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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|ý  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2002
|-- | -----------------------------------------------------------------------------------------------------------------------------------------
|or
|o  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                                 

Commission file number:0-26994

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ADVENT SOFTWARE, INC.(Exact name of Registrant as specified in its charter)

|Delaware(State or other jurisdiction of incorporation or organization)                                   |  | 94-2901952(IRS Employer Identification Number)
|-------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|301 Brannan Street, San Francisco, California 94107(Address of principal executive offices and zip code)
|(415) 543-7696(Registrant's telephone number, including area code)                                      

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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 for the past 90 days.

Yes ý    No o

The
number of shares of the Registrant's Common Stock outstanding as of October 31, 2002 was 32,698,093.

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INDEX

|PART I. FINANCIAL INFORMATION |            |                                                                                   
|----------------------------- | ---------- | ----------------------------------------------------------------------------------
|                              | Item 1.    |                                                                                   
|                              |            | Condensed Consolidated Balance Sheets                                             
|                              |            | Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
|                              |            | Condensed Consolidated Statements of Cash Flows                                   
|                              |            | Notes to the Condensed Consolidated Financial Statements                          
|                              | Item 2.    |                                                                                   
|                              | Item 3.    |                                                                                   
|                              | Item 4.    |                                                                                   
|PART II. OTHER INFORMATION    |            |                                                                                   
|                              | Item 1.    |                                                                                   
|                              | Item 2.    |                                                                                   
|                              | Item 3.    |                                                                                   
|                              | Item 4.    |                                                                                   
|                              | Item 5.    |                                                                                   
|                              | Item 6.    |                                                                                   
|                              | Signatures |                                                                                   

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PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

ADVENT SOFTWARE, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)

|                                     |                                     | September 30,
2002         |                                            | December 31,
2001 |        
|------------------------------------ | ----------------------------------- | -------------------------- | ------------------------------------------ | ----------------- | -------
|
|ASSETS                               |                                     |                            |                                            |                   |        
|Current assets:                      |                                     |                            |                                            |                   |        
|                                     | Cash and cash equivalents           |                            | $                                          | 97,674            |        
|                                     | Short-term investments              |                            |                                            | 74,852            |        
|                                     | Accounts receivable, net            |                            |                                            | 22,784            |        
|                                     | Prepaid expenses and other          |                            |                                            | 9,167             |        
|                                     | Deferred income taxes               |                            |                                            | 17,365            |        
|                                     |                                     |                            |                                            |                   |        
|                                     |                                     | Total current assets       |                                            |                   | 221,842
|                                     |                                     |                            |                                            |                   |        
|Fixed assets, net                    |                                     |                            | 27,691                                     |                   |        
|Other assets, net                    |                                     |                            | 168,270                                    |                   |        
|                                     |                                     |                            |                                            |                   |        
|                                     |                                     |                            | Total assets                               |                   | $      
|                                     |                                     |                            |                                            |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                     |                            |                                            |                   |        
|Current liabilities:                 |                                     |                            |                                            |                   |        
|                                     | Accounts payable                    |                            | $                                          | 3,045             |        
|                                     | Accrued liabilities                 |                            |                                            | 14,115            |        
|                                     | Deferred revenues                   |                            |                                            | 29,047            |        
|                                     | Income taxes payable                |                            |                                            | 1,437             |        
|                                     |                                     |                            |                                            |                   |        
|                                     |                                     | Total current liabilities  |                                            |                   | 47,644 
|Long-term liabilities                |                                     |                            | 4,852                                      |                   |        
|                                     |                                     |                            |                                            |                   |        
|                                     |                                     |                            | Total liabilities                          |                   |        
|                                     |                                     |                            |                                            |                   |        
|Stockholders' equity:                |                                     |                            |                                            |                   |        
|                                     | Common stock                        |                            |                                            | 341               |        
|                                     | Additional paid-in capital          |                            |                                            | 291,610           |        
|                                     | Retained earnings                   |                            |                                            | 73,490            |        
|                                     | Cumulative other comprehensive loss |                            |                                            | (134              | )      
|                                     |                                     |                            |                                            |                   |        
|                                     |                                     | Total stockholders' equity |                                            |                   | 365,307
|                                     |                                     |                            |                                            |                   |        
|                                     |                                     |                            | Total liabilities and stockholders' equity |                   | $      
|                                     |                                     |                            |                                            |                   |        

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

3

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ADVENT SOFTWARE, INC.  CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) AND  COMPREHENSIVE INCOME (LOSS)(In thousands, except per share data)

|                                              |                                                 | Three Months Ended
September 30,  |        | Nine Months Ended
September 30, |        
|--------------------------------------------- | ----------------------------------------------- | --------------------------------- | ------ | ------------------------------- | -------
|
|
|Revenues:                                     |                                                 |                                   |        |                                 |        
|License and development fees                  |                                                 | $                                 | 9,193  |                                 | $      
|Maintenance and other recurring               |                                                 |                                   | 21,690 |                                 |        
|Professional services and other               |                                                 |                                   | 4,227  |                                 |        
|                                              |                                                 |                                   |        |                                 |        
|                                              | Net revenues                                    |                                   |        | 35,110                          |        
|                                              |                                                 |                                   |        |                                 |        
|Cost of revenues:                             |                                                 |                                   |        |                                 |        
|License and development fees                  |                                                 |                                   | 1,843  |                                 |        
|Maintenance and other recurring               |                                                 |                                   | 5,829  |                                 |        
|Professional services and other               |                                                 |                                   | 1,526  |                                 |        
|                                              |                                                 |                                   |        |                                 |        
|                                              | Total cost of revenues                          |                                   |        | 9,198                           |        
|                                              |                                                 |                                   |        |                                 |        
|                                              | Gross margin                                    |                                   |        | 25,912                          |        
|                                              |                                                 |                                   |        |                                 |        
|Operating expenses:                           |                                                 |                                   |        |                                 |        
|Sales and marketing                           |                                                 |                                   | 16,589 |                                 |        
|Product development                           |                                                 |                                   | 10,293 |                                 |        
|General and administrative                    |                                                 |                                   | 5,344  |                                 |        
|Amortization of intangibles                   |                                                 |                                   | 2,880  |                                 |        
|Purchased in-process research and development |                                                 |                                   | 1,450  |                                 |        
|                                              |                                                 |                                   |        |                                 |        
|                                              | Total operating expenses                        |                                   |        | 36,556                          |        
|                                              |                                                 |                                   |        |                                 |        
|                                              |                                                 | Income (loss) from operations     |        |                                 | (10,644
|Interest income and other expense, net        |                                                 |                                   | (1,786 | )                               |        
|                                              |                                                 |                                   |        |                                 |        
|                                              |                                                 | Income (loss) before income taxes |        |                                 | (12,430
|Provision for (benefit from) income taxes     |                                                 |                                   | (4,102 | )                               |        
|                                              |                                                 |                                   |        |                                 |        
|                                              | Net income (loss)                               |                                   | $      | (8,328                          | )      
|                                              |                                                 |                                   |        |                                 |        
|Other comprehensive income (loss), net of tax |                                                 |                                   |        |                                 |        
|                                              | Unrealized gain (loss) on marketable securities |                                   | $      | (626                            | )      
|                                              | Foreign currency translation adjustments        |                                   |        | 529                             |        
|                                              |                                                 |                                   |        |                                 |        
|                                              | Comprehensive income (loss)                     |                                   | $      | (8,425                          | )      
|                                              |                                                 |                                   |        |                                 |        
|Net income (loss) per share data:             |                                                 |                                   |        |                                 |        
|Basic:                                        |                                                 |                                   |        |                                 |        
|Net income (loss) per share                   |                                                 | $                                 | (0.25  | )                               | $      
|Shares used in per share calculations         |                                                 |                                   | 32,910 |                                 |        
|Diluted:                                      |                                                 |                                   |        |                                 |        
|Net income (loss) per share                   |                                                 | $                                 | (0.25  | )                               | $      
|Shares used in per share calculations         |                                                 |                                   | 32,910 |                                 |        

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

4

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ADVENT SOFTWARE, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)

|                                                       |                                                                             | Nine Months Ended
September 30,                                                          |                                                             
|------------------------------------------------------ | --------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------
|
|
|Cash flows from operating activities:                  |                                                                             |                                                                                          |                                                             
|                                                       | Net income (loss)                                                           |                                                                                          | $                                                           
|                                                       |                                                                             | Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                             
|                                                       |                                                                             |                                                                                          | Non-cash stock compensation                                 
|                                                       |                                                                             |                                                                                          | Depreciation and amortization                               
|                                                       |                                                                             |                                                                                          | Purchased in-process research and development               
|                                                       |                                                                             |                                                                                          | Provision for doubtful accounts                             
|                                                       |                                                                             |                                                                                          | Other than temporary loss on investments                    
|                                                       |                                                                             |                                                                                          | Loss on investments                                         
|                                                       |                                                                             |                                                                                          | Deferred income taxes                                       
|                                                       |                                                                             |                                                                                          | Other                                                       
|                                                       |                                                                             |                                                                                          | Cash provided by (used in) operating assets and liabilities:
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|Cash flows used in investing activities:               |                                                                             |                                                                                          |                                                             
|                                                       | Net cash used in acquisitions including payments of net assumed liabilities |                                                                                          |                                                             
|                                                       | Acquisition of fixed assets                                                 |                                                                                          |                                                             
|                                                       | Purchases of other investments                                              |                                                                                          |                                                             
|                                                       | Proceeds from sales of other investments                                    |                                                                                          |                                                             
|                                                       | Purchase of short-term marketable securities                                |                                                                                          |                                                             
|                                                       | Sales and maturities of short-term marketable securities                    |                                                                                          |                                                             
|                                                       | Deposits and other                                                          |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|Cash flows provided by (used in) financing activities: |                                                                             |                                                                                          |                                                             
|                                                       | Proceeds from issuance and exercise of warrants                             |                                                                                          |                                                             
|                                                       | Common stock repurchased                                                    |                                                                                          |                                                             
|                                                       | Proceeds from issuance of common stock                                      |                                                                                          |                                                             
|                                                       | Repayment of capital leases                                                 |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|                                                       |                                                                             |                                                                                          |                                                             
|Net increase (decrease) in cash and cash equivalents   |                                                                             |                                                                                          | (69,120                                                     
|Cash and cash equivalents at beginning of period       |                                                                             |                                                                                          | 166,794                                                     
|                                                       |                                                                             |                                                                                          |                                                             
|Cash and cash equivalents at end of period             |                                                                             | $                                                                                        | 97,674                                                      
|                                                       |                                                                             |                                                                                          |                                                             
|Supplemental disclosure of cash flow information:      |                                                                             |                                                                                          |                                                             
|                                                       | Cash paid for income taxes                                                  |                                                                                          | $                                                           
|                                                       | Unrealized loss on marketable securities, net of tax                        |                                                                                          | $                                                           

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

5

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ADVENT SOFTWARE, INC.  NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Unaudited)

1.    Basis of Presentation

The condensed consolidated financial statements include the accounts of Advent Software, Inc. ("Advent") and its wholly owned subsidiaries. We have
eliminated all significant intercompany balances and transactions.

We
prepared the condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") applicable to interim financial
information. Certain information and footnote disclosures included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim
statements pursuant to such SEC rules and regulations. We recommend that these interim financial statements be read in conjunction with the audited financial statements and related notes included in
our 2001 Annual Report on Form 10-K filed with the SEC. Interim results are not necessarily indicative of the results to be expected for the full year.

In
our opinion, the condensed consolidated financial statements include all adjustments necessary to present fairly the financial position and results of operations for each interim
period shown.

2.    Accounting Policies

In June 2002, we began to offer term licenses as an alternative to the perpetual licenses we have historically offered to customers. We recognize revenue
for term licenses ratably over the period of the contract term. We recognize revenue on perpetual licenses upon shipment assuming all other revenue
recognition criteria have been met. Looking forward, it is too early to predict any trends or adoption rates with respect to customer preferences related to term or perpetual licensing.

In
July 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.146, "Accounting for Costs Associated with Exit or
Disposal Activities". SFAS No. 146 nullifies the guidance of the Emerging Issues Task Force ("EITF") in EITF Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". Under EITF Issue No. 94-3, an entity recognized a liability for an
exit cost on the date that the entity committed itself to an exit plan. In SFAS 146, the Board acknowledges that an entity's commitment to a plan does not, by itself, create a present
obligation to the other parties that meets the definition of a liability and requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability
is incurred. It also establishes that fair value is the objective for the initial measurement of the liability. SFAS 146 will be effective for exit or disposal activities that are initiated
after December 31, 2002. We do not expect a significant impact on our financial position and results of operations for the adoption of SFAS 146.

6

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3.    Net Income (Loss) Per Share

|                                                                          |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30,
|------------------------------------------------------------------------- |  | -------------------------------- | ------ | -------------------------------
|
|
|Net income (loss)                                                         |  | $                                | (8,328 | )                              
|Reconciliation of shares used in basic and diluted per share calculations |  |                                  |        |                                
|Basic                                                                     |  |                                  |        |                                
|Weighted average common shares outstanding                                |  |                                  | 32,910 |                                
|Basic net income (loss) per share                                         |  | $                                | (0.25  | )                              
|Diluted                                                                   |  |                                  |        |                                
|Weighted average common shares outstanding                                |  |                                  | 32,910 |                                
|Dilutive effect of stock options                                          |  |                                  |       |                                
|Shares used in diluted net income (loss) per share calculation            |  |                                  | 32,910 |                                
|Diluted net income (loss) per share                                       |  | $                                | (0.25  | )                              
|Antidilutive options outstanding excluded from the computation of EPS     |  |                                  | 4,459  |                                

4.    Acquisitions

In February 2002, we acquired Kinexus Corporation, a privately held company located in New York. Kinexus provides internal account aggregation and manual
data management services which we will use in our Advent TrustedNetwork service. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has
been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the
consolidated financial statements beginning on the acquisition date. In order to further increase our deployment of Advent TrustedNetwork, we acquired Kinexus at amounts exceeding the tangible and
identifiable intangible fair values of assets and liabilities resulting in goodwill of $25.3 million.

The
total purchase price of approximately $45.5 million included cash of approximately $34 million, closing costs of $3 million and a warrant to purchase 165,176
shares of our Common Stock valued at $8.5 million. The fair value of the warrant was calculated using the Black-Scholes method using the following assumptions: fair value of common stock of
$51.34 per share, interest rate of 3%, volatility of 65.9% and a dividend rate of zero. The warrant had an exercise price of $0.01 per share, was exercised in February 2002 and had a
contractual term of one year. There is $3.8 million of additional contingent consideration that is held in escrow for 14 months, which if released will be recorded as additional
goodwill. There is also a potential earn-out distribution to shareholders of up to $115 million over the next two years in cash or stock at the option of Advent under a formula
based on revenues and expenses for the years ending December 31, 2002 and 2003, which if earned will be recorded as additional goodwill. As of September 30, 2002, there have been no
payments or accruals related to this earn-out provision.

In
the quarter ended June 30, 2002, there was an adjustment to Kinexus goodwill and liabilities assumed decreasing both by approximately $4.1 million. We reduced the
estimated liability assumed in connection with a vacant Kinexus facility located in downtown Manhattan within a few blocks of the World Trade Center site based on additional analysis on the local
commercial rental market.

7

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The
updated allocation of the Kinexus purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

Estimated Remaining
Useful Life

Adjusted Balance
September 30, 2002Goodwill



$
25,296Existing technologies

3 Years


3,900Existing technologiesinternal

2 Years


498Core technologies

3 Years


2,100Trade name/trademarks

3 Years


600Contracts and customer relationships

3 Years


9,400Tangible assets




3,593Net deferred tax assets




39,807Liabilities assumed




(39,656
)Total Purchase Price



$
45,538


Goodwill
is not expected to be deductible for tax purposes.

Liabilities
assumed of $39.7 million include cash advances from Advent of $4.9 million, change-in-control separation obligations of
$11.1 million and remaining estimated long-term lease obligations of $4.1 million. The purchase price is subject to further refinement and change over the next few months due
primarily to assessing the liabilities assumed. The amount allocated to identifiable intangibles was determined based on management's estimates using established valuation techniques.

In
July 2002, we acquired Techfi Corporation, a privately held company. Techfi provides software, technology and services to the financial intermediary market. This acquisition
was in keeping with our strategy to add products and services that meet the needs of a wide variety of sectors in the financial services industry, as we added the capability that Techfi brings
particularly in the financial planning and independent broker/dealer areas. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been
allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the
consolidated financial statements beginning on the acquisition date. The total purchase price of approximately $22.8 million includes cash of approximately $20.2 million, acquisition
related expenses of $0.8 million and options to purchase 70,000 shares of our Common Stock valued at approximately $1.8 million. The options were valued using the Black-Scholes method to
determine fair value, have an exercise price of $17.39 per share, vest over five years, and expire in August 2012. There is $2.3 million of additional contingent consideration that is
held in escrow for 14 months, which if released will be recorded as additional goodwill. The acquisition price of Techfi exceeded the tangible and identifiable intangible fair values of assets
and liabilities resulting in goodwill of $17 million, which is not expected to be deductible for tax purposes. At the acquisition date, Techfi's primary purchased in-process
research and development ("IPR&D") projects involved the development of a web-enabled system for portfolio management, performance reporting and contact management; distributable macro
language to automate operational tasks like downloading, importing and report printing and enhancements to their currently offered AdvisorMart service.

Purchased
IPR&D for Techfi represents the present value of the estimated after-tax cash flows expected to be generated by the purchased technology, which, at the acquisition
date, had not yet reached technological feasibility. The cash flow projections for revenues were based on estimated projected revenue and expenses beyond 2003 and expected industry benchmarks. Revenue
estimates also include
an estimated annual attrition percentage to account for the fact that, as time passes, the portion of projected revenue attributable to purchased IPR&D technologies will become less as newer
technology replaces the capabilities and functionality of the purchased IPR&D technologies. Estimated

8

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operating expenses and income taxes were deducted from estimated revenue projections to arrive at after-tax cash flows. Projected operating expenses included costs of goods sold, research
and development, sales and marketing expenses, general and administrative expenses, including estimated costs to maintain the products once they have been introduced into the market and are generating
revenue. The rates utilized to discount projected cash flows were 20% to 35% for in-process technologies and were based primarily on rates of return and the overall level of market
acceptance and the amount of time each respective technology has been in the marketplace. The purchased IPR&D is expected to be fully completed and revenues are expected to commence in the fourth
quarter of 2002.

As
of the date of acquisition, Advent concluded that the purchased in-process technology had no alternative future use after taking into consideration the potential use of
the technology in different products, the stage of development and life-cycle of each project and resale of the software. The value of the purchased IPR&D of approximately
$1.5 million was expensed at the time of the acquisition.

The
preliminary allocation of the Techfi purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

Estimated Remaining
Useful Life

Balance
September 30, 2002Goodwill



$
16,768Existing technologies

5 Years


2,310Core technologies

6 Years


620Trade name/trademarks

6 Years


200Maintenance contracts

7 Years


460Non-compete agreements

5 Years


3,150Tangible assets




1,259Net deferred tax assets




10Purchased in-process research and development




1,450Liabilities assumed




(3,441
)Total Purchase Price



$
22,786


In
September 2002, we acquired all of the common stock of our distributor's operation located in Greece, Advent Hellas, for a total purchase price of approximately
$6.6 million in cash. In addition, in connection with this acquisition, we are required to pay 50% of operating margins that exceed 20% for the two years after the acquisition. The acquisition
was accounted for using the purchase method of accounting and the results of operations are included in our consolidated financial statements beginning on the acquisition date. We acquired our Greek
distributor's operation at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $5.4 million in order to expand control over
European channels for our products and services. The preliminary allocation of the Advent Hellas purchase price was based on the estimated fair value of the net tangible liabilities of
$0.2 million at the acquisition date (consisting of current assets of $0.8 million; property, plant and equipment of $0.03 million; other assets of $0.01 million; current
liabilities of approximately $1 million), goodwill of $5.4 million, which is not deductible for tax purposes, and an identified intangible for a licensing agreement of
$1.4 million which has an amortization period of 7 years.

The
following pro forma supplemental information presents selected financial information as though the purchases of Kinexus and Techfi had been completed as of the beginning of the
periods being reported on and after giving effect to purchase accounting adjustments. The pro forma consolidated net income (loss) amounts include certain pro forma adjustments, primarily the

9

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amortization of identifiable intangible assets, tax provision (benefit) adjustments on pro forma pre-tax income (loss) at a statutory tax rate of 41% and the elimination of interest
income on cash used in the acquisition. The pro forma consolidated information below does not include acquisitions completed in 2001 nor does it include the acquisition of Advent Hellas in
September 2002 as they were not material (in thousands, except per share data):

|                           |  | Three Months Ended
September 30, |        | Nine Months Ended
September 30, |  
|-------------------------- |  | -------------------------------- | ------ | ------------------------------- | -
|
|Revenue                    |  | $                                | 35,264 |                                 | $
|Net loss                   |  | $                                | (8,960 | )                               | $
|Basic net loss per share   |  | $                                | (0.27  | )                               | $
|Diluted net loss per share |  | $                                | (0.27  | )                               | $

5.    Other Assets

Components of other assets were as follows (in thousands):

|                             |  | Weighted-Average
Amortization Period |  | September 30,
2002 |         | December 31,
2001
|---------------------------- |  | ------------------------------------ |  | ------------------ | ------- | -----------------
|Goodwill                     |  |                                      |  | $                  | 61,101  |                  
|Purchased technologies       |  | 5.16 years                           |  |                    | 16,640  |                  
|Customer relationships       |  | 5.42 years                           |  |                    | 18,353  |                  
|Other intangibles            |  | 5.19 years                           |  |                    | 4,483   |                  
|Deferred tax assets          |  |                                      |  |                    | 38,485  |                  
|Long-term equity investments |  |                                      |  |                    | 11,504  |                  
|Other                        |  |                                      |  |                    | 17,704  |                  
|                             |  |                                      |  |                    |         |                  
|Total                        |  |                                      |  | $                  | 168,270 |                  
|                             |  |                                      |  |                    |         |                  

Interest
income and other expense includes a non-cash charge of approximately $3.2 million during the quarter ended September 30, 2002 related to the
write-down of our long-term equity investments, primarily an investment in myCFO, Inc. On September 27, 2002, Harris Wealth Management Group announced that it has
reached an agreement to acquired certain assets of myCFO, Inc. resulting in no anticipated recovery of our initial investment. Additionally, during the quarter ended June 30, 2002, we
had a charge of approximately $9 million related to the write-down of our long-term equity investments, primarily our investment in Encompys, Inc. In
May 2002, the Board of Directors of Encompys, Inc. informed us that it had decided to sell the assets of Encompys or wind down operations. Encompys was formed in April 2001 by
Accenture, Microsoft, Compaq and the Bank of New York to provide an Internet-based straight-through-processing solution for the global asset management community.

We
recorded a benefit from income taxes of approximately $4 million, or 33%, in the third quarter of 2002. The third quarter effective tax rate reflects the effect of the
in-process research and development write off and the write-downs of certain investments. The annual effective tax rate is anticipated to be 6% for 2002 compared to the 2001 effective tax
rate of 34%. The actual effective tax rate for the entire 2002 fiscal year could vary substantially depending on actual results achieved. The anticipated 2002 tax rate differs from the statutory rate
primarily due to the write-offs of in-process research and development and changes in valuation allowances for certain deferred tax assets, resulting from the write-downs of
certain investments, all of which are not anticipated to be deductible for tax purposes. We currently do not expect any goodwill to be deductible for tax purposes.

10

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We
adopted Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets" in the first fiscal quarter of 2002. SFAS 142
supercedes Accounting Principles Board Opinion No. 17 "Intangible Assets" and discontinues the amortization of goodwill. SFAS 142 primarily addresses the accounting for goodwill and
intangible assets subsequent to their initial recognition. The provisions of SFAS 142 (1) prohibit the amortization of goodwill and indefinite-lived intangible assets, (2) require
that goodwill and indefinite-lived intangibles assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or
indefinite-lived intangible assets may be impaired), (3) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill, and (4) remove
the forty-year limitation on the amortization period of intangible assets that have finite lives.

SFAS 142
requires that goodwill be tested annually for impairment using a two-step process. The first step of the goodwill impairment test, used to identify potential
impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit
is considered not impaired, thus the second step of the impairment test is unnecessary. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the
implied fair value of reporting unit goodwill with the carrying amount of that goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an
impairment loss shall be recognized in an amount equal to that excess. The implied fair value of goodwill shall be determined by allocating the fair value of a reporting unit to all of the assets and
liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid
to acquire the reporting unit. During the second quarter of 2002, we completed this first step of the transitional goodwill impairment test measured as of January 1, 2002. This first test did
not indicate impairment and, therefore, no changes were made based on the outcome of this testing. The second step of the transitional impairment test is not required.

The
changes in the carrying value of goodwill and intangible assets for the nine months ended September 30, 2002 were as follows (in thousands):

|                                  |  | Gross |        | Accumulated
Amortization |   | Net     |  
|--------------------------------- |  | ----- | ------ | ------------------------ | - | ------- | -
|Goodwill                          |  |       |        |                          |   |         |  
|Balance at December 31, 2001      |  | $     | 15,946 |                          | $ | (3,296  | )
|Additions                         |  |       | 52,788 |                          |   |        |  
|Acquisition and other adjustments |  |       | (4,337 | )                        |   |        |  
|                                  |  |       |        |                          |   |         |  
|Balance at September 30, 2002     |  | $     | 64,397 |                          | $ | (3,296  | )
|                                  |  |       |        |                          |   |         |  
|Intangibles                       |  |       |        |                          |   |         |  
|Balance at December 31, 2001      |  | $     | 26,393 |                          | $ | (4,718  | )
|Additions                         |  |       | 24,640 |                          |   |        |  
|Amortization                      |  |       |       |                          |   | (7,392  | )
|Other adjustments                 |  |       | 553    |                          |   |        |  
|                                  |  |       |        |                          |   |         |  
|Balance at September 30, 2002     |  | $     | 51,586 |                          | $ | (12,110 | )
|                                  |  |       |        |                          |   |         |  

Additions
to goodwill include $29.4 million, $16.8 million, and $5.4 million related to the acquisitions of Kinexus in February 2002, Techfi in
July 2002, and Advent Hellas in September 2002, respectively, approximately $1 million adjustment to the purchase price of our Scandinavian subsidiaries and $0.2 million
additional consideration paid to the former NPO stockholders in connection with performance based earn-outs. The $4.3 million of acquisition and other adjustments are primarily the
result of a revaluation of an assumed liability for a lease of a vacant Kinexus facility located in downtown Manhattan within a few blocks of the World Trade Center site.

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As
of September 30, 2002, the estimated intangibles amortization expense for each calendar year ended December 31 is: $10.4 million for 2002; $11.8 million
for 2003; $11.4 million for 2004; $6.6 million for 2005; $4.1 million for 2006; and $2.5 million thereafter.

Net
income (loss) on a pro forma basis, excluding goodwill amortization expense, would have been as follows (in thousands, except per share data):

|                                |                                        | Three months ended
September 30, |   | Nine months ended
September 30,
|------------------------------- | -------------------------------------- | -------------------------------- | - | -------------------------------
|
|Net income (loss)               |                                        |                                  |   |                                
|                                | Reported net income (loss)             |                                  | $ | (8,328                         
|                                | Add: goodwill amortization, net of tax |                                  |   |                               
|                                |                                        |                                  |   |                                
|                                | Adjusted net income (loss)             |                                  | $ | (8,328                         
|                                |                                        |                                  |   |                                
|Basic income (loss) per share   |                                        |                                  |   |                                
|                                | Reported net income (loss)             |                                  | $ | (0.25                          
|                                | Goodwill amortization                  |                                  |   |                               
|                                |                                        |                                  |   |                                
|                                | Adjusted net income (loss)             |                                  | $ | (0.25                          
|                                |                                        |                                  |   |                                
|                                | Shares used in per share calculation   |                                  |   | 32,910                         
|Diluted income (loss) per share |                                        |                                  |   |                                
|                                | Reported net income (loss)             |                                  | $ | (0.25                          
|                                | Goodwill amortization                  |                                  |   |                               
|                                |                                        |                                  |   |                                
|                                | Adjusted net income (loss)             |                                  | $ | (0.25                          
|                                |                                        |                                  |   |                                
|                                | Shares used in per share calculation   |                                  |   | 32,910                         

6.    Stock Related

In March 2001, Advent's Board of Directors authorized the repurchase of up to one million shares of outstanding common stock. On May 8, 2002 and
June 28, 2002, the Board of Directors authorized the repurchase of an additional one million and two million shares, respectively. A total of 430,000 shares were repurchased in 2001. During the
six months ended June 30, 2002, Advent repurchased 1,455,000 shares at an average price of $22.90 per share. We repurchased an additional 900,000 shares in July 2002 at an average price
of $18.16 per share. The purchases may be made, from time to time, on the open market or in privately negotiated transactions and will be funded from available working capital. The repurchase program
will allow us to help manage the dilution of our shares from our employee stock programs.

In
February and May 2002, the Board of Directors and the stockholders, respectively, approved the 2002 Stock Plan which includes an "evergreen" provision which adds an annual
increase to the plan on the last day of the Company's fiscal year beginning in 2002 equal to the lesser of (i) 1,000,000 shares, (ii) 2% of the Company's outstanding shares on such date,
or (iii) a lesser number of shares determined by the Board of Directors. The plan allows for the grant of options to purchase Common Stock to employees and consultants under substantially the
same terms as the 1992 Stock Plan described in our Annual
Report on Form 10-K for the year ended December 31, 2001. All remaining options from the expired 1992 Stock Plan have rolled over to the 2002 Stock Plan.

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7.    Commitments and Contingencies

A European distributor and its subsidiaries that operate in certain European locations have the exclusive right to sell our software in the European Union,
excluding certain locations, until July 1, 2004 subject to achieving certain revenue levels. During this period the distributor also has the contingent right to require us to purchase any one
or any group of their subsidiaries. Our requirement to purchase is contingent upon the distributor achieving specified operating margins greater than 20% and specified customer satisfaction criteria.
The purchase price would be two times the preceding twelve months total revenue of the purchased subsidiaries plus potential additional consideration equal to 50% of operating margins greater than 20%
that are achieved in the two years subsequent to our acquisition. In addition, Advent has the right to purchase any one or any group of the distributor's subsidiaries under certain conditions. In the
event these rights are exercised by Advent or the distributor, the purchase of these subsidiaries would principally result in an increase in intangible assets, goodwill and amortization of intangible
assets. Please see Note 4 for further information on the purchase of the European distributor's Greek subsidiary in September 2002. We do not expect to purchase any more of the European
distributor's subsidiaries for the remainder of 2002.

Our
operating lease commitments after 2001 increased to $63 million for the years 2002 through 2012, cumulatively, primarily due to a new operating lease for additional facilities
in San Francisco signed in 2002 and leases assumed in connection with the Kinexus acquisition. Approximately $8 million related to vacant Kinexus facilities was originally included in net
liabilities assumed in February 2002. The recorded liability was later reduced by approximately $4 million in the quarter ended June 30, 2002 based on additional analysis on the
local commercial rental market.

On
November 8, 2001, Charles Schwab & Co, Inc. ("Schwab") filed suit against us because of our intention to cease maintenance of an existing software interface and
to transition to a new, and what we believe to be improved, software interface (the "Advent Custodial Data" or "ACD" system). On July 22, 2002, we settled our dispute with Schwab. Pursuant to
the settlement agreement, Advent will extend maintenance of the point-to-point interface for licensed users through December 30, 2004 to be paid for by the licensed
users. Concurrent with maintenance of the point-to-point interface, Advent and Schwab will fully support and continue to offer ACD service and will work together to further
enhance the Schwab ACD interface. Advent and Schwab will cooperate to create an orderly transition from the point-to-point interface to ACD by year-end 2004.
Finally, Advent's ACD pricing for Schwab customers will not differ based on the custodial relationship of the advisor, and Schwab will not develop a substitute for the
point-to-point interface.

From
time to time we are subject to various other legal proceedings, claims and litigation arising in the ordinary course of business. We do not expect that the ultimate costs to resolve
these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

8.    Subsequent Events

In November 2002, the Company commenced a voluntary stock option exchange program made available to certain eligible employees of the Company. The Chairman
of the Board, Chief Executive Officer, Chief Financial Officer, Chief Technology Officer and Executive Vice President of Business Development are specifically excluded from participating in the
exchange program. Under this program, eligible employees were given the option to cancel each outstanding stock option granted to them at an exercise price greater than or equal to $20 per share, in
exchange for a new option to buy 0.8 shares of the Company's Common Stock to be granted on June 5, 2003, six months and one day from December 4, 2002, the expiration date of the offer,
and the date the old options of participating employees will be cancelled. There is no credit given for option vesting during the period between cancellation of the outstanding option and the grant of
the new option. The exercise price of the new

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options will be equal to the fair market value of the Company's Common Stock on the date of grant. In total, 3,336,504 option shares are eligible to participate in this program. The exchange program
is not expected to result in additional compensation charges or variable option plan accounting.

In
November 2002, we purchased all of the outstanding membership interests of AdventOutsource Data Management, LLC ("AdventOutsource"), formerly Uoutsource Data Management, LLC,
for approximately $947,000 in cash plus net liabilities of approximately $4 million plus acquisition costs. AdventOutsource is an application service provider of portfolio reconciliation and
reporting services via the internet. AdventOutsource stores the client's data, provides secure access over the Web to their accounts, and delivers the Axys functionality in portfolio management,
accounting and reporting. In addition to the initial cash consideration, there is also a potential earn-out distribution to the selling members of up to $5 million through
December 31, 2004 under a formula based on revenue results for the years ending December 31, 2003 and 2004. For the remainder of 2002 through 2005, AdventOutsource operating lease
commitments approximate $1 million.

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

You should read the following discussion in conjunction with our consolidated financial statements and related notes. Except for historical information, the
following discussion contains forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934. These
forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our anticipated product offerings, revenues, gross margins and operating costs and
expenses. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those discussed in the
forward-looking statements include, but are not limited to, those discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Other Factors Which May Affect
Future Operations and Forward-Looking Statements" and elsewhere in this document as well as other information set forth in our Form 10-K for the year ended December 31, 2001,
and other documents we file from time to time with the Securities and Exchange Commission.

Accounting Policies

In June 2002, we began to offer term licenses as an alternative to the perpetual licenses we have historically offered to customers. We recognize revenue
for term licenses ratably over the period of the contract term. We recognize revenue on perpetual licenses upon shipment assuming all other revenue recognition criteria have been met. Looking forward,
it is too early to predict any trends or adoption rates with respect to customer preferences related to term or perpetual licensing.

In
July 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with Exit or Disposal Activities". SFAS No. 146 nullifies the guidance of the Emerging Issues
Task Force (EITF) in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". Under EITF Issue No. 94-3, an entity recognized a liability for an exit cost on the date that the entity committed itself to an exit plan.
In SFAS 146, the Board acknowledges that an entity's commitment to a plan does not, by itself, create a present obligation to the other parties that meets the definition of a liability and
requires that a liability for a cost that is associated with an exit or disposal activity be recognized when the liability is incurred. It also establishes that fair value is the objective for the
initial measurement of the liability. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. We do not expect a significant impact on our
financial position and results of operations for the adoption of SFAS 146.

Acquisitions

In February 2002, we acquired Kinexus Corporation, a privately held company located in New York. Kinexus provides internal account aggregation and manual
data management services which we will use in our Advent TrustedNetwork service. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has
been allocated to the tangible and intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the
consolidated financial statements beginning on the acquisition date. In order to further increase our deployment of Advent TrustedNetwork, we acquired Kinexus at amounts exceeding the tangible and
identifiable intangible fair values of assets and liabilities resulting in goodwill of $25.3 million.

The
total purchase price of approximately $45.5 million included cash of approximately $34 million, closing costs of $3 million and a warrant to purchase 165,176
shares of our Common Stock valued at $8.5 million. The fair value of the warrant was calculated using the Black-Scholes method

15

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using the following assumptions: fair value of common stock of $51.34 per share, interest rate of 3%, volatility of 65.9% and a dividend rate of zero. The warrant had an exercise price of $0.01 per
share, was exercised in February 2002 and had a contractual term of one year. There is $3.8 million of additional contingent consideration that is held in escrow for 14 months,
which if released will be recorded as additional goodwill. There is also a potential earn-out distribution to shareholders of up to $115 million over the next two years in cash or
stock at the option of Advent under a formula based on revenues and expenses for the years ending December 31, 2002 and 2003, which if earned will be recorded as additional goodwill. As of
September 30, 2002, there have been no payments or accruals related to this earn-out provision.

In
the quarter ended June 30, 2002, there was an adjustment to Kinexus goodwill and liabilities assumed decreasing both by approximately $4.1 million. We reduced the
estimated liability assumed in connection with a vacant Kinexus facility located in downtown Manhattan within a few blocks of the World Trade Center site based on additional analysis on the local
commercial rental market.

The
updated allocation of the Kinexus purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

Estimated Remaining
Useful Life

Adjusted Balance
September 30, 2002Goodwill



$
25,296Existing technologies

3 Years


3,900Existing technologiesinternal

2 Years


498Core technologies

3 Years


2,100Trade name/trademarks

3 Years


600Contracts and customer relationships

3 Years


9,400Tangible assets




3,593Net deferred tax assets




39,807Liabilities assumed




(39,656
)Total Purchase Price



$
45,538


Goodwill
is not expected to be deductible for tax purposes.

Liabilities
assumed of $39.7 million include cash advances from Advent of $4.9 million, change-in-control separation obligations of
$11.1 million and remaining estimated long-term lease obligations of $4.1 million. The purchase price is subject to further refinement and change over the next few months due
primarily to assessing the liabilities assumed. The amount allocated to identifiable intangibles was determined based on management's estimates using established valuation techniques.

In
July 2002, we acquired Techfi Corporation, a privately held company. Techfi provides software, technology and services to the financial intermediary market. This acquisition
was in keeping with our
strategy to add products and services that meet the needs of a wide variety of sectors in the financial services industry, as we added the capability that Techfi brings particularly in the financial
planning and independent broker/dealer areas. The acquisition has been accounted for using the purchase method of accounting and accordingly, the purchase price has been allocated to the tangible and
intangible assets and liabilities acquired on the basis of their respective fair values on the acquisition date. The results of operations are included in the consolidated financial statements
beginning on the acquisition date. The total purchase price of approximately $22.8 million includes cash of approximately $20.2 million, acquisition related expenses of
$0.8 million and options to purchase 70,000 shares of our Common Stock valued at approximately $1.8 million. The options were valued using the Black-Scholes method to determine fair
value, have an exercise price of $17.39 per share, vest over five years, and expire in August 2012. There is $2.3 million of additional contingent consideration that is held in escrow
for 14 months, which if released will be recorded as additional goodwill. The acquisition price of Techfi

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exceeded the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of $17 million, which is not expected to be deductible for tax purposes. At the
acquisition date, Techfi's primary purchased in-process research and development ("IPR&D") projects involved the development of a web-enabled system for portfolio management,
performance reporting and contact management; distributable macro language to automate operational tasks like downloading, importing and report printing; and enhancements to their currently offered
AdvisorMart service.

Purchased
IPR&D for Techfi represents the present value of the estimated after-tax cash flows expected to be generated by the purchased technology, which, at the acquisition
date, had not yet reached technological feasibility. The cash flow projections for revenues were based on estimated projected revenue and expenses beyond 2003 and expected industry benchmarks. Revenue
estimates also include an estimated annual attrition percentage to account for the fact that, as time passes, the portion of projected revenue attributable to purchased IPR&D technologies will become
less as newer technology replaces the capabilities and functionality of the purchased IPR&D technologies. Estimated operating expenses and income taxes were deducted from estimated revenue projections
to arrive at after-tax cash flows. Projected operating expenses included costs of goods sold, research and development, sales and marketing expenses, general and administrative expenses,
including estimated costs to maintain the products once they have been introduced into the market and are generating revenue. The rates utilized to discount projected cash flows were 20% to 35% for
in-process technologies and were based primarily on rates of return and the overall level of market acceptance and the amount of time each respective technology has been in the
marketplace. The purchased IPR&D is expected to be fully completed and revenues are expected to commence in the fourth quarter of 2002.

As
of the date of acquisition, Advent concluded that the purchased in-process technology had no alternative future use after taking into consideration the potential use of
the technology in different products, the stage of development and life cycle of each project and resale of the software. The value of the purchased IPR&D of approximately $1.5 million was
expensed at the time of the acquisition.

The
preliminary allocation of the Techfi purchase price to tangible and intangible assets and liabilities is summarized below (in thousands).

Estimated Remaining
Useful Life

Balance
September 30, 2002Goodwill



$
16,768Existing technologies

5 Years


2,310Core technologies

6 Years


620Trade name/trademarks

6 Years


200Maintenance contracts

7 Years


460Non-compete agreements

5 Years


3,150Tangible assets




1,259Net deferred tax assets




10Purchased in-process research and development




1,450Liabilities assumed




(3,441
)Total Purchase Price



$
22,786


In
September 2002, we acquired all of the common stock of our distributor's operation located in Greece, Advent Hellas, for a total purchase price of approximately
$6.6 million in cash. In addition, in connection with this acquisition, we are required to pay 50% of operating margins that exceed 20% for the two years after the acquisition. The acquisition
was accounted for using the purchase method of accounting and the results of operations are included in our consolidated financial statements beginning

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on the acquisition date. We acquired our Greek distributor's operation at amounts exceeding the tangible and identifiable intangible fair values of assets and liabilities resulting in goodwill of
$5.4 million in order to expand control over European channels for our products and services. The preliminary allocation of the Advent Hellas purchase price was based on the estimated fair
value of the net tangible liabilities of $0.2 million at the acquisition date (consisting of current assets of $0.8 million; property, plant and equipment of $0.03 million; other
assets of $0.01 million; current liabilities of approximately $1 million), goodwill of $5.4 million which is not deductible for tax purposes, and an
identified intangible for a licensing agreement of $1.4 million which has an amortization period of 7 years.

In
November 2002, we purchased all of the outstanding membership interests of AdventOutsource Data Management, LLC. ("AdventOutsource"), formerly Uoutsource Data Management, LLC,
for approximately $947,000 in cash plus net liabilities of approximately $4 million plus acquisition costs. AdventOutsource is an application service provider of portfolio reconciliation and
reporting services via the Internet. AdventOutsource stores the client's data, provides secure access over the Web to their accounts, and delivers the Axys functionality in portfolio management,
accounting and reporting. In addition to the initial cash consideration, there is also a potential earn-out distribution to the selling members of up to $5 million through
December 31, 2004 under a formula based on revenue results for the years ending December 31, 2003 and 2004.

Distributor Relationship

We rely on a number of strategic alliances to help us achieve market acceptance of our products and to leverage our development, sales, and marketing resources.
In 1998 we established one such relationship with a company in Scandinavia to distribute our products within Scandinavia. In the third quarter of 1999, this distributor formed Advent Europe. Advent
Europe and its subsidiaries have the exclusive right to distribute our software in the European Union, excluding certain locations, until July 1, 2004 subject to achieving certain revenue
levels. Incorporated in The Netherlands, Advent Europe is an independent entity and is not financially backed by us and is entirely capitalized by independent third party investors. It makes tax and
language modifications to Advent Office to fit the various needs of the local jurisdictions and then markets and licenses the Advent Office suite and related services. All transactions between Advent
Europe and us are transacted in U.S. dollars and are arms length transactions. Revenue from sales to this distributor is recognized when the distributor submits a signed contract, the product has been
delivered, the fee is fixed and determinable, and the resulting receivable is reasonably assured. Our revenues from this distributor in each of the three years ended December 31, 2001, 2000,
and 1999 and in the quarters ended March 31, 2002, June 30, 2002, and September 30, 2002 were less than 4% of our total net revenue.

Through
July 1, 2004, subject to achieving certain revenue levels, Advent Europe also has the contingent right to require us to purchase any one or any group of their
subsidiaries. Our requirement to purchase is contingent upon the distributor achieving specified operating margins in excess of 20% as well as customer satisfaction criteria as specified in the
agreement. The purchase price would be two times the preceding twelve months total revenue of the purchased subsidiaries plus an earn-out equal to 50% of operating margins that exceed 20%
for the two years after the acquisition. In addition, we have the right to purchase any one or any group of the distributor's subsidiaries under certain conditions. In the event these rights are
exercised by us or the distributor, the purchase of these subsidiaries would principally result in an increase in intangible assets, goodwill and amortization of intangible assets. In
November 2001, we acquired three of Advent Europe's companies located in Norway, Sweden, and Denmark. During the nine months ended September 30, 2002, a net $1 million was paid in
connection with an adjustment to the original purchase price for these three Scandinavian subsidiaries. In addition to the purchase price paid for these three companies, there is potential additional
consideration equal to 50% of operating margins greater than 20% that are achieved in the

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two years subsequent to our acquisition of these companies as described above. As of September 30, 2002, no additional potential consideration has been earned or paid. In
September 2002, we acquired all of the common stock of Advent Hellas, our distributor's operation located in Greece, for a total purchase price of approximately $6.6 million in cash. We
do not expect to purchase any more of the European distributor's subsidiaries for the remainder of 2002. Please see Note 4 for additional information.

Employee Stock Option Exchange Program

On November 1, 2002, the Company commenced a voluntary stock option exchange program made available to certain eligible employees of the Company. The
Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Chief Technology Officer and Executive Vice President of Business Development are specifically excluded from participating in
the exchange program. Under this program, eligible employees were given the option to cancel each outstanding stock option granted to them at an exercise price greater that or equal to $20 per share,
in exchange for a new option to buy 0.8 shares of the Company's Common Stock to be granted on June 5, 2003, six months and one day from December 4, 2002, the expiration date of the
offer, and the date the old options of participating employees will be cancelled. There is no credit given for option vesting during the period between cancellation of the outstanding option and the
grant of the new option. The exercise price of the new options will be equal to the fair market value of the Company's Common Stock on the date of grant. In total, 3,336,504 option shares are eligible
to participate in this program. The exchange program is not expected to result in additional compensation charges or variable option plan accounting.

Results of Operations

REVENUES

Our net revenues are made up of three components: license and development fees, maintenance and recurring, and professional services and other. Our net revenues
for the third quarter ended 2002 decreased 10% to $35.1 million, compared with net revenues of $39.2 million for the same period in 2001. This decrease primarily resulted from a decline
in license revenue and development fees. The target clients for our products include a range of financial services organizations that manage investment portfolios, including investment advisors,
brokerage firms, banks and hedge funds. In addition, we target corporations, public funds, universities and non-profit organizations, which also manage investment portfolios and have many
of the same needs. The success of many of our clients is intrinsically linked to the health of the financial markets. We believe that the demand for our products was negatively affected by the current
economic environment, downturns in the financial markets, and by pending and proposed regulatory activity in the financial services market. These factors have
resulted in reduced revenue growth across the industry, longer sales cycles, deferral and delay of information technology projects and generally reduced expenditure for software related services. We
expect a continued difficult environment for the remainder of 2002.

Net
revenues for the nine months ended September 30, 2002 increased 5% to $123.2 million, compared with net revenues of $117.8 million for the same period in 2001,
primarily due to increases in our maintenance and other recurring revenues.

License Revenue and Development Fees.License revenue and development fees for the third quarter of
2002 decreased 48% to $9.2 million compared with license revenue and development fees of $17.6 million for the third quarter of 2001. License revenue and development fees for the nine
months ended September 30, 2002 decreased 20% to $44.2 million, compared with $55.2 million for the same period in 2001. These decreases in license and development fees were
primarily due to decreased sales of the Advent Office suite of products during the second and third quarters of 2002. Sales of these

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products decreased principally due to the impact of current economic conditions and the slowing economy on the financial services clients.

Maintenance and Other Recurring Revenues.Maintenance and other recurring revenues for the third
quarter of 2002 increased 25% to $21.7 million, compared with maintenance and other recurring revenue of $17.4 million for the third quarter of 2001. Maintenance and other recurring
revenues for the nine months ended September 30, 2002 increased 33% to $64.9 million, compared with $48.7 million for the same period in 2001. These increases were primarily due
to an increase in the client base and higher average maintenance fees as clients selected more components for a full feature, multi-product solution and expanded the number of users and sites
licensing our software. Revenue associated with our acquisition of Kinexus and increased demand for pricing data and other data services associated with our Wealth Management Solutions also
contributed to the increases in maintenance and other recurring revenues.

Professional Services and Other Revenues.Professional services and other revenues for the third
quarter of 2002 remained consistent at $4.2 million, compared with $4.2 million for the same period in 2001. Professional services and other revenues for the nine months ended
September 30, 2002, also remained consistent at $14.1 million as compared with $13.9 million for the same period in 2001. Revenues during the third quarter of 2002 include
additional services revenue earned through our newly acquired subsidiary, Kinexus, partially offset by a decrease in the demand for our other professional services. Revenues during the third quarter
of 2001 included revenue from our bi-annual user conference held in the third quarter of last year. This year our bi-annual user conference will be held in the fourth quarter.

COST OF REVENUES

Our cost of revenues is made up of three components: cost of license and development fees, cost of maintenance and other recurring and cost of professional
services and other. Our cost of revenues for the third quarter of 2002 increased 26% to $9.2 million compared with cost of revenues of $7.3 million for the third quarter of 2001. Cost of
revenues for the nine months ended September 30, 2002, increased 25% to $27 million compared with $21.6 million for the same period in 2001. Cost of revenues as a percentage of
net revenues increased to 26% from 19% for the three months ended September 30, 2002 and 2001, respectively, and to 22% from 18% for the nine months ended September 30, 2002 and 2001,
respectively.

Cost of License and Development Fees.Cost of license and development fees revenue consists primarily
of the cost of product media and duplication, manuals, packaging materials, the fixed direct labor involved with producing and distributing our software; labor costs associated with generating
development fees; and royalties paid to third parties. Cost of license and development fees will fluctuate between periods due to the mix of license and development fee revenues. Cost of license and
development fees increased 6% to $1.8 million in the third quarter of 2002 from $1.7 million in the third quarter of 2001 and 10% to $5.3 million for the nine months ended
September 30, 2002 compared with $4.8 million for the same period of 2001. The increase in cost of license and development fees is directly related to the product mix in license and
development fees revenue. Cost of license and development fees as a percentage of the related revenues increased to 20% from 9% for the three months ended September 30, 2002 and 2001,
respectively, and to 12% from 9% for the nine months ended September 30, 2002 and 2001, respectively. The increase as a percentage of revenue is primarily due to the fixed costs associated with
our product distribution combined with a decrease in revenues and to a lesser extent product mix for the three and nine months ended September 30, 2002.

Cost of Maintenance and Other Recurring.Cost of maintenance and other recurring revenues are
primarily comprised of the direct costs of providing technical support and other services for recurring revenues, the engineering costs associated with product updates and royalties paid to third
party

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subscription-based and transaction-based vendors. Cost of maintenance and other recurring revenues increased 35% to $5.8 million for the third quarter of 2002 from $4.3 million for the
third quarter of 2001 and increased 36% to $16.6 million for the nine months ended September 30, 2002, compared with $12.2 million for the same period in 2001. These increases
were due to additional staffing required to support an increasing customer base, continued interface development and increased royalties paid to third party subscription-based and transaction-based
vendors. Cost of maintenance and other recurring revenues as a percentage of the related revenues increased to 27% from 24% for the three months ended September 30, 2002 and 2001, respectively,
and remained relatively flat at 26% compared with 25% for the nine months ended September 20, 2002 and 2001, respectively.

Cost of Professional Services and Other.Cost of professional services revenue primarily consists of
personnel related costs associated with the client services and support organization in providing consulting, custom report writing, and conversions of data from clients' previous systems. To the
extent that such personnel are not fully utilized in consulting, training, conversion or custom report writing
projects, they are utilized for pre-sales, marketing and engineering activities and the related costs are charged to operating expenses. Cost of professional services and other revenue
increased 7% to $1.5 million for the third quarter of 2002, compared with $1.4 million for the same period in 2001. Cost of professional services and other revenue increased 11% to
$5 million for the nine months ended September 30, 2002, compared with $4.5 million for the same time period in 2001. These increases are primarily due to changes in product mix.
Revenues and costs of professional services in 2001 included revenues and costs related to our bi-annual user conference held in the third quarter of last year. This year our
bi-annual conference will be held in the fourth quarter. Cost of professional services and other as a percentage of the related revenues increased to 36% for the third quarter of 2002,
compared with 34% for the same period in 2001 and increased to 36% for the nine months ended September 30, 2002, compared with 33% for the same period in 2001. These increases are due to
changes in product mix. Revenues and costs of professional services in 2001 included revenues and costs related to our bi-annual user conference held in the third quarter of last year.
This year our bi-annual conference will be held in the fourth quarter.

OPERATING EXPENSES

Sales and Marketing.Sales and marketing expenses consist primarily of the cost of personnel involved
in the sales and marketing process, sales commissions, advertising and promotional materials, sales facilities expense, trade shows and seminars. Our sales and marketing expenses for the third quarter
of 2002 increased 20% to $16.6 million, compared with sales and marketing expenses of $13.8 million for the third quarter of 2001 and increased 26% to $48.9 million for the nine
months ended September 30, 2002, compared with $38.7 million for the same time period in 2001. The increase in expense was primarily due to an increase in sales and marketing personnel,
additional personnel related to our acquisitions of Kinexus and Techfi and increased marketing programs targeting our core markets and our Wealth Management initiatives such as Advent TrustedNetwork
and Wealthline. Sales and marketing expenses as a percentage of net revenues increased to 47% in the third quarter compared with 35% in the same period in 2001 and increased to 40% for the nine months
ended September 30, 2002, compared with 33% for the same period in 2001. The increase as a percentage of revenue was primarily due to increased expenses combined with a decrease in revenues
during the three and nine months ended September 30, 2002.

Product Development.Research and development expenses consist primarily of salary and benefits for
our development staff as well as contractors fees and other costs associated with the enhancements of existing products and services and development of new products and services. Costs associated with
product updates are included in cost of maintenance and other recurring revenue. Our product development expenses for the third quarter of 2002 increased 49% to $10.3 million, compared with
product development expenses of $6.9 million for the third quarter of 2001 and expenses for the nine

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months ended September 30, 2002 increased 54% to $29.2 million, compared with $19 million for the same period in 2001. Product development expenses increased primarily due to a
growth in personnel as we increased our product development efforts to accelerate the rate of product enhancements and new product introductions, both released and unreleased, in connection with
Geneva, Advent Office,
and our Wealth Management initiatives such as Wealthline and Advent TrustedNetwork. We also incurred additional personnel costs related to our acquisitions of Kinexus and Techfi. Product development
expenses also increased as a percentage of net revenues to 29% for the third quarter of 2002 compared to 18% in the third quarter of 2001 and increased to 24% from 16% for the nine months ended
September 30, 2002 and 2001, respectively. The increase as a percentage of revenue was primarily due to increased development expenses combined with a decrease in revenues during the three and
nine-month period ended September 30, 2002.

General and Administrative.General and administrative expenses consist primarily of personnel costs
for finance, administration, operations and general management, as well as accounting and legal expenses. Our general and administrative expenses for the third quarter of 2002 increased 39% to
$5.3 million compared with general and administrative expenses of $3.8 million for the third quarter of 2001 and increased 41% for the nine months ended September 30, 2002 to
$15.1 million compared to $10.7 million for the same period in 2001. The increase was primarily due to increased number of personnel and related costs required to support the growth and
increasing complexities of our business, an increase in personnel related to our acquisitions of Kinexus and Techfi and an increase in legal fees. General and administrative expenses as a percentage
of net revenues increased to 15% in the third quarter of 2002 from 10% in the same period in 2001 and increased to 12% for the nine months ended September 30, 2002 compared with 9% for the same
period in 2001. The increase as a percentage of revenue was primarily due to increased expenses combined with a decrease in revenues during the three-month period ended September 30, 2002.

Amortization of Intangibles.This amortization is based on the intangibles acquired in connection
with our acquisitions. We typically record goodwill and other intangibles based on the application of established valuation techniques using our estimates of market potential, product introductions,
technology trends, and any other relevant cash flow assumptions. We periodically assess our estimates related to the valuation model to determine if assets acquired have been impaired. If we determine
that there has been impairment, there could be additional charges to income. In accordance with FAS 142 issued in July 2001, we did not record any amortization of goodwill in the first,
second and third quarters of 2002. We recorded amortization of other intangibles totaling $2.9 million in the third quarter of 2002 compared with $1.5 million in the third quarter of
2001 and $7.4 million for the nine months ended September 30, 2002 compared with $3.5 million for the same time period in 2001. The increases are attributed to the acquisitions of
Kinexus, Techfi, Rex Development Partners L.P., three Scandinavian distributors, and NPO Solutions, Inc.

INTEREST INCOME AND OTHER EXPENSE, NET

Interest income and other expense, net consists primarily of interest income, realized gains and losses on investments that are other than temporary, and
miscellaneous non-operating income and expense items. Interest income and other expense, net was a net expense of $1.8 million in the third quarter of 2002, compared with a net
income of $1.5 million for the same period in 2001. Interest income and other expense, net was a net expense of $8.1 million for the nine months ended September 30, 2002, compared
with a net income totaling $4.8 million for the same period of 2001. The increase in expense for the three months ended September 30, 2002 is primarily the result of a $2 million
write-off of our investment in myCFO, Inc. based on a September 27, 2002 announcement by the Harris Wealth Management Group that it has reached an agreement to acquire
certain assets of myCFO, Inc. resulting
in no anticipated recovery of our initial investment. The increase in expense for the nine months ended September 30, 2002 is primarily the result of charges of $13 million for

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other-than-temporary investment losses, mainly due to the write off our investments in Encompys, Inc. and myCFO, Inc. In May 2002, the Board of Directors
of Encompys, Inc. informed us that it had decided to sell the assets of Encompys and wind down the operations. Encompys was formed in April 2001 by Accenture, Microsoft, Compaq and the
Bank of New York to provide an Internet-based straight-through-processing solution for the global asset management community.

PROVISION FOR INCOME TAXES

We recorded a benefit from income taxes of approximately $4 million, or 33%, in the third quarter of 2002. The third quarter effective tax rate reflects
the effect of the purchased in-process research and development write off and the write-downs of certain investments. The annual effective tax rate is anticipated to be 6% for 2002
compared to the 2001 effective tax rate of 34%. The actual effective tax rate for the entire 2002 fiscal year could vary substantially depending on actual results achieved. The anticipated 2002 tax
rate differs from the statutory rate primarily due to the write offs of purchased in-process research and development and changes in valuation allowances for certain deferred tax assets
resulting from the write-downs of certain investments all of which are not deductible for tax purposes.

Liquidity and Capital Resources

Our cash, cash equivalents and short-term marketable securities at September 30, 2002 were $172.5 million, decreasing by
$116.1 million from $288.6 million at December 31, 2001. The decrease was primarily due to payments made in connection with the Kinexus acquisition, including a $34 million
cash purchase price, $3 million in closing costs, $3.8 million of additional contingent consideration to be held in escrow for 14 months, $11.1 million for
change-in-control separation payments and approximately $8 million in payments for other assumed Kinexus liabilities; payments made in connection with our Techfi
acquisition, including a $20.2 million cash purchase price, $0.8 million in closing costs and $2.3 million of additional contingent consideration to be held in escrow for
14 months; payments made in connection with our Advent Hellas acquisition totaling a $6.5 million cash purchase price; as well as $50 million for the repurchase of stock,
partially offset by $25 million in cash generated from operations.

The
net cash of $25 million provided by operating activities for the nine months ended September 30, 2002 was primarily due to net income excluding non-cash
items such as depreciation, amortization, the one time write-off of in process research and development fees associated with our Techfi acquisition and the
other-than-temporary losses from investments and a $18 million decrease in accounts receivable primarily due to a decrease in revenues in the third quarter of 2002
compared to the fourth quarter of 2001 and increased collections. Increases in net cash provided by operating activities were partially offset by a $4.6 million decrease in accrued liabilities,
primarlily compensation related liabilities, a $3 million decrease in deferred revenue due to lower sales and a $6.3 million decrease in income taxes payable, due primarily to a
$0.8 million benefit from income taxes recorded for the nine months ended
September 30, 2002, compared to a provision for income taxes of $9.9 million recorded for the same period in 2001.

Net
cash used in investing activities of $58 million for the nine months ended September 30, 2002, is primarily due to $62 million paid in connection with the
purchase of Kinexus and other purchase price adjustments, $23.5 million paid in connection with the purchase of Techfi, $6.5 million paid in connection with the purchase of Advent
Hellas, $8 million in net purchases of other investments and $4 million for the acquisition of fixed assets, partially offset by a net $46 million received from net maturities and
sales of short-term marketable securities.

Net
cash used for financing activities of $36 million for the nine months ended September 30, 2002 was primarily for the repurchase of common stock in the amount of
$50 million partially offset by

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$13 million in proceeds received from the exercise of stock options and the issuance of stock under the Employee Stock Purchase Plan.

At
September 30, 2002, we had $174.2 million in working capital. We currently have no significant capital commitments other than commitments under our operating leases.
During the nine months ended September 30, 2002, our operating lease commitments increased to $63 million for the remainder of 2002 through 2012, cumulatively, primarily due to
additional leases assumed in connection with the Kinexus and Techfi acquisitions and a new operating lease for additional facilities in San Francisco signed in the second quarter of 2002, partially
offset by a successful exit from a lease commitment for unoccupied space in San Francisco. In November 2002, total operating lease commitments through 2005 increased approximately
$1 million in connection with the acquisition of AdventOutsource.

At
September 30, 2002 and December 31, 2001, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited
purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Our
principal source of liquidity is our operating cash flows, which are dependent upon continued market acceptance of our products and services. We believe that our available sources of
funds and anticipated cash flows from operations will be adequate to finance current operations and anticipated capital expenditures for at least the next twelve months.

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Other Factors Which May Affect Future Operations

Investors should carefully consider the risks described below before making an investment decision. In addition, these risks are not the
only ones we face. Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business operations. Our business could be harmed by any of these
risks. The trading price of our common stock could decline due to any of these risks.

Our Operating Results Fluctuate Significantly and We May Not Be Able to Maintain Our Historical Growth Rates.

Licenses into multi-user networked environments have increased both in individual size and number, and the timing and size of individual license
transactions are becoming increasingly important factors in quarterly operating results. The sales cycles for these transactions are often lengthy and unpredictable. We may not be successful in
closing large license transactions such as these on a timely basis or at all. Accordingly, because revenues from large licenses are increasing as a portion of our net revenues, the timing of such
licenses could cause additional variability in our quarterly operating results. Software product backlog at the beginning of any quarter typically represents only a small portion of that quarter's
expected revenues. Our expense levels are based in significant part on our expectations of future revenues and therefore are relatively fixed in the short term. Due to the fixed nature of these
expenses combined with the relatively high gross margin historically achieved by us on products and services, an unanticipated decline in net revenues in any particular quarter is likely to
disproportionately adversely affect our operating results.

We
have often recognized a substantial portion of each quarter's license revenues in the last month, weeks or even days of that quarter. As a result, the magnitude of quarterly
fluctuations in revenue or earnings may not be evident until late in or after the close of a particular quarter and a disruption late in the quarter may have a disproportionately large negative impact
on our quarterly results.

Both
of these factors impacted our results in the second and third quarters of fiscal 2002 and may continue to impact our results. Additionally, in June 2002, we announced that we
would begin to offer term licenses as an alternative to the perpetual licenses we have previously sold. Although we believe that this will give us more predictable revenue in the long term, it may
potentially decrease our revenues in the short term as some clients make the shift from perpetual to term and therefore we recognize less revenue at the beginning of the contract.

Because
of the above factors, we believe that period-to-period comparisons of our operating results are not necessarily meaningful and that these comparisons
cannot be relied upon as indicators of future performance.

Our stock price has fluctuated significantly since our initial public offering in November 1995.

Like many companies in the technology and emerging growth sector, our stock price may be subject to wide fluctuations, particularly during times of high market
volatility. If net revenues or earnings in any quarter fail to meet the investment community's expectations, our stock price is likely to decline. In addition, our stock price may be affected by
trends in the financial service sector and by broader market trends unrelated to our performance.

Our Sales Cycle Is Long and We Have Limited Ability to Forecast the Timing and Amount of Specific Sales.

Because the purchase of our software products often requires significant, executive-level investment and systems architecture decisions by prospective customers,
we must generally engage in a relatively lengthy sales effort. These transactions may be delayed during the customer decision process because

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we must provide a significant level of education to prospective customers regarding the use and benefit of our products. As a result, the sales cycle associated with the purchase of our software
products is typically between two and twelve months depending upon the size of the client, though it can be considerably longer, and is subject to a number of significant risks over which we have
little or no control, including customers' budgeting constraints and internal selection procedures, among other factors. As a result of a lengthy and unpredictable sales cycle, we have limited ability
to forecast the timing and amount of specific sales. The timing of large individual sales is especially difficult to forecast. As a result, there can be no assurance that we will be successful in
closing large license transactions on a timely basis or at all. In addition, customers may postpone their purchases of our existing products or product enhancements in advance of the anticipated
introduction of new products or product enhancements by us or our competitors or due to economic conditions. Because our expenses are generally relatively fixed in the near term, any shortfall from
anticipated revenues could result in significant variations in our operating results from quarter to quarter.

We Depend Heavily on Our Product, Axys.

In 2001, 2000, and 1999, and to date in 2002, we derived a majority of our net revenues from the licensing of Axys, part of our Advent Office suite, and related
applications and services. In addition, many of our other applications, such as Moxy, Qube and various data interfaces were designed to
operate with Axys to provide an integrated solution. As a result, we believe that a majority of our net revenues, for the foreseeable future, will depend upon continued market acceptance of Axys,
enhancements or upgrades to Axys and related products and services.

We Depend upon Financial Markets.

The target clients for our products include a range of organizations that manage investment portfolios, including investment advisors, brokerage firms, banks and
hedge funds. In addition, we target corporations, public funds, universities and non-profit organizations, which also manage investment portfolios and have many of the same needs. The
success of many of our clients is intrinsically linked to the health of the financial markets. We believe that demand for our products could be disproportionately affected by fluctuations,
disruptions, instability or downturns in the financial markets which may cause clients and potential clients to exit the industry or delay, cancel or reduce any planned expenditures for investment
management systems and software products. In addition, a slowdown in formation of new investment firms or a decline in the growth of assets under management would cause a decline in demand for our
products. We believe that the economic downturn in the financial markets negatively impacted the demand for our products in the second and third quarters of fiscal 2002, and that a continuing downturn
could have a material adverse effect on our business and results of operations.

Difficulties in Integrating Our Acquisitions Could Adversely Impact Our Business and We Face Risks Associated With Potential Acquisitions, Investments or Divestitures.

In 2001, we completed acquisitions of Rex Development Partners, L.P., NPO Solutions, Inc., certain assets of ManagerLink.com LLC and our Scandinavian
distributors located in Norway, Sweden and Denmark. In 2002, we completed the acquisition of Kinexus Corporation, Techfi Corporation, Advent Hellas, our Greek distributor, and AdventOutsource Data
Management, LLC. Our acquisition of Kinexus Corporation is our largest acquisition to date, and the number of acquisitions completed in 2001 and 2002 is unprecedented for us.

The
complex process of integrating Kinexus and our other acquisitions has required and will continue to require significant resources, particularly in light of our relative inexperience
integrating acquisitions. Integrating these acquisitions has been and will continue to be time consuming, expensive and disruptive to our business. This integration process has strained our managerial
controls, and has

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resulted in the diversion of management and financial resources from our core business objectives. Failure to achieve the anticipated benefits of these acquisitions or to successfully integrate the
operations of these entities could harm our business, results of operations and cash flows. We may not realize the benefits we anticipate from these acquisitions because of the following significant
challenges:



We
have incurred and expect to continue to incur significant costs and commit significant management time integrating the operations, technology, development programs, products,
information systems, customers and personnel of these acquisitions. These costs have been and will likely continue to be substantial and include costs for:



We
may make additional acquisitions of complementary companies, products or technologies in the future, which would further exacerbate these issues. In addition, we continually evaluate the
performance of all our products and product lines and may sell or discontinue current products or product lines. Failure to achieve the anticipated benefits of any future acquisition or divestiture
could also harm our business, results of operations and cash flows. Furthermore, we may have to incur debt,

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write-off investments, infrastructure costs or other assets, incur severance liabilities, write-off impaired goodwill or other intangible assets or issue equity securities to
pay for any future acquisitions. The issuance of equity securities could dilute our existing stockholders' ownership. Finally, we may not identify suitable businesses to acquire or negotiate
acceptable terms for acquisitions.

Difficulties We May Encounter Managing a Substantially Larger Business Could Adversely Affect Our Operating Results.

Our business has grown in recent years through both internal expansion and acquisitions, and that growth along with any continued growth may cause a significant
strain on our infrastructure, internal systems and managerial resources. For example, during 2001 and 2002, we acquired Rex Development
Partners, L.P., NPO Solutions, Inc., certain assets of ManagerLink.com LLC, our Scandinavian and Greek distributors (located in Norway, Sweden, Denmark and Greece), Kinexus Corporation, Techfi
Corporation and AdventOutsource Data Management, LLC. Further, our headcount increased from 481 employees at December 31, 1998 to 837 employees at December 31, 2001 and 972 at
September 30, 2002. To manage our growth effectively, we must continue to improve and expand our infrastructure, including operating and administrative systems and controls, and continue
managing headcount, capital and processes in an efficient manner. Our productivity and the quality of our products may be adversely affected if we do not integrate and train our new employees quickly
and effectively and coordinate among our executive, engineering, finance, marketing, sales, operations and customer support organizations, all of which add to the complexity of our organization and
increase our operating expenses. In addition, our revenues may not grow at a sufficient rate to absorb the costs associated with a larger overall headcount. Integrating our recent acquisitions will
complicate these tasks.

Writing Off Investments Could Harm Our Results of Operations

In addition, we have made investments in privately held companies, which we classify as "other assets" on our balance sheet. The value of these investments is
influenced by many factors, including the operating effectiveness of these companies, the overall health of these companies' industries, the strength of the private equity markets and general market
conditions. Due to these and other factors, we have previously determined, and may in the future determine, that the value of these investments is impaired, which has caused and would cause us to
write down the stated value of these investments such as the write-off of our investments in Encompys and MyCFO. Further, we cannot be sure that future investment, license, fixed asset or
other asset write-downs will not happen, particularly if the current economic downturn continues. If future write-downs do occur, they could harm our business and results of operations.

General Economic Conditions May Reduce Our Revenues.

We believe that the market for large management software systems may be negatively impacted by a number of factors, including reductions in capital expenditures
by large customers; poor performance of major financial markets, and increasing competition. Those factors may, in turn, give rise to a number of market trends, which we experienced in the second and
third quarters of fiscal 2002, that may slow revenue growth across the industry, including longer sales cycles, deferral or delay of information technology projects and generally reduced expenditures
for software and related services, and increased price competition. If the current economic slowdown continues, the presence of these factors in the market for large management software systems will
likely materially adversely affect our business and results of operations.

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Business Interruptions Could Adversely Affect Our Business.

Our operations are exposed to interruption by fire, earthquake, power loss, telecommunications failure, and other events beyond our control. Additionally, we are
vulnerable to interruption caused by political and terrorist incidents. For example, our facilities in New York were temporarily closed due to the September 11, 2001 terrorist attacks.
Immediately after the terrorist attacks, our clients who were located in the World Trade Center area were concentrating on disaster recovery rather than licensing additional software components, while
the grounding of transportation impeded our ability to deliver professional services at client sites. Additionally, during the temporary closure of the U.S. stock markets, our clients did not use our
market data services. Such interruptions could affect our ability to sell and deliver products and services and other critical functions of our business and could seriously harm us. Further, such
attacks could cause instability in the financial markets upon which we depend.

We Are Continuing to Expand Our Internet Based Enabled Solutions, such as Advent TrustedNetwork and Wealthline.

To take advantage of the internet, we are continuing to develop solutions to bring internet-based products and services to our clients. As we develop these new
products and services, we have entered, and will continue to enter, into development agreements and other agreements with information providers, clients or other companies in order to accelerate the
delivery of new products and services, such as our relationship with Microsoft for Wealthline. We may not be successful in marketing our internet services or in developing other internet services or
maintaining these relationships. Additionally, we may not be successful in being able to replace our current technology with new technology. Our failure to do so could seriously harm our business. In
addition, we cannot assure you that there will not be disruptions in internet services beyond our control or that of our third party vendors. Any such disruptions could harm our business.

Security Risks and Concerns May Deter the Use of the Internet for Conducting Business.

A significant barrier to commerce and communications over public networks is the secure transmission of confidential information. Advances in computer
capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems or those of other web sites to protect
proprietary information. If any well-publicized compromises of security were to occur, it could have the effect of substantially reducing the use of the internet for commerce and
communications. Anyone who circumvents our security measures could misappropriate proprietary information or cause interruptions in our services or operations. The internet is a public network, and
data is sent over this network from many sources. In the past, computer viruses, software programs that disable or impair computers, have been distributed and have rapidly spread over the internet.
Computer viruses could be introduced into our systems or those of our customers or other third parties, which could disrupt or make it inaccessible to customers. We may be required to expend
significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. To the extent that our activities may involve the storage and
transmission of proprietary information, security breaches could expose us to a risk of loss
or litigation and possible liability. Our security measures may be inadequate to prevent security breaches, and our business would be harmed if our security is breached.

We Face Risks Related to Our New Business Areas.

We have expanded in recent periods into a number of new business areas to foster long-term growth including international operations, strategic
alliances, and Advent TrustedNetwork. These areas are still relatively new to our product development and sales personnel. New business areas require significant management time and resources prior to
generating significant revenues and may divert management from our core business. There is no assurance that we will compete effectively or will

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generate significant revenues in these areas. The success of our ability to develop and market new internet based products and services, such as Advent TrustedNetwork, and Wealthline, is difficult to
predict because it represents a new area of business for our entire industry. Additionally, to help manage our growth, we will need to continually improve our operational, financial, management and
information systems and controls.

We Expect Our Gross and Operating Margins May Fluctuate Over Time.

We expect that our gross and operating margins may fluctuate from period to period as we continue to introduce new products, change our professional services
organization and associated revenue, continue to hire and acquire additional personnel and increase other expenses to support our business. Because these expenses are relatively fixed in the short
term, a fluctuation in revenue could lead to operating results differing from expectations.

We Must Continue to Introduce New Products and Product Enhancements.

The market for our products is characterized by rapid technological change, changes in customer demands and evolving industry standards. As a result, our future
success will continue to depend upon our ability to develop new products or product enhancements that address the future needs of our target markets and to respond to these changing standards and
practices. We may not be successful in developing, introducing and marketing new products or product enhancements on a timely and cost effective basis, or at all, and our new products and product
enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. Delays in the commencement of commercial shipments of new products or enhancements may result in
client dissatisfaction and delay or loss of product revenues. If we are unable, for technological or other reasons, to develop and introduce new products or enhancements of existing products in a
timely manner in response to changing market conditions or client requirements, or if new products or new versions of existing products do not achieve market acceptance, our business would be
seriously harmed. In addition, our ability to develop new products and product enhancements is dependent upon the products of other
software vendors, including certain system software vendors, such as Microsoft Corporation, database vendors and development tool vendors. If the products of such vendors have design defects or flaws,
or if such products are unexpectedly delayed in their introduction, our business could be seriously harmed. Software products as complex as those offered by us may contain undetected defects or errors
when first introduced or as new versions are released. Although we have not experienced adverse effects resulting from any software errors, we cannot assure you that, despite testing by us and our
clients, defects or errors will not be found in new products after commencement of commercial shipments, resulting in loss of or delay in market acceptance, which could seriously harm our business.

If Our Relationship with Interactive Data Is Terminated, Our Business May Be Harmed.

Many of our clients use our proprietary interface to electronically retrieve pricing and other data from Interactive Data. Interactive Data pays us a commission
based on their revenues from providing this data to our clients. Our software products have been customized to be compatible with their system and this software would need to be redesigned if their
services were unavailable for any reason. Termination of our agreement with Interactive Data would require at least two years notice by either us or them, or 90 days in the case of material
breach. If our relationship with Interactive Data were terminated or their services were unavailable to our clients for any reason, replacing these services could be costly and time consuming.

We Face Intense Competition.

The market for investment management software is intensely competitive and highly fragmented, subject to rapid change and highly sensitive to new product
introductions and marketing efforts by

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industry participants. Our competitors include providers of software and related services as well as providers of timeshare services.

Our
competitors vary in size, scope of services offered and platforms supported. In addition, we compete indirectly with existing and potential clients, many of whom develop their own
software for their particular needs and therefore may be reluctant to license software products offered by independent vendors like us. Many of our competitors have longer operating histories and
greater financial, technical, sales and marketing resources than we do. In addition, we also face competition from potential new entrants into our market that may develop innovative technologies or
business models. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressures will not result in price reductions, reduced
operating margins and loss of market share, any one of which could seriously harm our business.

We Face Challenges in Expanding Our International Operations.

We market and sell our products in the United States and, to a lesser extent, internationally. In November 1998, we purchased an independent distributor in
Australia which markets and licenses our products in Australia. In addition, we entered into a distributor relationship in 1999 with Advent Europe, an independent distributor of our products in
selected European markets. In November 2001, we acquired the Norwegian, Swedish, and Danish companies of this independent distributor and in September 2002, we purchased their Greek
subsidiary. In order to further expand our international operations, we will need to continue to establish additional facilities, acquire other businesses or enter into additional distribution
relationships in other parts of the world. The expansion of our existing international operations and entry into additional international markets will require significant management attention and
financial resources. We cannot be certain that our establishment of facilities in other countries will produce desired levels of revenue. We currently have limited experience in developing localized
versions of our products and marketing and distributing our products internationally. In addition, international operations are subject to other inherent risks, including:



The
revenues, expenses, assets and liabilities of our international subsidiaries are primarily denominated in local currencies. We have not historically undertaken foreign exchange
hedging transactions to cover potential foreign currency exposure. Future fluctuations in currency exchange rates may adversely affect revenues from international sales and the U.S. dollar value of
our foreign subsidiaries' revenues, expenses, assets and liabilities. Our international revenues from our distributors are generally denominated in local foreign currencies.

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Undetected Software Errors or Failures Found in New Products May Result in Loss of or Delay in Market Acceptance of Our Products That Could Seriously Harm Our Business.

Our products may contain undetected software errors or failures when first introduced or as new versions are released. Despite testing by us and by current and
potential customers, errors may not be found in new products until after commencement of commercial shipments, resulting in loss of or a delay in market acceptance, which could seriously harm our
business.

If We Are Unable to Protect Our Intellectual Property We May Be Subject to Increased Competition That Could Seriously Harm Our Business.

Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks for many of our products and services and will continue to evaluate the
registration of additional trademarks as appropriate. We generally enter into confidentiality agreements with our employees and with our resellers and customers. We seek to protect our software,
documentation and other written materials under trade secret and copyright laws, which afford only limited protection. Despite these efforts, it may be possible for unauthorized third parties to copy
certain portions of our products or to reverse engineer or otherwise obtain and use our proprietary information. We do not have any patents, and existing copyright laws afford only limited protection.
In addition, we cannot be certain that others will not develop substantially equivalent or superseding proprietary technology, or that equivalent products will not be marketed in competition with our
products, thereby substantially reducing the value of our proprietary rights. We cannot assure you that we will develop proprietary products or technologies that are patentable, that any patent, if
issued, would provide us with any competitive advantages or would not be challenged by third parties, or that the patents of others will not adversely affect our ability to do business. Litigation may
be necessary to protect our proprietary technology. This litigation may be time-consuming and expensive. Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. In addition, the laws of some foreign countries do not protect proprietary rights to as great an
extent as do the laws of the United States. We cannot assure you that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar
technology, duplicate our products or design around any patent that may be issued to us or other intellectual property rights of ours.

We Must Retain Key Employees and Recruit Qualified Technical and Sales Personnel.

We believe that our success will depend on the continued employment of our senior management and key technical personnel, none of whom has an employment agreement
with us. Our Chief Financial Officer has announced his intent to retire at some point in the future. Additionally, our continued success depends, in part, on our ability to identify, attract, motivate
and retain qualified technical, sales and other personnel. Because our future success is dependent on our ability to continue to enhance and introduce new products, we are particularly dependent on
our ability to identify, attract, motivate and retain qualified engineers with the requisite education, backgrounds and industry experience. Competition for qualified engineers, particularly in
Northern California and the San Francisco Bay Area, is intense. The loss of the services of a significant number of our engineers or sales people could be disruptive to our development efforts or
business relationships and could seriously harm our business. We may also be required to create additional performance and retention incentives in order to retain our employees, including the granting
of additional stock options to employees at current prices or issuing incentive cash bonuses. Such incentives may either dilute our existing stockholder base or result in unforeseen operating
expenses, which may cause our stock price to fall.

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates. Much of our revenue and capital spending is
transacted in U.S. dollars. However, since the acquisitions of Advent Australia, Advent Denmark, Advent Norway, Advent Sweden and Advent Hellas, whose revenues and capital spending are transacted in
local country currencies, we have greater exposure to foreign currency fluctuations. Results of operations from Advent Australia, Advent Denmark, Advent Norway, Advent Sweden and Advent Hellas are not
material to our operating results; therefore, we believe that foreign currency exchange rates should not materially adversely affect our overall financial position, results of operations or cash
flows. We believe that the fair value of our investment portfolio or related income would not be significantly impacted by increases or decreases in interest rates due mainly to the
short-term nature of our investment portfolio. However, immediate sharp increases in interest rates could have a material adverse affect on the fair value of our investment portfolio.
Conversely, immediate sharp declines in interest rates could seriously harm interest earnings of our investment portfolio.

The
table below presents principal amounts by expected maturity (in U.S. dollars) and related weighted average interest rates by year of maturity for our investment portfolio (in
thousands):

|                                             |  | Estimated Fair Value at September 30, 2002
|-------------------------------------------- |  | ------------------------------------------
|
|
|Federal Instruments                          |  | $                                         
|Weighted Average Interest Rate               |  |                                           
|Commercial Paper & Short-term obligations    |  |                                           
|Weighted Average Interest Rate               |  |                                           
|Corporate Notes & Bonds                      |  |                                           
|Weighted Average Interest Rate               |  |                                           
|Municipal Notes & Bonds                      |  |                                           
|Weighted Average Interest Rate               |  |                                           
|Corporate Equity Securities                  |  |                                           
|                                             |  |                                           
|Total Portfolio, excluding equity securities |  | $                                         
|                                             |  |                                           

At
September 30, 2002, cash, cash equivalents and short-term marketable securities totaled approximately $172.5 million, which is comprised of the
$132.7 million in our investment portfolio, presented above, and $39.8 million in other cash and cash equivalents.

We
also invested in numerous privately held companies, many of which can still be considered in the start-up or development stages and are classified as "other assets" in our
balance sheet. These investments are inherently risky as the market for the technologies or products they have under development are typically in the early stages and may never materialize. The value
of these investments is influenced by many factors, including the operating effectiveness of these companies, the overall health of the companies' industries, the strength of the private equity
markets and general market conditions. We could lose our entire initial investment in these companies.

Item 4.    Controls and Procedures

Evaluation of disclosure controls and procedures.

Within 90 days prior to the filing date of this Quarterly Report on Form 10-Q (the "Evaluation Date"), we evaluated, under the
supervision of our chief executive officer and our chief financial officer, the effectiveness of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief
financial officer concluded that our disclosure controls and procedures are

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effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal controls.

Our review of our internal controls was made within the context of the relevant professional auditing standards defining "internal controls," "significant
deficiencies," and "material weaknesses." "Internal controls" are processes designed to provide reasonable assurance that our transactions are properly authorized, our assets are safeguarded against
unauthorized or improper use, and our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting
principles. "Significant deficiencies" are referred to as "reportable conditions," or control issues that could have a significant adverse effect on the ability to record, process, summarize and
report financial data in the financial statements. A "material weakness" is a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk
that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employees in the normal
course of performing their assigned functions. As part of our internal controls procedures, we also address other, less significant control matters that we or our auditors identify, and we determine
what revision or improvement to make, if any, in accordance with our on-going procedures.

Subsequent
to the Evaluation Date, there were no significant changes in our internal controls or in other factors that could significantly affect our internal controls, including any
corrective actions with regard to significant deficiencies and material weaknesses.

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PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

From time to time we are involved in litigation incidental to the conduct of our business. We are not party to any lawsuit or proceeding that, in our opinion, is
likely to seriously harm our business.

On
November 8, 2001, Charles Schwab & Co, Inc. ("Schwab") filed suit against us because of our intention to cease maintenance of an existing software interface and
to transition to a new, and what we believe to be improved, software interface (the "Advent Custodial Data" or "ACD" system). On July 22, 2002, we settled our dispute with Schwab. Pursuant to
the settlement agreement, Advent will extend maintenance of the point-to-point interface for licensed users through December 30, 2004 to be paid for by the licensed
users. Concurrent with maintenance of the point-to-point interface, Advent and Schwab will fully support and continue to offer ACD service and will work together to further
enhance the Schwab ACD interface. Advent and Schwab will cooperate to create an orderly transition from the point-to-point interface to ACD by year-end 2004.
Finally, Advent's ACD pricing for Schwab customers will not differ based on the custodial relationship of the advisor, and Schwab will not develop a substitute for the
point-to-point interface.

Item 2.    Changes in Securities

None.

Item 3.    Defaults Upon Senior Securities

None

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

None

Item 5.    Other Information

None.

Item 6.    Exhibits And Reports On Form 8-K



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                         |  | ADVENT SOFTWARE, INC.
|------------------------ |  | ---------------------
|Dated: November 13, 2002 |  | By:                  
|                         |  |                      
|Dated: November 13, 2002 |  | By:                  
|                         |  |                      

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I, Irv H. Lichtenwald, certify that:





Date:    November 13,
2002

| |  | /s/IRV H. LICHTENWALDIrv H. Lichtenwald Executive Vice President,
Chief Financial Officer and Secretary
| |  | -------------------------------------------------------------------------------------------------------

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I,
Peter M. Caswell, certify that:





Date:    November 13,
2002

| |  | /s/PETER M. CASWELLPeter M. Caswell Chief Executive Officer and President
| |  | -------------------------------------------------------------------------

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