However, these amounts during the three years presented were immaterial to the
individual segments.

We use earnings before interest and taxes (operating income) to measure segment
profit. Segment operating income includes selling, general and administrative
expenses directly attributable to that segment. Corporate includes general and
administrative services shared by all of our segments such as treasury, legal,
corporate accounting, human resources, and facilities. Where practical, shared
expenses are allocated based on measurable drivers of expense (e.g., human
resource costs are allocated based on headcount).

Certain reclassifications have been made to the segment disclosures as the
result of changes to our operating structure. Prior years results have been
restated for comparison purposes.

51



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

The following tables reflect the results of the segments consistent with our
management system (in thousands):

|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|----------------------------------------------------------------------- |  | ---------- | --------- | ---------- |  | --------------- | --------- | --------- |  | ------------ | ------- |  |  | - | ------- | - |  | - | --------- | 
|                                                                        |  |            |           |            |  | State and Local |           | Federal   |  |              |         |  |  |   |         |  
|                                                                        |  | Commercial |           | Government |  | Government      |           | Corporate |  | Consolidated
|                                                                        |  |            |           |            |  |                 |           |           |  |             
|Fiscal 2002                                                             |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Revenues                                                                |  | $          | 1,008,766 |            |  | $               | 1,242,817 |           |  | $            | 811,335 |  |  | $ |        |   |  | $ | 3,062,918 | 
|Operating expenses                                                      |  |            | 807,923   |            |  |                 | 987,341   |           |  |              | 727,783 |  |  |   | 28,753  |   |  |   | 2,551,800 | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|EBITDA(c)                                                               |  |            | 200,843   |            |  |                 | 255,476   |           |  |              | 83,552  |  |  |   | (28,753 | ) |  |   | 511,118   | 
|Depreciation and
amortization expense
(excluding goodwill
amortization) |  |            | 57,307    |            |  |                 | 33,170    |           |  |              | 17,894  |  |  |   | 2,115   |   |  |   | 110,486   | 
|Goodwill amortization expense                                           |  |            |          |            |  |                 |          |           |  |              |        |  |  |   |        |   |  |   |          | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Operating income                                                        |  | $          | 143,536   |            |  | $               | 222,306   |           |  | $            | 65,658  |  |  | $ | (30,868 | ) |  | $ | 400,632   | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Total assets                                                            |  | $          | 1,250,139 |            |  | $               | 1,640,182 |           |  | $            | 424,976 |  |  | $ | 88,270  |   |  | $ | 3,403,567 | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Capital expenditures                                                    |  | $          | 44,152    |            |  | $               | 61,005    |           |  | $            | 28,380  |  |  | $ | 10,869  |   |  | $ | 144,406   | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Fiscal 2001                                                             |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Revenues                                                                |  | $          | 964,694   |            |  | $               | 351,199   |           |  | $            | 747,666 |  |  | $ |        |   |  | $ | 2,063,559 | 
|Operating expenses(a)                                                   |  |            | 780,182   |            |  |                 | 268,935   |           |  |              | 676,728 |  |  |   | 20,371  |   |  |   | 1,746,216 | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|EBITDA(c)                                                               |  |            | 184,512   |            |  |                 | 82,264    |           |  |              | 70,938  |  |  |   | (20,371 | ) |  |   | 317,343   | 
|Depreciation and
amortization expense
(excluding goodwill
amortization) |  |            | 45,587    |            |  |                 | 10,067    |           |  |              | 11,795  |  |  |   | 1,700   |   |  |   | 69,149    | 
|Goodwill amortization expense                                           |  |            | 9,983     |            |  |                 | 9,767     |           |  |              | 4,718   |  |  |   |        |   |  |   | 24,468    | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Operating income                                                        |  | $          | 128,942   |            |  | $               | 62,430    |           |  | $            | 54,425  |  |  | $ | (22,071 | ) |  | $ | 223,726   | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Total assets                                                            |  | $          | 666,726   |            |  | $               | 504,325   |           |  | $            | 392,391 |  |  | $ | 328,245 |   |  | $ | 1,891,687 | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Capital expenditures                                                    |  | $          | 55,392    |            |  | $               | 24,160    |           |  | $            | 15,268  |  |  | $ | 4,250   |   |  | $ | 99,070    | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Fiscal 2000                                                             |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Revenues                                                                |  | $          | 1,104,758 |            |  | $               | 239,913   |           |  | $            | 617,871 |  |  | $ |        |   |  | $ | 1,962,542 | 
|Operating expenses
(excluding impairment
charges)(a)                    |  |            | 929,596   |            |  |                 | 184,182   |           |  |              | 568,252 |  |  |   | 15,781  |   |  |   | 1,697,811 | 
|Impairment charges(b)                                                   |  |            | 56,571    |            |  |                 |          |           |  |              |        |  |  |   |        |   |  |   | 56,571    | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|EBITDA(c)                                                               |  |            | 118,591   |            |  |                 | 55,731    |           |  |              | 49,619  |  |  |   | (15,781 | ) |  |   | 208,160   | 
|Depreciation and
amortization expense
(excluding goodwill
amortization) |  |            | 47,278    |            |  |                 | 5,444     |           |  |              | 9,342   |  |  |   | 1,115   |   |  |   | 63,179    | 
|Goodwill amortization expense                                           |  |            | 11,808    |            |  |                 | 7,227     |           |  |              | 2,538   |  |  |   |        |   |  |   | 21,573    | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Operating income                                                        |  | $          | 59,505    |            |  | $               | 43,060    |           |  | $            | 37,739  |  |  | $ | (16,896 | ) |  | $ | 123,408   | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Total assets                                                            |  | $          | 905,168   |            |  | $               | 316,037   |           |  | $            | 357,836 |  |  | $ | 77,405  |   |  | $ | 1,656,446 | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 
|Capital expenditures                                                    |  | $          | 57,809    |            |  | $               | 5,295     |           |  | $            | 6,778   |  |  | $ | 1,666   |   |  | $ | 71,548    | 
|                                                                        |  |            |           |            |  |                 |           |           |  |              |         |  |  |   |         |   |  |   |           | 



---

|(a) |  | Operating expenses during fiscal 2001 include a $10.4 million charge in
connection with the termination of certain hardware leases and disaster
recovery contracts and a $2.1 million charge for non-recurring litigation
costs and the writedown of property held-for-sale. Operating expenses
during fiscal year 2000 include a $15.4 million charge ($7.1 million
relates to the federal government segment), associated with loss
contracts, a non-recurring charge related to a contractual dispute with a
client, non-recurring litigation, and severance (see Note 16). Operating
expenses during fiscal year 2000 in the commercial segment also include a
$3.0 million charge in connection with the consolidation of certain
business process outsourcing operations (see Note 16).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Impairment charges of $48.3 million during fiscal year 2000 result from
the writedown of goodwill and other intangibles to estimated market value
associated with divestitures not completed at June 30, 2000 (see Note 17).
In addition, certain other intangibles, primarily customer relationships,
were written down based on discounted net cash flows in the amount of $8.3
million (see Note 17).                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) |  | EBITDA consists of earnings before interest income, interest expense,
other non-operating income and expense, income taxes, depreciation, and
amortization. EBITDA is not a measure of financial performance under
generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income as an indicator of a
companys performance or to cash flows from operating activities as a
measure of liquidity. Our measure of EBITDA may not be comparable to
similarly titled measures of other companies.                                                                                                                                                                                                                                       

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

The following reconciles consolidated operating income to pretax profit (in
thousands):

|                                          |  |                     |         |      |  |      |         |   |  |   |         |  
|----------------------------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                          |  | Year ended June 30,
|                                          |  |                    
|                                          |  | 2002                |         | 2001 |  | 2000
|                                          |  |                     |         |      |  |     
|Consolidated operating income             |  | $                   | 400,632 |      |  | $    | 223,726 |   |  | $ | 123,408 |  
|Interest expense                          |  |                     | (30,619 | )    |  |      | (23,742 | ) |  |   | (23,979 | )
|Net gain on divestitures                  |  |                     |        |      |  |      |        |   |  |   | 85,846  |  
|Other non-operating income (expense), net |  |                     | (9,557  | )    |  |      | 21,076  |   |  |   | 9,995   |  
|                                          |  |                     |         |      |  |      |         |   |  |   |         |  
|Consolidated pretax profit                |  | $                   | 360,456 |      |  | $    | 221,060 |   |  | $ | 195,270 |  
|                                          |  |                     |         |      |  |      |         |   |  |   |         |  

Over 99% of our consolidated revenues are derived from domestic clients. In
fiscal years ended 2002, 2001, and 2000, no single customer exceeded 10% of our
revenues.

20.     Quarterly Results of Operations (unaudited)

(in thousands, except per share amounts)

|                                                      |  |               |         |             |  |          |         |           |  |          |         |          |  |          |         |           |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         |    
|----------------------------------------------------- |  | ------------- | ------- | ----------- |  | -------- | ------- | --------- |  | -------- | ------- | -------- |  | -------- | ------- | --------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- |  |  | - | ------- | ---
|                                                      |  | Quarter ended
|                                                      |  |              
|                                                      |  | Fiscal 2002   |         | Fiscal 2001
|                                                      |  |               |         |            
|                                                      |  | June 30,      |         | Mar. 31,    |  | Dec. 31, |         | Sept. 30, |  | June 30, |         | Mar. 31, |  | Dec. 31, |         | Sept. 30,
|                                                      |  | 2002          |         | 2002        |  | 2001     |         | 2001      |  | 2001     |         | 2001     |  | 2000     |         | 2000     
|                                                      |  |               |         |             |  |          |         |           |  |          |         |          |  |          |         |          
|Revenues                                              |  | $             | 856,785 |             |  | $        | 800,687 |           |  | $        | 750,427 |          |  | $        | 655,019 |           |  | $ | 550,477 |  |  | $ | 533,574 |  |  | $ | 500,882 |  |  | $ | 478,626 |    
|Operating income                                      |  |               | 116,328 |             |  |          | 105,341 |           |  |          | 97,421  |          |  |          | 81,542  |           |  |   | 63,059  |  |  |   | 61,767  |  |  |   | 56,727  |  |  |   | 42,173  | (a)
|Net income                                            |  |               | 68,093  |             |  |          | 62,030  |           |  |          | 55,560  |          |  |          | 43,913  |           |  |   | 36,552  |  |  |   | 35,193  |  |  |   | 31,992  |  |  |   | 30,555  | (a)
|Earnings per common
share (basic)                     |  | $             | .52     |             |  | $        | .51     |           |  | $        | .47     |          |  | $        | .43     |           |  | $ | .36     |  |  | $ | .35     |  |  | $ | .32     |  |  | $ | .31     |    
|Weighted average
shares outstanding                   |  |               | 131,871 |             |  |          | 122,795 |           |  |          | 118,572 |          |  |          | 101,580 |           |  |   | 100,614 |  |  |   | 99,928  |  |  |   | 99,622  |  |  |   | 98,876  |    
|Earnings per common
share assuming
dilution           |  | $             | .49     |             |  | $        | .46     |           |  | $        | .42     |          |  | $        | .39     |           |  | $ | .33     |  |  | $ | .32     |  |  | $ | .29     |  |  | $ | .29     |    
|Weighted average
shares outstanding
assuming dilution |  |               | 143,215 |             |  |          | 142,776 |           |  |          | 140,692 |          |  |          | 123,344 |           |  |   | 122,378 |  |  |   | 117,346 |  |  |   | 113,762 |  |  |   | 112,414 |    



---

|(a) |  | The first quarter of fiscal 2001 includes a $12.8 million gain in
other non-operating income related to the sale of a non-strategic
minority investment in ACS Merchant Services, Inc. Also during the
quarter, we recorded a $10.4 million charge in connection with the
termination of certain hardware leases and disaster recovery contracts
and a $2.1 million charge for non-recurring litigation costs and the
writedown of property held-for-sale.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Report of Independent Accountants on
Financial Statement Schedule

To the Board of Directors and Stockholders of
Affiliated Computer Services, Inc.:

Our audits of the consolidated financial statements referred to in our report
dated July 30, 2002 appearing in this Annual Report on Form 10-K also included
an audit of the financial statement schedule listed in Item 15(b) of this
Annual Report on Form 10-K. In our opinion, this financial statement schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
July 30, 2002

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Affiliated Computer Services, Inc.
Schedule II  Valuation and Qualifying Accounts
For the Years Ended June 30, 2002, 2001 and 2000
(in thousands)

|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |         |         | 
|------------------------ | -------------------------------- | --------- | - | ------------ | ------- | ---------------- | - | ---------- | ------- | ----------- | - | ------- | ------- | ------ | - | ------- | ------- | - | - | ------- | ------- | 
|                         |                                  |           |   | Balance      |         |                  |   |            |         | Balances of |   |         |         |        |   | Balance
|                         |                                  |           |   | at Beginning |         | Charged to Costs |   | Divested   |         |             |   |         |         | at End
|Description              |                                  | of Period |   | And Expenses |         | Businesses(1)    |   | Deductions |         | of Period  
|                         |                                  |           |   |              |         |                  |   |            |         |            
|Year ended June 30, 2002 |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         | Deducted from asset accounts:    |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         | Accounts receivable              |           | $ | 5,620        |         |                  | $ | 3,283      |         |             | $ |        |         |        | $ | (1,947  | )(2)    |   | $ | 6,956   |        
|                         | Property and equipment, software |           |   | 216,810      |         |                  |   | 88,332     |         |             |   |        |         |        |   | (22,291 | )(3)    |   |   | 282,851 |        
|                         | Other intangible assets          |           |   | 39,395       |         |                  |   | 22,097     |         |             |   |        |         |        |   | (6,170  | )       |   |   | 55,322  |        
|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         |                                  | Total     |   | $            | 261,825 |                  |   | $          | 113,712 |             |   | $       |        |        |   | $       | (30,408 | ) |   | $       | 345,129 | 
|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|Year ended June 30, 2001 |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         | Deducted from asset accounts:    |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         | Accounts receivable              |           | $ | 4,646        |         |                  | $ | 2,062      |         |             | $ |        |         |        | $ | (1,088  | )(2)    |   | $ | 5,620   |        
|                         | Property and equipment, software |           |   | 165,558      |         |                  |   | 56,628     |         |             |   |        |         |        |   | (5,376  | )(3)    |   |   | 216,810 |        
|                         | Goodwill                         |           |   | 51,771       |         |                  |   | 24,468     |         |             |   |        |         |        |   | (412    | )(3)    |   |   | 75,827  |        
|                         | Other intangible assets          |           |   | 28,568       |         |                  |   | 12,521     |         |             |   |        |         |        |   | (1,694  | )(3)    |   |   | 39,395  |        
|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         |                                  | Total     |   | $            | 250,543 |                  |   | $          | 95,679  |             |   | $       |        |        |   | $       | (8,570  | ) |   | $       | 337,652 | 
|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|Year ended June 30, 2000 |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         | Deducted from asset accounts:    |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         | Accounts receivable              |           | $ | 4,633        |         |                  | $ | 7,295      |         |             | $ | (794    | )       |        | $ | (6,488  | )(2)    |   | $ | 4,646   |        
|                         | Property and equipment, software |           |   | 139,000      |         |                  |   | 49,975     |         |             |   | (14,523 | )       |        |   | (8,894  | )(3)    |   |   | 165,558 |        
|                         | Goodwill                         |           |   | 41,779       |         |                  |   | 21,573     |         |             |   | (11,581 | )       |        |   |        | (3)     |   |   | 51,771  |        
|                         | Other intangible assets          |           |   | 25,006       |         |                  |   | 13,204     |         |             |   | (2,351  | )       |        |   | (7,291  | )(3)    |   |   | 28,568  |        
|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        
|                         |                                  | Total     |   | $            | 210,418 |                  |   | $          | 92,047  |             |   | $       | (29,249 | )      |   | $       | (22,673 | ) |   | $       | 250,543 | 
|                         |                                  |           |   |              |         |                  |   |            |         |             |   |         |         |        |   |         |         |   |   |        



---

|(1) |  | Allowances associated with divested and held-for-sale business units at
June 30, 2000.      
|--- |  | --------------------------------------------------------------------------------------------
|   
|(2) |  | Uncollectible accounts written off, net of recoveries and allowances of
acquired businesses.
|   
|(3) |  | Retirements.                                                                                

55



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##### Table of Contents






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

Not applicable.




PART III

Pursuant to Instruction G(3) to Form 10-K, the information required in Items 10
through 13is incorporated by reference from our definitive proxy statement,
which is incorporated herein by reference.




PART IV




Item 15. Exhibits, Financial Statements, Financial Schedules and Reports on Form 8-K



| | (a) |  | Financial Statements and Financial Schedules                                                                                           
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | The following consolidated financial statements of Affiliated Computer
Services, Inc. and Subsidiaries are included in Part II, Item 8:

| |  |                                                           
| |  | ----------------------------------------------------------
| |  | Report of Independent Accountants                         
| |  | Consolidated Balance Sheets                               
| |  | Consolidated Statements of Income                         
| |  | Consolidated Statements of Changes in Stockholders Equity
| |  | Consolidated Statements of Cash Flows                     
| |  | Notes to the Consolidated Financial Statements            



| | (b) |  | The following financial schedule of Affiliated Computer Services,
Inc. and Subsidiaries is included in Part II, Item 8:
| | --- |  | -----------------------------------------------------------------------------------------------------------------------

| |  |                                                
| |  | -----------------------------------------------
| |  | Schedule II  Valuation and Qualifying Accounts



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

| |  |                                                                                                                                                        
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On May 16, 2002, ACS filed a Current Report on Form 8-K announcing the
signing of a definitive agreement to acquire the stock of AFSA Data
Corporation.
| |  |                                                                                                                                                        
| |  | On June 10, 2002, ACS filed a Current Report on Form 8-K announcing
the acquisition of AFSA Data Corporation.                                          



| | (d) |  | Exhibits
| | --- |  | --------

| |  |                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------
| |  | Reference is made to the Index to Exhibits beginning on page 60 for a
list of all exhibits filed as part of this report.

56



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##### Table of Contents



SIGNATURES

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

|                         |  |                                    |  |                                                                       
|------------------------ |  | ---------------------------------- |  | ----------------------------------------------------------------------
|                         |  | Affiliated Computer Services, Inc.
|Date: September 18, 2002 |  |                                    |  |                                                                       
|                        
|                         |  | By:                                |  | /s/ Warren D. Edwards                                                 
|                         |  |                                    |  |                                                                       
|                         |  |                                    |  | Warren D. Edwards
Executive Vice President and
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 18th day of September 2002.

|                                                           |  |                                                                            
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------
|Signature                                                  |  | Title                                                                      
|                                                           |  |                                                                            
|/s/ Darwin Deason

(Darwin Deason)                         |  | Director, Chairman of the Board                                            
|                                                           |  |                                                                            
|/s/ Jeffrey A. Rich

(Jeffrey A. Rich)                     |  | Director and Chief Executive Officer                                       
|                                                           |  |                                                                            
|/s/ Mark A. King

(Mark A. King)                           |  | Director, President and Chief Operating Officer                            
|                                                           |  |                                                                            
|/s/ Warren D. Edwards

(Warren D. Edwards)                 |  | Executive Vice President and Chief Financial Officer                       
|                                                           |  |                                                                            
|/s/ Henry G. Hortenstine

(Henry G. Hortenstine)           |  | Director, Executive Vice President                                         
|                                                           |  |                                                                            
|/s/ William L. Deckelman, Jr.

(William L. Deckelman, Jr.) |  | Director, Executive Vice President, Corporate Secretary and General Counsel
|                                                           |  |                                                                            
|/s/ Peter A. Bracken

(Peter A. Bracken)                   |  | Director                                                                   
|                                                           |  |                                                                            
|/s/ Joseph P. ONeill

(Joseph P. ONeill)                 |  | Director                                                                   
|                                                           |  |                                                                            
|/s/ Frank A. Rossi

(Frank A. Rossi)                       |  | Director                                                                   
|                                                           |  |                                                                            
|/s/ Clifford M. Kendall

(Clifford M. Kendall)             |  | Director                                                                   

57



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##### Table of Contents



Certification
pursuant to and in connection with the
Annual Reports on Form 10-K
to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended

I, Jeffrey A. Rich, Chief Executive Officer of Affiliated Computer
Services, Inc. (the Registrant), certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of the
Registrant for the fiscal year ending June 30, 2002;                                                                                                                                                                                                                 
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report; and
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the
periods presented in this annual report.                       

|                         |  |                                                                                                   
|------------------------ |  | --------------------------------------------------------------------------------------------------
|Date: September 18, 2002 |  | /s/ Jeffrey A. Rich
Jeffrey A. Rich,
Chief Executive Officer of Affiliated Computer
Services, Inc.

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | The above certificate is for an annual report for the period ending prior to August 29, 2002. Pursuant to and in
accordance with the transition rules promulgated by the Securities and Exchange Commission, paragraphs 4, 5 and 6 of the
form of certification required under Sections 13 and 15(d) of the Securities and Exchange Act of 1934, as amended, have
been excluded from the above certificate.

58



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##### Table of Contents



Certification
pursuant to and in connection with the
Annual Reports on Form 10-K
to be filed under Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended

I, Warren D. Edwards, Executive Vice President and Chief Financial Officer
of Affiliated Computer Services, Inc. (the Registrant), certify that:



| | 1. |  | I have reviewed this annual report on Form 10-K of the
Registrant for the fiscal year ending June 30, 2002;                                                                                                                                                                                                                 
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this annual report; and
|
| | 3. |  | Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the Registrant as of, and for, the
periods presented in this annual report.                       

|                         |  |                                                                                                                                    
|------------------------ |  | -----------------------------------------------------------------------------------------------------------------------------------
|Date: September 18, 2002 |  | /s/ Warren D. Edwards
Warren D. Edwards,
Executive Vice President and Chief Financial
Officer of Affiliated Computer Services, Inc.

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | The above certificate is for an annual report for the period ending prior to August 29, 2002. Pursuant to and in
accordance with the transition rules promulgated by the Securities and Exchange Commission, paragraphs 4, 5 and 6 of the
form of certification required under Sections 13 and 15(d) of the Securities and Exchange Act of 1934, as amended, have
been excluded from the above certificate.

59



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INDEX TO EXHIBITS

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|2.1     |  | Agreement and Plan of Merger, dated as of September 20, 1997, by
and among the Company, ACS Acquisition Corp. and Computer Data
Systems, Inc., filed as Exhibit 2.1 to the Companys Form S-4
(Registration No. 333-40351) (Form S-4) and incorporated
herein by reference.                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.1     |  | Certificate of Incorporation of the Company, filed as Exhibit
3.1 to the Companys Registration Statement on Form S-3 dated
March 30, 2001 (Registration No. 333-58038) (Form S-3) and
incorporated herein by reference.                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.2     |  | Bylaws of the Company, as amended and in effect on May 3, 2000,
filed as Exhibit 3.2 to the Companys Annual Report on Form 10-K
for the year ended June 30, 2000 and incorporated herein by
reference.                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.1     |  | Form of New Class A Common Stock Certificate, filed as Exhibit
4.3 to the Companys Form S-1 (Registration No. 333-79394)
(Form S-1) and incorporated herein by reference.                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.2     |  | Rights Agreement, dated April 2, 1999, between the Company and
First City Transfer Company, as Rights Agent, filed as Exhibit
4.1 to the Companys Report on Form 8-K dated May 19, 1999 and
incorporated herein by reference.                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.3     |  | Indenture, dated as of March 20, 1998, between Affiliated
Computer Services, Inc., as issuer and U.S. Trust Company of
Texas, N.A. as trustee, filed as Exhibit 4.1 to the Companys
Report on Form 8-K dated March 20, 1998 and incorporated herein
by reference.                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.4     |  | Registration Rights Agreement, dated as of March 17, 1998,
between Affiliated Computer Services, Inc. and Goldman, Sachs &
Co., Bear, Stearns & Co. Inc., Smith Barney Inc., Hambrecht &
Quist LLC, Donaldson, Lufkin & Jenrette Securities Corporation
and Prudential Securities Incorporated, filed as Exhibit 4.2 to
the Companys Report on Form 8-K dated March 20, 1998 and
incorporated herein by reference.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.5     |  | Indenture dated as of February 21, 2001, by and between the
Company, as Issuer, and U.S. Trust Company of Texas, N.A., as
Trustee, relating to the Companys 3.5% Convertible Subordinated
Notes due February 15, 2006, filed as Exhibit 4.1 to the
Companys Form S-3 and incorporated herein by reference.                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.6     |  | Registration Rights Agreement, dated February 21,2001, by and
between the Company and Goldman, Sachs & Co., as representative
of the several purchasers named therein relating to the
Companys 3.5% Convertible Subordinated Notes due February 15,
2006, filed as Exhibit 4.4 to the Companys Form S-3 and
incorporated herein by reference.                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.7     |  | Specimen Note for the Companys 3.5% Convertible Subordinated
Notes due February 15, 2006, filed as Exhibit 4.2 to the
Companys Form S-3 and incorporated herein by reference.                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.8     |  | Amendment No. 1 to First Amended and Restated Rights Agreement
dated as of February 5, 2002, by and between the Company and
First City Transfer Company, filed as Exhibit 4.1 to the
Companys Current Report on Form 8-K dated February 6, 2002 and
incorporated herein by reference.                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.1    |  | Amended Stock Option Plan of the Company, filed as Exhibit 10.1
to the Companys Form S-1 and incorporated herein by reference.                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.2    |  | 1997 Stock Incentive Plan of the Company, filed as Appendix to
the Companys Joint Proxy Statement / Prospectus filed as Form
14A dated November 14, 1997 and incorporated herein by
reference.                                                                                                                                                                                                                    

60



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Number  |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.3    |  | Reciprocal Services Agreement, dated June 30, 1994, between the
Company and Precept, filed as Exhibit 10.15 to the Companys
Form S-1 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.4    |  | Mutual Indemnification Agreement, dated June 30, 1994, between
the Company and Precept, filed as Exhibit 10.18 to the Companys
Form S-1 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.5    |  | Stockholders Tax Indemnification Agreement, dated June 30, 1994,
between the Company and the Stockholders named therein, filed as
Exhibit 10.19 to the Companys Form S-1 and incorporated herein
by reference.                                                                                                                                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.6    |  | Form of Directors Indemnification Agreement, filed as Exhibit
10.20 to the Companys Form S-1 and incorporated herein by
reference.                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.7    |  | Credit Agreement dated December 15, 1995 the Company, Bank One,
Texas, N.A., as Documentation Agent and Co-Agent, First
Interstate Bank of Texas N.A., as Administrative Agent and
Co-Agent and Certain Lenders filed as Exhibit 10.1 to the
Companys Third Quarter Report on Form 10-Q for the quarter
ended March 31, 1996 and incorporated herein by reference.                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.8    |  | Restated Credit Agreement dated June 20, 1996 between the
Company, Borrower, Wells Fargo Bank (Texas), N.A., Agent, Bank
One, Texas, N.A., Co-Agent, and Certain Lenders for $160 million
Revolving Facility filed as Exhibit 10.19 to the Companys
Annual Report on Form 10-K for the year ended June 30, 1996 and
incorporated herein by reference.                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.9    |  | First Amendment to Restated Credit Agreement dated July 29, 1997
the Company, Wells Fargo Bank (Texas) N.A., Agent; Bank One,
Texas, N.A., Co-Agent; and Certain Lenders for $200 million
Revolving Facility filed as Exhibit 10.14 to the Companys
Annual Report on Form 10-K for the year ended June 30, 1997 and
incorporated herein by reference.                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.10   |  | Second Amendment to Restated Credit Agreement dated March 20,
1998 between the Company, Wells Fargo Bank (Texas) N.A., Agent;
Bank One, Texas, N.A., Co-Agent; and Certain Lenders for $200
million Revolving Credit Facility filed as Exhibit 10.10 to the
Companys Annual Report on Form 10-K for the year ended June 30,
1999 and incorporated herein by reference.                                                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.11   |  | Third Amendment to Restated Credit Agreement dated September 24,
1999 between the Company; Wells Fargo Bank (Texas), N.A., Agent;
Bank One, Texas, N.A., Co-Agent; and certain Lenders for $200
million Revolving Credit Facility filed as Exhibit 10.11 to the
Companys Annual Report on Form 10-K for the year ended June 30,
2000 and incorporated herein by reference.                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.12   |  | Credit Agreement dated September 27, 1999 between the Company;
Wells Fargo Bank (Texas), N.A., Agent and Arranger; and certain
Lenders for $50 million Revolving Credit Facility filed as
Exhibit 10.12 to the companys Annual Report on Form 10-K for
the year ended June 30, 2000 and incorporated herein by
reference.                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.13   |  | First Amendment to Credit Agreement dated February 24, 2000
between the Company; Wells Fargo Bank (Texas), N.A., Agent and
Arranger; and certain lenders for $50 million Revolving Credit
Facility filed as Exhibit 10.13 to the Companys Annual Report
on Form 10-K for the year ended June 30,2000 and incorporated
herein by reference.                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.14   |  | Credit Agreement dated May 12, 2000 between the Company; Wells
Fargo Bank Texas, National Association, Administrative Agent and
Co-Lead Arranging Agent; Bank One, N.A., Syndication Agent and
Co-Lead Arranging Agent; SunTrust Bank, Documentation Agent: The
Bank of Tokyo-Mitsubishi, Ltd., Co-Agent; and certain Lenders
and certain Subsidiary Guarantors for $450 million Revolving
Credit Facility filed as Exhibit 10.14 to the Companys Annual
Report on form 10-K for the year ended June 30, 2000 and
incorporated herein by reference.

61



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Exhibit Name                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.15   |  | Form of Severance Agreement by and between the Company and
Certain Executive Officers of the Company filed as Exhibit 10.15
to the Companys Annual Report on Form 10-K for the year ended
June 30, 1997 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.16   |  | U.S. Department of Education Contract No. PM94017001 (portions
of which are subject to an Order for Confidential Treatment
pursuant to Rule 24b-2) included as an exhibit to the Form
10-Q/A filed August 24, 1994 by ACS Government Solutions, Inc.
(formerly known as Computer Data Systems, Inc.) and incorporated
herein by reference.                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.17   |  | Supplemental Executive Retirement Agreement by and between the
Company and the Companys Chairman of the Board filed as Exhibit
10.13 to the Companys Annual Report on Form 10-K for the year
ended June 30, 1999 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.18   |  | Employment Agreement by and between the Company and the
Companys Chairman of the Board filed as Exhibit 10.(iii)(A) to
the Companys Third Quarter Report on Form 10-Q for the quarter
ended March 31, 1999 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.19   |  | Guaranty of Affiliated Computer Services, Inc. of Citibank loan
to DDH Aviation filed as Exhibit 1.0.1 to the Companys Form
10-Q for the period ended December 31, 2000 and incorporated
herein by reference.                                                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.20   |  | Stock Purchase Agreement dated as of August 18, 2001 by and
among Lockheed Martin Corporation, Lockheed Martin Investments,
Inc., and the Company, filed as Exhibit 10.1 to the Companys
Current Report on Form 8-K dated August 29, 2001 and
incorporated herein by reference.                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.21   |  | Credit Agreement dated August 24, 2001 between the Company as
borrower, Bear Stearns Corporate Lending Inc. as Administrative
Agent and Syndication Agent, Bear, Stearns & Co., Inc. as
Bookrunner and Co-Lead Arranger, Wells Fargo Bank Texas,
National Association as Documentation Agent and Co-Lead
Arranger, certain lenders and certain subsidiary guarantors,
filed as Exhibit 10.2 to the Companys Current Report on Form
8-K dated August 29, 2001 and incorporated herein by reference.                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.22   |  | Second Amendment to the Credit Agreement and Consent dated
August 10, 2001 between the Company as Borrower, Wells Fargo
Bank Texas, National Association as Administrative Agent and
Co-Lead Arranging Agent for Lenders, Bank One N.A. as
Syndication Agent and Co-Lead Arranging Agent for Lenders,
SunTrust Bank as Documentation Agent for Lenders and The Bank of
Tokyo-Mitsubishi, LTD. as Co-Agent for Lenders and subsidiary
guarantors, filed as Exhibit 10.3 to the Companys Current
Report on Form 8-K dated August 29, 2001 and incorporated herein
by reference.
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.23   |  | Stock Purchase Agreement dated May 16, 2002 by and among Fleet
National Bank, Fleet Holding Corp. and the Company, filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K dated
June 10, 2002 and incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.24   |  | Credit Agreement dated June 10, 2002 between the Company as
Borrower, Goldman Sachs Credit Partners L.P. as Co-Lead
Arranger, Sole Bookrunner and Sole Syndication Agent, Wells
Fargo Bank Texas, National Association as Co-Lead Arranger and
Administrative Agent, certain lenders and certain subsidiary
guarantors, filed as Exhibit 10.2 to the Companys Current
Report on Form 8-K dated June 10, 2002 and incorporated herein
by reference.                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 10.25 |  | Revolving Credit Agreement dated as of September 12, 2002 among
the Company and other borrowers from time to time party hereto,
Wells Fargo Bank, National Association as Co-Lead Arranger and
Sole Book Runner, JP Morgan Chase Bank as Co-Lead Arranger,
Wells Fargo Bank Texas, National Association as Administrative
Agent, JP Morgan Chase Bank And Bank One, N.A. as Co-Syndication
Agents and Key Corporate Capital, Inc. And The Bank Of
Tokyo-Mitsubishi, Ltd. as Co-Documentation Agents                                                                           

62



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|        |  |                                      
|------- |  | -------------------------------------
|Exhibit |  |                                      
|Number  |  | Exhibit Name                         
|        |  |                                      
| 21.1  |  | Subsidiaries of the Company          
|        |  |                                      
| 23.1  |  | Consent of PricewaterhouseCoopers LLP



---

| |  |  Filed herewith
| |  | ----------------

63