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



FORM 10-K

ý

Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2009oro

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the transition period
from              to


Commission file number: 0-26994



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)


600 Townsend Street, San Francisco, California 94103(Address of principal executive offices and zip code)

(415) 543-7696(Registrant's telephone number, including area code)

Securities
registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01 per share

The NASDAQ Stock Market LLC(NASDAQ Global Select)


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



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes o    No ý

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 (the "Exchange Act") 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o    No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "small reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a
smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    No ý

The number of shares of the registrant's common stock outstanding as of June 30, 2009 was 25,437,431. The aggregate market value of the registrant's common
stock held by non-affiliates, based upon the closing price on June 30, 2009, as reported on the NASDAQ National Market System, was approximately $381 million. Shares of
common stock held by each officer and director and by each person who owns 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination for other purposes. As of February 28, 2010, there were 25,876,754 shares of the registrant's common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants definitive Proxy Statement for the Annual Meeting of Stockholders to be held June 2, 2010 are incorporated by reference into
Part III of this Annual Report on Form 10-K to the extent stated herein. Except with respect to information specifically incorporated by reference in this
Form 10-K, the Proxy Statement is not deemed to be filed as part herein.



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TABLE OF CONTENTS



PART IItem 1.

Business

3Item 1A.

Risk Factors

16Item 1B.

Unresolved Staff Comments

30Item 2.

Properties

31Item 3.

Legal Proceedings

31Item 4.

Submission of Matters to a Vote of Security Holders

32PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

32Item 6.

Selected Financial Data

35Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

36Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

72Item 8.

Financial Statements and Supplementary Data

74Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

124Item 9A.

Controls and Procedures

124Item 9B.

Other Information

124PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

124Item 11.

Executive Compensation

125Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

125Item 13.

Certain Relationships and Related Transactions, and Director Independence

125Item 14.

Principal Accountant Fees and Services

125PART IVItem 15.

Exhibits and Financial Statement Schedules

126


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

You should read the following discussion in conjunction with our consolidated financial statements and related notes. The following
discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as
amended, including, but not limited to, statements referencing our expectations relating to future revenues, expenses and operating margins. Forward-looking statements can be identified by the use of
terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" or other similar terms and the negative of such terms regarding
beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include, among others, statements regarding in the future of the investment management market and
opportunities for us related thereto, future expansion, acquisition, divestment of or investment in other businesses, projections of revenues, future cost and expense levels, expected timing and
amount of amortization expenses related to past acquisitions, the adequacy of resources to meet future cash requirements, estimates or predictions of actions by customers, suppliers, competitors or
regulatory authorities, future client wins, future hiring and future product introductions. Such forward-looking statements are based on our current plans and expectations and involve known and
unknown risks and uncertainties which may cause our actual results or performance to be materially different from any results or performance expressed or implied by such forward-looking statements.
Such factors include, but are not limited to, the "Risk Factors" set forth in "Item 1A. Risk Factors" in this Form 10-K, as well as other risks identified from time to time
in other Securities and Exchange Commission ("SEC") reports. You should not place
undue reliance on our forward-looking statements, as they are not guarantees of future results, levels of activity or performance and represent our expectations only as of the date they are made.

Unless
expressly stated or the context otherwise requires, the terms "we", "our", "us", the "Company" and "Advent" refer to Advent Software, Inc. and its subsidiaries.

PART I

Item 1.    Business

Overview

Advent Software, Inc. was founded and incorporated in 1983 in California and reincorporated in Delaware in November 1995. We
offer software and services that automate work flows and data across investment management organizations, as well as the information flows between an investment management organization and external
parties. Our products are intended to increase operational efficiency, improve the accuracy of client information and enable better decision-making. Each solution focuses on specific mission-critical
functions of the investment management organization and is tailored to meet the needs of the particular client, as determined by size, assets under management and complexity of the investment process.

Historically,
our business was organized into two reportable segments, Advent Investment Management ("AIM") and MicroEdge. Advent Investment Management is our core business and derives
revenues from the development, marketing and sale of software products, hosting services, data interfaces and related maintenance and services that automate, integrate and support certain
mission-critical functions of investment management organizations primarily in the United States, Europe, Asia, the Middle East and Africa. MicroEdge derived revenues from the sale of software and
services for grant management, matching gifts and volunteer tracking for the grantmaking community primarily in the United States and United Kingdom. In October 2009, we completed the sale of
MicroEdge and we now report a
single operating segment, AIM. The results of MicroEdge have been reclassified as a discontinued operation for all periods presented. Unless otherwise noted, discussion in this document pertains to
our continuing operations.

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Our
principal executive offices are located at 600 Townsend Street, San Francisco, California 94103, and our telephone number is (415) 543-7696. Our internet address
iswww.advent.com. On our Investor Relations web site, which is accessible throughwww.advent.com, we
post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission: our annual reports on
Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports. All such filings on our
Investor Relations web site are available free of charge. Information contained or referenced on our website is not incorporated by reference in and does not form a part of this Annual Report
on Form 10-K. The SEC maintains an internet site atwww.sec.govthat contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The public may also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE,
Washington DC, 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Advent's
common stock (ticker symbol: ADVS) has traded on the NASDAQ Stock Market since its initial public offering on November 15, 1995. Our fiscal year ends on
December 31st.

Clients

Advent's core clients are investment management institutions and service providers that manage, advise and perform recordkeeping
functions on financial assets. Examples of these institutions include global and US-based asset managers, registered investment advisors, prime brokers, fund administrators, hedge funds,
family offices, broker dealers, foundations, endowments, fund of funds and wealth managers. We have a diverse client base ranging from small clients to some of the largest institutional clients in the
world. In fiscal 2009, 2008 and 2007, no single customer accounted for more than 10% of our total net revenues. Geographically, the US continues to represent our primary market, with international
sales representing 13%, 14% and 14% of total net revenues in 2009, 2008 and 2007, respectively.

Our Industry

Over the past decade, the investment management industry has transformed dramatically. These changes include: a significant increase in
cross border cash and other asset flows and global investment activity; the evolution and maturation of electronic markets; the proliferation of research information from a myriad of sources; the
increase of assets managed in alternative strategies; and the creation of increasingly complex securities instruments used by hedge funds and in alternative strategies. All of these factors have
created opportunities over the years for our investment manager clients, but they have also resulted in substantially increased complexity in their operations and processes. We believe that investment
managers have clear needs that translate into demand for Advent solutions: portfolio accounting and analysis; trade order management and post-trade processing; research management; account
management; and custodial reconciliation.

Recent Market Trends

In the fall of 2008, dislocation and decreasing confidence in the credit markets drove global equity markets into significant decline.
Although many markets recovered in 2009, the impact on investment management organizations in 2009 was twofold: first, the decline in market valuations in 2008 impacted the solvency, size and buying
power of some of our clients; and second, these firms face increasing pressure from regulators and investors to provide operational transparency. In addition to market trends, a series of
high-profile cases of investment fraud have emphasized the importance of checks and

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balances
between investment management companies and their investors' custodial firms. We anticipate the following trends to continue, some of which will drive demand for Advent
solutions:



In
this climate, the need to operate more efficiently while enhancing investor confidence is driving investment management organizations to continue to leverage Advent to automate and
integrate their mission-critical and labor-intensive functions, including: (i) investment decision support; (ii) trade order management and compliance; (iii) portfolio accounting,
performance measurement and report generation; (iv) client relationship management; (v) straight-through-processing that includes connectivity and data integration; and
(vi) research management. Investment management organizations historically have relied on internally-developed systems, third-party systems, outsourced services or spreadsheet-based systems to
manage these information flows.

During
2009, many investment managers' revenues decreased as a result of decreases in their assets under management and some hedge funds and other types of clients have gone out of
business. While we are not immune to downturns in technology spending, we believe we are well-positioned to maintain our competitive position in the longer term for the following
reasons:



Particularly
in difficult market conditions, we believe that the need to streamline operations increases the value of Advent's ability to offer an integrated, proven, and
cost-effective suite to clients and prospects seeking operational efficiency and an established business partner. We believe our recent financial results validate the strength and
stability of our business and the attractiveness of our product portfolio to our customers. In addition, we saw an improved demand environment during the second half of 2009 from prospects and
customers across all the markets we serve. As such, we expect an improved demand environment for 2010 and expect to grow revenues by 5% to 8% in 2010. As the current economic situation evolves, we
will continue to evaluate the impact of this environment on our business and we will remain focused on delivering solutions for our customers.

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Seasonality

We experience seasonality in our license bookings. We believe that this seasonality in our bookings results primarily from customer
budgeting cycles and expect this seasonality to continue in the future. The fourth quarter of the year typically has more licensing activity. This can result in term license bookings and perpetual
license fee revenue being the highest in the fourth quarter, followed by lower bookings and perpetual license revenue in the first quarter of the following year.

We
also experience seasonality in our operating cash flows and expect this seasonality to continue in the future. We experience lower operating cash flows in the first quarter of the
year as we make payments of our year-end liabilities including payables, bonuses, commissions and payroll taxes. Conversely, we experience relatively stronger operating cash flows in the
fourth quarter of the year since we traditionally have more licensing activity in the fourth quarter of the year and bill annually at the anniversary of the contract signing date, resulting in higher
collections during the fourth quarter.

For
additional information regarding factors that affect the timing of the recognition of software license revenue, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations / Critical Accounting Policies and Estimates / Revenue Recognition."

Strategy

Mission

Our mission is to strengthen and grow our business as a leading provider of mission-critical software and services for the investment
management industry.

We
plan to strengthen and grow our core business by:



Customer Focus

At December 31, 2009, we served approximately 4,700 customers. The needs of our customers, and the investment management
industry as a whole, continue to evolve, as noted above. We are committed to making the required investments in product development to continue delivering mission-critical solutions to our customers
as their needs change. We believe our strategy and customer focus are driving increasing market acceptance for our products. We signed 72 new APX clients and 38 new Geneva clients during fiscal 2009.

Our
customers use our products for an average of over 10 years. Although the current environment has created pressure on our clients to decrease their information technology
budgets, which has impacted our customer renewal rates in 2009, we experienced continued loyalty from our customers. In spite of the challenges faced by the investment management industry in 2009, our
initially

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disclosed
renewal rates, which we report one quarter in arrears, showed improvement during latter half of 2009.

Renewal Rates

Q409

Q309

Q209

Q109

Q408Based on cash collections relative to prior year collectionsInitially Disclosed Rate(1)


89
%

87
%

85
%

93
%

98
%Updated Disclosed Rate(2)


n/a


90
%

88
%

98
%

101
%


(1)"Initially
Disclosed Rate" is based on cash collections and reported one quarter in arrears(2)"Updated
Disclosed Rate" reflects initially disclosed rate updated for subsequent cash collections


Business Model

During 2009, we substantially completed the transition of our business to a predominately term license model. Under this model,
customers purchase a license to use our software for a fixed period of time and we recognize the license revenue ratably over the length of the contract. Conversely, under a perpetual pricing model,
customers purchase a license to use our software indefinitely and we recognize all license revenue at the time of sale. Although the term license model has the effect of lowering license revenues
compared to a perpetual model in its early periods, we believe the term license business model increases the total potential value of our customer relationships because our customer focus, the
stability of our customer base and the market acceptance of our products results in a long customer relationship. We believe that a term license business model ultimately provides more predictable
revenue streams.

We
continue to focus on growing our recurring revenues. Total recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, have increased
from 79% of total net revenues in 2007 to 80% in 2008 and 86% in 2009, and we expect them to increase in future years. These recurring revenue sources provide us with increased ability to make
strategic decisions to invest in our business while remaining confident that our operating results will be reasonably predictable.

In
2010, we plan to continue to invest in client support, product development, and sales and marketing. Our investment in client support will enable us to continue to improve the
services we provide to our clients in their day-to-day use of our software and build a scalable organization to support our largest and most complex customers. Our investments
in product development are designed to enable us to develop new products as well as maintain our rapid pace of enhancements and upgrades to our existing products. Our investment in sales and marketing
will help us expand our international presence and capitalize on new market opportunities.

Overall,
despite the current economic environment and our intention to continually invest to support our growth, we plan to grow our operating margins as a percentage of revenues in
2010. In the longer term, we believe that our mission critical products, market leadership position and our reasonably predictable term license revenue model will enable us to consistently grow
operating margins.

Products and Services

Advent products are intended to automate those mission-critical functions in the investment management process that will increase
operational efficiency, facilitate timely regulatory compliance, improve the accuracy of client reporting and enable better decision-making. Each product focuses on specific functions within an
investment management organization and pricing, for the most part, is determined by size of the implementation and assets under management.

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We
offer solutions for customers in numerous markets, which include:



These
solutions are comprised of various combinations of Advent software products, data integration tools and professional services all aimed at meeting our clients' critical business
needs.

Software Products



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Outsourcing Services



Data and Data Integration Services



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Support and Maintenance Services

Due to the mission-critical nature of our products, almost all of our perpetual license clients purchase support and maintenance, which
entitles them to technical support through Advent's Client Services group and product upgrades as they become available. Term license customers also receive support and maintenance services as part of
the term license offering. We continually upgrade and enhance our products to respond to changing market needs, evolving regulatory requirements and new technologies.

We
offer a tiered support structure to meet the diverse needs of our client base. Advent's services are scalable, which means that they adapt to meet the specific needs of a firm no
matter how large or small.



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In
February 2009, our Investment Management Group's client support organization achieved certification under the Service Capability and Performance (SCP) Support Standard for the fourth
consecutive year.

Professional Services

Professional services consist of consulting, project management, implementation and integration services, custom report writing, and
training. Many of Advent's clients purchase professional services from us to support their implementations, assist in the conversion of their historical data and provide ongoing training and
education. Professional services may be required for as little as a few days or up to several months for large implementations. We believe that these services facilitate a client's early success with
our products, strengthen the client relationship and generate valuable feedback for our product development group. In 2009, our Investment Management Group's professional services organization
achieved certification under the SCP Support Standard.

Alliance Program

Our Alliance Program is designed to benefit our clients and our partners. The program provides a means by which partners can develop,
promote, and sell their products, services, and solutions in conjunction with our solutions. Advent's Alliance Program was created to further extend our product and service offerings.

Sales and Marketing

We primarily license and sell Advent products and services through four sales groups, which are organized by product and customer type.
The sales groups include a direct sales organization (comprised of both field sales and telesales representatives) as well as product marketing and product management groups, which are responsible for
assessing market opportunities and collaborating with our product development organization on product planning and management. Product marketing coordinates our market validation process, through
which we interview existing clients and sales prospects, and gather information to define scope, features and functionality of new products and product upgrades. The sales groups are as
follows:



We
have sales and support offices throughout the world, including San Francisco, New York, Boston, London, Oslo, Copenhagen, Stockholm, Amsterdam, Zurich, Dubai, Hong Kong and Beijing.

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Our
corporate marketing organization is responsible for providing support to the Company through lead generation activities, brand support, sales and marketing materials, and the
provision of marketing events, such as conferences and seminars.

Product Development

In fiscal 2009, 2008 and 2007, our product development expenses were $48.4 million, $42.9 million and
$36.6 million, respectively. We also capitalized $3.0 million, $2.5 million and $3.3 million of software development costs in 2009, 2008 and 2007, respectively. Our product
development organization builds product enhancements and new products, incorporates new technologies into existing products and sustains the quality of our current products. Our product development
activities include the identification and validation of product specifications as well as engineering, quality assurance and documentation.

Our
new products and product upgrades require varying degrees of development time, depending upon the complexity of the accounting requirements and securities regulations which they are
intended to address, as well as the number and type of features incorporated. To date, we have generally relied upon internal development for our products. We have in the past acquired, and may again
in the future acquire, additional technologies or products from third parties. For example, in October 2008, we acquired Tamale Software, a provider of research management software which helps
investment professionals manage their workflow and research process. We intend to continue to support industry standard operating environments, architectures and network protocols.

Unfilled License Orders, Deferred Revenues and Backlog

Unfilled license orders represent license orders that have been received from our customers for the license of our software products
but have not been shipped as of the end of the applicable fiscal period. We do not believe that unfilled license orders are a consistent or reliable indicator of future results. Our customers
generally do not cancel orders for our software products. Unfilled license orders as of December 31, 2009 and 2008 totaled $1.2 million and $1.5 million, respectively.

Total
deferred revenue includes deferred perpetual license, term license, maintenance, outsourcing, data services and professional services. Deferred perpetual license revenue is
recognized when a contingency, such as a future product deliverable committed in the contract, is removed. Deferred term license revenue is generally recognized over the contract length. Deferred
maintenance revenue is generally recognized over the service period, which is typically twelve months. Deferred professional services revenue is either recognized over the period the specific services
are rendered, or over the related contract period when sold in conjunction with a multi-year term license.

During
2009, we substantially completed our transition to selling mostly term licenses. We believe that the move to a term license model increases the value over the
long-term of each customer relationship and improves the predictability of our revenues. We generally recognize revenue from term licenses ratably over the period of the contract term
which varies from one to five years but is typically three years. For these term contracts, we invoice the customer annually in advance. As a result, the first year's contract value is included in
deferred revenue while subsequent years of the contracted value are not (unless the subsequent years are prepaid by the client, which is typically not the case). During the subsequent years, annual
term billing results in an increase in deferred revenues at the commencement of each annual billing period. Total deferred revenues were $146.1 million and $141.3 million at
December 31, 2009 and 2008, respectively.

We
define backlog as the value of multi-year term license, outsourcing and data service contracts which contain a binding commitment for the full contract term, less any
amounts from those contracts already invoiced. We exclude annual contracts from the backlog calculation since they contain annual renewal options (for example, annual term licenses, annual maintenance
or data reconciliation

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contracts).
Our total backlog was approximately $100.4 million and $151.7 million as of December 31, 2009 and 2008, respectively. Backlog decreased by $51.3 million in 2009
due to the following factors:



For
additional information regarding factors that affect the timing of the recognition of software license revenue, see "Management's Discussion and Analysis of Financial Condition and
Results of OperationsCritical Accounting Policies and EstimatesRevenue Recognition."

Competition

The market for investment management software is characterized by the relative size of the organizations that manage and advise on
investment portfolios. The market is competitive and highly fragmented. It is subject to rapid change and is sensitive to new product introductions and marketing efforts by industry participants.
Competitors vary in size, scope of services offered and platforms supported. Our largest single source of competition is from proprietary systems used by our existing and potential clients, some of
whom develop their own software for their particular needs and therefore may be reluctant to license software products offered by third party vendors such as Advent. We also face significant
competition from other providers of software and related services as well as providers of outsourced services such as Charles River Development, the Checkfree APL subsidiary of Fiserv, DST
International, the Eagle Investment Systems subsidiary of Bank of New York/Mellon Financial Corporation, the Eze Castle Software subsidiary of BNY ConvergEx Group, FT Interactive Data, the IBSI
division of SunGard, INDATA, the LatentZero division of Fidessa group plc, Linedata Services, the Macgregor division of Investment Technology Group, the PORTIA division of Thomson Financial,
Schwab Performance Technologies, SimCorp A/S and SS&C Technologies. Many of our largest competitors have longer operating histories and greater financial, technical, sales and marketing resources than
we do, due, in part to a wave of consolidation that has occurred in our markets. Since 2005, many of our competitors have been acquired by larger enterprises, and it is possible that even larger
competitors will be created through additional acquisitions of companies and technologies. We believe that Advent competes effectively in terms of the most predominant competitive differentiators,
which include product performance and functionality, ease of use, scalability, ability to integrate external data sources, product and company reputation, client service and price.

Intellectual Property and Other Proprietary Rights

Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright, trademark, patent
and trade secret law, as well confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks and copyrights for many of our products and
services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We generally enter into confidentiality agreements with our employees, customers,
resellers, vendors and others. We seek to protect our software, documentation and other written materials under trade secret and copyright laws. We also have two issued patents. While we do not
believe we are dependent on any one of our intellectual property rights, we do rely on the combination of intellectual property rights and other measures to protect our proprietary rights. Despite
these efforts, existing intellectual property laws may afford only limited protection. In addition, it may be possible for unauthorized third parties to copy certain portions of our products or to
reverse

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engineer
or otherwise obtain and use our proprietary information. In addition, we cannot be certain that others will not develop or acquire substantially equivalent or superseding proprietary
technology, equivalent or better products will not be marketed in competition with our products, or others may not design around any patent that we have or that may be issued to us or other
intellectual property rights of ours, thereby substantially reducing the value of our proprietary rights. We cannot be sure 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. 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. Litigation may be necessary to protect our
proprietary technology which may be time-consuming and expensive, with no assurance of success. As a result, we cannot be sure that our means of protecting our proprietary rights will be
adequate.

Employees

As of December 31, 2009, we had 998 employees, including approximately 376 in client services and support, 185 in sales and
marketing, 279 in product development and 158 in general and administration. Of these employees, 852 were located in the United States and 146 were based internationally. We endeavor to maintain
competitive compensation, benefits, equity participation and work environment policies in order to attract and retain qualified personnel. None of our employees are represented by a labor union. We
have not experienced any work stoppages and we believe our employee relations are good.

Executive Officers of Registrant

The following sets forth certain information regarding the executive officers of the Company as of March 1, 2010:

Name

Age

PositionStephanie G. DiMarco


52

Chief Executive OfficerDavid Peter F. Hess Jr.


39

PresidentLily S. Chang


61

Executive Vice President and Chief Technology OfficerJohn P. Brennan


53

Senior Vice President, Human ResourcesJames S. Cox


38

Senior Vice President and Chief Financial Officer


Ms. DiMarco
founded Advent in June 1983. She served as Chairman of the Board from November 1995 until December 2003. Ms. DiMarco currently serves as Chief Executive Officer
since her permanent appointment to the position in December 2003, after serving on an interim basis from May 2003. Ms. DiMarco also served as Chief Financial Officer from December 2008 to
September 2009, after serving on an interim basis from July 2008. Previously, she had served as President from June 1983 to April 1997 and again from May 2003 to December 2008, and as Chief Executive
Officer from June 1983 to November 1999. She is a former member of the Board of Trustees of the UC Berkeley Foundation, serves on the Advisory Board of the College of Engineering at the University of
California, Berkeley, and is a San Francisco Foundation board member and Chairman of its Investment Committee and former member of the Audit Committee. Ms. DiMarco holds a B.S. in Business
Administration from the University of California at Berkeley.

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Mr. Hess joined Advent in 1994. He was appointed as President of Advent in December 2008. Mr. Hess is responsible for the worldwide marketing, sales
and services for the Company's Investment Management, Global Accounts, Straight-Through-Processing (STP) and Tamale Research Management groups as well as the Company's international operations. From
February 2007 to December 2008, Mr. Hess served as Executive Vice President and General Manager of Advent's Investment Management Group. From May 2004 to February 2007, Mr. Hess served
as Executive Vice President and General Manager of our Global Accounts group. In this role, Mr. Hess had global responsibility for strategy, product marketing, sales, services, and support of
Advent solutions for the asset management industry's largest firms. Mr. Hess has held a variety of other positions in the company including Vice President of Sales and Vice President of
Marketing. Mr. Hess holds a B.A. from Princeton University.

Ms. Chang
joined Advent in May 1993 as Vice President, Technology. In April 1997, Ms. Chang was promoted to Executive Vice President, Technology and was also named Chief
Technology Officer. From July 1989 to May 1993, Ms. Chang held various positions, including Vice President, Strategic Accounts and Vice President of Oracle Financial Applications, for Oracle
Corporation. Ms. Chang holds a B.S. in Biochemistry from Taiwan University.

Mr. Brennan
joined Advent in March 2004 as Vice President of Human Resources and is responsible for all aspects of Human Resources and facilities and real estate management. In
February 2009, Mr. Brennan was promoted to Senior Vice President. Prior to joining Advent, Mr. Brennan was Vice President of Human Resources from 1999 to 2004 for Wind River
Systems. Prior to Wind River, Mr. Brennan held various positions at Visa International from 1991 to 1999. Mr. Brennan began his
human resources career with assignments at Westinghouse Electric Company and Pacific Gas and Electric. Mr. Brennan also serves as the current Chairman of the Board of the Goodwill of the
Greater East Bay. Mr. Brennan has a master's degree in Industrial and Labor Relations from Cornell University, and a bachelor's degree in English Literature and Music from Hamilton College.

Mr. Cox
joined Advent in June 2006. He was appointed Senior Vice President and Chief Financial Officer in September 2009. Mr. Cox is responsible for the oversight of the
Company's financial functions. From July 2008 to September 2009, Mr. Cox served as Vice President and Principal Accounting Officer, and served as Corporate Controller from June 2006 to July
2008. Prior to joining Advent, Mr. Cox served as Assistant Controller of UTStarcom from 2004 to 2006. From 1994 to 2004, Mr. Cox held various positions at
PricewaterhouseCoopers, LLP. Mr. Cox holds a B.A. in Economics from Ohio University.

Item 1A.    Risk Factors

Investors should carefully consider the risks described below before making an investment decision. The trading
price of our common stock could decline due to any of, but are not limited to, these risks. In assessing these risks, investors should also refer to the other information contained or incorporated by
reference in this Annual Report on Form 10-K filed with the SEC, including our consolidated financial statements and related notes thereto.

If our existing customers do not renew their term license, perpetual maintenance or other recurring contracts, our business will suffer.

Total recurring revenues represented 86%, 80% and 79% of total net revenues in fiscal 2009, 2008 and 2007, respectively. We expect to
continue to derive a significant portion of our revenue from our clients' renewal of term license, perpetual maintenance and other recurring contracts and such renewals

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are
critical to our future success. Some factors that may affect the renewal rate of our contracts include:



Most
of our perpetual license customers have historically renewed their annual maintenance although our customers have no obligation to renew such maintenance after the first year of
their license agreements. In addition, our customers may select maintenance levels less advantageous to us upon renewal, which may reduce recurring revenue from these customers. The current market
downturn has caused, and may in the future cause, some clients not to renew their maintenance or reduce their level of maintenance, which would affect our renewal rates and revenue. Our renewal rates
are based on cash collections and are disclosed one quarter in arrears. Our reported renewal rates for the first three quarters of 2009 were below the levels we disclosed for our quarterly periods of
2008. The decrease in renewal rates reflects increases in the number of customers who have gone out of business or reduced maintenance expenditures, as well as from slower payments received from
renewal clients.

As
a result of our relatively recent transition to term licensing, we only have limited experience with renewals of our term license contracts. During the third quarter of 2007, we
commenced renewing term license contracts signed in the third quarter of 2004. These were the first three-year term license contracts to be renewed by Advent since our transition to a term
pricing model began. Our customers have no obligation to renew their term license contracts and given the small number of
contracts subject to renewal that were renewed in the second half of 2007 through 2009, we cannot yet conclude whether customers will renew at a rate consistent with our perpetual maintenance
customers. Additionally, we cannot predict whether the renewals will be less advantageous to us than the original term contract. For example, the renewal periods for our term license contracts are
typically shorter than our original term license contract and customers may request a reduction in the number of users or products licensed, resulting in a lower annual term license fee. Further,
customers may elect to not renew their term license contracts at all. We may incur significantly more costs in securing our term license contract renewals than we incur for our perpetual maintenance
renewals. If our term license contract customers renew under terms less favorable to us or choose not to renew their contracts, or if it costs significantly more to secure a renewal for us, our
operating results may be harmed.

Our sales cycle is long and we have limited ability to forecast the timing and amount of specific sales and the timing of specific implementations.

The purchase of our software products often requires prospective customers to provide significant executive-level sponsorship and to
make major systems architecture decisions. As a result, we must generally engage in relatively lengthy sales and contracting efforts. Sales transactions may therefore be delayed during the customer
decision process because we must provide a significant level of education to prospective customers regarding the use and benefit of our products. Our business and prospects are subject to
uncertainties in the financial markets that can cause customers to remain cautious about capital and information technology expenditures, particularly in the current economic environment, or to
decrease their information technology budgets as an expense reduction measure. The sales cycle

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associated
with the purchase of our solutions is typically between two and twelve months depending upon the size of the client, and is subject to a number of significant risks over which we have
little or no control, including broader financial market volatility, adverse economic conditions, customers' budgeting constraints, internal selection procedures, and changes in customer personnel,
among others. Ongoing volatility in the US and global financial markets has further exacerbated this risk.

As
a result of a lengthy and unpredictable sales cycle, we have limited ability to forecast the timing and amount of specific perpetual license sales, or term license sales which we
report quarterly as annual term license contract value (ACV). The timing of large individual license sales is especially difficult to forecast, and we may not be successful in closing large license
transactions on a timely basis or at all. 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. Accordingly, our level of ACV bookings and perpetual license revenue in any particular period is subject to significant fluctuation. For example, during fiscal
2009, our ACV bookings and perpetual license revenue decreased by 23% and 33%, respectively, compared to fiscal 2008.

When
a customer purchases a term license together with implementation services we do not recognize any revenue under the contract until the implementation services are substantially
complete. The timing of large implementations is difficult to forecast. Customers may delay or postpone the timing of their particular projects due to the availability of resources or other customer
specific priorities. If we are not able to complete an implementation project for a term license in a quarter, it will cause us to defer all of the proportionate contract revenues to a subsequent
quarter. Because our expenses are relatively fixed in the near term, any shortfall from anticipated revenues could result in a significant variation in our operating results from quarter to quarter.

Our current operating results may not be reflective of our future financial performance.

During fiscal 2009, 2008 and 2007, we recognized 86%, 80% and 79%, respectively, of total net revenues from recurring sources, which we
define as revenues from term license, maintenance on perpetual licenses, and other recurring revenue. We generally recognize revenue from these sources ratably over the terms of these agreements,
which typically range from one to three years. As a result, almost all of our revenues in any quarter are generated from contracts entered into during previous periods.

Consequently,
a significant decline in new business generated in any quarter may not materially affect our results of operations in that quarter but will have an impact on our revenue
growth rate in future quarters. Additionally, a decline in renewals of term agreements, maintenance or data and other subscription contracts during a quarter will not be fully reflected in our
financial performance in that quarter. For example, because we recognize revenue ratably, the non-renewal of term agreements or maintenance contracts late in a quarter may have very little
impact on revenue for that quarter, but will reduce revenue in future quarters. In addition, we may be unable to adjust our costs in response to reduced revenue.

Further,
because of the large percentage of revenue from recurring sources in our term license business model, our historical operating results on a generally accepted accounting
principles (GAAP) basis will not necessarily be the sole or most relevant factor in predicting our future operating results. Accordingly, we report certain non-GAAP or operational
information, including our quarterly term license bookings metrics (expressed as ACV) and maintenance renewal rates, that is intended to provide investors with certain of the information that
management uses as a basis for planning and forecasting of future periods. However, we believe that undue reliance should not be placed upon non-GAAP or operating information because this
information is neither standardized across companies nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

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The
current market downturn has caused, and may in the future cause more clients not to renew their term licenses or perpetual license maintenance. Also, the significant declines in
market value of our clients affect their AUA or AUM. Consequently, we may also experience a decline in the ACV of bookings since the pricing of some of our products is based upon our client's AUA or
AUM. Furthermore, we have some contracts for which clients pay us fees based on the greater of a negotiated annual minimum fee or a calculated fee that is determined by the client's AUA or AUM. If a
client previously paid us based on the calculated fee, rather than the annual minimum fee, we would experience a decline in revenue as a result of any decline in those clients' AUA or AUM.

Uncertain economic and financial market conditions adversely affect our business.

The market for investment management software systems has been and currently is negatively affected by a number of factors, including
reductions in capital expenditures by customers and poor performance of major financial markets. The current market downturn, dissolution and acquisitions of our clients and prospects, the decline in
Assets Under Administration (AUA) or Assets Under Management (AUM) as a result of significant declines in asset values of our clients and the accompanying market uncertainty affects and will continue
to affect both our ability to sell our solutions and the amount of revenue we receive from such sales. The target clients for our products include a range of financial services organizations that
manage investment portfolios. The success of many of our clients is intrinsically linked to the health of the financial markets. The demand for our solutions has been and currently is
disproportionately affected by fluctuations, disruptions, instability and downturns in the economy and financial services industry, 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. Since the fall of 2008, we have experienced some clients and prospects delaying or
cancelling additional license purchases. In addition, some prospects and clients have gone out of business, undergone personnel reductions or turnover, or have been acquired, which we expect to
continue as the financial markets face continued hardship.

In
addition, the failure of existing investment firms or the slowdown in the formation of new investment firms could cause a decline in demand for our solutions. Consolidation of
financial services firms and other clients will result in reduced technology expenditures or acquired customers using the acquirer's own proprietary software and services solutions or the solutions of
another vendor. In some circumstances where both acquisition parties are customers of Advent, the combined entity may require fewer Advent products and services than each individually licensed, thus
reducing our revenue. Challenging economic conditions may also cause our customers to experience difficulty with gaining timely access to sufficient credit or our customers may become unable to pay
for the products or services they have purchased, which could result in their inability to fulfill or make timely payments to
us. If that were to occur, our ability to collect receivables would be negatively affected, and our reserves for doubtful accounts and write-offs of accounts receivable may increase.

We
have, in the past, experienced a number of market downturns in the financial services industry and resulting declines in information technology spending, which has caused longer sales
and contracting cycles, deferral or delay of information technology projects and generally reduced expenditures for software and related services. The severity of the market downturn and worsening
volatility and uncertainty in the financial markets and the financial services sector in the last 18 months makes it difficult for us to forecast operating results and may result in a material
adverse effect on our revenues and results of operations in the longer term.

Our stock price may fluctuate significantly.

Like many other companies, our stock price has been subject to wide fluctuations in recent months as a result of market volatility. If
net revenues or earnings in any quarter or our financial guidance for future periods fail to meet the investment community's expectations, our stock price is likely to decline.

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Even
if our revenues or earnings meet or exceed expectations, our stock price is subject to decline in this period of high market volatility because our stock price is affected by trends in the
financial services sector and by broader market trends unrelated to our performance. Unfavorable or uncertain economic and market conditions, which can be caused by many factors, including declines in
economic growth, business activity or investor or business confidence; limitation on the availability or increases in the cost of credit or capital; increases in inflation, interest rates, exchange
rate volatility, default rates or the price of basic commodities; corporate, political or other scandals that reduce investor confidence in capital markets; outbreaks of hostilities or other
geopolitical instability; natural disasters or pandemics; or a combination of these or other factors, have adversely affected, and may in the future adversely affect, our business, profitability and
stock price.

We operate in a highly competitive industry.

The market for investment management software is competitive and highly fragmented, is subject to rapid change and is sensitive to new
product introductions and marketing efforts by industry participants. Our largest single source of competition is from proprietary systems used by 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 third party vendors such as Advent. We also face significant competition from other
providers of software and related services as well as providers of outsourced services. Many of our competitors have longer
operating histories and greater financial, technical, sales and marketing resources than we do. In addition, consolidation has occurred among some of the competitors in our markets. Competitors vary
in size, scope of services offered and platforms supported. In recent years, many of our competitors have merged with each other or with other larger third parties, and it is possible that even larger
companies will emerge through additional acquisitions of companies and technologies. Consolidation among our competitors may result in stronger competitors in our markets and may therefore either
result in a loss of market share or harm our results of operations. In addition, we also face competition from potential new entrants into our markets that may develop innovative technologies or
business models. Furthermore, competitors may respond to weak market conditions by lowering prices, offering better contractual terms and attempting to lure away our customers and prospects to lower
cost solutions. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure will not result in price reductions, reduced
operating margins or loss of market share, any one of which could seriously harm our business. 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, evolving industry standards and new regulatory requirements. New products based
on recent technologies or new industry standards can render existing products obsolete and unmarketable. 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 respond to their changing standards and practices. We continue to release numerous products and product
upgrades and we believe our future success depends on continuing such releases. Additionally, in October 2008, we acquired Tamale Software which enables us to offer a new product in the nascent
research management field. However, it is too early to know whether these products will meet anticipated sales or will be broadly accepted in the market, that a market will develop as expected for
these new products or that we will continue to introduce more products.

We
may not be successful in developing, introducing, marketing and licensing our 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 or delays in client implementations or migrations may result in client dissatisfaction and delay or loss of

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product
revenues. Additionally, existing clients may be reluctant to go through the process of migrating from our Axys product to our APX product, which may slow the migration of our customer base to
APX. In addition, clients may delay purchases in anticipation of new products or product enhancements. Our ability to develop new products and product enhancements is also 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, are unexpectedly delayed in their introduction, are unavailable on acceptable terms, or the vendors exit the business, our business could be seriously harmed.

We depend heavily on our Axys®, Geneva®, APX and Moxy® products.

We derive a majority of our net revenues from the license and maintenance revenues from our Axys, Geneva, APX and Moxy products. In
addition, Moxy and many of our applications, such as Partner and various data services, have been designed to provide an integrated solution with Axys, Geneva and APX. As a result, we believe that for
the foreseeable future a majority of our net revenues will depend upon continued market acceptance of Axys, Geneva, APX, and Moxy, and upgrades to those products. This is particularly true as a result
of our divestiture of our MicroEdge grants management products, which further concentrates our revenue streams.

Our operating results may fluctuate significantly.

Revenues from recurring sources have grown from 79% in 2007, to 80% in 2008 and to 86% in fiscal 2009. During fiscal 2009, term license
revenues comprised approximately 44% of term license, maintenance and other recurring revenues as compared to approximately 35% and 25% in fiscal 2008 and 2007, respectively. Term license contracts
are comprised of both software licenses and maintenance services. Individual perpetual software licenses vary significantly in value, and the value and timing of these transactions can therefore cause
our quarterly perpetual license revenues to fluctuate. As we continue to sign term license agreements for new customers, grow our subscription, data management and outsourced services revenues, and
our customers renew their perpetual maintenance, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues.

When
a customer purchases a term license together with implementation services, we do not recognize any revenue under the contract until the implementation services are substantially
completed and then we recognize revenue ratably over the remaining length of the contract. If the implementation services are still in progress as of quarter-end, we will defer all of the
contract revenues to a subsequent quarter. At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services
fees earned and related expenses, based on the elapsed time from the start of the term license to the substantial completion of professional services. During 2009, the revenue recognized from
completed implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of revenue of $6.1 million for fiscal 2009, composed of
$3.5 million of term license revenue and $2.6 million of professional services revenue. In future periods, our revenues related to completed implementations may be lower depending on the
number of projects that reach substantial completion during the quarter. Term license revenue for the remaining contract years and the remaining deferred professional services revenue and related
expenses are recognized ratably over the remaining contract length. The term license component of the deferred revenue balance will increase or decrease in the future depending on the amount of new
term license bookings relative to the number of implementations that reach substantial completion in a particular quarter. Although our substantial revenue from recurring sources under our term
license model provides us with longer term stability and more visibility in the short term, our quarterly net revenues and operating results may still fluctuate significantly depending on these and
other factors. Our expense levels are relatively fixed in the short-term. Due to the fixed nature of these expenses, combined with the relatively high gross margin historically achieved on
our

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products,
an unanticipated decline in net revenues in any particular quarter may adversely affect our operating results.

In
addition, we experience seasonality in our licensing. We believe that this seasonality results primarily from customer budgeting cycles and expect this seasonality to continue in the
future. The fourth quarter of the year typically has more licensing activity. That can result in term license bookings and perpetual license fee revenue being the highest in the fourth quarter,
followed by lower term license bookings and perpetual license revenue in the first quarter of the following year. This seasonality may be adversely affected by the current market downturn and
worsening economic conditions. Also, term licenses entered into during a quarter may not result in recognition of associated revenue until later quarters, as we begin recognizing revenue for such
licenses when the related implementation services are substantially complete. In addition, we may incur commission and bonus expenses in the period in which we enter into a license, but not recognize
the associated revenue until later periods.

Because
of the above factors, we believe that quarter-to-quarter comparisons of our operating results are not necessarily reliable indicators of future
performance.

If our relationship with Financial Times/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 Financial Times/Interactive
Data ("FTID"). FTID 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 our software
would need to be redesigned to operate with additional alternative data vendors if FTID's services were unavailable for any reason. Non-renewal of our current agreement with FTID would
require at least two years' prior notice by either us or them and the agreement may be terminated upon 90 days advance notice for an uncured material breach of the other party. While we have
contracts with other data vendors for substantially similar financial data with which our products can be used, if our relationship with FTID was terminated or their services were unavailable to
clients for any reason, we cannot be certain that we could enter into contracts with additional alternative data providers, or that these other relationships would provide similar commission rates to
us or if the amount of data used by our clients would remain the same, and our operating results could suffer or our resources could be constrained from the costs of redesigning our software.

If our large subscription-based clients or if our revenue sharing relationships are terminated, our business may be harmed.

In recent years, Advent has entered into contracts relating to our subscription, data management revenue streams and outsourced
services with contract values that are substantially larger than we have customarily entered into in the past, including our agreement with TIAA-CREF. It is too early to know whether we
will be able to continue to sign large recurring revenue contracts of this nature or if such clients will renew their contracts at similar rates, if at all. Some of these agreements are subject to
milestones, acceptance and penalties and there is no assurance that these agreements will be fully implemented. In addition, we have revenue sharing agreements with other companies that provide
revenue to Advent for our clients' use of those companies' services and products. Our operating results could be adversely impacted if these agreements are not fully implemented, terminated or not
renewed, or if we are unable to continue to generate similar opportunities and enter similar or larger sized contracts in the future.

Our outsourcing and data integration services are subject to risks that may harm our business.

Our clients rely on our outsourcing and data services to meet their operational needs, including account aggregation and
reconciliation. Because our services are complex, we utilize third party data

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and
other vendors, and our clients use our services in a variety of ways, our services may have undetected errors or defects, service disruptions, delays, or incomplete or incorrect data that could
result in unanticipated downtime for our customers, failure to meet service levels and service disruptions. In addition, our security measures could be breached or unauthorized access to our
information or our customers' information could occur. Such potential errors, defects, delays, disruptions or other performance problems may damage our clients' business, harm our reputation, result
in losing future sales, cause clients to withhold payment or terminate or not renew their agreements with us, and subject us to litigation and other possible liabilities.

We must recruit and retain key employees.

We believe that our future success is dependent on the continued employment of our senior management and our ability to identify,
attract, motivate and retain qualified technical, sales and other personnel. Members of our executive management team have acquired specialized knowledge and skills with respect to Advent. We need
technical resources such as our product development engineers to develop new products and enhance existing products; we rely upon sales personnel to sell our products and services and maintain healthy
business relationships; we must recruit professional service consultants to support our implementations; we must hire client services personnel to provide technical support to our growing installed
base of customers; and we must attract and retain financial and accounting personnel to comply with our public company reporting requirements. We need to identify, attract, motivate and retain such
employees with the requisite education, backgrounds and industry experience. However, experienced high quality personnel in the information technology industry continue to be in high demand and
competition for their talents remains intense, especially in the San Francisco Bay Area where the majority of our employees are located.

We
have relied on our ability to grant equity compensation as one mechanism for recruiting and retaining such highly skilled personnel. In making employment decisions, particularly in
the high-technology industries and San Francisco Bay Area, job candidates often consider the value of the equity awards they are to receive in connection with their employment and market
downturns may result in our incentives becoming less valuable. Additionally, accounting regulations requiring the expensing of equity compensation impair our ability to provide these incentives
without reporting significant compensation costs.

We
may also choose to create additional performance and retention incentives in order to retain our employees, including the granting of additional stock options, restricted stock,
restricted stock units, stock appreciation rights, performance shares or performance units to employees or issuing incentive cash bonuses. Such incentives may either dilute our existing stockholder
base or result in unforeseen operating expenses which may have a material adverse effect on our operating results, or could result in our stock price falling; or may not be valued as highly by our
employees which may create retention issues.

We face challenges in expanding our international operations in which we may have limited experience and resources.

We market and sell our products in the United States and, to a growing extent, internationally. From 2001 through 2005, we acquired the
subsidiaries of our independent distributor. In addition, we have begun to expand our sales in relatively new jurisdictions for Advent, such as the Middle East, Eastern Europe, and Asia. In 2006, we
opened a branch office of Advent Europe Ltd. in the United Arab Emirates, and we established Advent Software (Asia) Ltd. a subsidiary of Advent Software, Inc. in Hong Kong in
2008. In addition, in the third quarter of 2009, we established a subsidiary of Advent Software (Asia), Ltd. in Beijing, China. More recently in March 2010, our wholly-owned Norwegian
subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software

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company
that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors.

We
cannot be certain that establishing businesses in other countries will produce the desired levels of revenues, such as in the case of our former Greek subsidiary, Advent Hellas, which
produced less than satisfactory revenues and profitability before its sale by Advent in 2005. Also, the recent worldwide decline in financial markets may disrupt our sales efforts in overseas markets.
We currently have limited experience in developing localized versions of our products and marketing and distributing our products internationally. In other instances, we may rely on the efforts and
abilities of foreign business partners in such markets. For example, we outsourced certain engineering activities to a business partner located in China. Now, Advent has transitioned those contract
developers to become employees of Advent as part of our recently opened Beijing office. 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 foreign 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 and accounts receivable from international
sales and the US dollar value of our foreign subsidiaries' revenues, expenses, assets and liabilities. Our international service revenues and certain license revenues from our European subsidiaries
are generally denominated in local foreign currencies.

Difficulties in integrating our acquisitions and expanding into new business areas have impacted and could continue to adversely impact our business and we face risks
associated with potential acquisitions, investments, divestitures and expansion.

Periodically we seek to grow through the acquisition of additional complementary businesses. In October 2008, we completed the
acquisition of Tamale Software, Inc., which provides research management software. In December 2006, we acquired East Circle Solutions, Inc., a developer of investment management billing
solutions to integrate their product into our software offerings. More recently in March 2010, our wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the

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entire
share capital of Goya AS, a Norwegian software company that provides transfer agency-related solutions to mutual fund managers and mutual fund distributors.

The
process of integrating our acquisitions has required and will continue to require significant resources, particularly in light of our relative inexperience in integrating
acquisitions, potential regulatory requirements and operational demands. In particular, our Tamale acquisition reflects our entry into the research management software market, where we have no prior
experience. Integrating these acquisitions in the past has been time-consuming, expensive and disruptive to our business. This integration process has strained our managerial resources,
resulting in the diversion of these resources from our core business objectives and may do so in the future. Failure to achieve the anticipated benefits of these acquisitions or to successfully
integrate the operations of these entities has
harmed and could potentially harm our business, results of operations and cash flows in future periods. The assumptions we made in determining the value of, and relative risks, of these acquisitions
could be erroneous. For example, in the first quarter of 2003, we closed our Australian subsidiary because it failed to perform at a satisfactory profit level and similarly in the fourth quarter of
2005, we disposed of our Advent Hellas subsidiary because of less than satisfactory profitability. In addition, as we have expanded into new business areas and built new offerings through strategic
alliances and internal development, as well as acquisitions, some of this expansion has required significant management time and resources without generating required revenues. We have had difficulty
and may continue to have difficulty creating demand for such offerings. Furthermore, we may face other unanticipated costs from our acquisitions, such as disputes involving earn-out and
incentive compensation amounts.

We
may make additional acquisitions of complementary companies, products or technologies in the future. In addition, we periodically evaluate the performance of all our products and
services and may sell or discontinue current products, product lines or services, particularly as we focus on ways to streamline our operations. For example, in October 2009, we divested our MicroEdge
subsidiary. Failure to achieve the anticipated benefits of any acquisition or divestiture could harm our business, results of operations and cash flows. Furthermore, we may have to incur debt,
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. Financing may not be available to us on sufficiently advantageous terms, or at all, and we have let our Credit Facility with Wells Fargo Foothill lapse. 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 future acquisitions.

Our investment portfolio may become impaired by deterioration of the capital markets.

Our cash equivalent, short-term and long-term investment portfolio as of December 31, 2009 consisted of
US government and commercial debt securities. We follow an established investment policy and set of guidelines to monitor and help mitigate our exposure to interest rate and credit risk. The policy
sets forth credit quality standards and limits our exposure to any one issuer, as well as our maximum exposure to various asset classes.

As
a result of current adverse financial market conditions, investments in some financial instruments may pose risks arising from recent market liquidity and credit concerns. As of
December 31, 2009, we had no impairment charges associated with our short-term or long-term investment portfolio relating to such adverse financial market conditions.
Although we believe our current investment portfolio has very little risk of material impairment, we cannot predict future market conditions or market liquidity and can provide no assurance that our
investment portfolio will remain materially unimpaired. In addition, the decrease in interest rates has materially decreased the interest income we receive on our investments.

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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, trademark, patent
and trade secret law, as well as confidentiality procedures and contractual provisions to protect our proprietary rights. We have registered trademarks and copyrights for many of our products and
services and will continue to evaluate the registration of additional trademarks and copyrights as appropriate. We generally enter into confidentiality agreements with our employees, customers,
resellers, vendors and others. We seek to protect our software, documentation and other written materials under trade secret and copyright laws. We also have two issued patents. Despite our efforts,
existing intellectual property laws may afford only limited protection. 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. In addition, we cannot be certain that others will not develop or acquire substantially equivalent or superseding proprietary technology, equivalent or
better products will not be marketed in competition with our products, or others may not design around any patent that we have or that may be issued to us or other intellectual property rights of
ours, thereby substantially reducing the value of our proprietary rights. We cannot be sure 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. 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 and so our expansion into international markets may expose our proprietary rights to increased risks. Litigation may be necessary to protect our proprietary technology
which may be time-consuming and expensive, with no assurance of success. As a result, we cannot be sure that our means of protecting our proprietary rights will be adequate.

If we infringe the intellectual property rights of others, we may incur additional costs or be prevented from selling our products and services.

We cannot be certain that our products or services do not infringe the intellectual property rights of others. As a result, we may be
subject to litigation and claims, including claims of misappropriation of trade secrets or infringement of patents, copyrights and other intellectual property rights of third parties that would be
time-consuming and costly to resolve and may lead to unfavorable judgments or settlements. If we discovered that our products or services violated the intellectual property rights of third
parties, we may have to make substantial changes to our products or services or obtain licenses from such third parties. We might not be able to obtain such licenses on favorable terms or at all, and
we may be unable to change our products successfully or in a timely or cost-effective manner. Failure to resolve an infringement matter successfully or in a timely manner would damage our
reputation and force us to incur significant costs, including payment of damages, redevelopment costs, diversion of management's attention and satisfaction of indemnification obligations that we have
with our clients, as well as prevent us from selling certain products or services.

Catastrophic events could adversely affect our business.

We are a highly automated business and rely on our network infrastructure and enterprise applications, internal technology systems and
our website for our development, marketing, operational, support, and sales activities. A disruption or failure of these systems in the event of major earthquake, fire, telecommunications failure,
cyber-attack, terrorist attack, or other catastrophic event could cause system interruptions, reputational harm, delays in our product development and loss of critical data and could affect our
ability to sell and deliver products and services and other critical functions of our

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business.
Our corporate headquarters, a significant portion of our research and development activities, our data centers, and certain other critical business operations are located in the San
Francisco Bay Area, which is a region of seismic activity. We have developed certain disaster recovery plans and certain backup systems to reduce the potentially adverse effect of such events, but a
catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct
normal business operations and, as a result, our future operating results could be adversely affected. Further, such disruptions could cause further instability in the financial markets or the
spending of our clients and prospects
upon which we depend. Although we are in the process of creating an enterprise risk management program, it is not currently implemented and, when implemented, may not adequately protect us.

In
addition to the severe market conditions of recent months, other catastrophic events such as abrupt political change, terrorist acts, conflicts or wars may cause damage or disruption
to the economy, financial markets and our customers. The potential for future attacks, the national and international responses to attacks or perceived threats to national security and other actual or
potential conflicts or wars have created many economic and political uncertainties. Although it is impossible to predict the occurrences or consequences of any such events, they could unsettle the
financial markets or result in a decline in information technology spending, which could have a material adverse effect on our revenues.

Undetected errors or failures found in new products and services may result in loss of or delay in market acceptance of our products and services that could seriously harm
our business.

Our products and services may contain undetected errors or scalability limitations at any point in their lives, but particularly 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 and services until after commencement of
commercial shipments or use, resulting in a loss of or a delay in market acceptance, damage to our reputation, customer dissatisfaction and reductions in revenues and margins, any of which could
seriously harm our business. Additionally, our agreements with customers that attempt to limit our exposure to liability claims may not be enforceable in jurisdictions where we operate, particularly
as we expand into new international markets.

Two of our principal stockholders have an influence over our business affairs and may make business decisions with which you disagree and which may adversely affect the
value of your investment.

Our Chief Executive Officer and the Chairman of our board of directors own or control, indirectly or directly, a substantial number of
shares of our common stock (approximately 37% as of February 26, 2010). As a result, if these parties were to act together, they will have the ability to exert significant influence on matters
submitted to our stockholders for approval, such as the election or removal of directors, amendments to our certificate of incorporation or the approval of a business combination. These actions may be
taken even if they are opposed by other stockholders or it may be difficult to approve these actions without their consent. This concentration of ownership may also have the effect of delaying or
preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares.

Changes in securities laws and regulations may increase our costs or may harm demand.

The Sarbanes-Oxley Act ("the Act") of 2002 required changes in some of our corporate governance and securities disclosure and/or
compliance practices. As part of the Act's requirements, the SEC has enacted new rules on a variety of subjects, and the Nasdaq Stock Market has enacted new corporate governance listing requirements.
These developments have increased and may in the future increase our accounting and legal compliance costs and could also expose us to additional liability if we

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fail
to comply with these new rules and reporting requirements. In fiscal 2009, 2008 and 2007, we incurred approximately $0.5 million, $0.8 million and $0.9 million, respectively,
in Sarbanes-Oxley related expenses consisting of external consulting costs and auditor fees. In addition, such developments may make retention and recruitment of qualified persons to serve on our
board of directors, or as executive officers, more difficult. We continue to evaluate and monitor regulatory and legislative developments and cannot reliably estimate the timing or magnitude of all
costs we may incur as a result of the Act or other related legislation or regulation.

In
addition, our customers operate within a highly regulated environment. In light of the current conditions in the US financial markets and economy, Congress and regulators have
increased their focus on the regulation of the financial services industry. The information provided by, or resident in, the software or services we provide to our customers could be deemed relevant
to a regulatory investigation or other governmental or private legal proceeding involving our customers, which could result in requests for information from us that could be expensive and time
consuming for us. In addition, clients subject to investigations or legal proceedings may be adversely impacted possibly leading to their liquidation, bankruptcy, receivership, reductions in AUM or
AUA, or diminished operations that would adversely affect our revenues and collection of receivables.

Our
customers must comply with governmental and quasi-governmental rules, regulations, directives and standards. New legislation or changes in government or quasi-governmental rules,
regulations, directives or standards may reduce demand for our services or increase our expenses. We develop, configure and market products and services to assist customers in meeting these
requirements. New legislation, or a significant change in rules, regulations, directives or standards, could cause our services to become obsolete, reduce demand for our services or increase our
expenses in order to continue providing services to clients.

Changes in, or interpretations of, accounting principles could result in unfavorable accounting charges.

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America. These principles are subject to interpretation by us, the SEC and various bodies formed to interpret and create accounting principles. A change in these principles or a change in the
interpretations of these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions. Some of our accounting principles that
recently have been or may be affected include:



In
December 2007, the Financial Accounting Standards Board ("FASB") issued ASC 805, "Business Combinations", which changes the accounting for business combinations including the
measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition related restructuring liabilities, the treatment of acquisition related
transaction costs and the recognition of changes in the acquirer's income tax valuation allowance. ASC 805 is effective for financial statements issued for fiscal years beginning after
December 15, 2008. In the event we have a business combination, we currently believe that the adoption of ASC 805 will result in the recognition of certain types of expenses in our results of
operations that we currently capitalize pursuant to existing accounting standards and may also impact our financial statement in other ways. Additionally, the nature and magnitude of the specific

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effects
will depend upon the nature, terms and size of the acquisitions the Company consummates after the effective date.

Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.

We are a US based multinational company subject to tax in multiple US and foreign tax jurisdictions. Unanticipated changes in our tax
rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in, or interpretation of, tax rules and regulations in the jurisdictions in
which we do business, by unanticipated decreases in the amount of revenue or earnings in countries with low statutory tax rates, by lapses of the availability of the US research and development tax
credit, or by changes in the valuation of our deferred tax assets and liabilities.

In
addition, we could be subject to examination of our income tax returns by the IRS and other domestic and foreign tax authorities. These examinations would be expected to focus on
areas where considerable judgment is exercised by the company. We regularly assess the likelihood of outcomes resulting from an examination to determine the adequacy of our provision for income taxes
and have reserved for potential adjustments that may result from an examination. We believe such estimates to be reasonable; however, there can be no assurance that the final determination of any of
these examinations will not have an adverse effect on our operating results and financial position.

Security risks may harm our business.

Maintaining the security of computers, computer networks, hosted solutions and the transmission of confidential information over public
networks is essential to commerce and communications, particularly in the market in which Advent operates. Efforts of others to seek unauthorized access to Advent's or its clients' information,
computers and networks or introduce viruses, worms and other malicious software programs that disable or impair computers into our systems or those of our customers or other third parties, could
disrupt or make our systems and services inaccessible or allow access to proprietary information and data of Advent or its clients. Advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments, could also result in compromises or breaches of our security systems. Our security measures may be inadequate to prevent security breaches, exposing us to
a risk of data loss, financial loss, harm to reputation, business interruption, litigation and other possible liabilities, as well as possibly requiring us to expend significant capital and other
resources to protect against the threat of security breaches or to alleviate problems caused by such breaches.

Potential changes in securities laws and regulation governing the investment industry's use of soft dollars may reduce our revenues.

Some of our clients utilized trading commissions ("soft dollar arrangements") to pay for software products and services. During each of
fiscal 2009, 2008 and 2007, the total value of Advent products and services paid with soft dollars was approximately 4% of our total billings. Such soft dollar arrangements could be impacted by
changes in the regulations governing those arrangements.

In
July 2006, the SEC published an Interpretive Release that provides guidance on money managers' use of client commissions to pay for brokerage and research services under the safe
harbor set forth in Section 28(e) of the Securities Exchange Act of 1934. The Interpretive Release clarifies that money managers may use client commissions ("soft dollars") to pay only for
eligible brokerage and research services. Among other matters, the Interpretive Release states that eligible brokerage includes those products and services that relate to the execution of the trade
from the point at which the money manager communicates with the broker-dealer for the purpose of transmitting an order for execution, through the point at which funds or securities are delivered or
credited to the advised account. In

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addition,
for potentially "mixed-use" items (such as trade order management systems) that are partly eligible and partly ineligible, the Interpretive Release states that money managers
must make a reasonable allocation of client commissions in accordance with the eligible and ineligible uses of the items. Based on this guidance, our customers may change their method of paying all or
a portion of certain Advent products or services from soft to hard dollars, and as a result reduce their usage of
these products or services in order to avoid increasing expenses, which could cause our revenues to decrease.

If we fail to maintain an effective system of internal control, we may not be able to accurately report our financial results or our filings may not be timely. As a result,
current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.

Effective internal control is necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports,
our business and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal control that need improvement including control deficiencies
that may constitute material weaknesses.

We
do not expect that our internal control over financial reporting will prevent all errors or fraud. A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Controls can be circumvented by individual acts of some persons, by collusion of two or more people, or by management override of the
controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Any
failure to implement or maintain improvements in our internal control over financial reporting, or difficulties encountered in the implementation of these improvements in our
controls, could cause significant deficiencies or material weaknesses in our internal controls and consequently cause us to fail to meet our reporting obligations. Any failure to implement or maintain
required new or improved internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our stock. In
addition, during 2009, we moved certain compliance functions from external providers to internal resources, and we cannot be certain that these changes will be as effective or will control costs as
anticipated.

Item 1B.    Unresolved Staff Comments

None.

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Item 2.    Properties

Our principal executive offices are located in San Francisco, California. The table below summarizes the principal properties that we
leased as of December 31, 2009:

Use of PropertyLocation

Approximate
Square
Footage

Sales and
Support

Marketing

Product
Development

AdministrativeUnited States:San Francisco, CA (2 properties)*


196,384

X

X

X

XNew York, NY (3 properties)*


72,183

X

X

X

XNew Rochelle, NY


5,795

X

XBoston, MA (3 properties)


39,426

X

X

X

XEurope and Middle East:Copenhagen, Denmark


3,475

X



X

XZurich, Switzerland


1,830

XOslo, Norway


1,920

X

X

XLondon, United Kingdom


3,586

X

X



XBracknell, United Kingdom


449







XStockholm, Sweden


4,489

X



X

XDubai, United Arab Emirates


485

XAsia:Hong Kong, People's Republic of China


345

X

XBeijing, People's Republic of China


2,799

X



XTotal leased square footage


333,166


*As
part of our restructuring activities, we vacated properties in San Francisco, California and New York, New York. Approximately 58,000 square feet of New
York and California property has been sub-leased as of December 31, 2009.


On
October 1, 2009, Advent completed the sale of the Company's MicroEdge subsidiary. With the exception of the MicroEdge facilities in New York City, the leases related to
MicroEdge have been transferred to the Purchaser. In connection with the sale of MicroEdge, the Company entered into a sub-lease agreement with Microedge LLC, whereby
Microedge LLC will sub-lease approximately 24,000 square feet of the 29,000 square feet of office space located at 619 West 54th Street in New York, New York from the
Company. MicroEdge LLC will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The
sub-lease agreement became effective upon the close of sale of MicroEdge on October 1, 2009. The Company's contractual lease obligation related to this facility is not reflected in
the table above.

During
2009, we opened a new office in Beijing, China. The office is staffed with more than 50 employees who were previously contractors of the Company.

We
continue to assess our needs with respect to office space and may, in the future, vacate or add additional facilities. We believe that our current facilities are adequate for our
needs in the immediate and foreseeable future.

Item 3.    Legal Proceedings

On March 8, 2005, certain of the former shareholders of Kinexus and the shareholders' representative filed suit against Advent
in the Delaware Chancery Court. The complaint alleges that

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Advent
breached the Agreement and Plan of Merger dated as of December 31, 2001 pursuant to which Advent acquired all of the outstanding shares of Kinexus due principally to the fact that no
amount was paid by Advent on an earn-out of up to $115 million. The earn-out, which was payable in cash or stock at the election of Advent, was based upon Kinexus
meeting certain revenue targets in both 2002 and 2003. The complaint seeks unspecified compensatory damages, an accounting and restitution for unjust enrichment. Advent advised the shareholders'
representative in January 2003 that the earn-out terms had not been met in 2002 and accordingly no earn-out was payable for 2002 and would not be payable for 2003. There has
been no further activity in this case since additional document discovery and interrogatory answers were provided by the parties in December 2008. Advent disputes the plaintiffs' claims and believes
that it has
meritorious defenses and intends to vigorously defend this action. Management believes that any potential loss associated with this litigation is neither probable nor reasonably estimable at this time
and accordingly has not accrued any amounts for any potential loss.

From
time to time, we are involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe
that the ultimate outcome of these unresolved matters, individually or in the aggregate, is likely to have a material adverse effect on the Company's financial position or results of operations.
However, litigation is subject to inherent uncertainties and our view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material
adverse impact on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods.

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

None.

PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock is listed on the NASDAQ Stock Market under the symbol "ADVS." The closing price of our common stock on
February 26, 2010 was $40.32. The table below summarizes the range of high and low reported sales prices on the NASDAQ Stock Market for our common stock for the periods indicated.

Price RangeHigh

LowFiscal 2008First quarter

$
55.34

$
38.78Second quarter

$
44.61

$
35.80Third quarter

$
49.32

$
32.90Fourth quarter

$
36.13

$
17.51Fiscal 2009First quarter

$
34.76

$
19.46Second quarter

$
35.95

$
29.28Third quarter

$
40.86

$
30.09Fourth quarter

$
42.70

$
37.20


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Stockholders

As of February 26, 2010, there were approximately 81 holders of record of our common stock. However, because many of our shares
of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate with any level of accuracy the total number of stockholders represented by these record
holders.

Dividends

We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings to
fund development and growth of our business and to repurchase our common stock, and do not anticipate paying cash dividends in the foreseeable future.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Our Board of Directors (the "Board") has approved common stock repurchase programs authorizing management to repurchase shares of the
Company's common stock in the open market. The timing and actual number of shares subject to repurchase are at the discretion of management and are contingent on a number of factors, including the
price of our stock, general market conditions and alternative investment opportunities. The purchases are funded from available working capital.

On
October 30, 2008, Advent's Board authorized the repurchase of up to 3.0 million shares of the Company's outstanding common stock. During the fourth quarter of 2009,
Advent did not make any repurchases of common stock. At December 31, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

In
addition to the above, we have withheld shares through net share settlements during the three months ended December 31, 2009. The following tables provides a
month-to-month summary of the repurchase activity upon the vesting of restricted stock units and the exercise of stock-settled stock appreciation rights under our equity
compensation plan to satisfy tax withholding obligations during the three months ended December 31, 2009 (in thousands, except per share data):

Month

Total
Number
of Shares
Repurchased(1)

Average
Price Per
Share

Maximum Number
of Shares that May
Yet Be Purchased
Under the PlanOctober


1

$
41.54


November


2

$
39.78


December


1

$
39.62


Total


4

$
40.10





(1)These
purchases represent shares cancelled when surrendered in lieu of cash payments for withholding taxes due from employees. These shares were not
purchased as part of a publicly announced program to purchase shares.


Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding securities authorized for issuance under equity compensation plans is incorporated by reference from our Proxy
Statement to be filed for our 2010 Annual Meeting of Stockholders.

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Performance Graph

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Advent Software, Inc., The S&P 500 Index  And The NASDAQ Computer & Data Processing Index

GRAPHIC

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Item 6.    Selected Financial Data

The following selected financial data are derived from our consolidated financial statements. This data should be read in conjunction
with the consolidated financial statements and notes thereto, and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations".

Fiscal Years2009(1)(2)

2008(1)(3)

2007(1)(4)

2006(1)(5)(6)

2005(1)(7)(in thousands, except per share data)STATEMENT OF OPERATIONSNet revenues

$
259,508

$
237,884

$
191,570

$
162,911

$
148,675Gross margin

$
176,963

$
156,379

$
129,510

$
109,362

$
101,449Income (loss) from continuing operations

$
27,879

$
17,995

$
8,088

$
(4,168
)
$
4,191Net income from continuing operations

$
20,774

$
17,316

$
10,043

$
79,142

$
11,972Net income from discontinued operation

$
16,109

$
1,579

$
2,588

$
3,460

$
2,163Net income

$
36,883

$
18,895

$
12,631

$
82,602

$
14,135Basic net income per share:Continuing operations

$
0.82

$
0.65

$
0.38

$
2.73

$
0.39Discontinued operation

$
0.63

$
0.06

$
0.10

$
0.12

$
0.07Total operations

$
1.45

$
0.71

$
0.48

$
2.85

$
0.46Diluted net income per share:Continuing operations

$
0.79

$
0.62

$
0.36

$
2.59

$
0.37Discontinued operation

$
0.61

$
0.06

$
0.09

$
0.11

$
0.07Total operations

$
1.39

$
0.68

$
0.45

$
2.70

$
0.44BALANCE SHEETCash, cash equivalents and short-term marketable securities

$
89,150

$
45,098

$
48,809

$
54,669

$
162,979Working capital

$
(6,749
)
$
(43,436
)
$
(16,637
)
$
10,831

$
122,531Total assets of discontinued operation

$
2,589

$
20,746

$
21,242

$
9,920

$
10,841Total assets

$
454,292

$
419,594

$
347,675

$
335,776

$
340,575Long-term liabilities

$
23,963

$
42,530

$
17,635

$
14,870

$
6,374Stockholders' equity

$
252,034

$
195,823

$
179,846

$
209,627

$
241,979


(1)The
MicroEdge segment was divested on October 1, 2009. Accordingly, the results of MicroEdge have been reclassified as a discontinued operation for
all periods presented. Unless otherwise noted, selected financial data in the above table pertain to our continuing operations.(2)Our
results of operations for 2009 included stock-based compensation expense of $18.2 million, restructuring charges of $0.1 million, and a
net gain on sale of private equity investments of $2.1 million. The Company has recorded an associated gain of $13.6 million resulting from the sale of MicroEdge in "net income from
discontinued operation, net of applicable taxes" in its 2009 results.(3)Our
results of operations for 2008 included stock-based compensation expense of $16.1 million, restructuring charges of $0.1 million, acquired
in-process research and development expense of $0.4 million, a net gain on sale of private equity investments of $3.4 million, and the operating results of Tamale
Software, Inc., subsequent to their acquisition in the fourth quarter of 2008.(4)Our
results of operations for 2007 included stock-based compensation expense of $12.9 million, restructuring charges of $1.0 million, and a
net gain on sale of private equity investments of $3.7 million.(5)Our
results of operations for 2006 included a benefit from income taxes of $79.5 million as a result of releasing the valuation allowance against our
deferred tax assets originally recorded in fiscal


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2003,
stock-based employee compensation expense of $12.8 million and restructuring charges of $3.7 million. (6)Effective
January 1, 2006, we adopted ASC 718, "CompensationStock Compensation", which requires the recognition of the fair value of
stock-based compensation in net income.(7)Our
results of operations for 2005 included restructuring charges of $2.0 million and a gain on sale of investments of $3.6 million.


Item 7.    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. The following
discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as
amended, including, but not limited to statements referencing our expectations relating to future revenues, expenses and operating margins. Forward-looking statements can be identified by the use of
terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue" or other similar terms and the negative of such terms regarding
beliefs, plans, expectations or intentions regarding the future. Forward-looking statements include, among others, statements regarding the future of the investment management market and opportunities
for us related thereto, future expansion, acquisition, divestment of or investment in other businesses and the impact of our divestment of MicroEdge, projections of revenues, future cost and expense
levels, expected timing and amount of amortization expenses related to past acquisitions, the adequacy of resources to meet future cash requirements, estimates or predictions of actions by customers,
suppliers, competitors or regulatory authorities, future client wins, future hiring and future product introductions. Such forward-looking statements are based on our current plans and expectations
and involve known and unknown risks and uncertainties which may cause our actual results or performance to be materially different from any results or performance expressed or implied by such
forward-looking statements. Such factors include, but are not limited to the "Risk Factors" set forth in "Item 1A. Risk Factors" in this Form 10-K, as well as other risks
identified from time to time in other Securities and Exchange Commission ("SEC") reports. You should not place undue reliance on our forward-looking statements, as they are not guarantees of future
results, levels of activity or performance and represent our expectations only as of the date they are made.

We
report or otherwise provide to investors certain non-GAAP and operational information, including non-GAAP operating income and earnings per share, and our term
license bookings metrics (expressed as annual term license contract value, "ACV") and maintenance renewal rates, that is intended to provide investors with certain of the information that management
uses as a basis for planning and forecasting of future periods. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information
presented in accordance with GAAP. In addition, undue reliance should not be place upon non-GAAP or operating information because this information is neither standardized across companies
nor subjected to the same control activities and audit procedures that produce our GAAP financial results.

Unless
expressly stated or the context otherwise requires, the terms "we", "our", "us", the "Company" and "Advent" refer to Advent Software, Inc. and its subsidiaries.

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Overview

We offer integrated software products and services for automating and integrating data and work flows across the investment management
organization, as well as between the investment management organization and external parties. Our products are intended to increase operational efficiency, improve the accuracy of client information
and enable better decision-making. Each solution focuses on specific mission-critical functions of the front, middle and back offices of investment management organizations and is designed to meet the
needs of the particular client, as determined by size, assets under management and complexity of their investment process. On October 1, 2009, we completed the sale of MicroEdge, Inc.,
our wholly-owned subsidiary, as further described below. The results of MicroEdge have been reclassified as a discontinued operation for all periods presented. Unless otherwise noted, discussion in
this document pertains to our continuing operations. See Notes 1 and 3 of Notes to Consolidated Financial Statements.

Current Economic Environment

During 2009, our business continued to be impacted by the generally weak macro-economic environment. The current environment has
created pressure on our clients to decrease their information technology budgets, which negatively impacted our customer renewal rates and bookings of annual term license contract value ("ACV") in
2009. For example, initially disclosed renewal rates, which we report one quarter in arrears, ranged from 85% to 93% during 2009 compared to a range of 98% to 103% during 2008. Additionally, the ACV
added during 2009 decreased to $21.8 million from $28.1 million during 2008. Despite the negative impact on our renewal rates and overall bookings, we continued to proactively control
our costs and achieved growth in our continuing operations' operating profit margin and earnings per share over 2008.

During
2009, many investment managers' revenues decreased as a result of decreases in their assets under management and some hedge funds and other types of clients have gone out of
business. While we are not immune to downturns in technology spending, should our customers continue to reduce or limit their spending, we believe we are well positioned to maintain our competitive
position in the longer term for the following reasons:



We
also believe that investment managers will be increasingly focused on providing increased and differentiated levels of service to their customers. These factors have traditionally
been demand drivers for our products.

We
believe our recent financial results validate the strength and stability of our business and the attractiveness of our product portfolio to our customers. For example, our continuing
operations have grown revenue, operating income and margin, and operating cash flows during 2009 compared to 2008. In addition, we saw an improved demand environment during the second half of 2009
from prospects

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and
customers across all the markets we serve. As such, we expect an improved demand environment for 2010 and expect to grow revenues by 5% to 8% in 2010. As the current economic situation evolves, we
will continue to evaluate the impact of this environment on our business and we will remain focused on delivering solutions for our customers. We remain positive about our relative market position and
our product delivery plans and we intend to remain focused on executing in the areas we can control by continuing to provide high value products while managing our expenses and headcount growth.

Operating Overview

Operating highlights of 2009 include:



Divestiture of MicroEdge

During 2009, management determined that the continued growth in the not-for-profit community would require a
significant investment of resources and decided to focus on the core business. In connection with this decision, management explored divesting the MicroEdge subsidiary and on October 1, 2009,
we completed the sale of MicroEdge. See Note 3, "Discontinued Operation", to the consolidated financial statements for a description of the principal terms of the divestiture.

In
accordance with FASB ASC 205-20, "Discontinued Operations", MicroEdge's results have been reclassified as a discontinued operation in the consolidated statements of
operations for all periods presented. The results of operations and the related charges for our discontinued operation are classified as "net income from discontinued operation, net of applicable
taxes" in the accompanying consolidated statements of operations for all periods presented. In addition, the assets and liabilities of
MicroEdge have been reclassified as assets and liabilities of discontinued operation in the Company's consolidated balance sheet for all periods presented.

Unless
noted otherwise, discussion in this document pertains only to continuing operations.

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Financial Overview

The components of revenue from continuing operations during 2009 and 2008, and associated dollar and percentage fluctuations were as
follows (in thousands, except % change):

Fiscal Year$
Change

%
Change2009

2008Term license revenues

$
98,382

$
66,053

$
32,329


49
%Maintenance revenues


74,410


77,700


(3,290
)

(4
)%Other recurring revenues


49,967


47,691


2,276


5
%Total term license, maintenance and other recurring revenues


222,759


191,444


31,315


16
%Recurring revenue as % of total revenue


86
%

80
%Asset under administration (AUA) fees


6,546


8,417


(1,871
)

(22
)%Other perpetual license fees


4,729


8,391


(3,662
)

(44
)%Total perpetual license fees


11,275


16,808


(5,533
)

(33
)%Professional services and other


25,474


29,632


(4,158
)

(14
)%Total net revenues

$
259,508

$
237,884

$
21,624


9
%


We
recognized revenue of $259.5 million from continuing operations during 2009, which represented an increase of 9% over the prior year. This increase was driven by significant
growth in term license revenue (Geneva and APX) as we continued to layer in incremental ACV sold in previous periods, and to a lesser extent, price increases and revenues from our new research
management solution, Tamale RMS, which we introduced in the fourth quarter of 2008. Perpetual license fees in 2009 were down compared 2008 as we licensed fewer perpetual seats to our existing
perpetual client base and fewer
modules to new clients. Incremental assets under administration fees from perpetual licenses decreased by $1.9 million in 2009 compared to 2008, as clients experienced declines in the market
value of AUA balances due to market conditions. Professional services and other revenues also decreased due to reduced spending by our customers on consulting services during 2009. We have grown net
revenue year-over-year for several reasons, including the following:



Total
recurring revenues, which we define as term license, perpetual maintenance, and other recurring revenues, increased to 86% of total net revenues during 2009, as compared to 80%
during 2008. Term license revenues increased 49% in 2009 from the prior year period and represented 38% of total net revenues in 2009, as compared to 28% in 2008.

Total
expenses from continuing operations, including cost of revenues, were $231.6 million in 2009, compared with $219.9 million in 2008. Our expenses increased in 2009
from 2008 largely as a result of increased payroll, variable compensation and benefit expenses resulting from increases in headcount primarily from our acquisition of Tamale Software, Inc. on
October 1, 2008.

Our
operating income from continuing operations in 2009 increased to $27.9 million or 11% of revenue from $18.0 million or 8% of revenue in 2008 which is reflective of
revenue growth and our cost reduction initiatives.

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Our
continuing operations' income tax expense was $8.3 million resulting in a 29% effective tax rate during 2009, compared to $3.9 million or 18%, respectively, in 2008.

Net
income from continuing operations was $20.8 million, resulting in diluted earnings per share of $0.79 for 2009, compared to $17.3 million or $0.62 in 2008.

Our
continuing operations generated operating cash flow of $72.4 million in 2009, which compares to $70.3 million in 2008.

Term License and Term License Deferral

We are substantially through the process of converting the Company's license revenues from a perpetual model to a predominantly term
model. Under a perpetual pricing model, customers purchase a license to use our software indefinitely and generally we recognize all license revenue at the time of sale; maintenance is purchased under
an annual renewable contract, and recognized ratably over the contract period. Under a term pricing model, customers purchase a license to use our software and receive maintenance for a limited period
of time and we recognize all of the revenue ratably over the length of the contract. This had the effect of lowering revenues for our continuing operations in the early stages of the transition, but
increasing the total potential value of the customer relationship.

When
a customer purchases a term license together with implementation services, we do not recognize any revenue under the contract until the implementation services are complete and the
remaining services are substantially complete. If the implementation services are still in progress as of quarter-end, we will defer all of the contract revenues to a subsequent quarter.
At the point professional services are substantially completed, we recognize a pro-rata amount of the term license revenue, professional services fees earned and related expenses, based on
the elapsed time from the start of the term license to the substantial completion of professional services. Term license revenue for the remaining contract years and the remaining deferred
professional services revenue and related expenses are recognized ratably over the remaining contract length.

The
term license component of the deferred revenue balance related to implementations in process will increase or decrease in the future depending on the amount of new term license
bookings relative to the number of implementations that reach completion in a particular quarter. During 2009, the revenue recognized from completed implementations exceeded the revenue deferred from
projects being implemented, resulting in a net recognition of revenue of $6.1 million for fiscal 2009 composed of $3.5 million of term license revenue and $2.6 million of
professional services revenue. We do not expect this trend of revenue recognition exceeding revenue deferral to continue. For example, during 2008, the revenue deferred from projects being implemented
exceeded the revenue recognized from completed
implementations by $9.6 million composed of $2.8 million of term license revenue and $6.8 million of professional services revenue.

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Amounts
of revenues and directly-related expenses deferred as of December 31, 2009 and 2008 associated with our term licensing deferral were as follows (in millions):

December 312009

2008Deferred revenuesShort-term

$
20.1

$
26.0Long-term


4.6


4.8Total

$
24.7

$
30.8Directly-related expensesShort-term

$
6.2

$
8.1Long-term


2.4


2.1Total

$
8.6

$
10.2


Deferred
net revenues and directly-related expenses are classified as "Deferred revenues" (short-term and long-term), and "Prepaid expenses and other," and "Other
assets," respectively, on the consolidated balance sheets.

Term License Bookings

The following table summarizes the Company's quarterly term license bookings (operational information) and the associated average term
and annual term license contract value (in thousands):

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total2009Annual Contract Value(1)

$
3,299

$
3,584

$
5,977

$
8,919

$
21,779Average Term(2)


2.8


2.3


3.0


3.3


2.92008Annual Contract Value(1)

$
5,510

$
6,853

$
6,188

$
9,553

$
28,104Average Term(2)


2.8


3.1


2.9


3.6


3.22007Annual Contract Value(1)

$
3,359

$
6,274

$
5,905

$
12,061

$
27,599Average Term(2)


3.3


2.9


3.5


3.4


3.3


(1)Annual
contract value represents the annual contribution to revenue, once they are fully implemented, from term license contracts signed.(2)Average
term is weighted by contract value for all new term licenses signed in the period.


Critical Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial
statements and related notes, which have been prepared in accordance with accounting principles generally accepted in the United States of America. We review the accounting policies used in reporting
our financial results on a regular basis. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues
and expenses, and related disclosure of contingent liabilities.

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On an ongoing basis, we evaluate the process we use to develop estimates. We base our estimates on historical experience and on other information that we believe
is reasonable for making judgments at the time the estimates are made. Actual results may differ from our estimates due to actual outcomes being different from those on which we based our assumptions.

We
believe the following accounting policies contain the more significant judgments and estimates used in the preparation of our consolidated financial
statements:



Revenue recognition.Our revenue recognition policies contain our most significant judgments and estimates. Our revenue policy is
further described
in Note 1, "Summary of Significant Accounting Policies", to the consolidated financial statements.

We
recognize revenue from term license, maintenance and other recurring; perpetual license fees, and professional services and other. We offer a wide variety of products and services to
a large number of financially sophisticated customers. While many of our lower-priced license transactions, maintenance contracts, subscription-based transactions and professional services projects
conform to a standard structure, many of our larger transactions are complex and may require significant review and judgment in our application of generally accepted accounting principles.

Software licenses.We recognize revenue from the licensing of software when persuasive evidence of an arrangement exists, the product
has been
delivered, the fee is fixed or determinable and collection of the resulting receivable is probable. We generally use a signed license agreement as evidence of an arrangement. Sales through our
distributors are evidenced by a master agreement governing the relationship together with binding order forms and signed contracts from the distributor's customers. Revenue is recognized once shipment
to the distributor's customer has taken place and when all other revenue recognition criteria have been met. Delivery occurs when a product is delivered to a common carrier F.O.B shipping point, or
upon confirmation that product delivered F.O.B shipping destination has been received, or upon notification that software is available for electronic download through our fulfillment vendor. Some of
our arrangements include acceptance provisions, and if such acceptance provisions are present, delivery is deemed to occur upon acceptance. We assess whether the fee is fixed or determinable based on
the payment terms associated with the transaction. We assess whether the collectability of the resulting receivable is probable based on a number of factors, including the credit worthiness of the
customer determined through review of credit reports, our transaction history with the customer, other available information and pertinent country risk if the customer is located outside the United
States. Our standard payment terms are due at 180 days or less, but payment terms may vary based on the country in which the agreement is executed. Software licenses are sold with maintenance
and, frequently, professional services.

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We
typically license our products on a per server, per user basis with the price per customer varying based on the selection of the products licensed, the assets under administration,
the number of site installations and the number of authorized users. We have substantially completed our transition from selling mostly perpetual licenses to selling a mix of term and perpetual
licenses, and expect term license revenue to continue to increase as a proportion of total recurring revenues (which we define as term license, maintenance and other recurring revenues) in the future.
Term license revenue comprised approximately 44%, 35% and 25% of total term license, maintenance and other recurring revenues in 2009, 2008 and 2007, respectively. Revenue recognition for software
licensed under term and perpetual license models differs depending on which type of contract a customer signs:





Certain
of our perpetual and term license contracts include asset-based fee structures that provide additional revenues based on the assets that the client manages using our software
("Assets Under Administration" or "AUA"). Contracts containing an AUA fee structure have a defined measurement period which requires the client to self-report actual AUA in arrears of the
specified period. AUA fees above the stated minimum fee for the same period are considered incremental fees. Because incremental fees are not determinable until the conclusion of the measurement
period, they are both earned and recognized upon completion of the measurement period, on a quarterly or annual basis. Incremental fees from perpetual AUA contracts are included in "Perpetual license
fees" on the consolidated statement of operations. Incremental fees from term AUA contracts are included in "Term license, maintenance and other recurring" revenue on the consolidated statement of
operations. The

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Company
recognizes AUA contract minimum fees over the period of service and continues to recognize incremental fees in arrears once clients contractually report the AUA to the company, because the
incremental fees are not determinable until reported.

Maintenance and other recurring revenues.We offer annual maintenance programs on perpetual licenses that provide for technical support
and updates
to our software products. Maintenance fees are bundled with perpetual license fees in the initial licensing year and charged separately for renewals of annual maintenance in subsequent years. Fair
value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Generally, we recognize maintenance revenue ratably over the contract term.

We
offer other recurring revenue services that are either subscription or transaction based which primarily include the provision of software interfaces to download securities
information from third party data providers, partial or full business process outsourcing, account aggregation, reconciliation, reference data management, and hosting of hardware and/or software. We
recognize revenue from recurring revenue transactions either ratably over the subscription period or as the transactions occur based on the terms of the arrangement.

Professional services and other revenues.We offer a variety of professional services that include project management, implementation,
data
conversion, integration, custom report writing and training. We base fair value for professional services upon separate sales of these services to customers. Our professional services are generally
billed based on hourly rates together with reimbursement for travel and accommodation expenses. We recognize revenue as professional services are performed, except in the case of
multi-year term license contracts which are described in the "term licenses" section above. Certain professional services arrangements involve acceptance criteria and in these cases,
revenue and related expenses are recognized upon acceptance. Professional services and other revenues also include revenue from our user conferences.

Directly related expenses.When we defer service revenues, we also defer the direct costs incurred in the delivery of those services to
the extent
those costs are recoverable through the future revenues on non-cancelable contracts as prepaid contract expense. We recognize those deferred costs as costs of professional services
revenues proportionally and over the same period that the deferred revenue is recognized as service revenue. When we defer license revenue, we defer the direct incremental costs incurred as a result
of selling the contract (i.e. sales commissions earned by the sales force as a part of their overall compensation) because those costs would not have been incurred but for the acquisition of
that contract. We recognize those costs as sales and marketing expense proportionally and over the same period as the license revenues.

Income taxes.We account for worldwide income taxes under an asset and liability approach that requires the expected future tax
consequences of
temporary differences between book and tax bases of assets and liabilities to be recognized as deferred tax assets and liabilities. Significant judgment is
required to determine our worldwide income tax provision. In the ordinary course of business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Many of these
uncertainties arise as a consequence of cost reimbursement arrangements among related entities, the process of identifying items of revenue and expense that have differing or preferential tax
treatment and segregation of foreign and domestic income and expense to the appropriate taxing jurisdictions to reasonably allocate earnings. Although we believe that our judgments and estimates are
reasonable, the final outcome could be different from that which is reflected in our income tax provision and accruals.

A
valuation allowance is recorded to reduce the recognized net deferred tax assets to an amount that will more likely than not be realized. In order for us to realize our deferred tax
assets, we must be able to generate sufficient future taxable income in the jurisdiction where the tax asset is located. We

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consider
forecasted earnings, identified future taxable income and prudent and reasonable tax planning strategies in assessing the need for a valuation allowance.

We
calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed during the
subsequent year. Adjustments based on filed returns are generally recorded in the period when the return is filed and the tax implication is known.

We
are subject to audits by state, federal and foreign tax authorities. Our estimates for the potential outcome of any uncertain tax matter are judgmental. We believe we have adequately
provided for any reasonably foreseeable outcome related to these matters. However, our future results may include adjustments to our estimated tax liabilities.

Stock-based compensation.We currently use the Black-Scholes option pricing model to determine the fair value of stock options, stock
appreciation
rights ("SAR") and employee stock purchase plan shares. The fair value of our restricted stock units is calculated based on the fair market value of our stock on the date of grant. The determination
of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective
variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee exercise behavior, the risk-free interest rate and
expected dividends.

We
estimate the volatility of our common stock based on an equally weighted average of historical and implied volatility of the Company's common stock. We determined that a blend of
historical and implied volatility is more reflective of the market conditions and a better indicator of expected volatility than using purely historical volatility. We estimate the expected life of
options and SARs granted based
on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. We base the
risk-free interest rate on the US Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option and SAR. We do not anticipate paying
any cash dividends in the foreseeable future and therefore use an expected dividend yield of zero in the option pricing model.

These
variables are sensitive and change on a daily basis. As a result, the financial result from issuing the same number of options or SARs can vary significantly over time. The
following table reflects the change in the fair value of a hypothetical option or SAR as a result of a hypothetical change in one of the underlying assumptions:

Assumption

Base Case

Assumption
Change

Value
Change

Assumption
Change

Value
ChangeGrant and stock price

$
40.00

+$1

$
0.32

-$1

$
(0.32
)Risk-free interest rate


2.5
%
+0.5%

$
0.27

-0.5%

$
(0.27
)Volatility


44.0
%
+5%

$
1.36

-5%

$
(1.40
)Expected life (years)


5.1

+1 year

$
0.67

-1 year

$
(0.87
)Expected dividend yield


3.0
%
+1%

$
(1.15
)
-1%

$
1.24Base Option Value

$
12.80


Historically,
our SAR and stock option awards granted to employees cliff vest 20% after one year and monthly thereafter over the next 48 months. Starting in February 2009, we
reduced the vesting period from 5 years to 4 years, and SARs and stock option awards granted to employees now cliff vest 25% after one year and monthly thereafter over the next
36 months. Our restricted stock unit ("RSU") awards cliff vest 50% after two years and 50% after four years. ASC 718, "CompensationStock Compensation", requires forfeitures to be
estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures are estimated based on

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our
annual forfeiture rate. The annual forfeiture rate is based on our historical forfeiture experience over the last ten years. Although we believe the assumptions and estimates we have made in the
past have been reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. A decrease in our annual forfeiture rate assumption would
increase stock-based compensation expense. The estimated impact of a hypothetical 500 basis point decrease in the annual forfeiture rate on 2009 stock-based compensation expense would have been an
increase of approximately $0.2 million.

Restructuring charges and related accruals.We have developed and implemented formalized plans for restructuring our business to better
align our
resources to market conditions and recorded significant charges. In connection with these plans, we recorded estimated expenses for severance and benefits, lease cancellations, asset
write-offs and other restructuring costs. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of
estimates made at the time the original decisions were made, including evaluating real estate market conditions for expected vacancy periods and sub-lease rents. We
continually evaluate the adequacy of the remaining liabilities under our restructuring initiatives. Although we believe that these estimates accurately reflect the costs of our restructuring plans,
actual results may differ, thereby requiring us to record additional provisions or reverse a portion of such provisions.

Business combinations.When we acquire businesses, we allocate the purchase price to tangible assets and liabilities and identifiable
intangible
assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets
acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on historical experience and information obtained from the management of the acquired
companies. These estimates can include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost
savings expected to be derived from acquiring an asset. These estimates are inherently uncertain and unpredictable. In addition, unanticipated events and circumstances may occur which may affect the
accuracy or validity of such estimates.

Disposition.When we dispose of a subsidiary, we account for the divestiture in accordance with ASC 205-20, "Discontinued Operations".
The results of operations and the related charges for the discontinued operation are classified as "Net income from discontinued operation, net of applicable taxes" in the accompanying consolidated
statements of operations for all periods presented. In addition, the assets and liabilities of the discontinued operation are reclassified as assets and liabilities of discontinued operation in our
consolidated balance sheet for all periods presented.

The
calculation of the gain on disposal of our discontinued operation required management to make significant estimates in the resulting facility exit costs. In connection with the sale
of MicroEdge, the Company vacated its MicroEdge facilities in New York and entered into a sub-lease agreement with the Purchaser whereby the Purchaser will sub-lease the
premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. Given the significance of, and the timing of the execution of such
activities, this process is complex and involves periodic reassessments of estimates made at the time the original decisions were made, including evaluating the probability that the Purchaser will
decide to sub-lease the premises beyond the initial two-year period and through 2018, evaluating real estate market conditions for expected vacancy periods and
sub-lease rents. We continually evaluate the adequacy of the remaining liabilities related to this disposition. Although we believe that these estimates accurately reflect costs for our
facility exit costs, actual results may differ, thereby requiring us to record additional provisions or reverse a portion of such provisions.

Additionally,
$3 million of the Purchase Price has been placed in escrow for eighteen (18) months following the close to be held as security for losses incurred by the
Purchaser in the event of certain breaches of the representations and warranties contained in the Agreement or certain other events.

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Given
the uncertainty associated with the potential losses, any gain on sale associated with the $3.0 million held in escrow will be recorded by the Company when realized.

Goodwill.We review our goodwill for impairment annually during the fourth quarter of our fiscal year (as of November 1) and more
frequently
if an event or circumstance indicates that an impairment loss has occurred. We are required to test our goodwill for impairment at the reporting unit level. Historically, we determined that the
Company had three reporting units for the purposes of goodwill impairment testing. With the divestiture of MicroEdge on October 1, 2009, we determined that the Company now has two reporting
units, Domestic and International, which comprise our Advent Investment Management segment, for the goodwill impairment testing performed during the fourth quarter of 2009. The test for goodwill
impairment is a two-step process:

The
first step compares the fair value of each reporting unit with its respective carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying
amount, goodwill of our reporting unit is considered not impaired, thus the second step of the impairment test is unnecessary.

The
second step, used to measure the amount of impairment loss, compares the implied fair value of each reporting unit's goodwill with the respective carrying amount of that goodwill. If
the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess.

Determining
the fair value of a reporting unit is subjective and requires judgment at many points during the test including the development of future revenue and expense forecasts used
to calculate future cash flows, the selection of risk-adjusted discount rates, and determination of market comparable entities. During the fourth quarter of 2009, Advent completed the
first step of its annual impairment test and determined that none of the reporting units were at risk for failing step one of the impairment testing. Therefore, the second step of the impairment test
was not necessary to perform.

Impairment of long-lived assets.We review our other long-lived assets including property and equipment and other intangibles
for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Determining
whether an impairment trigger has occurred is subjective and requires judgment. Our recoverability test compares the assets' carrying amount to their expected future undiscounted net cash flows. We
estimate future revenue and expense amounts to calculate future cash flows. We believe our forecast revenue and expense amounts are reasonable but forecast amounts are inherently uncertain and
unpredictable.

Legal contingencies.From time to time, Advent is involved in claims and legal proceedings that arise in the ordinary course of
business. We use our
judgment to assess both the likelihood and potential amount of a contingency. We periodically review our assessment whenever there is a change in the facts and circumstances of these proceedings.
Litigation is subject to inherent uncertainties and our view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a material adverse impact
on our financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods.

Sales returns and accounts receivable allowances.Our standard practice is to enforce our contract terms and not allow our customers to
return
software. We have, however, allowed customers to return software on a limited case-by-case basis and have recorded sales returns provisions as offsets to revenue in the period
the sales return becomes probable. We use our judgment in estimating our sales returns. We analyze customer demand, acceptance of products and historical returns when evaluating the adequacy of the
allowance for sales returns, which are not generally provided to customers. Beginning in 2004, we implemented a methodology to supplement our judgment for calculating the value of reserves that
considered the last 18 months of experience into account. Beginning in the second quarter of 2007, we changed our methodology to include the last 12 months of return experience.

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Our
ability to estimate returns is based on our long history of experience with relatively homogenous transactions and the fact that the return period is short. The estimates for returns
are adjusted periodically based upon changes in historical rates of returns and other related factors. We have recorded a sales returns provision to decrease revenue for these situations based on our
historical experience of $0.3 million, $0.2 million and $0.1 million in fiscal 2009, 2008 and 2007, respectively.

We
use our judgment in estimating our allowance for doubtful accounts. In order to estimate our allowance for doubtful accounts, we analyze specific accounts receivables, historical bad
debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms. We have recorded a provision for bad debt expense of $0.2 million,
$0.6 million and $0.1 million in fiscal 2009, 2008 and 2007, respectively.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation to better reflect our view of the
current business. These reclassifications do not affect total net revenues, net income, cash flows, or stockholders' equity. See Note 1, "Summary of Significant Accounting Policies," of Notes
to our consolidated financial statements for a complete description of the reclassifications.

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Results of Operations for Fiscal Years 2009, 2008 and 2007

The following table summarizes, for the periods indicated, certain items in the consolidated statements of operations as a percentage
of net revenues. The financial information and the ensuing discussion should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

Fiscal Years2009

2008

2007Net revenues:Term license, maintenance and other recurring


86
%

80
%

79
%Perpetual license fees


4


7


11Professional services and other


10


12


10Total net revenues


100


100


100Cost of revenues:Term license, maintenance and other recurring


18


18


18Perpetual license fees


*


*


*Professional services and other


11


14


13Amortization of developed technology


2


1


1Total cost of revenues


32


34


32Gross margin


68


66


68Operating expenses:Sales and marketing


24


24


26Product development


19


18


19General and administrative


14


15


17Amortization of other intangibles


1


*


1Acquired in-process research and development


*


*


*Restructuring charges


*


*


1Total operating expenses


57


58


63Income from continuing operations


11


8


4Interest expense


*


*


*Interest income and other, net


*


*


1Gain on sale of equity investments, net


1


1


2Income from continuing operations before income taxes


11


9


7Provision for income taxes


3


2


1Net income from continuing operations


8


7


5Discontinued operation:Net income from discontinued operation


6


1


1Net income


14
%

8
%

7
%


*Less
than 1%


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NET REVENUES

2009

2008

2007(in thousands, except percentages)Total net revenues

$
259,508

$
237,884

$
191,570Change over prior year

$
21,624

$
46,314Percent change over prior year


9
%

24
%


Our
net revenues are made up of three components: term license, maintenance and other recurring revenue; perpetual license fees; and professional services and other revenue. The revenues
from a term license, which includes both software license and maintenance services, are earned under a time based contract. Maintenance revenues are derived from maintenance fees charged for perpetual
license arrangements and recurring revenues are derived from our subscription-based and transaction-based services. Perpetual license revenues are derived from the licensing of software products under
a perpetual arrangement and include Assets Under Administration ("AUA") fees for certain perpetual arrangements. Professional services and other revenues include fees for consulting, fees from
training, and project management services and our client conferences. Sales returns, which we generally do not provide to customers, are accounted for as deductions to these three revenue categories
based on our historical experience.

Since
fiscal 2007, revenues from recurring sources have grown and conversely revenues from perpetual licenses have decreased as follows:

As a percentage of net revenues

2009

2008

2007Revenues from recurring sources


86
%

80
%

79
%Revenues from perpetual license fees


4
%

7
%

11
%


As
we continue to sign term license agreements for new customers, grow our subscription, data management and outsourced services revenues, and our customers renew their perpetual
maintenance, we expect our revenue from recurring sources to continue to increase as a percentage of net revenues.

Net
revenues increased in 2009 and 2008 due to continued customer adoption for many of our products and services, which principally includes increases in sales of our APX and Geneva
products. The year-over-year growth in total net revenues for 2009 was due principally to substantially higher term license, maintenance and other recurring revenues, which
reflected 16% and 26% growth in term license revenues during 2009 and 2008, respectively.

Revenue
derived from sales to the Europe, Middle East and Africa ("EMEA") region were $32.6 million, $34.2 million and $26.6 million in 2009, 2008 and 2007, respectively.
The decrease in EMEA revenue for 2009 is primarily due to declines in the market values of AUA balances for our EMEA customers, as well as economic conditions in those regions. We plan to continue
expanding our international sales efforts, both in our current markets and elsewhere. The revenues from customers in any single international country did not exceed 10% of total net revenues.

We
expect net revenues to be in the range of $272 million to $280 million for fiscal 2010. Additionally, as we continue to sign term license agreements for new customers,
we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues.

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Term License, Maintenance and Other Recurring Revenues

2009

2008

2007(in thousands, except percentages)Term license revenues

$
98,382

$
66,053

$
37,359Maintenance revenues


74,410


77,700


73,616Other recurring revenues


49,967


47,691


40,672Total term license, maintenance and other recurring revenues

$
222,759

$
191,444

$
151,647Percent of total net revenues


86
%

80
%

79
%Change over prior year

$
31,315

$
39,797Percent change over prior year


16
%

26
%


We
began our transition to a term license model in 2004 and have experienced growth in our term license ACV bookings through 2008, and experienced a 22% decline in 2009. Revenues from
term licenses, which include both the software license and maintenance services for term licenses, grew 49% in 2009 from 2008 and represented 44% of total term license, maintenance and other recurring
revenues in 2009, up from 35% in 2008 and 25% in 2007. The growth of term license revenues in 2009 and 2008 reflects the continued layering of incremental ACV sold in previous periods into our term
revenue and the continued market acceptance of our Geneva, APX, Axys, Partner, Moxy and Tamale products. In addition, during 2009, the revenue recognized from completed implementations exceeded the
revenue deferred from projects being implemented, resulting in a net recognition of revenue of $3.5 million during 2009. This is in contrast to our historical trend of net revenue deferral through
2008. In 2008, term license revenue deferred from projects being implemented exceeded the revenue recognized from completed implementations by $2.8 million. Revenues from our new research
management solution, Tamale RMS, which we introduced in October 2008, also contributed to the growth of our term license revenues in 2009.

Maintenance
revenues decreased by $3.3 million during 2009. The decrease in maintenance revenues during 2009 was attributable to perpetual license customers migrating to term
licenses, maintenance de-activations due to customer attrition, and customers downgrading maintenance levels, partially offset by the impact of price increases. The increase in maintenance
revenues of $4.1 million during 2008 were attributable to the impact of price increases on annual perpetual maintenance renewals purchased by our installed customer base, up-selling
to higher value maintenance plans and, to a lesser extent, an increase in new perpetual maintenance support contracts, partially offset by maintenance de-activations and downgrades, and
perpetual license customers migrating to term licenses.

Other
recurring revenues, which primarily include revenues from the provision of software interfaces to download securities information from third party data providers, partial or full
business process outsourcing, account aggregation, reconciliation, reference data management, and hosting of hardware and/or software, increased $2.3 million and $7.0 million during 2009
and 2008, respectively. This was primarily due to revenue increases associated with growth in our subscription, data management and outsourced services of $2.5 million and $4.5 million
during 2009 and 2008, respectively, and changes in transaction charges of $(0.3) million and $2.5 million.

As
a percentage of total net revenues, total term license, maintenance and other recurring revenues increased to 86% during 2009 from 80% and 79% in 2008 and 2007, respectively. These
increases as a percentage of total net revenues were primarily attributable to the continued emphasis in term license sales relative to perpetual license sales. Our renewal rates are based on cash
collections and are disclosed one quarter in arrears. We disclose our renewal rates one quarter in arrears in order to include substantially all payments received against the invoices for that
quarter. We also update our renewal rates from the initially disclosed rates to include all cash collections subsequent to the initial

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disclosure.
The following summarizes our initial and updated renewal rates (operational metric) for the previous five quarters:

Renewal Rates

Q409

Q309

Q209

Q109

Q408Based on cash collections relative to prior year collectionsInitially Disclosed Rate(1)


89
%

87
%

85
%

93
%

98
%Updated Disclosed Rate(2)


n/a


90
%

88
%

98
%

101
%


(1)"Initially
Disclosed Rate" is based on cash collections and reported one quarter in arrears(2)"Updated
Disclosed Rate" reflects initially disclosed rate updated for subsequent cash collections


As
we continue to sign term license agreements for new customers, we expect our revenue from recurring sources to continue to represent over 85% of our total net revenues. In addition,
we expect other recurring revenues to increase due to new bookings in recent years, including the data services contract with TIAA-CREF and the hosted services contract with Fidelity
Investments which were both fully implemented in 2009.

Perpetual License Fees

2009

2008

2007(in thousands, except percentages)Assets under administration (AUA) fees

$
6,546

$
8,417

$
8,562Other perpetual license fees


4,729


8,391


11,672Total perpetual license fees

$
11,275

$
16,808

$
20,234Percent of total net revenues


4
%

7
%

11
%Change over prior year

$
(5,533
)
$
(3,426
)Percent change over prior year


(33
)%

(17
)%


Consistent
with our transition to term licensing, perpetual license fees continue to account for a smaller percentage of total net revenues. Additionally, we licensed fewer perpetual
seats and modules to our existing perpetual client base. Incremental assets under administration fees from perpetual licenses decreased by $1.9 million in 2009 compared to 2008 and
$0.1 million in 2008 compared to 2007, as clients experienced declines in the market value of AUA balances due to market conditions.

We
expect AUA fees will increase in 2010, as compared to 2009, due to an increase in assets that our clients manage using our software resulting from more favorable market conditions.
Conversely, we expect other perpetual license fees to decrease as we continue our emphasis on term licenses.

Professional Services and Other Revenues

2009

2008

2007(in thousands, except percentages)Professional services and other revenues

$
25,474

$
29,632

$
19,689Percent of total net revenues


10
%

12
%

10
%Change over prior year

$
(4,158
)
$
9,943Percent change over prior year


(14
)%

51
%


Professional
services and other revenues include consulting, project management, custom integration, training and our client conference. Professional services projects related to Axys,
Moxy and Partner products generally can be completed in a two-to six-month time period, while services related to Geneva and APX products may require a four- to
nine-month implementation period.

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We
defer professional services revenue for services performed on term license implementations that are not considered substantially complete. Service revenue is deferred until the
implementation is complete and remaining services are substantially completed. Upon substantial completion, we recognize a pro-rata amount of professional services fees earned based on the
elapsed time from the start of the term license to the substantial completion of professional services. The remaining deferred professional services revenue is recognized ratably over the remaining
contract length.

Professional
services and other revenues fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Increased (decreased) consulting services

$
(7,611
)
$
4,655Increased (decreased) client conference


(1,665
)

96Increased (decreased) reimbursable travel revenue


(1,466
)

806Increased (decreased) custom report services


(1,248
)

976Increased (decreased) project management


(984
)

402Decreased term license implementation deferral


9,417


2,941Various other items


(601
)

67Total change

$
(4,158
)
$
9,943


The
revenue decrease in 2009 represented a contraction in new services engagements in addition to lower utilization of our consultants and related reimbursable travel resulting from a
decrease in demand for consulting services in 2009 compared to 2008. In addition, we experienced a decline in
revenues associated with our annual client conference as we did not hold a conference in 2009. These decreases were partially offset by the recognition of net professional services revenue related to
the completion of term license implementations. The impact of our term license implementation recognition (deferral) on professional services revenues was as follows:

2009

2008

2007(in thousands, except
percentages)Net recognition (deferral) of professional services revenue related to term license implementations

$
2,612

$
(6,805
)
$
(9,746
)Change over prior year

$
9,417

$
2,941


As
more professional service implementation projects reached substantial completion during 2009, the revenue recognized from completed implementations exceeded the revenue deferred from
projects being implemented, resulting in a net recognition of revenue of $2.6 million, representing a $9.4 million increase to professional services revenue compared to the net deferral
of $6.8 million during 2008.

The
revenue increase in 2008 is primarily due to more revenue generating professional services headcount utilized and third party service providers hired in 2008 associated with
implementations of our APX and Geneva products. Additionally, we experienced an increase in implementation services during 2008, compared to 2007, after the launch of our APX product and the sales
success of our Geneva product, which are both sold under a term license model. As a result, we deferred professional services revenues of $6.8 million during 2008, which represented a 30%
decrease in net deferrals compared to 2007.

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Revenues by Segment

2009

2008

2007(in thousands)Advent Investment Management

$
259,508

$
237,884

$
191,490Other








80Total

$
259,508

$
237,884

$
191,570


On
October 1, 2009, Advent completed the sale of its MicroEdge subsidiary. Accordingly, the results of MicroEdge have been classified as a discontinued operation in the
consolidated statements of operations for all periods presented. Following the divestiture, the Company operates under one reportable segment, Advent Investment Management. See Note 3,
"Discontinued Operation" to the consolidated financial statements for further discussion.

The
elimination of revenue in our "Other" segment in fiscal 2009 and 2008 and the revenue amount in fiscal 2007 resulted from the wind down of the "soft dollar" business of our
SEC-registered broker/dealer subsidiary, Second Street Securities, as it no longer fit our corporate strategy.

COST OF REVENUES

2009

2008

2007(in thousands, except percentages)Total cost of revenues

$
82,545

$
81,505

$
62,060Percent of total net revenues


32
%

34
%

32
%Change over prior year

$
1,040

$
19,445Percent change over prior year


1
%

31
%


Our
cost of revenues is made up of four components: cost of term license, maintenance and other recurring; cost of perpetual license fees; cost of professional services and other; and
amortization of developed technology. The slight increase in cost of revenues in absolute dollars in 2009 was due principally to an increase in costs from less cost deferral from our term
implementations, and costs resulting from headcount additions associated with our acquisition of Tamale in October 2008, partially offset by a decrease in costs associated with the cancelation of our
2009 annual client conference. To a lesser extent, increased amortization associated with our developed technology also contributed to the overall increase.

Cost
of revenues as a percent of total net revenues decreased in 2009 resulting principally from the recognition of term license and professional services revenue from several projects
that reached substantial completion in 2009. We defer revenues and direct costs associated with services performed on term license implementations. Indirect costs such as management and other overhead
expenses are
recognized in the period in which they are incurred. The increase in gross margin percentage in 2009 is primarily due to the net recognition of term license and professional services revenue from
several projects that reached substantial completion during 2009. Consistent with historical trends, we are still experiencing negative gross margins on professional services revenues.

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Cost of Term License, Maintenance and Other Recurring

2009

2008

2007(in thousands, except percentages)Cost of term license, maintenance and other recurring

$
46,823

$
43,798

$
35,298Percent of total term license, maintenance and other recurring revenues


21
%

23
%

23
%Change over prior year

$
3,025

$
8,500Percent change over prior year


7
%

24
%


Cost
of term license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor and third-party costs involved in producing and distributing our
software, and cost of product media including duplication, manuals and packaging materials. Cost of maintenance and other recurring revenues is primarily comprised of the direct costs of providing
technical support services under maintenance agreements and other services for recurring revenues, and royalties paid to third party subscription-based and transaction-based vendors. Gross margins for
term licenses were 79%, 77% and 77% during 2009, 2008 and 2007, respectively. The increase in gross margin in 2009 when compared to 2008 was due to the impact of cost control measures implemented
during 2009.

Cost
of term license, maintenance and other recurring fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Increased payroll and related

$
4,133

$
5,360Increased depreciation


435


58Increased computers and telecom


350


323Increased (decreased) royalties


(1,008
)

947Increased (decreased) recruiting


(235
)

47Increased (decreased) outside services


(214
)

437Increased (decreased) allocation-in of facility and infrastructure expenses


(190
)

800Various other items


(246
)

528Total change

$
3,025

$
8,500


The
absolute dollar amount increases in 2009 and 2008 were due primarily to an increase in compensation and related costs resulting from increases in salary costs and headcount which
enables us to deliver the services we provide to our growing number of clients in their day-to-day use of our software. During 2009, headcount decreased to 270 employees at
December 31, 2009 from 278 employees at December 31, 2008, but was higher on average year over year as we increased headcount by 21 heads from our Tamale acquisition in October 2008.
Headcount increased to 278 employees at December 31, 2008 from 227 employees at December 31, 2007. Royalty expenses decreased in 2009 compared to 2008, resulting from the cessation
during 2009 of royalty contracts with certain software vendors. Royalty fees increased in 2008 due to an increase in payments to third party subscription-based and transaction based vendors. Decreases
to outside services and recruiting expenses reflect less activity and utilization during 2009 compared to 2008.

We
expect cost of term license, maintenance and other recurring revenue to increase in dollar amount but not as a percentage of related revenue in 2010 as compared to 2009.

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Cost of Perpetual License Fees

2009

2008

2007(in thousands, except
percentages)Cost of perpetual license fees

$
327

$
488

$
365Percent of total perpetual license revenues


3
%

3
%

2
%Change over prior year

$
(161
)
$
123Percent change over prior year


(33
)%

34
%


Cost
of perpetual license fees consists primarily of royalties and other fees paid to third parties, the fixed direct labor and third party costs involved in producing and distributing
our software, and cost of product media including duplication, manuals and packaging materials. The cost of perpetual license fees fluctuated during 2009 and 2008 as a result of changes in payroll and
related expenses and product media costs. Payroll and related expenses decreased during 2009 and 2008 due to a decline in headcount. During 2009, we experienced a decrease in product related costs as
we continue to transition away from perpetual licensing. We expect these fees to decrease slightly in 2010 as a result of our continuing transition away from perpetual licensing.

Cost of Professional Services and Other

2009

2008

2007(in thousands, except percentages)Cost of professional services and other

$
29,777

$
34,158

$
24,985Percent of total professional services revenues


117
%

115
%

127
%Change over prior year

$
(4,381
)
$
9,173Percent change over prior year


(13
)%

37
%


Cost
of professional services and other revenue consists primarily of personnel related costs associated with the client services organization in providing consulting, custom report
writing and conversions of data from clients' previous systems. Also included are direct costs associated with third-party consultants and travel expenses. Additionally, we defer direct professional
services costs until we have completed the term license implementation services.

Cost
of professional services and other fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Decreased service cost deferral related to term implementations

$
4,063

$
1,066Increased (decreased) outside services


(3,665
)

2,545Increased (decreased) travel and entertainment


(2,114
)

820Increased (decreased) payroll and related


(1,782
)

5,449Decreased recruiting


(272
)

(506
)Decreased marketing


(51
)

(382
)Various other items


(560
)

181Total change

$
(4,381
)
$
9,173


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The change in cost of professional services in 2009 and 2008 primarily reflects changes in expenses associated with payroll and related costs, outside services
and travel and entertainment. Decreases in payroll and related expenses during 2009 resulted from the change in demand for consulting and training services related to term license contract sales.
During the latter half of 2007, we hired a significant number of consultants resulting in increased payroll costs in 2008. Headcount increased to 132 employees at December 31, 2008 from 129
employees at December 31, 2007. The decrease in payroll and related expenses in 2009 reflects the redeployment of consulting employees to other areas of our business during the year. Headcount
in our consulting group decreased to 105 at December 31, 2009. The decrease in outside services and travel and entertainment reflects a lower level of professional service activity and lower
utilization of consulting employees during 2009 compared to 2008. During 2008, we experienced an increase in outside services and travel and entertainment resulting from an increase in demand for
consulting and training services.

We
defer direct costs associated with services performed on term license implementations until a project reaches substantial completion. Indirect costs such as management and other
overhead expenses are recognized in the period in which they are incurred, with no revenue to offset them. As the implementation services are completed, the deferred professional services revenue and
expense associated with our term licenses are recognized ratably over the remaining contract length which we believe will improve margins over time. The impact of our term license implementation
recognition (deferral) on professional services costs was as follows:

2009

2008

2007(in thousands, except percentages)Net recognition (deferral) of professional services costs related to term license implementations

$
1,254

$
(2,809
)
$
(3,875
)Change over prior year

$
4,063

$
1,066Percent change over prior year


(145
)%

(28
)%


As
more professional service implementation projects related to our APX and Geneva products reached substantial completion during 2009, the costs recognized from completed
implementations exceeded the revenue deferred from projects being implemented, resulting in a net recognition of costs of $1.3 million, representing a $4.1 million increase to costs of
professional services compared to the deferral during 2008.

Gross
margins for professional services and other were (17)%, (15)% and (27)% during 2009, 2008 and 2007, respectively. The slight deterioration in 2009 when compared to 2008 was
primarily due to the lower utilization of our consulting employees, partially offset by the benefit from the net recognition of professional services revenue from several projects that reached
substantial completion during 2009. Professional services gross margins for 2008 and 2007 improved compared to the previous year, respectively, but continued to be negative as a result of the
significant deferral of professional services
revenues and costs associated with our term license implementation. In addition, headcount in our consulting group had increased during 2007, and to a lesser degree, in 2008. Since these new employees
undergo a training period, typically of six months, before becoming fully billable, their associated costs had a near-term negative impact on gross margins.

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Amortization of Developed Technology

2009

2008

2007(in thousands, except
percentages)Amortization of developed techology

$
5,618

$
3,061

$
1,412Percent of total net revenues


2
%

1
%

1
%Change over prior year

$
2,557

$
1,649Percent change over prior year


84
%

117
%


Amortization
of developed technology represents amortization of acquisition-related intangibles, and amortization of capitalized software development costs previously capitalized under
ASC 985, "Costs of Software to be Sold, Leased, or Marketed". The increases in 2009 and 2008 reflect increased amortization from technology-related intangible assets associated with Tamale which we
acquired in October 2008. Also contributing to the increase, but to a lesser extent, is amortization from software development costs previously capitalized under ASC 985.

OPERATING EXPENSES

Sales and Marketing

2009

2008

2007(in thousands, except percentages)Sales and marketing

$
62,738

$
57,939

$
50,158Percent of total net revenues


24
%

24
%

26
%Change over prior year

$
4,799

$
7,781Percent change over prior year


8
%

16
%


Sales
and marketing expenses consist primarily of the costs of personnel involved in the sales and marketing process, sales commissions, advertising and promotional materials, sales
facilities expense, trade shows, and seminars.

Sales
and marketing expense fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Increased payroll and related

$
7,202

$
5,188Increased allocation-in of facility and infrastructure expenses


516


437Increased (decreased) travel and entertainment


(1,710
)

723Increased (decreased) bad debt and broker fees


(422
)

552Increased (decreased) outside services


(389
)

560Decreased marketing


(211
)

(67
)Various other items


(187
)

388Total change

$
4,799

$
7,781


The
increase in expense in 2009 and 2008 primarily reflects the growth of payroll related costs. The increase in payroll and related expense were a result of an increase in headcount to
185 at December 31, 2009 from 181 (9 heads from Tamale acquisition) and 149 at December 31, 2008 and 2007, respectively, and increases in variable compensation paid to these individuals.
Travel and entertainment, outside services and marketing costs decreased in 2009 compared to 2008 as a result of cost control measures implemented in 2009, as well as our decision to host a road show
in lieu of the

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Advent
client conference in 2009. The decrease in bad debt expense in 2009 is a result of fewer accounts being sent to collections in 2009 when compared to 2008.

Higher
travel and entertainment and outside services costs in 2008 compared to 2007 were primarily due to more employees attending the Advent client conference in 2008 and the
$0.4 million fee associated with the cancellation of the 2009 Advent client conference. During 2008, we referred more accounts to collections which resulted in our increased provision for bad
debt compared to 2007.

In
2010, we expect sales and marketing expenses to increase in dollar amount but remain relatively flat as a percentage of total net revenues compared with 2009, as we will incur
additional travel expenses for the 2010 Advent client conference and an increase our marketing activities in support of planned product launches.

Product Development

2009

2008

2007(in thousands, except percentages)Product development

$
48,443

$
42,897

$
36,562Percent of total net revenues


19
%

18
%

19
%Change over prior year

$
5,546

$
6,335Percent change over prior year


13
%

17
%


Product
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. We expense costs incurred to develop computer software products until technological feasibility is reached for the products. Once
technological feasibility is reached, all software costs are capitalized until the product is made available for general release to customers. The capitalized costs are amortized using the greater of
the ratio of the product's current gross revenues to the total of current expected gross revenues or on a straight-line basis over the software's estimated economic life of approximately
three years.

Product
development expenses fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Increased payroll and related

$
6,889

$
4,272Increased computers and telecommunications


203


145Increased (decreased) outside services


(927
)

1,147Decreased (increased) capitalization of product development


(587
)

674Increased (decreased) travel and entertainment


(200
)

61Various other items


168


36Total change

$
5,546

$
6,335


The
increase in total product development expenses during fiscal 2009 and 2008 were primarily due to increases in payroll related costs resulting from an increase in headcount
attributable to our acquisition of Tamale Software in October 2008 and also headcount additions to help continue the enhancement of our existing product suite including new versions of Geneva, APX,
Moxy, Advent Rules Manager, Advent Revenue Center, Partner and Tamale RMS, and to a lesser extent, the conversion in December 2009 of approximately 50 individuals from third party contractor status to
employee status in our new Beijing office. Headcount increased to 279 at December 31, 2009, from 216 and 186 at December 31, 2008 and 2007, respectively. The fluctuations in outside
service cost during 2009 and 2008 were due to the utilization of an outside service provider in 2008 to assist in the

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development
of our Geneva product. The fluctuations in the capitalization of our product development costs is attributable to the timing of product releases during fiscal 2009 and 2008 as we
capitalized $3.0 million of costs during fiscal 2009 associated with new releases of Geneva, APX, Axys, Partner, Revenue Center and Rules Manager as compared with $2.5 million of costs
in fiscal 2008 associated with Geneva, Axys and Partner. We invested 19%, 18% and 19% of our revenues in product development during 2009, 2008 and 2007, respectively.

We
expect product development expenses to increase in dollar amount in 2010 but to remain relatively flat as a percentage of revenues.

General and Administrative

2009

2008

2007(in thousands, except percentages)General and administrative

$
36,107

$
35,887

$
32,293Percent of total net revenues


14
%

15
%

17
%Change over prior year

$
220

$
3,594Percent change over prior year


1
%

11
%


General
and administrative expenses consist primarily of personnel costs for information technology, finance, administration, operations and general management, as well as legal and
accounting expenses.

General
and administrative expenses fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Increased facilities

$
1,059

$
1,025Increased payroll and related


590


2,686Increased depreciation


534


1,134Increased (decreased) loss on disposal of assets


71


(600
)Increased (decreased) legal and professional


(1,115
)

894Increased allocation-out of facility and infrastructure expenses


(487
)

(1,600
)Decreased recruiting


(161
)

(472
)Various other items


(271
)

527Total change

$
220

$
3,594


The
increase in expenses during 2009 is primarily due to an increase in facilities related costs, as we incurred one-time expenses from the opening of a new office in
Beijing, China and additional rent expense from occupying our current facilities in New York City while building out our new facilities. The increase in payroll and other related costs during fiscal
2009 is due to headcount additions, partially offset by a decrease from lower severance costs as we incurred severance costs associated with our former Chief Financial Officer during the third quarter
of 2008. Headcount remained flat between December 31, 2009 and December 31, 2008 at 158, but was higher on average year over year as a result of our Tamale acquisition in October 2008.
Additionally, depreciation was higher in 2009 as a result of a full year's depreciation of assets from the Tamale acquisition, which we acquired on October 2008 and accelerated depreciation associated
with the planned exit of our facility in New York City in 2010. These cost increases were partially offset by a decrease in legal and professional fees as a result of lower accounting fees for
external audit and Sarbanes-Oxley vendors, and lower legal fees. In addition, we incurred an increase in the allocation-out of facility and infrastructure expenses to other

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departments
associated with higher allocable expenses (information technology and facilities charges) in 2009 and lower recruiting fees from a lower volume of external recruiting activities.

The
increase in expenses during 2008 is primarily due to payroll and other related costs being higher as a result of an increase in headcount and annual merit increases. Headcount
increased to 158 at December 31, 2008 from 145 at December 31, 2007. Additionally, depreciation was higher in 2008 as a result of accelerated depreciation associated with the exit of our
data center facility at 303 2nd Street in November 2008 instead of our previous commitment date of May 2012. Facility expenses increased primarily due to higher rent expense from
the leasing of additional space at our San Francisco headquarters facility during 2008. These cost increases were partially offset by lower recruiting fees from a lower volume of external recruiting
activities, as well as a lower loss on disposal of assets as we wrote-off construction-in-progress assets at our 303 2nd Street facility in San
Francisco, California, as a result of our decision to cease improvement on the facility and relocate this data center facility in 2007.

We
expect general and administrative expenses to increase in 2010 due to additional rent expense of approximately $1 million. During 2009, we signed lease agreements for our
future facilities in New York City and Boston. During the build-out phase for these facilities in 2010, we will incur rent expense at both our current facilities and our future facilities
in these cities.

Amortization of Other Intangibles

2009

2008

2007(in thousands, except
percentages)Amortization of other intangibles

$
1,666

$
1,160

$
1,444Percent of total net revenues


1
%

0
%

1
%Change over prior year

$
506

$
(284
)Percent change over prior year


44
%

(20
)%


Other
intangibles represent non-technology related intangible assets. The increase in amortization during 2009 was attributed to additional amortization from intangible
assets acquired through the Tamale acquisition in October 2008. The decrease in amortization during 2008 was attributable to assets from prior acquisitions becoming fully amortized during fiscal 2008,
partially offset by amortization from intangible assets acquired through the Tamale acquisition.

Acquired In-Process Research and Development ("IPR&D")

2009

2008

2007(in thousands, except
percentages)Acquired in-process research and development

$


$
400

$
Percent of total net revenues


0
%

0
%

0
%Change over prior year

$
(400
)
$
400


During
2008, we expensed acquired IPR&D costs of $400,000 in connection with our Tamale acquisition. IPR&D was expensed because the acquired technology had not reached technological
feasibility and had no alternative uses. Technological feasibility is defined as being equivalent to completion of a beta-phase working prototype in which there is no remaining risk
relating to the development.

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Restructuring Charges

2009

2008

2007(in thousands, except
percentages)Restructuring charges

$
130

$
101

$
965Percent of total net revenues


0
%

0
%

1
%Change over prior year

$
29

$
(864
)Percent change over prior year


29
%

(90
)%


Restructuring
initiatives have been implemented in our AIM segment in 2006 to reduce costs and improve operating efficiencies by better aligning our resources to near-term
revenue opportunities. These initiatives have resulted in restructuring charges comprised primarily of costs related to properties abandoned in connection with facilities consolidation, related
write-down of leasehold improvements, severance and associated employee termination costs related to headcount reductions. Our restructuring charges included accruals for estimated losses
on facility costs based on our contractual obligations net of estimated sub-lease income. We reassess this liability periodically based on market conditions.

During
2009, we recorded restructuring charges of $0.1 million related to the present value amortization of facility exit obligations partially offset by adjustments to facility
exit assumptions.

During
2008, we recorded additional restructuring charges which related to a partial lease surrender fee of $0.1 million to exit the data center portion of our facility space
located at 303 2nd Street in San Francisco, California. These restructuring charges were partially offset by adjustments to our other facility exit assumptions.

During
2007, we recorded aggregate restructuring charges of $1.0 million related to the modification of certain sub-lease assumptions for our prior San Francisco
headquarters facility located at 301 Brannan Street, and to the accretion of interest on our existing obligations.

For
additional analysis of the components of the payments and charges made against the restructuring accrual in fiscal 2009, 2008 and 2007, see Note 7, "Restructuring Charges" to
our consolidated financial statements.

At
December 31, 2009, we accrued $1.2 million of excess facility costs of which $0.5 million and $0.7 million are included in accrued liabilities and other
long-term liabilities, respectively. The accrued facility exit costs of $1.2 million are stated at estimated fair value, net of estimated sub-lease income of
$2.2 million. We expect to pay the remaining obligations in connection with vacated facilities over the remaining lease terms, which will expire on various dates through 2012.

Operating Income by Segment

2009

2008

2007(in thousands)Advent Investment Management

$
53,325

$
38,724

$
23,750Other








80Unallocated corporate operating costs and expenses:Stock-based compensation


(18,162
)

(16,108
)

(12,886
)Amortization of developed technology


(5,618
)

(3,061
)

(1,412
)Amortization of other intangibles


(1,666
)

(1,160
)

(1,444
)Acquired in-process research and development





(400
)

Total

$
27,879

$
17,995

$
8,088


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Table of Contents

ASC 280, "Segment Reporting" establishes standards for reporting information about operating segments in a company's financial statements. Advent's organizational
structure is based on a number of factors that the chief operating decision maker ("CODM") uses to evaluate, view and run its business operations which include, but are not limited to, customer base,
homogeneity of products and technology. Advent's operating segments are based on this organizational structure and information reviewed by Advent's CODM to evaluate the operating segment results.

Historically,
the Company determined that its operations were organized into two reportable segments: 1) Advent Investment Management, and 2) MicroEdge. On
October 1, 2009, Advent completed the sale its MicroEdge subsidiary and accordingly, the results of MicroEdge have been classified as a discontinued operation in the consolidated statements of
operations for all periods presented. The Company now operates under a single reportable segment, Advent Investment Management. See Note 3, "Discontinued Operation," for further information
regarding the divestiture of MicroEdge.

The
operating income for our Other segment is associated with the winding down of our soft dollar component in 2006.

Interest Expense

2009

2008

2007(in thousands, except
percentages)Interest expense

$
(484
)
$
(584
)
$
(1,181
)Percent of total net revenues


0
%

0
%

(1
)%Change over prior year

$
100

$
597Percent change over prior year


(17
)%

(51
)%


The
decrease of interest expense of $0.1 million during 2009 reflects the impact of a lower interest rate and a smaller amount of debt being outstanding during the year in 2009
versus 2008. In November 2008, we drew down $25.0 million against our Credit Facility, which bore interest at the Wells Fargo prime rate of 4.0%. During the first quarter of 2009, the Company
repaid $10.0 million of the debt and elected to move from the Wells Fargo prime rate into a monthly LIBOR rate contract on the remaining $15.0 million which bears an all-in
rate of 1.95%. During the second quarter of 2009, the Company repaid the remaining outstanding balance of $15.0 million.

The
decrease of interest expense of $0.6 million during 2008 reflects the impact of debt being outstanding for a smaller portion of the year in 2008 versus 2007. During 2007, we
drew down $25.0 million on our credit facility in June 2007, which was fully repaid in December 2007. In 2008, we drew down $25.0 million on our credit facility in November 2008, all of
which remained outstanding as of December 31, 2008.

Interest Income and Other, net

2009

2008

2007(in thousands, except
percentages)Interest income and other, net

$
(332
)
$
369

$
1,963Percent of total net revenues


0
%

0
%

1
%Change over prior year

$
(701
)
$
(1,594
)Percent change over prior year


(190
)%

(81
)%


Interest
income and other, net consists of interest income, realized gains and losses on investments and foreign currency gains and losses.

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Table of Contents

Interest
income and other, net fluctuated due to the following (in thousands):

Change From
2008 to 2009

Change From
2007 to 2008Decrease in interest income

$
(900
)
$
(861
)Decrease (increase) in foreign currency losses


205


(738
)Various other items


(6
)

5Total change

$
(701
)
$
(1,594
)


Declining
market interest rates and a conservative investment portfolio contributed to the decrease in interest income during 2009, despite our higher overall cash balance. Declining
market interest rates, a smaller average cash balance and more conservative investment portfolio all contributed to the decrease in interest income during 2008.

Foreign
exchange losses decreased during 2009 as the US dollar weakened against foreign currencies in 2009 and increased during 2008 as the US dollar strengthened against foreign
currencies in 2008.

Gain on Sale of Equity Investments, net

2009

2008

2007(in thousands, except
percentages)Gain on sale of equity investments, net

$
2,056

$
3,393

$
3,680Percent of total net revenues


1
%

1
%

2
%Change over prior year

$
(1,337
)
$
(287
)Percent change over prior year


(39
)%

(8
)%


Gain
on sale of equity investments includes realized gains on sale and impairment losses of our investments in privately held companies. The gain in 2009 reflects the second and final
deferred contingent payment of $2.1 million related to the sale of our ownership in LatentZero Limited ("LatentZero") to royalblue group plc. while the gain in 2008 reflects the initial
deferred contingent payment of $3.4 million that we received in April 2008. The gain in 2007 reflects an aggregate gain of $4.2 million from the sale of two private equity investments,
including our investment in LatentZero Limited, partially offset by an impairment loss of $585,000 for a third private equity investment.

Provision For Income Taxes

2009

2008

2007(in thousands, except
percentages)Provision for income taxes

$
8,345

$
3,857

$
2,507Effective tax rate


29
%

18
%

20
%


Our
2008 and 2009 effective tax rates differ from the statutory rate primarily due to the favorable effects of federal and state research credits and the release of valuation allowances
relating to capital loss carryovers that were utilized to offset unanticipated capital gains in those years. The effective tax rate for 2008 is lower than 2009 primarily due to the 2008 inclusion of
the favorable cumulative effect of the recognition of California enterprise zone credits for the years 2003 through 2008. These favorable effects were partially offset by the unfavorable impact of
stock compensation expense relating to incentive stock options and the Company's employee stock purchase plan.

We
continue to maintain a valuation allowance against deferred tax assets relating to investment reserves and assorted state net operating losses because the likelihood of their
realization is not more

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likely
than not. We expect our effective tax rate for fiscal 2010 to be in the range of 35% to 40% of profit before taxes. Our expected effective tax rate for 2010 reflects the impact of the
expiration of the Federal Research Credit which has lapsed and subsequently been restored in some previous periods. However, we expect our cash payments for federal income taxes to remain nominal over
the next few years as we have significant net operating losses and tax credit carryforwards to utilize against current income taxes.

Discontinued Operation

2009

2008

2007(in thousands, except percentages)Net revenues

$
18,859

$
26,948

$
23,733Change over prior year

$
(8,089
)
$
3,215Percent change over prior year


(30
)%

14
%Income from operation of discontinued operation (net of applicable taxes of $1,337, $1,097, and $1,656, respectively)

$
2,486

$
1,579

$
2,588Gain on disposal of discontinued operation (net of applicable taxes of $4,302, $0, and $0, respectively)


13,623





Net income from discontinued operation

$
16,109

$
1,579

$
2,588Change over prior year

$
14,530

$
(1,009
)Percent change over prior year


920
%

(39
)%


Net
revenues of $18.9 million and income from operation of $2.5 million from our discontinued operation, MicroEdge, for fiscal 2009 represents revenues and expenses for the
nine months ending September 30, 2009. In conjunction with the sale of MicroEdge on October 1, 2009, we recorded a gain on sale of discontinued operation of $13.6 million, net of
applicable taxes. See Note 3, "Discontinued Operation", for further discussion on the divestiture of MicroEdge.

Net
revenues from our discontinued operation increased by $3.2 million during fiscal 2008 compared to 2007. This increase primarily reflected an increase in perpetual license
sales in MicroEdge's core product, GIFTS, and an increase in maintenance revenues due to price increases and continued strong customer retention.

The
decrease in net income of $1.0 million during fiscal 2008 is primarily due to the restructuring program we initiated in 2008 in order to reduce our operating costs and focus
our resources on key strategic priorities.

Liquidity and Capital Resources

Cash, Cash Equivalents, Marketable Securities and Cash Flows

The following is a summary of our cash, cash equivalents and marketable securities (in thousands):

December 312009

2008Cash and cash equivalents

$
57,877

$
45,098Short-term and long-term marketable securities

$
59,768

$



Cash
and cash equivalents, short-term and long-term marketable securities primarily consist of money market mutual funds, US government and US Government
Sponsored Entities (GSE's) and high credit quality corporate debt securities. Cash and cash equivalents are comprised of highly liquid investments purchased with an original or remaining maturity of
90 days or less at the date of purchase.

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Our
short-term and long-term marketable securities are classified as available-for-sale, with long-term investments having a maturity date
greater than one year from the end of the period.

The
table below, for the periods indicated, provides selected consolidated cash flow information (in thousands):

Fiscal Years2009

2008

2007Net cash provided by operating activities from continuing operations

$
72,427

$
70,337

$
58,495Net cash provided by (used in) investing activities from continuing operations

$
(64,964
)
$
(48,788
)
$
24,499Net cash used in financing activities from continuing operations

$
(27,017
)
$
(27,274
)
$
(59,281
)Net cash provided by operating activities from discontinued operation

$
2,621

$
6,650

$
3,880Net cash provided by (used in) investing activities from discontinued operation

$
26,358

$
(1,417
)
$
(8,475
)




Our cash flows from operating activities represent the most significant source of funding for our operations. The major uses of our
operating cash include funding payroll (salaries, commissions, bonuses and benefits), general operating expenses (marketing, travel, computer and telecommunications, legal and professional expenses,
and office rent) and cost of revenues. Our cash provided by operating activities generally follows the trend in our net revenues, operating results and bookings.

Our
cash provided by operating activities from continuing operations of $72.4 million during fiscal 2009 was primarily the result of our net income of $20.8 million and
non-cash charges including stock-based compensation of $18.2 million and depreciation and amortization of $16.7 million, partially offset by a gain from our equity investment
activity of $2.1 million. Cash flows resulting from changes in assets and liabilities included increases in deferred revenue and accrued liabilities. The increase in deferred revenue reflected
customer renewals and additional bookings. Under the term model, we generally bill and collect for a term agreement in equal installments in advance of each annual period. These amounts are deferred
at billing and recognized over the annual term period. The increase in accrued liabilities primarily reflects an increase in accrued bonuses. Other changes in assets and liabilities include a decrease
in accounts receivable, which primarily reflects an overall improvement in collections during 2009 of invoices billed in our previous fourth quarter. Days' sales outstanding were 62, 60, 55, and
61 days during the first, second third and fourth quarters of 2009, respectively, compared to 67, 60, 70 and 64 days during the first, second, third and fourth quarters of 2008.

Cash
provided by operating activities from continuing operations of $70.3 million during fiscal 2008 was primarily the result of our net income of $17.3 million and
non-cash charges including stock-based compensation of $16.1 million, depreciation and amortization of $12.7 million, partially offset by a gain from our equity investment
activity of $3.4 million. Cash flows resulting from changes in assets and liabilities included increases in deferred revenue and accounts payable. Other changes in assets and liabilities
include a decrease in accrued liabilities, which reflected a decrease in accrued commissions and restructuring expenses.

Cash
provided by operating activities from continuing operations of $58.5 million during fiscal 2007 was primarily the result of our net income of $10.0 million, increase
in deferred revenue of $33.4 million, and non-cash expenses including stock-based compensation of $12.9 million and depreciation and amortization of $10.0 million,
partially offset by a net gain from equity investment activity of $3.7 million. The increase in deferred revenue primarily reflected our continued transition to the term license model.

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We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors including fluctuations in our net revenues
and operating results, new term license bookings that increase deferred revenue, collection of accounts receivable, and timing of payments.

We
expect operating cash flow to be between $77 million to $82 million for fiscal 2010.



Net cash used in investing activities from continuing operations of $65.0 million in 2009 reflects purchases of
short-term and long-term marketable securities of $60.0 million, capital expenditures of $4.6 million primarily related to the purchase of computer equipment,
external software and capitalization of costs associated with internal use software, capitalized software development costs of $2.9 million and cash used for acquisition of $0.2 million
related to an earn out payment to East Circle Solutions. These expenditures were partially offset by the receipt of $2.1 million for the final deferred contingent consideration from the sale of
our ownership interest in LatentZero and a net decrease in our restricted cash balance of $0.6 million. During the third quarter of 2009, we reduced our restricted cash balance as a result of
the reduction of the letter of credit associated with the lease of our San Francisco headquarters and in the fourth
quarter of 2009 we increased our restricted cash balance to secure a letter of credit associated with the lease of our future New York City office.

Net
cash used in investing activities from continuing operations of $48.8 million in 2008 reflects cash used for the acquisition of Tamale totaling $27.8 million, capital
expenditures of $21.9 million primarily related to the build-out of additional space at our San Francisco headquarters, and capitalized software development costs of
$2.3 million, partially offset by the receipt of $3.4 million for the initial deferred contingent consideration of our sale of our ownership to LatentZero.

Net
cash provided by investing activities from continuing operations of $24.5 million in 2007 is primarily from proceeds of $24.9 million from the sale of short term
investments and from the proceeds of $11.6 million from the sale of two private equity investments, including our stake in LatentZero Limited. This was partially offset by capital expenditures
of $7.6 million, cash used for the acquisition of East Circle Solutions totaling $1.0 million, capitalized software development costs of $3.0 million and a change in restricted
cash of $0.4 million to increase the bank letter of credit associated with lease amendments for our headquarters facility in San Francisco, California. In the event we default under the terms
of this agreement, the letter of credit may be drawn upon by Toda.

During
2009, we signed lease agreements for our future facilities in New York City and Boston which we will build-out and move into during 2010. Therefore, we expect our
capital expenditures to increase in fiscal 2010 and to be in the range of $18 million to $22 million.



Net cash used in financing activities from continuing operations of $27.0 million in 2009 reflected the repayment of
$25.0 million on our credit facility, repurchase of 690,000 shares of our common stock for $14.6 million, and payments totaling $2.2 million to satisfy withholding taxes on equity
awards that are net share settled. This was partially offset by cash received from the exercise of employee stock options of $8.6 million and proceeds of $5.6 million from the issuance
of common stock under the Company's employee stock purchase plan.

Net
cash used in financing activities from continuing operations of $27.3 million in 2008 reflected the repurchase of 2.3 million shares of our common stock for
$61.6 million and withholding taxes paid of $2.1 million associated with the exercise of stock-settled stock appreciation rights and vesting of restricted stock units, partially offset
by the draw-down of $25.0 million against our credit facility, proceeds of $6.1 million received from the exercise of employee stock options and $5.0 million from the
issuance of common stock under the employee stock purchase plan.

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Table of Contents

Net
cash used in financing activities from continuing operations of $59.3 million in 2007 reflected the repurchase of 2.6 million shares of our common stock for
$91.2 million and the repayment of $25.0 million on our credit facility. These cash outlays were partially offset by the draw-down of $25.0 million against our credit
facility and proceeds from the issuance of our common stock of $31.4 million under our employee stock option and purchase plans.



Our cash provided by operating activities from discontinued operation of $2.6 million in 2009 was primarily the result of our
income from discontinued operation for the nine months ended September 30, 2009 of $2.5 million and non-cash charges including stock-based compensation of $0.3 million
and depreciation and amortization of $0.9 million. Cash flows resulting from changes in assets and liabilities included decreases in accounts receivable, accounts payable, accrued liabilities
and deferred revenue. The decrease in accounts receivable primarily reflects an improvement in collections during the first nine months of 2009 of invoices billed in our previous fourth quarter. Days'
sales outstanding were 51, 55 and 51 days during the first, second and third quarters of 2009, respectively, compared to 52, 52, 52 and 59 days during the first, second and third and
fourth quarters of 2008. The decrease in accounts payable and accrued liabilities reflects cash payments of fiscal 2008 liabilities including year-end payables and bonuses, commissions and
payroll taxes. The decrease in deferred revenue reflects the recognition of revenue and lower level of bookings during the nine months ended September 30, 2009.

Our
cash provided by operating activities from discontinued operation of $6.7 million in 2008 was primarily the result of our net income of $1.6 million and
non-cash charges including stock-based compensation of $0.7 million, depreciation and amortization of $1.8 million and a non-cash impairment charge of
$0.8 million. Cash flows resulting from changes in assets and liabilities include increases in accounts receivable and deferred revenue. The increase in accounts receivable reflected strong
revenue growth in the fourth quarter of 2008 and an increase in days' sales outstanding. The increase in deferred revenue reflected an increased level of bookings in 2008.

Our
cash provided by operating activities from discontinued operation of $3.9 million in 2007 was primarily the result of our net income of $2.6 million and
non-cash charges including stock-based compensation of $0.5 million and depreciation and amortization of $1.2 million. Cash flows resulting from changes in assets and
liabilities include increases in accrued liabilities and deferred revenue. The increase in accrued liabilities reflected an increase in accrued bonus and legal fees. The increase in deferred revenue
reflected an increased level of bookings in 2007.



Net cash provided by investing activities from discontinued operation of $26.4 million in 2009 reflects cash received from the
sale of MicroEdge of $27.1 million, partially offset by capital expenditures of $0.6 million primarily related to the purchase of computer equipment and capitalization of costs
associated with internal use software, and capitalized software development costs of $0.1 million.

Net
cash used in investing activities from discontinued operation of $1.4 million in 2008 reflects capital expenditures of $1.4 million primarily related to the purchase of
computer equipment and software, and capitalized software development costs of $0.1 million.

Net
cash used in investing activities from discontinued operation of $8.5 million in 2007 reflects cash used for the acquisition of Vivid Orange totaling $7.2 million and
capital expenditures of $1.3 million primarily related to the purchase of computer equipment.

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Table of Contents

Working Capital

At December 31, 2009, we had negative working capital of $(6.7) million, up from negative working capital of $(43.4) million at
December 31, 2008. Our negative working capital in 2009 is due to our common stock repurchases of $14.6 million, our repayment on our credit facility of $25.0 million, our
purchase of long-term marketable securities of $28.5 million and our deferred revenue balance, which reflects our term pricing model. Our negative working capital in 2008 is due to
our common stock repurchases of $61.6 million, cash paid to acquire Tamale of $27.8 million, and our deferred revenue balance. Excluding deferred revenues and deferred taxes, we had
working capital of $118.4 million at December 31, 2009, compared to $79.3 million at December 31, 2008.

Credit Facility and Expiration

In February 2007, Advent and certain of our domestic subsidiaries entered into a senior secured credit facility agreement (the "Credit
Facility") with Wells Fargo Foothill, Inc. (the "Lender"). Under the Credit Facility, the Lender will provide the Company with a revolving line of credit up to an aggregate amount of
$75 million, subject to a borrowing base formula, to provide backup liquidity for general corporate purposes, including stock repurchases, or investment opportunities for a period of three
years. During the third quarter of 2009, we reduced our line of credit by $1.0 million in connection with providing a deposit for our lease of the Grace Building. As of December 31,
2009, there was no outstanding balance under the Credit Facility and the Company was in compliance with all associated covenants.

In
the past, we had utilized the Credit Facility to facilitate the timing of stock repurchases. In February 2010, the Credit Facility expired and we elected not to renew the Credit
Facility due to the limited expected use of the Credit Facility. We believe our existing cash, cash equivalents, short-term and long-term marketable securities, together with
cash expected to be generated from operations, will be sufficient to fund our operating activities, anticipated capital expenditures and authorized stock repurchases. Although the expiration of the
Credit Facility may restrict our liquidity, we believe the costs associated with the Credit Facility would exceed the anticipated benefit of the additional liquidity. For example, our interest expense
and other fees related to the Credit Facility was approximately $2 million during the three-year term of the Credit Facility.

Common Stock Repurchases

Advent's Board has approved common stock repurchase programs authorizing management to repurchase shares of the Company's common stock.
The timing and actual number of shares subject to repurchase are at the discretion of Advent's management and are contingent on a number of factors and limitations, including the price of Advent's
stock, corporate and regulatory requirements, alternative investment opportunities and other market conditions. The stock repurchase programs specify a maximum number of shares subject to repurchase,
do not have an expiration date and may be limited or terminated at any time without prior notice. Repurchased shares are returned to the status of authorized and unissued shares of common stock. The
purchases are funded from combination of available working capital and debt.

The
purchase price for the shares of our common stock repurchased was reflected as a reduction to stockholders' equity. In accordance with ASC 505-30, "Treasury Stock", we
are required to allocate the purchase price of the repurchased shares as (i) an increase to accumulated deficit and (ii) a reduction of common stock and additional paid-in
capital. Issuance of common stock and the tax benefit related to employee stock option plans are recorded as an increase to
common stock and additional paid-in capital. As a result of future repurchases, we may continue to report an accumulated deficit included in stockholders' equity in our consolidated
balance sheets.

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Table of Contents

The
following is a summary of the repurchase programs authorized by the Board since fiscal 2007 (in thousands):

Date of Authorization

Number of Shares AuthorizedFebruary 2007


2,250May 2008


1,000October 2008


3,000Total


6,250


The
following is a summary of the Company's repurchase activity since fiscal 2007 (in thousands, except per share data):

Fiscal Year

Total
Number
of Shares
Repurchased

Cost

Average
Price
Paid Per
Share2007


2,580

$
91,157

$
35.332008


2,331

$
61,572

$
26.422009


690

$
14,578

$
21.13Total


5,601

$
167,307

$
29.87


At
December 31, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

Off-Balance Sheet Arrangements and Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2009 (in thousands):

Fiscal Years2010

2011

2012

2013

2014

Thereafter

TotalOperating lease obligations, net of sub-lease income

$
7,314

$
7,564

$
6,957

$
6,368

$
6,716

$
34,757

$
69,676


On
October 1, 2009, we completed the sale of our MicroEdge subsidiary. See Note 3, "Discontinued Operation", to the consolidated financial statements for a description of
the principal terms of the divestiture. With the exception of the MicroEdge facilities in New York City, the leases related to MicroEdge have been transferred to the Purchaser.

In
connection with the sale of MicroEdge, the Company entered into a sub-lease agreement with Microedge LLC, whereby Microedge LLC will sub-lease
approximately 24,000 square feet of the 29,000 square feet of office space located at 619 West 54th Street in New York, New York from the Company. MicroEdge LLC will
sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The sub-lease agreement became
effective upon the close of sale of MicroEdge on October 1, 2009. The operating lease commitment related to this discontinued operation facility, which
is approximately $10.4 million, less estimated sub-lease income for two years of $1.7 million, is not reflected in the above table.

As
of December 31, 2009, there was no outstanding balance under our credit facility.

At
December 31, 2009 and December 31, 2008, we had a gross liability of $7.5 million and $6.9 million, respectively, for uncertain tax positions associated
with the adoption of ASC 740-10-25,

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"Income
TaxesOverallRecognition". If recognized, the impact on our statement of operations would be to decrease our income tax expense and increase our net income by
$6.2 million. The impact on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. Since almost all of this liability
relates to reserves against deferred tax assets that we do not expect to utilize in the short term, we cannot estimate the timing of potential future cash settlements and have not included any
estimates in the table of contractual cash obligations above. Our cash payments for federal income taxes will continue to be nominal through 2011 as we have significant net operating losses and tax
credit carryforwards to utilize. On September 27, 2008, the state of California enacted tax law changes that suspended the utilization of California net operating losses and limited the
utilization of California tax credits to 50% of our tax liability for the 2008 and 2009 tax periods. As a result, we expect to pay cash income taxes in California related to fiscal 2009 but do not
expect the amount to exceed $1.2 million for the year.

At
December 31, 2009 and 2008, 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 materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Other Liquidity and Capital Resources Considerations

As noted above, we expect our cash payments for federal income taxes to remain nominal over the next few years as we have significant
net operating losses and tax credit carryforwards to utilize against current income taxes. However, our cash payments for federal income taxes could increase as early as fiscal 2012.

Our
liquidity and capital resources in any period could also be affected by the exercise of outstanding employee stock options and SARs, and issuance of common stock under our employee
stock purchase plan. The resulting increase in the number of outstanding shares from this and from the issuance of common stock from our RSUs could also affect our per share results of operations.
However, we cannot predict the timing or amount of proceeds from the exercise of these securities, or whether they will be exercised at all.

We
expect that for the next year, our operating expenses will continue to constitute a significant use of cash flow. In addition, we may use cash to fund other acquisitions, repurchase
additional common stock, or invest in other businesses, when opportunities arise. Based upon the predominance of our revenues from recurring sources, term license bookings performance and current
expectations, we believe that our cash and cash equivalents, and cash generated from operations will be sufficient to satisfy our working capital needs, capital expenditures, investment requirements,
stock repurchases and financing activities for the next year. However, if we identify opportunities that exceed our current expectation, we may choose to seek additional capital resources through debt
or equity financing. However, such financing may not be available at all particularly in the current economic environment, or if available may not be obtainable on terms favorable to us and could be
dilutive.

Recent Accounting Pronouncements

Refer to Note 1, "Summary of Significant Accounting Policies", to our consolidated financial statements for a discussion of
recent accounting standards and pronouncements.

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Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates. Historically, much
of our revenues and capital spending was transacted in US dollars. However, since the acquisitions of Advent Denmark, Advent Norway, Advent Sweden, Advent Netherlands, and Advent Europe's remaining
distributors in the United Kingdom and Switzerland, whose service and certain license revenues and capital spending, are transacted in local country currencies, we have greater exposure to foreign
currency fluctuations. Additionally as of
December 31, 2009, $43.3 million of goodwill from the acquisition of these entities are denominated in foreign currency. Therefore a hypothetical change of 10% could increase or decrease
our assets and equity by $3.0 million and could increase or decrease our consolidated results of operations or cash flows by approximately $0.3 million.

We
maintain an investment portfolio of various holdings, types, and maturities. Our interest rate risk relates primarily to our investment portfolio, which consisted of
$117.6 million in cash and cash equivalents, short-term and long-term marketable securities as of December 31, 2009. Our short-term and
long-term marketable securities are generally classified as available-for-sale and, consequently, are recorded on our consolidated balance sheet at fair value with
unrealized gains or losses reported as a separate component of accumulated other comprehensive income. At any time, a rise in interest rates could have a material adverse impact on the fair value of
our investment portfolio. Conversely, declines in interest rates could have a material impact on interest earnings of our investment portfolio. We do not currently hedge these interest rate exposures.

The
following table presents hypothetical changes in fair value of our short-term and long-term marketable securities of $59.8 million at
December 31, 2009. For December 31, 2009 the market changes reflect an immediate hypothetical parallel shifts in the yield curve of plus or minus 25 basis points ("BPS"), plus 50 BPS,
and plus 100 BPS. For balances at December 31, 2009 the hypothetical fair values are as follows (in millions, except percentages):

Decrease in Interest Rates

Increase in Interest Rates-100 Basis Points

-50 Basis Points

-25 Basis Points

25 Basis Points

50 Basis Points

100 Basis Points$60.4

$60.2

$60.0

$59.8

$59.6

$59.40.87
%
0.44
%
0.22
%
-0.22
%
-0.44
%
-0.87
%


We
have also invested in several privately-held companies. These non-marketable investments are classified as other assets on our consolidated balance sheets. Our
investments in privately-held companies could be affected by an adverse movement in the financial markets for publicly-traded equity securities, although the impact cannot be directly
quantified. These investments are inherently risky as the market for the technologies or products these privately-held companies have under development are typically in the early stages
and may never materialize. It is our policy to review investments in privately held companies on a regular basis to evaluate the carrying amount and economic viability of these companies. This policy
includes, but is not limited to, reviewing each of the companies' cash position, financing needs, earnings/revenue outlook, operational performance, management/ownership changes and competition. The
evaluation process is based on information that we request from these privately held companies. This information is not subject to the same disclosure regulations as US publicly traded companies, and
as such, the basis for these evaluations is subject to timing and the accuracy of the data received from these companies.

Our
investments in privately held companies are assessed for impairment when a review of the investee's operations indicates that a decline in value of the investment is other than
temporary. Such indicators include, but are not limited to, limited capital resources, limited prospects of receiving additional financing, and prospects for liquidity of the related securities.
Impaired investments in privately held companies are written down to estimated fair value. We estimate fair value using a

72

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variety
of valuation methodologies. Such methodologies include comparing the private company with publicly traded companies in similar lines of business, applying revenue and price/earnings multiples
to estimated future operating results for the private company and estimating discounted cash flows for that company. We could lose our entire investment in these companies. During the second quarter
of
2008, we received the initial deferred contingent payment as a result of the sale of our investment in April 2007 in LatentZero Limited. During the second quarter of 2009, we received the second and
final deferred contingent payment related to the sale of our ownership in LatentZero. At December 31, 2009, our net investments in privately-held companies totaled
$0.5 million. See Note 5, "Balance Sheet Detail", to our consolidated financial statements for further discussion.

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Item 8.    Financial Statements and Supplementary Data

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in
the United States of America. Internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

The
Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2009. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal ControlIntegrated
Framework. Based on management's assessment using the COSO criteria, management has concluded that the Company maintained effective internal control over financial reporting as
of December 31, 2009.

The
effectiveness of the Company's internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in its report which is included herein.

/s/ STEPHANIE G. DIMARCO Stephanie G. DiMarco Chief Executive Officer
(Principal Executive Officer)

/s/ JAMES S. COX James S. Cox Senior Vice President and Chief Financial Officer
(Principal Financial Officer)


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of Advent Software, Inc.:

In
our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Advent
Software, Inc. and its subsidiaries at December 31, 2009 and December 31, 2008, and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial
Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/
PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
San Jose, California
March 12, 2010

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ADVENT SOFTWARE, INC.        CONSOLIDATED BALANCE SHEETS        (In thousands, except per share amounts)

December 312009

2008ASSETSCurrent assets:Cash and cash equivalents

$
57,877

$
45,098Short-term marketable securities


31,273


Accounts receivable, net of allowance for doubtful accounts of $267 and $347, respectively


44,246


46,564Deferred taxes, current


15,081


12,458Prepaid expenses and other


22,350


19,732Current assets of discontinued operation


494


9,443Total current assets


171,321


133,295Property and equipment, net


33,945


39,150Goodwill


144,827


143,044Other intangibles, net


22,965


27,217Long-term marketable securities


28,495


Deferred taxes, long-term


40,502


54,166Other assets


10,142


11,419Noncurrent assets of discontinued operation


2,095


11,303Total assets

$
454,292

$
419,594LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
4,708

$
5,312Accrued liabilities


31,066


25,781Deferred revenues


140,186


135,217Income taxes payable


1,616


978Current liabilities of discontinued operation


719


13,953Total current liabilities


178,295


181,241Long-term debt





25,000Deferred revenues, long-term


5,879


6,083Other long-term liabilities


12,969


10,072Noncurrent liabilities of discontinued operation


5,115


1,375Total liabilities


202,258


223,771Commitments and contingencies (See Note 10)Stockholders' equity:Preferred stock; $0.01 par value: 2,000 shares authorized; none issued





Common stock; $0.01 par value: 120,000 shares authorized; 25,867 and 25,728 shares issued and outstanding


259


257Additional paid-in capital


386,623


365,351Accumulated deficit


(145,584
)

(176,484
)Accumulated other comprehensive income


10,736


6,699Total stockholders' equity


252,034


195,823Total liabilities and stockholders' equity

$
454,292

$
419,594


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

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ADVENT SOFTWARE, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share data)

Years Ended December 312009

2008

2007Net revenues:Term license, maintenance and other recurring

$
222,759

$
191,444

$
151,647Perpetual license fees


11,275


16,808


20,234Professional services and other


25,474


29,632


19,689Total net revenues


259,508


237,884


191,570Cost of revenues:Term license, maintenance and other recurring


46,823


43,798


35,298Perpetual license fees


327


488


365Professional services and other


29,777


34,158


24,985Amortization of developed technology


5,618


3,061


1,412Total cost of revenues


82,545


81,505


62,060Gross margin


176,963


156,379


129,510Operating expenses:Sales and marketing


62,738


57,939


50,158Product development


48,443


42,897


36,562General and administrative


36,107


35,887


32,293Amortization of other intangibles


1,666


1,160


1,444Acquired in-process research and development





400


Restructuring charges


130


101


965Total operating expenses


149,084


138,384


121,422Income from continuing operations


27,879


17,995


8,088Interest expense


(484
)

(584
)

(1,181
)Interest income and other, net


(332
)

369


1,963Gain on sale of equity investments, net


2,056


3,393


3,680Income from continuing operations before income taxes


29,119


21,173


12,550Provision for income taxes


8,345


3,857


2,507Net income from continuing operations

$
20,774

$
17,316

$
10,043Discontinued operation:Net income from discontinued operation (net of applicable taxes of $5,639, $1,097, and $1,656, respectively)


16,109


1,579


2,588Net income

$
36,883

$
18,895

$
12,631Basic net income per share:Continuing operations

$
0.82

$
0.65

$
0.38Discontinued operation


0.63


0.06


0.10Total operations

$
1.45

$
0.71

$
0.48Diluted net income per share:Continuing operations

$
0.79

$
0.62

$
0.36Discontinued operation


0.61


0.06


0.09Total operations

$
1.39

$
0.68

$
0.45Weighted average shares used to compute basic and diluted net income per shareBasic


25,450


26,640


26,495Diluted


26,454


27,893


28,067


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

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ADVENT SOFTWARE, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND  COMPREHENSIVE INCOME        (In thousands)

Common Stock





Accumulated
Other
Comprehensive
IncomeComprehensive
Income

Additional
Paid-In
Capital

Accumulated
Deficit

Total
Stockholders'
EquityShares

AmountBalances, December 31, 2006





27,231

$
272

$
309,993

$
(111,387
)
$
10,749

$
209,627Stock-based award activity

$



1,719


18


27,338








27,356Common stock repurchased and retired





(2,580
)

(26
)

(28,202
)

(62,929
)




(91,157
)Common stock issued under employee stock purchase plan





127


1


3,912








3,913Stock-based compensation











13,765








13,765Tax benefit from exercise of stock options











158








158Net income


12,631











12,631





12,631Unrealized gain on marketable securities


8














8


8Foreign currency translation adjustments


3,545














3,545


3,545Comprehensive income for fiscal 2007

$
16,184Balances, December 31, 2007





26,497

$
265

$
326,964

$
(161,685
)
$
14,302

$
179,846Common stock issued for Tamale acquisition

$



906


9


39,895








39,904Stock-based award activity





457


4


4,013








4,017Common stock repurchased and retired





(2,331
)

(23
)

(27,855
)

(33,694
)




(61,572
)Common stock issued under employee stock purchase plan





199


2


5,016








5,018Stock-based compensation











17,141








17,141Tax benefit from exercise of stock options











177








177Net income


18,895











18,895





18,895Foreign currency translation adjustments


(7,603
)













(7,603
)

(7,603
)Comprehensive income for fiscal 2008

$
11,292Balances, December 31, 2008





25,728

$
257

$
365,351

$
(176,484
)
$
6,699

$
195,823Stock-based award activity

$



553


6


6,435








6,441Common stock repurchased and retired





(690
)

(7
)

(8,588
)

(5,983
)




(14,578
)Common stock issued under employee stock purchase plan





276


3


5,618








5,621Stock-based compensation











18,648








18,648Tax shortfall from exercise of stock options











(853
)







(853
)Other











12








12Net income


36,883











36,883





36,883Unrealized loss on marketable securities


(62
)













(62
)

(62
)Foreign currency translation adjustments


4,099














4,099


4,099Comprehensive income for fiscal 2009

$
40,920Balances, December 31, 2009





25,867

$
259

$
386,623

$
(145,584
)
$
10,736

$
252,034


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

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

Years Ended December 312009

2008

2007Cash flows from operating activities:Net income

$
36,883

$
18,895

$
12,631Adjustment to net income for discontinued operation


(16,109
)

(1,579
)

(2,588
)Net income from continuing operations

$
20,774

$
17,316

$
10,043Adjustments to reconcile net income to net cash provided by operating activities from continuing operations:Stock-based compensation


18,162


16,108


12,886Depreciation and amortization


16,692


12,657


10,021Acquired in-process research and development





400


3Provision for doubtful accounts


215


611


100Provision for sales returns


315


219


122Loss on disposition of fixed assets


94


6


651Gain on investments


(2,056
)

(3,393
)

(4,265
)Non-cash impairment loss








585Deferred income taxes


8,129


3,060


5,081Other


199


(126
)

103Changes in operating assets and liabilities, net of effect of acquisitions:Accounts receivable


2,094


(2,658
)

(5,664
)Prepaid and other assets


(1,906
)

(588
)

(9,751
)Accounts payable


(262
)

1,147


231Accrued liabilities


7,829


(3,489
)

5,427Deferred revenues


4,450


29,409


33,436Income taxes payable


(2,301
)

(342
)

(514
)Net cash provided by operating activities from continuing operations


72,427


70,337


58,495Cash flows from investing activities:Cash used in acquisitions, net of cash acquired


(200
)

(27,775
)

(1,022
)Purchases of property and equipment


(4,575
)

(21,851
)

(7,617
)Capitalized software development costs


(2,893
)

(2,307
)

(3,032
)Proceeds from sales of investments


2,056


3,393


11,621Purchases of marketable securities


(60,000
)




Sales and maturities of marketable securities








24,921Proceeds from disposition of fixed assets


37





Change in restricted cash


611


(248
)

(372
)Net cash provided by (used in) investing activities from continuing operations


(64,964
)

(48,788
)

24,499Cash flows from financing activities:Proceeds from exercises of stock options


8,637


6,095


27,475Withholding taxes related to equity award net share settlement


(2,196
)

(2,078
)

(119
)Common stock repurchased and retired


(14,578
)

(61,572
)

(91,157
)Proceeds from common stock issued under the employee stock purchase plan


5,621


5,018


3,913Proceeds from long-term borrowing





25,000


25,000Repayment of long-term borrowing


(25,000
)




(25,000
)Excess tax benefits from stock-based compensation


499


263


607Net cash used in financing activities from continuing operations


(27,017
)

(27,274
)

(59,281
)Net cash transferred from (transferred to) discontinued operation


31,959


2,707


(4,974
)Effect of exchange rate changes on cash and cash equivalents


374


(693
)

282Net change in cash and cash equivalents from continuing operations


12,779


(3,711
)

19,021Cash and cash equivalents of continuing operations at beginning of period


45,098


48,809


29,788Cash and cash equivalents of continuing operations at end of period

$
57,877

$
45,098

$
48,809Supplemental disclosure of cash flow information:Cash paid for income taxes, net of refunds

$
2,309

$
569

$
1,356Cash paid for interest

$
316

$
299

$
920Cash flow from discontinued operation:Net cash provided by operating activities

$
2,621

$
6,650

$
3,880Net cash provided by (used in) investing activities


26,358


(1,417
)

(8,474
)Net cash transferred from (transferred to) continuing operations


(31,959
)

(2,707
)

4,974Effect of exchange rates on cash and cash equivalents


(7
)

(52
)

Net change in cash and cash equivalents from discontinued operation


(2,987
)

2,474


380Cash and cash equivalents of discontinued operation at beginning of period


3,253


779


399Cash and cash equivalents of discontinued operation at end of period

$
266

$
3,253

$
779


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

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ADVENT SOFTWARE, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Summary of Significant Accounting Policies

Business description:Advent Software, Inc. ("Advent" or "the Company") provides stand-alone and client/server software products,
data and
data interfaces and related maintenance and services that automate, integrate and support certain mission-critical functions of the front, middle and back offices of investment management
organizations. Advent's clients vary significantly in size and assets under management and include investment advisors, brokerage firms, hedge funds, foundations and endowments, universities and
banks.

Basis of presentation:The consolidated financial statements include the accounts of Advent and its wholly-owned subsidiaries after
elimination of
all intercompany transactions and amounts. We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of
America and pursuant to the rules and regulations of the SEC.

Divestiture of the MicroEdge Segment and Discontinued Operation Reclassification:On October 1, 2009, Advent completed the sale of
MicroEdge, Inc. ("MicroEdge") a wholly-owned subsidiary of the Company pursuant to an Agreement and Plan of Merger (the
"Agreement") entered into on July 27, 2009, by and among the Company, Microedge Holdings, LLC, a Delaware limited liability company and
an affiliate of Vista Equity Partners III, LLC, Microedge Merger Sub, LLC, a New York limited liability company and a wholly-owned subsidiary of Microedge Holdings, LLC,
MicroEdge, and, with respect to Article VII, Article VIII and Article IX thereof only, U.S. Bank National Association as escrow agent. Pursuant to the Agreement, MicroEdge merged
with and into Merger Sub.

In
accordance with FASB Accounting Standards Codification ("ASC") ASC 360, "Property, Plant, and Equipment" and ASC 205-20, "Discontinued Operations", the assets, liabilities
and results of MicroEdge have been reclassified as a discontinued operation in the consolidated financial statements for all periods presented. The results of operations and the related charges for
the discontinued operation are classified as "Net income from discontinued operation, net of applicable taxes" in the accompanying consolidated statements of operations. For comparative purposes, the
Company restated all prior periods presented to reflect the reclassifications on a consistent basis. See Note 3, "Discontinued Operation," for further discussion.

Unless
noted otherwise, discussions in the notes to the consolidated financial statements pertain only to continuing operations.

Year End:Advent's fiscal year ends on December 31st.

Foreign currency translation:The functional currencies of the Company's foreign subsidiaries are their local currencies. All assets and
liabilities
denominated in foreign functional currencies are translated into US dollars at the exchange rate on the balance sheet date. Revenues, costs and expenses in foreign functional currencies are translated
at the average rate of exchange during the period.

Foreign currency measurement:Asset and liabilities denominated in currencies other than the functional currencies are re-measured into
the functional currency with gains or losses recorded in "interest income and other, net" on the consolidated statement of operations.

Use of estimates:The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets

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ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 1Summary of Significant Accounting Policies (Continued)

and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information available as of the date
of the financial statements. Actual results could differ from those estimates. Advent believes the following critical accounting policies affect its more significant judgments and estimates used in
the preparation of its consolidated financial statements: Business Combinations; Dispositions; Goodwill; Revenue Recognition and Deferred Revenues; Income Taxes; Restructuring Charges and Related
Accruals; Impairment of Long-Lived Assets; Legal Contingencies; Sales Returns and Accounts Receivable Allowances; and Stock-Based Compensation.

Cash and cash equivalents:Cash equivalents are comprised of highly liquid investments purchased with an original or remaining maturity
of
90 days or less at the date of purchase.

Marketable securities:All of Advent's marketable securities are classified as available-for-sale and are carried at fair
value. The unrealized gains and losses, net of any related tax effect, are reported in accumulated comprehensive income in stockholders' equity in the accompanying consolidated financial statements.
Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in "interest income and
other, net".

Investments:Investments are recorded at cost and reviewed for impairment. Investments are included in "other assets" on the
consolidated balance
sheets and consist of non-marketable investments in privately held companies, most of which can be considered in the start-up or development stages. It is Advent's policy to
review investments in privately held companies on a regular basis to evaluate the carrying amount and economic viability of these companies. This policy includes, but is not limited to, reviewing each
of the companies cash position, financing needs, earnings/revenue outlook, operational performance, management/ownership changes and competition. The evaluation process is based on information that
Advent requests from these privately held companies. This information is not subject to the same disclosure regulations as US publicly traded companies, and as such, the basis for these evaluations is
subject to timing and the accuracy of the data received from these companies.

The
Company's investments in privately held companies are assessed for impairment when a review of the investee's operations indicate that there exists a decline in value of the
investment and the decline is other than temporary. Such indicators include, but are not limited to, limited capital resources, limited prospects of receiving additional financing, and prospects for
liquidity of the related securities. Impaired investments in privately held companies are written down to estimated fair value. The Company estimates fair value using a variety of valuation
methodologies. Such methodologies include comparing the private company with publicly traded companies in similar lines of business, applying revenue multiples to estimated future operating results
for the private company and estimating discounted cash flows for that company.

Product development:Product development expenses consist primarily of salary, benefits and stock-based compensation for the Company's
development
and technical support staff, contractors' fees and other costs associated with the enhancements of existing products and services and development of new products and services. Costs incurred for
software development prior to technological feasibility are expensed as product development costs in the period incurred. Once the point of technological feasibility is reached, which is generally the
completion of a working prototype that has no critical bugs and is a release candidate, development costs are capitalized until the product is ready for general

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Note 1Summary of Significant Accounting Policies (Continued)

release
and are classified "other intangibles, net" on the consolidated balance sheets. The Company amortizes capitalized software development costs using the greater of the ratio of the products'
current gross revenues to the total of current expected gross revenues or on a straight-line basis over the estimated economic life of the related product, which is typically three years.

Capitalization of internal use software:Certain costs related to computer software developed or obtained for internal use are
capitalized in
accordance with ASC 350-40, "Internal Use Software". The Company amortizes internal use software costs over their estimated useful lives, which typically range from two to five years.

Property and equipment:Property and equipment are stated at cost, less accumulated depreciation and amortization. Advent calculates
depreciation and
amortization using the straight-line method over the assets' estimated useful lives. Amortization of leasehold improvements is computed using the straight-line method over the
shorter of the estimated useful life of the assets or the remaining lease term. The cost and related accumulated depreciation applicable to property and equipment sold or no longer in service are
eliminated from the accounts and any gains or losses are generally included in operating expenses. Useful lives by principal classifications are as follows:

Computer equipment and software

3 to 5 yearsLeasehold improvements

End of lease termFurniture and fixtures

3 to 5 yearsTelephone system

3 to 5 years


Repairs
and maintenance expenditures, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred.

Goodwill:Advent reviews goodwill for impairment annually during the fourth quarter of the fiscal year (as of November 1) and more
frequently
if an event or circumstance indicates that an impairment loss has occurred. Advent is required to test goodwill for impairment at the reporting unit level. Historically, Advent has determined that the
Company had three reporting units for the purposes of goodwill impairment testing. With the divestiture of MicroEdge, Advent has determined that the Company has two reporting units, Domestic and
International, which comprise the Advent Investment Management segment, for the goodwill impairment testing performed during the fourth quarter of 2009. The test for goodwill impairment is a
two-step process:

The
first step compares the fair value of each reporting unit with its respective carrying amount, including goodwill. If the fair value of the 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, used to measure the amount of impairment loss, compares the implied fair value of each reporting unit's goodwill with the respective carrying amount of that goodwill. If
the carrying amount of the 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
process for evaluating the potential impairment of goodwill is subjective and requires judgment at many points during the test including future revenue forecasts, discount rates and
various reporting unit allocations. During the fourth quarter of 2009, Advent completed the first step of its annual impairment test and determined that none of the reporting units were at risk for
failing step

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Note 1Summary of Significant Accounting Policies (Continued)

one
of the impairment testing. Therefore, the second step of the impairment test was not necessary to perform.

Accounting for long-lived assets:Advent also reviews its other long-lived assets including property and equipment and other
intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable.

Recoverability
is measured by a comparison of the assets' carrying amount to their expected future undiscounted net cash flows. If such assets are considered to be impaired, the
impairment to be recognized is measured based on the amount by which the carrying amount of the asset exceeds its fair value.

Other
intangible assets mainly represent completed technology, distributor licenses, customer lists, trademark/tradenames and non-compete agreements acquired in business
combinations. Acquired identifiable intangibles are amortized on a straight line basis over their estimated useful lives as follows:

Purchased technology

4 to 5 yearsCustomer relationships

4 to 8 yearsOther intangibles

2 to 7 years


Revenue recognition:Advent recognizes revenue from term license, maintenance, other recurring; perpetual license fees; and
professional services and
other. Advent offers a wide variety of products and services to a large number of financially sophisticated customers. While many of the Company's lower-priced license transactions, maintenance
contracts, subscription-based transactions and professional services projects conform to a standard structure, many of Advent's larger transactions are complex and may require significant review and
judgment in Advent's application of generally accepted accounting principles.

Software license fees.Advent recognizes revenue from the licensing of software when persuasive evidence of an arrangement exists, the
product has
been delivered, the fee is fixed or determinable and collection of the resulting receivable is probable. Advent generally uses a signed license agreement as evidence of an arrangement. Revenue is
recognized once shipment to the distributor's customer has taken place and when all other revenue recognition criteria have been met. Delivery occurs when a product is delivered to a common carrier
F.O.B shipping point, or upon confirmation that product delivered F.O.B shipping destination has been received, or upon notification that software is available for electronic download through the
Company's fulfillment vendor. Some of Advent's arrangements include acceptance provisions, and if such acceptance provisions are present, delivery is deemed to occur upon acceptance. Advent assesses
whether the fee is fixed or determinable based on the payment terms associated with the transaction. The Company assesses whether the collectability of the resulting receivable is probable based on a
number of factors, including the credit worthiness of the customer determined through review of credit reports, Advent's transaction history with the customer, other available information and
pertinent country risk if the customer is located outside the United States. Advent's standard payment terms are due at 180 days or less but payment terms may vary based on the country in which
the agreement is executed. Software licenses are sold with maintenance and, frequently, professional services.

Advent
typically licenses its products on a per server, per user basis with the price per customer varying based on the selection of the products licensed, the assets under
administration, the number of

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Note 1Summary of Significant Accounting Policies (Continued)

site
installations and the number of authorized users. Advent has continued its transition from selling mostly perpetual licenses to selling a mix of term and perpetual licenses, and the Company
expects term license revenue to increase as a proportion of total recurring revenues (which Advent defines as term license, maintenance and other recurring revenues) in the future. Term license
revenue comprised
approximately 44%, 35% and 25% of total term license, maintenance and other recurring revenues in 2009, 2008, and 2007, respectively. Revenue recognition for software licensed under term and perpetual
license models differs depending on which type of contract a customer signs:





Certain
of Advent's perpetual and term license contracts include asset-based fee structures that provide additional revenues based on the assets that the client manages using the
Company's software ("Assets Under Administration" or "AUA"). Contracts containing an AUA fee structure have a defined measurement period which requires the client to self-report actual AUA
in arrears of the specified period. AUA fees above the stated minimum fee for the same period are considered incremental fees.

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Because
incremental fees are not determinable until the conclusion of the measurement period, they are both earned and recognized upon completion of the measurement period, on a quarterly or annual
basis. Incremental fees from perpetual AUA contracts are included in "Perpetual license fees" on the consolidated statement of operations. Incremental fees from term AUA contracts are included in
"Term license, maintenance and other recurring" revenue on the consolidated statement of operations. The Company recognizes AUA contract minimum fees over the period of service and continues to
recognize incremental fees in arrears once clients contractually report the AUA to the company, because the incremental fees are not determinable until reported.

Maintenance and other recurring revenues.Advent offers annual maintenance programs on perpetual licenses that provide for technical
support and
updates to the Company's software products. Maintenance fees are bundled with perpetual license fees in the initial licensing year and charged separately for renewals of annual maintenance in
subsequent years. Fair value for maintenance is based upon either renewal rates stated in the contracts or separate sales of renewals to customers. Generally, Advent recognizes maintenance revenue
ratably over the contract term.

Advent
offers other recurring revenue services that are either subscription or transaction based which primarily include the provision of software interfaces to download securities
information from third party data providers, partial or full business process outsourcing, account aggregation, reconciliation, reference data management, and hosting of hardware and/or software. The
Company recognizes revenue from recurring revenue transactions either ratably over the subscription period or as the transactions occur based on the terms of the arrangement.

Professional services and other revenues.Advent offers a variety of professional services that include project management,
implementation, data
conversion, integration, custom report writing and training. Fair value for professional services is based upon separate sales of these services by the Company to customers. Advent's professional
services are generally billed based on hourly rates together with reimbursement for travel and accommodation expenses. Advent generally recognizes revenue as these professional services are performed,
except when sold with multi-year term license contracts which are described in the "term licenses" section above. Certain professional services arrangements involve acceptance criteria. In
these cases, revenue and related expenses are recognized upon acceptance. Advent's professional services and other revenue also include revenue from the Company's annual user conferences.

Directly related expenses.When Advent defers service revenues, it also defers the direct costs incurred in the delivery of those
services to the
extent those costs are recoverable through the future revenues on non-cancellable contracts as prepaid contract expense. Advent recognizes those deferred costs as costs of professional
services revenues proportionally and over the same period that the deferred revenue is recognized as service revenue. When Advent defers license revenue, the Company defers the direct incremental
costs incurred as a result of selling the contract (i.e. sales commissions earned by the sales force as a part of their overall compensation) because those costs would not have been incurred
but for the acquisition of that contract. Advent recognizes those costs as sales and marketing expense proportionally and over the same period as the license revenues.

Allowance for doubtful accounts and sales returns:Advent analyzes specific accounts receivable, historical bad debts, customer
concentrations,
customer credit-worthiness, current economic trends and changes in its customer payment terms when evaluating the adequacy of the allowance for doubtful

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Note 1Summary of Significant Accounting Policies (Continued)

accounts.
Advent has recorded a provision for bad debt of $0.2 million, $0.6 million and $0.1 million in fiscal 2009, 2008 and 2007, respectively.

Advent
also analyzes customer demand and acceptance of product and historical returns when evaluating the adequacy of the allowance for sales returns, which are not generally provided to
customers. Allowances for sales returns are accounted for as deductions to net revenues and increases to reserves within deferred revenues. Advent's standard practice is to enforce its contract terms
and not allow its customers to return software. The Company has, however, allowed customers to return software on a limited case-by-case basis. The Company only provides a
contractual limited right of return to the end-user customer when it sells shrink-wrap license agreements. The shrink-wrap license agreement provides for a right of
return within seven days of delivery of the software.

Advent
has the ability to estimate returns based on a long history of experience with relatively homogenous transactions and the fact that the return period is short. The Company has
recorded sales returns provisions as offsets to revenue in the period the sales return becomes probable, in accordance with ASC 605-15-25, "Revenue
RecognitionProductsRecognition". The estimates for returns are adjusted periodically based upon historical rates of returns and other related factors. Advent has a
methodology for calculating the value of reserves that takes the previous 12 months of experience into account. Advent has recorded a sales returns provision to decrease revenue for these
situations based on the Company's historical experience of $0.3 million, $0.2 million and $0.1 million in fiscal 2009, 2008 and 2007, respectively.

Advertising costs:The Company expenses advertising costs as incurred and classifies these costs under sales and marketing expense.
Total advertising
expenses were $0.5 million, $0.8 million, and $0.9 million for fiscal 2009, 2008 and 2007, respectively.

Stock-based compensation:Stock-based compensation cost is measured at the grant date based on the fair value of the award and is
recognized as
expense on a straight-line basis over the requisite service period, which is the vesting period.

Advent
uses the Black-Scholes option pricing model to determine the fair value of stock options, stock appreciation rights ("SAR") and employee stock purchase plan shares. The fair value
of the Company's restricted stock units is calculated based on the fair market value of Advent's stock on the date of grant. The determination of the fair value of stock-based payment awards on the
date of grant using an option-pricing model is affected by Advent's stock price as well as assumptions regarding a number of complex and subjective variables. These variables include Advent's expected
stock price volatility over the term of the awards, actual and projected employee exercise behaviors, risk-free interest rate and expected dividends.

As
the stock-based compensation expense recognized on the consolidated statements of operations for fiscal 2009, 2008 and 2007 is based on awards ultimately expected to vest, such amount
has been reduced for estimated forfeitures. ASC 718, "CompensationStock Compensation" requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on the Company's historical experience over the last ten years.

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Note 1Summary of Significant Accounting Policies (Continued)

Advent
makes quarterly assessments of the adequacy of the Company's pool of windfall tax benefits to determine if there are any deficiencies which require recognition in the Company's
consolidated statements of operations.

Restructuring charges and related accruals:Advent has developed and implemented formalized plans for restructuring the business to
better align its
resources to market conditions and recorded significant
charges resulting from the restructuring plans. In connection with the restructuring plans Advent has recorded estimated expenses for severance and benefits, lease cancellations, asset
write-offs and other restructuring costs. Given the significance of, and the timing of the execution of such activities, this process is complex and involves periodic reassessments of
estimates made at the time the original decisions were made, including evaluating real estate market conditions for expected vacancy periods and sub-lease rental income. Advent continually
evaluates the adequacy of the remaining liabilities under the restructuring initiatives. Although the Company believes that these estimates accurately reflect the costs of the restructuring plans,
actual results may differ, thereby requiring Advent to record additional provisions or reverse a portion of such provisions.

Income taxes:Advent accounts for worldwide income taxes under an asset and liability approach that requires the expected future tax
consequences of
temporary differences between book and tax bases of assets and liabilities be recognized as deferred tax assets and liabilities. A valuation allowance is recorded to reduce the net deferred tax assets
to an amount that is more likely than not to be realized.

The
Company has elected to use the "with and without" approach as described in ASC 740-20, "Intraperiod Tax Allocation", in determining the order in which tax attributes are
utilized. As a result, the Company will only recognize a tax benefit from stock-based awards in additional paid-in capital if an incremental tax benefit is realized after all other tax
attributes currently available to the Company have been utilized. In addition, the Company has elected to account for the impact of stock-based awards on other tax attributes, such as the research tax
credit, through the consolidated statement of operations.

Net income per share:Basic net income per share is computed by dividing net income by the weighted average number of common shares
outstanding for
that period. Diluted net income per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential shares consist of incremental
common shares issuable upon exercise of stock options and stock appreciation rights, vesting of restricted stock units and conversion of preferred stock (none outstanding) for all periods, except in
situations where inclusion is anti-dilutive.

Comprehensive income:Comprehensive income consists of net income, net unrealized foreign currency translation adjustments and net
unrealized gains
or losses on available-for-sale marketable securities and is presented in the consolidated statements of stockholders' equity and comprehensive income.

Segment information:Historically, the Company determined that its operations were organized into two reportable segments: Advent
Investment
Management, and MicroEdge. On October 1, 2009, Advent completed the sale its MicroEdge subsidiary and accordingly, the results of MicroEdge have been classified as a discontinued operation in
the consolidated statements of operations for all periods presented. The Company now operates under a single reportable segment, Advent Investment

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Note 1Summary of Significant Accounting Policies (Continued)

Management.
See Note 3, "Discontinued Operation," for further information regarding the divestiture of MicroEdge.

International
sales, which are based on the location to which the product is shipped or services are delivered, represented 13%, 14%, and 14% of the Company's net revenues for fiscal
2009, 2008 and 2007, respectively. No single customer accounted for more than 10% of net revenues for fiscal 2009, 2008 or 2007.

Certain risks and concentrations:Product revenues are concentrated in the investment management software industry, which is highly
competitive and
rapidly changing. Significant technological changes in the industry or customer requirements, or the emergence of competitive products with new capabilities or technologies could adversely affect
operating results. Additionally, Advent derives a significant portion of its revenues from its Axys, Geneva and Advent Portfolio Exchange applications and ancillary products and services, and
therefore their market acceptance is essential to the Company's success.

Financial
instruments that potentially subject the Company to concentrations of credit risks comprise, principally, cash, cash equivalents, and trade accounts receivable. Advent invests
excess cash through banks, mutual funds, and brokerage houses primarily in highly liquid securities and has investment policies and procedures that attempt to minimize credit risk. Advent's marketable
securities consist of diversified investment grade securities traded in the United States of America. The Company believes no significant concentration of credit risk exists with respect to these
securities.

With
respect to accounts receivable, Advent performs ongoing credit evaluations of its customers and generally does not require collateral. The Company maintains reserves for potential
credit losses on customer accounts when deemed necessary. At December 31, 2009 and 2008, no single customer accounted for more than 10% of accounts receivable.

Common Stock Repurchases:Advent accounts for common stock repurchases by allocating the cash paid
in excess of par value to additional paid-in capital and accumulated deficit. The Company calculates the average additional paid-in capital per outstanding share at the
beginning of each monthly period in which stock was repurchased and records the difference between the repurchase price per share and the sum of the par value and average paid-in capital
per share as an increase to accumulated deficit.

Reclassifications:Certain prior year amounts have been reclassified to conform to the current presentation. These reclassifications do
not affect
total net revenues, net income or stockholders' equity.



In April 2009, the Financial Accounting Standards Board ("FASB") issued new accounting and disclosure rules that provided additional
guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased and requires that companies provide interim and annual disclosures of
the inputs and valuation technique(s) used to measure fair value. These new standards are effective for interim and annual reporting periods ending after June 15, 2009 and are to be applied
prospectively. The Company's adoption of these new standards did not have a material impact to its consolidated financial statements.

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Note 1Summary of Significant Accounting Policies (Continued)

In April 2009, the FASB amended the requirements for the recognition and measurement of other-than-temporary impairments for debt and equity securities in the
financial statements. The guidance is effective for interim and annual reporting periods ending after June 15, 2009. The Company's adoption of the guidance did not have a material impact to the
Company's consolidated financial statements.

In
April 2009, the FASB issued disclosure requirements that require publicly traded companies to disclose the fair value of its financial instruments in interim periods or whenever it
issues summarized financial information, as well as in its annual financial statements. The adoption of the accounting standard related to the reporting requirements for the fair value of its
financial instruments, which was effective for interim and annual periods ending after June 15, 2009, did not have material impact Company's consolidated financial statements.

In
May 2009, the FASB issued new accounting standards which establish general guidance related to the accounting and disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that
is, whether that date represents the date the financial statements were issued or were available to be issued. Since the standard only required additional disclosures, the adoption of the new guidance
did not have an impact to the Company's consolidated financial position, results of operations or cash flows. See Note 16, "Subsequent Events" to our consolidated financial statements for our
discussion of the subsequent events that have occurred since the balance sheet date of December 31, 2009.

In
July 2009, the FASB issued the Accounting Standard Codification, which establishes the exclusive authoritative reference for US GAAP for use in financial statements, except for
SEC rules and interpretive releases, which are also authoritative GAAP for SEC registrants. The Codification will supersede all existing non-SEC accounting and reporting standards. The
Accounting Standard Codification is effective for interim and annual periods ending after September 15, 2009. Advent has included the references to the Codification, as appropriate, in these
consolidated financial statements.

In
September 2009, the FASB issued new accounting guidance related to the revenue recognition of multiple element arrangements. The new guidance states that if vendor specific objective
evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and
allocate arrangement consideration using the relative selling price method. The new guidance is to be applied on a prospective basis for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010, with earlier adoption permitted. The Company does not expect adoption of this guidance to have a material impact on its consolidated financial
statements.

In
September 2009, the FASB issued new accounting guidance related to certain revenue arrangements that include software elements. Historically, companies that sold tangible products
with "more than incidental" software were required to apply software revenue recognition guidance. The previous guidance often delayed revenue recognition for the delivery of the tangible product.
Under the new guidance, tangible products that have software components that are "essential to the functionality" of the tangible product will be excluded from the software revenue recognition
guidance. The new guidance will include factors to help companies determine what is "essential to the functionality." Software-enabled products will now be subject to other revenue guidance and will
likely follow the guidance for multiple deliverable arrangements issued by the FASB in September 2009. The new

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Note 1Summary of Significant Accounting Policies (Continued)

guidance
is to be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with earlier adoption
permitted. The Company does not expect adoption of this guidance to have a material impact on its consolidated financial statements.

Note 2Cash Equivalents and Marketable Securities

At December 31, 2009, cash and cash equivalents, short-term and long-term marketable securities primarily consisted of money market mutual funds, US
government and US Government Sponsored Entities (GSE's) and high credit quality corporate debt securities. The Company's short-term and long-term marketable securities are
classified as available-for-sale, with long-term investments having a maturity date greater than one year from the end of the period.

At
December 31, 2009, marketable securities were summarized as follows (in thousands):

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Aggregate
Fair ValueCorporate debt securities

$
20,302

$
1

$
(40
)
$
20,263US government debt securities


39,571





(66
)

39,505Total

$
59,873

$
1

$
(106
)
$
59,768


The
following table summarizes marketable securities with unrealized losses by contractual maturity dates at December 31, 2009 (in thousands):

Less than
12 months

Greater than
12 months

TotalFair
Value

Gross
Unrealized
Losses

Fair
Value

Net
Unrealized
Losses

Fair
Value

Net
Unrealized
LossesCommercial debt securities


6,617

$
(13
)
$
13,685

$
(26
)
$
20,302

$
(39
)US government debt securities


24,694


(25
)

14,877


(41
)

39,571


(66
)Total

$
31,311

$
(38
)
$
28,562

$
(67
)
$
59,873

$
(105
)


Advent
regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is
temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition, credit quality and near-term prospects of the investee, and
Advent's ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

The
gross unrealized losses related to investments are primarily due to a decrease in the fair value of debt securities as a result of an increase in interest rates during fiscal 2009.
For fixed income securities that have unrealized losses as of December 31, 2009, the Company has determined that (i) it does not have the intent to sell any of these investments and
(ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. In addition, the Company has evaluated these
fixed income securities and has determined that no credit losses exist. As of December 31, 2009, all securities in an unrealized loss position have been in an

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Note 2Cash Equivalents and Marketable Securities (Continued)

unrealized
loss position for less than one year. The Company's management has determined that the unrealized losses on its fixed income securities as of December 31, 2009 were temporary in
nature.

At
December 31, 2008, cash and cash equivalents were primarily comprised of US government and treasury obligation money market mutual funds.

The
following table summarizes gross realized gains and losses related to the Company's investments (in thousands):

Fiscal Years2009

2008

2007Gross realized gains

$


$


$
22Gross realized losses








(4
)Net realized gains

$


$


$
18


Note 3Discontinued Operation

During 2009, the Company determined that the continued growth in the not-for-profit community would require a significant investment of resources and decided to
focus on the core business. In connection with this decision, the Company
explored divesting the MicroEdge subsidiary and on October 1, 2009, it completed the sale of MicroEdge to an affiliate of Vista Equity Partners III, LLC ("Purchaser"). The Company sold
net assets in MicroEdge totaling $3.0 million. The total consideration received by the Company in connection with the divestiture was approximately $30 million in cash, of which
$27 million in cash was paid on the closing date. The remaining $3 million of the Purchase Price has been placed in escrow for eighteen (18) months following the close to be held
as security for losses incurred by the Purchaser in the event of certain breaches of the representations and warranties contained in the Agreement or certain other events. Any gain on sale associated
with the $3.0 million held in escrow will be recorded when realized. Direct costs associated with the sale were approximately $0.7 million and have been reflected as a reduction to the
gain.

The
Company has recorded an associated gain of $13.6 million resulting from the sale of MicroEdge in "net income from discontinued operation, net of applicable taxes" in its 2009
results. As part of the disposition, certain assets and obligations of MicroEdge were excluded from the sale and are reflected on the discontinued operation's balance sheet as of December 31,
2009. Assets excluded from the sale include cash and deferred tax assets. Liabilities excluded from the sale include sales tax and other tax-related obligations, future payments related to
a two year service and maintenance agreement, certain legal costs and employee related compensation payments incurred as of the period ended September 30, 2009, and continuing lease obligations
included as part of the restructuring noted below. In addition, the Company recognized $1.2 million in cumulative translation adjustments as a reduction to the gain related to MicroEdge's
foreign subsidiary.

In
connection with the sale of MicroEdge, the Company vacated its MicroEdge facilities in New York and entered into a sub-lease agreement with the Purchaser whereby the
Purchaser will sub-lease the premises for two years with the option to extend the sub-lease term through the end of the lease term in 2018. The Company incurred restructuring
charges of $4.3 million related to the sub-lease loss which are included in the calculation of the gain.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3Discontinued Operation (Continued)

The
following table sets forth the assets and liabilities of the MicroEdge discontinued operation included in the consolidated balance sheets of the Company (in thousands):

December 31
2009

December 31
2008Assets:Cash and cash equivalents

$
266

$
3,253Accounts receivable, net





5,106Deferred taxes, current





663Prepaid expenses and other


228


421Total current assets of discontinued operation

$
494

$
9,443Property and equipment, net

$


$
2,090Goodwill





6,565Other intangibles, net





1,893Deferred taxes, long-term


2,095


620Other assets





135Total noncurrent assets of discontinued operation

$
2,095

$
11,303Liabilities:Accounts payable

$


$
313Accrued liabilities


519


2,143Deferred revenues





11,497Income taxes payable


200


Total current liabilities of discontinued operation

$
719

$
13,953Deferred income taxes

$


$
280Deferred revenues, long-term





367Accrued restructuring, long-term portion


5,115


Other long-term liabilities





728Total noncurrent liabilities of discontinued operation

$
5,115

$
1,375


92

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 3Discontinued Operation (Continued)

The following table sets forth an analysis of the components of the restructuring charges related to our discontinued operation and the payments and non-cash charges made
against the accrual during fiscal 2008 and 2009 (in thousands):

Facility Exit
Costs

Severance and
Benefits

TotalBalance of restructuring accrual at December 31, 2007

$


$


$
Restructuring charges





262


262Cash payments





(120
)

(120
)Balance of restructuring accrual at December 31, 2008

$


$
142

$
142Restructuring charges


4,322


179


4,501Reversal of deferred rent related to facilities exited


778





778Cash payments


(26
)

(321
)

(347
)Adjustment of prior restructuring costs


41





41Balance of restructuring accrual at December 31, 2009

$
5,115

$


$
5,115


The
remaining facility exit costs of $5.1 million will be paid over the remaining lease term through 2018.

Net
revenues and income from the Company's discontinued operation are as follows for the following periods (in thousands):

2009

2008

2007Net revenues

$
18,859

$
26,948

$
23,733Income from operation of discontinued operation (net of applicable taxes of $1,337, $1,097, and $1,656, respectively)

$
2,486

$
1,579

$
2,588Gain on disposal of discontinued operation (net of applicable taxes of $4,302, $0, and $0, respectively)


13,623





Net income from discontinued operation

$
16,109

$
1,579

$
2,588


Note 4Acquisition of Tamale Software, Inc. ("Tamale")

On October 1, 2008, Advent completed the acquisition of Tamale. Tamale provides software solutions designed specifically to help investment professionals manage their investment
ideas more effectively and easily access all of the firm's research. The total purchase price of approximately $68 million includes cash of $28 million and 906,000 shares of common stock
valued at approximately $40 million. The value of the equity consideration was calculated using the average closing stock price on the two days before and after, as well as the date of, the
announcement date of the acquisition. The per share value was calculated to be $44.06.

93

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4Acquisition of Tamale Software, Inc. ("Tamale") (Continued)

Purchase Price Allocation

The acquisition was accounted for in accordance with the purchase method of accounting. The total purchase price was allocated to net
tangible and intangible assets based on their estimated fair values as of October 1, 2008. The excess purchase price over the value of the net tangible and identifiable assets was recorded as
goodwill. The allocation of the purchase price and the estimated useful lives associated with certain assets is as follows:

Estimated
Useful Life
(Years)

Purchase Price
Allocation
(in thousands)Identifiable intangible assets:Existing technology


5

$
12,100Core technology


5


2,500Customer relationships


8


7,100Trademark/tradenames


5


900Non-competition agreements


2


300In-process research and development





400Goodwill





49,650Deferred tax asset





4,738Deferred tax liability





(9,402
)Net tangible assets





138Total purchase price




$
68,424


The
purchase price of $68.4 million was paid during the fourth quarter of 2008. Of the issuable shares, 226,098 shares of the Company's common stock were held in escrow and were
released in the fourth quarter of 2009.

Tangible assets and current liabilities

Tamale's tangible assets and liabilities as of October 1, 2008 were reviewed and adjusted to their fair value as necessary.
Current assets include accounts receivable, inventory and other current assets. Non-current assets are primarily comprised of facility deposits and fixed assets. Current liabilities were
fair valued and include accrued liabilities, direct costs associated with the acquisition and deferred revenues. In connection with the acquisition of Tamale, Advent assumed Tamale's contractual
obligations related to its deferred revenue. Tamale's deferred revenue was derived primarily from subscription services. As a result, Advent recorded an adjustment to reduce the carrying value of
deferred revenue to represent the Company's estimate of the fair value of the contractual obligations assumed.

Identifiable intangible assets

Existing technology relates to Tamale's Research Management Solution (RMS) product modules that have reached technological feasibility.
Core technology represents a combination of Tamale's processes, technology and trade secrets that are the building blocks for current and planned new versions of existing products. Advent is
amortizing the fair value of these assets to cost of revenues in the consolidated statement of operations on a straight-line basis over their estimated lives of 5 years.

94

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4Acquisition of Tamale Software, Inc. ("Tamale") (Continued)

Customer
relationships represent existing contracts and the underlying customer relationships. Advent is amortizing the fair value of these assets to operating expenses in the
consolidated statement of operations on a straight-line basis over an estimated life of 8 years.

Tradename/trademarks
related to the Tamale product names and Tamale pepper logo that will continue to be used. Advent is amortizing the fair values of these assets to operating expenses
in the consolidated statement of operations on a straight-line basis over an estimated life of 5 years.

Non-competition
agreements represent agreements which allow Advent to operate without competition from specified Tamale employees. Advent is amortizing the fair value of this
asset to operating expenses in the consolidated statement of operations on a straight-line basis over an estimated life of 2 years.

Goodwill

Approximately $49.7 million of the purchase price has been allocated to goodwill. Goodwill represents the excess of the purchase
price over the fair value of the underlying net tangible and intangible assets. The goodwill was attributed to the premium paid for the opportunity to better leverage Tamale's technology utilizing
Advent's broader market reach in order to achieve greater long-term growth opportunities.

In-process research and development ("IPR&D")

During fiscal 2008, Advent wrote-off acquired IPR&D related to a new module, Tamale Central, of $400,000 in connection with
its acquisition of Tamale. The IPR&D was written off because the acquired technologies had not reached technological feasibility and had no alternative uses. Technological feasibility is defined as
being equivalent to completion of a working prototype in which there is no remaining risk relating to the development.

The
value assigned to IPR&D was determined by estimating costs to develop the purchased IPR&D into commercially viable products, estimating the resulting net cash flow from the projects
when completed, and discounting the net cash flows to their present value. The revenue estimates used in the cash flow forecasts were based on estimates of relevant market sizes and growth factors,
expected trends in technology, and the nature and expected timing of new product introductions by Tamale and its competitors.

The
rate utilized to discount the net cash flows to their present value was based on Tamale's weighted average cost of capital. The weighted average cost of capital was adjusted to
reflect the difficulties and uncertainties in completing each project and thereby achieving technological feasibility, the percentage of completion of each project, anticipated market acceptance and
penetration, market growth rates, and risks related to the impact of potential changes in future target markets. Based on these factors, a discount rate of 21% was deemed appropriate for valuing the
IPR&D.

The
estimates used in valuing IPR&D were based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or
inaccurate, and unanticipated events and circumstances may occur.

95

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 4Acquisition of Tamale Software, Inc. ("Tamale") (Continued)

Pro forma results

The following supplemental unaudited pro forma information presents selected financial information as though the purchase of Tamale had
been completed at the beginning of each period presented after giving effect to purchase accounting adjustments. The pro forma financial information is presented for informational purposes only and is
not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2007 or of results that may occur in the future. The pro forma
consolidated net income and net income per share amounts include certain pro forma adjustments, primarily the amortization of identifiable intangible assets and the elimination of interest income on
cash used in the acquisition (in thousands, except per share data):

Fiscal Year
2008

Fiscal Year
2007Net revenues

$
245,594

$
198,300Net income

$
13,841

$
4,550Net income per share:Basic

$
0.51

$
0.17Diluted

$
0.48

$
0.16


Note 5Balance Sheet Detail

Prepaid expenses and other

The following is a summary of prepaid expenses and other assets (in thousands):

December 312009

2008Prepaid commission

$
5,483

$
5,953Prepaid royalty


1,138


1,728Prepaid contract expense


5,815


7,473Tenant improvement allowance


3,863


Other


6,051


4,578Total prepaid expenses and other

$
22,350

$
19,732


96

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5Balance Sheet Detail (Continued)

Property and equipment, net

The following is a summary of property and equipment (in thousands):

December 312009

2008Computer equipment and software

$
41,584

$
34,954Leasehold improvements


27,629


26,795Furniture and fixtures


6,377


6,141Telephone system


595


591Construction in process


1,635


5,495Property and equipment, gross

$
77,820

$
73,976Accumulated depreciation


(43,875
)

(34,826
)Property and equipment, net

$
33,945

$
39,150


Depreciation
expense was $9.4 million, $8.4 million and $7.2 million for fiscal 2009, 2008 and 2007, respectively. Costs of $2.0 million, $3.6 million
and $1.2 million related to the development of internal use software were capitalized in 2009, 2008 and 2007, respectively, and are included in "computer equipment and software" in the table
above.

Goodwill

The changes in the carrying value of goodwill for fiscal 2009 and 2008 were as follows (in thousands):

GoodwillBalance at December 31, 2007

$
98,681Additions


49,703Translation adjustments


(5,340
)Balance at December 31, 2008

$
143,044Translation adjustments


1,836Purchase price adjustments


(53
)Balance at December 31, 2009

$
144,827


Foreign
currency translation adjustments totaling $1.8 million reflect the general weakening of the US dollar versus the Pound Sterling (GBP) during fiscal 2009.

Additions
to goodwill of $49.7 million in 2008 related to the acquisition of Tamale in October 2008. Foreign currency translation adjustments totaling $5.3 million reflect
the general strengthening of the US dollar versus the GBP during fiscal 2008.

97

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5Balance Sheet Detail (Continued)

Other intangibles, net

The following is a summary of intangible assets (in thousands, except weighted average amortization period):

Weighted
Average
Amortization
Period
(Years)

Other
Intangibles,
Gross

Accumulated
Amortization

Other
Intangibles,
NetPurchased technologies


4.9

$
26,556

$
(15,416
)
$
11,140Product development costs


3.0


11,468


(6,428
)

5,040Developed technology sub-total





38,024


(21,844
)

16,180Customer relationships


6.0


27,038


(21,040
)

5,998Other intangibles


3.9


1,507


(720
)

787Other intangibles sub-total





28,545


(21,760
)

6,785Balance at December 31, 2009




$
66,569

$
(43,604
)
$
22,965




Weighted
Average
Amortization
Period
(Years)

Other
Intangibles,
Gross

Accumulated
Amortization

Other
Intangibles,
NetPurchased technologies


4.9

$
26,556

$
(12,289
)
$
14,267Product development costs


3.0


8,436


(3,937
)

4,499Developed technology sub-total





34,992


(16,226
)

18,766Customer relationships


6.0


27,038


(19,705
)

7,333Other intangibles


3.9


1,507


(389
)

1,118Other intangibles sub-total





28,545


(20,094
)

8,451Balance at December 31, 2008




$
63,537

$
(36,320
)
$
27,217


98

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5Balance Sheet Detail (Continued)

The
changes in the carrying value of intangible assets for fiscal 2009 and 2008 were as follows (in thousands):

Gross

Accumulated
Amortization

NetBalance at December 31, 2007

$
37,886

$
(31,826
)
$
6,060Additions


25,207





25,207Stock-based compensation additions


163





163Amortization





(4,221
)

(4,221
)Translation adjustments


281


(273
)

8Balance at December 31, 2008

$
63,537

$
(36,320
)
$
27,217Additions


2,894





2,894Stock-based compensation additions


138





138Amortization





(7,284
)

(7,284
)Balance at December 31, 2009

$
66,569

$
(43,604
)
$
22,965


Additions
to intangible assets of $2.9 million in 2009 were all related to capitalized product development costs.

Additions
to intangible assets of $25.2 million in 2008 include capitalized product development costs of approximately $2.3 million and intangible asset additions of
$22.9 million from the acquisition of Tamale.

We
did not incur net translation adjustments during 2009 as intangibles held by our foreign subsidiaries were fully amortized. Net translation adjustments of $8,000 in fiscal 2008
represents translation adjustments as the US dollar weakened relative to the Euro and Swiss Franc during 2008.

The
following is a summary of amortization of the Company's developed technology and other intangible assets for the periods presented (in thousands):

Fiscal Years2009

2008

2007Developed technology:Amortizationpurchased technologies

$
3,128

$
938

$
286Amortizationproduct development costs


2,490


2,123


1,126Amortization of developed technology


5,618


3,061


1,412Other intangibles:Amortizationcustomer relationships


1,336


1,078


1,417Amortizationother intangibles


330


82


27Amortization of other intangibles


1,666


1,160


1,444Total amortization

$
7,284

$
4,221

$
2,856


99

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5Balance Sheet Detail (Continued)

Based
on the carrying amount of intangible assets as of December 31, 2009, the estimated future amortization is as follows (in thousands):

Fiscal Years2010

2011

2012

2013

2014

Thereafter

TotalEstimated future amortization of:Developed technology

$
5,863

$
4,481

$
3,646

$
2,190

$


$


$
16,180Other intangibles


1,187


1,068


1,067


1,022


888


1,553


6,785Total

$
7,050

$
5,549

$
4,713

$
3,212

$
888

$
1,553

$
22,965


Other assets

The following is a summary of other assets (in thousands):

December 312009

2008Long-term investments

$
500

$
500Long-term prepaid commissions


3,204


4,915Deposits


2,821


3,145Prepaid contract expense, long-term


3,617


2,843Other





16Total other assets

$
10,142

$
11,419


Long-term
investments include an equity investment in a privately held company. This equity investment is carried at the lower of cost or fair value at December 31,
2009 and 2008. Deposits include restricted cash balance of $1.4 million and $2.0 million at December 31, 2009 and 2008, respectively. During the third quarter of 2009, restricted
cash was reduced by $1.5 million per the terms of the Company's lease agreement for its San Francisco headquarters facility. During the fourth quarter of 2009, the Company increased its
restricted cash balance by $0.9 million in accordance with the terms of the Company's lease agreement for its new facility in New York City. See Note 10, "Commitment and Contingencies",
for further discussion.

Accrued liabilities

The following is a summary of accrued liabilities (in thousands):

December 312009

2008Salaries and benefits payable

$
21,273

$
17,191Accrued restructuring, current portion


518


682Other


9,275


7,908Total accrued liabilities

$
31,066

$
25,781


100

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 5Balance Sheet Detail (Continued)

Other long-term liabilities

The following is a summary of other long-term liabilities (in thousands):

December 312009

2008Deferred rent

$
10,595

$
7,746Accrued restructuring, long-term portion


716


1,194Other


1,658


1,132Total other long-term liabilities

$
12,969

$
10,072


Note 6Accumulated Other Comprehensive Income

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

December 312009

2008

2007Net income from continuing operations

$
20,774

$
17,316

$
10,043Unrealized gain (loss) on marketable securities, net of taxes


(62
)




8Foreign currency translation adjustments


2,417


(6,148
)

3,773Comprehensive income from continuing operations


23,129


11,168


13,824Comprehensive income from discontinued operation


17,791


125


2,360Total comprehensive income, net of taxes

$
40,920

$
11,292

$
16,184


The
following table sets forth the taxes related for each component of other comprehensive income (in thousands):

December 312009

2008

2007Marketable securities

$
(43
)
$


$
2Foreign currency translation adjustments


693


(1,120
)

754Total from continuing operations


650


(1,120
)

756Total from discontinued operation


436


(596
)

(89
)Total

$
1,086

$
(1,716
)
$
667


101

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 6Accumulated Other Comprehensive Income (Continued)

The components of accumulated other comprehensive income, net of related taxes, were as follows (in thousands):

December 312009

2008Accumulated net unrealized loss on marketable securities

$
(62
)
$
Accumulated foreign currency translation adjustments


10,798


6,699Accumulated other comprehensive income, net of taxes

$
10,736

$
6,699


Note 7Restructuring Charges

During 2009, Advent recorded restructuring charges of $0.1 million related to the present value amortization of facility exit obligations partially offset by adjustments to other
facility exit assumptions.

During
2008, Advent recorded an additional restructuring charge related to a partial lease surrender fee of $0.1 million to exit the data center portion of our facility space
located at 303 2nd Street in San Francisco, California. These restructuring charges were partially offset by adjustments to other facility exit assumptions.

During
2007, Advent recorded aggregate restructuring charges of $1.0 million which primarily related to the modification of certain sub-lease assumptions for its prior
San Francisco headquarters facility located at 301 Brannan Street, which the Company exited in October 2006.

The
following table sets forth an analysis of the components of the restructuring charges and the payments and non-cash charges made against the accrual during fiscal 2007,
2008 and 2009 (in thousands):

Facility Exit
Costs

Severance and
Benefits

TotalBalance of restructuring accrual at December 31, 2006

$
6,587

$
4

$
6,591Restructuring charges


687





687Cash payments


(3,287
)

(4
)

(3,291
)Adjustment of prior restructuring costs


278





278Balance of restructuring accrual at December 31, 2007

$
4,265

$


$
4,265Restructuring charges (benefit)


(180
)

141


(39
)Reversal of deferred rent related to facilities exited


111





111Cash payments


(2,601
)




(2,601
)Adjustment of prior restructuring costs


140





140Balance of restructuring accrual at December 31, 2008

$
1,735

$
141

$
1,876Restructuring charges (benefit)


60


(4
)

56Cash payments


(635
)

(137
)

(772
)Adjustment of prior restructuring costs


74





74Balance of restructuring accrual at December 31, 2009

$
1,234

$


$
1,234


102

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 7Restructuring Charges (Continued)

Of
the remaining restructuring accrual of $1.2 million at December 31, 2009, $0.5 million and $0.7 million are included in accrued liabilities and other
long-term liabilities, respectively, on the accompanying consolidated balance sheet. The accrued facility exit costs of $1.2 million are stated at estimated fair value, net of
estimated sub-lease income of $2.2 million. Advent expects to pay the remaining obligations in connection with vacated facilities over the remaining lease terms, which will expire
on various dates through 2012.

Note 8Debt

On February 14, 2007, Advent and certain of its subsidiaries entered into a senior secured credit facility agreement (the "Credit Facility") with Wells Fargo Foothill, Inc.
(the "Lender") for a term of three years. Under the Credit Facility, the Lender provided the Company with a revolving line of credit up to an aggregate amount of $75.0 million to fund the
repurchase of outstanding common stock, capital expenditures and general corporate requirements. The Company had the option of selecting an interest rate for any drawdown under the Credit Facility
equal to either: (a) the Base Rate (Wells Fargo prime rate); or (b) the then applicable LIBOR Rate plus 1.50% per annum. The loan is secured by the Company's property and assets and is
subject to a financial covenant. The financial covenant in the Credit Facility was limited to a maximum ratio of senior debt to earnings before interest, taxes, depreciation, and amortization
(EBITDA), adjusted for cost capitalizations, extraordinary gains (losses) and non-cash stock-based employee compensation. Covenant testing would commence upon either the occurrence of an
event of default or when excess availability, defined as the Credit Facility line of $75.0 million less amounts drawn, plus qualified cash and cash equivalents is less than $50.0 million.

In
November 2008, the Company drew down $25.0 million against its Credit Facility which bore interest at the Wells Fargo prime rate of 4.0%.

In
January 2009, the Company repaid $10.0 million of the debt under its Credit Facility. During February 2009, Advent elected to move from the Wells Fargo prime rate into a
monthly LIBOR rate contract on the remaining $15.0 million which bears a rate of 0.45% plus an applicable margin of 1.50% for an all-in rate of 1.95%. During the second quarter of
2009, the Company repaid the remaining outstanding balance of $15.0 million. As of December 31, 2009, there were no outstanding borrowings under the Credit Facility and the Company was
in compliance with all associated covenants.

In
February 2010, Advent's Credit Facility expired in accordance with the terms of the senior secured facility agreement with the Lender. Advent elected not to renew the Credit Facility
as the Company determined its existing cash, cash equivalents, short-term and long-term marketable securities, together with cash expected to be generated from operations,
would be sufficient to fund its operating activities, anticipated capital expenditures and authorized stock repurchases during 2010.

103

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9Income Taxes

The components of income from continuing operations before income taxes were as follows (in thousands):

Fiscal Years2009

2008

2007US

$
27,622

$
20,257

$
12,242Foreign


1,497


916


308Total

$
29,119

$
21,173

$
12,550


The
components of the provision for income taxes included (in thousands):

Fiscal Years2009

2008

2007Current:Federal

$
783

$
748

$
748State


1,194


820


323Foreign


363


563


556Deferred:Federal


6,361


4,285


1,614State


(539
)

(2,390
)

(461
)Foreign


183


(169
)

(273
)Total

$
8,345

$
3,857

$
2,507


The
effective income tax rate on earnings differed from the United States statutory tax rate as follows:

Fiscal Years2009

2008

2007Statutory federal rate


35.0
%

35.0
%

35.0
%State taxes


5.3


5.9


8.7Stock compensation relating to incentive stock options and employee stock purchase plans


0.9


4.9


5.8Research and other state tax credits


(10.2
)

(22.7
)

(22.7
)Change in valuation allowance


(2.9
)

(6.5
)

(11.9
)Reserve adjustment due to statute closing





(0.9
)

Foreign taxes


0.3


1.5


1.5Other, net


0.3


1.0


3.6Effective income tax rate


28.7
%

18.2
%

20.0
%


As
of December 31, 2009, Advent made no provision for a cumulative total of $7.3 million of undistributed earnings for certain non-US subsidiaries, which are
deemed to be permanently reinvested.

104

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9Income Taxes (Continued)

The
tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):

December 312009

2008Current deferred tax assets (liabilities):Deferred revenue

$
2,408

$
2,510Other accrued liabilities and reserves


3,849


3,502Stock compensation


8,870


6,146Other


(46
)

1,468Valuation allowance





(1,168
)Total current


15,081


12,458Non-current deferred tax assets (liabilities):Depreciation and amortization


(1,392
)

(2,297
)Net operating losses, capital losses and credit carryforwards


38,307


58,484Other


4,888


3,672Valuation allowance


(1,301
)

(5,693
)Total non-current


40,502


54,166Deferred tax assets


55,583


66,624Deferred tax liabilities





Net deferred tax assets

$
55,583

$
66,624


The
Company maintains a valuation allowance against its deferred tax assets relating to investment reserves of $614,000 and certain state net operating losses of $687,000 as it believes
that based upon the available evidence, it is more likely than not that these assets will not be realized. If it is determined in the future that it is more likely than not that these deferred tax
assets will be realized, the valuation allowance will be reduced.

At
December 31, 2009, Advent had federal net operating loss carryforwards of approximately $71 million, which includes stock-based compensation deductions of $64 million.
Utilization of these loss carryforwards, including losses obtained from acquisitions, is subject to certain limitations under the federal income tax laws. These net operating loss carryforwards expire
between 2021 and 2027. Also at December 31, 2009, Advent had state net operating loss carryforwards in various states in which it files tax returns.

Advent
had federal research credits of $19.6 million which expire between 2012 and 2029. Advent also had California research credits of $15.4 million and California
enterprise zone credits of $5.5 million which do not expire.

105

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 9Income Taxes (Continued)

The
following table summarizes the activity relating to the Company's unrecognized tax benefits during 2009 and 2008 (in thousands):

TotalBalance at January 1, 2007

$
4,930Gross increases related to tax positions in prior period


66Gross increases related to current period tax positions


926Settlements with taxing authorities


(23
)Balance at December 31, 2007

$
5,899Gross increases related to tax positions in prior period


370Gross increases related to current period tax positions


832Settlements with taxing authorities


(197
)Balance at December 31, 2008

$
6,904Gross increases related to current period tax positions


563Balance at December 31, 2009

$
7,467


If
recognized, the portion of unrecognized tax benefits at December 31, 2009 that would decrease Advent's tax provision and increase net income is $6.2 million. The impact
on net income reflects the liabilities for unrecognized tax benefits net of the federal tax benefit of state income tax items. Advent recognizes interest and penalties accrued on unrecognized tax
benefits as well as interest received from favorable settlements within "Provision for income taxes" on the consolidated statement of operations. As of December 31, 2009, Advent has not accrued
any interest or penalties as part of its ASC 740-10-25, "Income TaxesOverallRecognition", reserve as any reversal of uncertain tax positions
would not result in the assessment of penalties or interest due to the Company's surplus of deferred tax assets that would offset any additional tax.

Advent
is subject to taxation in the US and various states and foreign jurisdictions. Advent is not under examination in any income tax jurisdiction at the present time and does not
anticipate the total amount of its unrecognized tax benefits to significantly change over the next 12 months. The material jurisdictions that are subject to examination by tax authorities
include federal for tax years after 2005 and California for tax years after 2004. During the year, New York concluded an income tax audit for tax years up through 2007 and there were no material
income tax assessments. In March 2010, Advent was notified by the State of California that it will be undergoing a franchise tax examination for the 2006 and 2007 tax years.

Note 10Commitments and Contingencies



Advent leases office space and equipment under non-cancelable operating lease agreements, which expire at various dates
through June 2025. Some operating leases contain escalation provisions for adjustments in the consumer price index. Advent is responsible for maintenance, insurance, and property taxes.

106

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10Commitments and Contingencies (Continued)

On
October 1, 2009, Advent completed the sale of the Company's MicroEdge subsidiary. See Note 3, "Discontinued Operation," to the consolidated financial statements for a
description of the principal terms of the divestiture. With the exception of the MicroEdge facilities in New York City, the lease obligations related to MicroEdge have been transferred to the
Purchaser.

On
September 30, 2009, the Company entered into a definitive lease agreement with 1114 6th Avenue Co., LLC whereby the Company will lease approximately
31,000 square feet of office space at 1114 Avenue of the Americas in New York, New York (the "Grace Building"). The Company's contractual operating lease obligation under this agreement is
approximately $30 million, payable over the fifteen-year term of the lease. Additionally, the Company anticipates approximately $8 million of leasehold improvements, of which
$2 million will be funded by the Landlord and approximately $6 million will be paid directly by Advent. After completion of the improvements,
currently estimated to be in the second fiscal quarter of 2010, the Company will relocate its New York City operations to the Grace Building facility.

On
December 28, 2009, the Company entered into a definitive lease agreement with Transwestern Broad Street, LLC whereby the Company will lease approximately 25,000 square
feet of office space at 40 Broad Street in Boston, Massachusetts. The Company's contractual operating lease obligation under this agreement is approximately $8 million, payable over the
ten-year term of the lease. Additionally, the Company anticipates approximately $7 million of leasehold improvements, of which $2 million will be funded by the Landlord and
approximately $5 million will be paid directly by Advent. After completion of the improvements, currently estimated to be in the third fiscal quarter of 2010, the Company will relocate its
Boston operations to the 40 Broad Street facility.

Future
minimum payments and receipts under the non-cancelable operating leases consisted of the following at December 31, 2009 (in thousands):

FutureLease Payments

Sub-lease Income

Net Lease Payments2009

$
8,550

$
1,236

$
7,3142010


8,364


800


7,5642011


7,267


310


6,9572012


6,368





6,3682013


6,716





6,716Thereafter


34,757





34,757Total

$
72,022

$
2,346

$
69,676


Rent
expense for fiscal 2009, 2008 and 2007 was $5.5 million, $5.0 million and $4.1 million, respectively, net of sub-lease income from
non-restructured facilities of $22,000, $5,000 and $0 in fiscal 2009, 2008 and 2007, respectively.

Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, Advent has certain obligations to
indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at Advent's request in such capacity. These indemnification
obligations are valid as long as the director or officer acted in good

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 10Commitments and Contingencies (Continued)

faith
and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. The maximum potential amount of future payments Advent could be required to make under these indemnification obligations is unlimited; however, Advent has a
director and officer insurance policy that mitigates Advent's exposure and enables Advent to recover a portion of any future amounts paid. The Company believes the estimated fair value of these
indemnification obligations is minimal.

Legal Contingencies

On March 8, 2005, certain of the former shareholders of Kinexus and the shareholders' representative filed suit against Advent
in the Delaware Chancery Court. The complaint alleges that Advent breached the Agreement and Plan of Merger dated as of December 31, 2001 pursuant to which Advent acquired all of the
outstanding shares of Kinexus due principally to the fact that no amount was paid by Advent on an earn-out of up to $115 million. The earn-out, which was payable in cash
or stock at the election of Advent, was based upon Kinexus meeting certain revenue targets in both 2002 and 2003. The complaint seeks unspecified compensatory damages, an accounting and restitution
for unjust enrichment. Advent advised the shareholders' representative in January 2003 that the earn-out terms had not been met in 2002 and accordingly no earn-out was payable
for 2002 and would not be payable for 2003. There has been no further activity in this case since additional document discovery and
interrogatory answers were provided by the parties in December 2008. Advent disputes the plaintiff's claim and believes that it has meritorious defenses and intends to vigorously defend this action.
Management has not determined that any potential loss associated with this litigation is either probable or reasonably estimable at this time and accordingly has not accrued any amounts for any
potential loss.

From
time to time, Advent is involved in claims and legal proceedings that arise in the ordinary course of business. Based on currently available information, management does not believe
that the ultimate outcome of these unresolved matters, individually and in the aggregate, is likely to have a material adverse effect on the Company's financial position or results of operations.
However, litigation is subject to inherent uncertainties and the Company's view of these matters may change in the future. Were an unfavorable outcome to occur, there exists the possibility of a
material adverse impact on the Company's financial position and results of operations for the period in which the unfavorable outcome occurs, and potentially in future periods.

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation

Stock-Based Compensation Expense

Stock-based compensation expense related to stock options, stock appreciation rights ("SARs"), employee stock purchase plan ("ESPP")
shares, and restricted stock units ("RSUs") was recognized on Advent's consolidated statement of operations for fiscal 2009, 2008 and 2007 as follows (in thousands):

Fiscal Years2009

2008

2007Options,
SARs
ESPP(1)

RSUs

Total

Options,
SARs
ESPP(1)

RSUs

Total

Options,
SARs
ESPP(1)

RSUs

TotalStatement of operations classificationCost of term license, maintenance and other recurring revenues

$
985

$
712

$
1,697

$
748

$
535

$
1,283

$
779

$
318

$
1,097Cost of professional services and other revenues


799


470


1,269


724


362


1,086


477


257


734Total cost of revenues


1,784


1,182


2,966


1,472


897


2,369


1,256


575


1,831Sales and marketing


3,274


2,116


5,390


3,512


1,194


4,706


3,096


867


3,963Product development


2,148


2,709


4,857


2,133


1,682


3,815


1,990


1,008


2,998General and administrative


3,180


1,769


4,949


4,176


1,042


5,218


3,408


686


4,094Total operating expenses


8,602


6,594


15,196


9,821


3,918


13,739


8,494


2,561


11,055Total stock-based employee compensation expense

$
10,386

$
7,776

$
18,162

$
11,293

$
4,815

$
16,108

$
9,750

$
3,136

$
12,886Tax effect on stock-based employee compensation


(4,091
)

(3,131
)

(7,222
)

(3,753
)

(1,965
)

(5,718
)

(3,657
)

(1,242
)

(4,899
)Effect on net income from continuing operations, net of tax

$
6,295

$
4,645

$
10,940

$
7,540

$
2,850

$
10,390

$
6,093

$
1,894

$
7,987Effect on net income from discontinued operation, net of tax

$
76

$
128

$
204

$
286

$
173

$
459

$
206

$
100

$
306Effect on net income, net of tax

$
6,371

$
4,773

$
11,144

$
7,826

$
3,023

$
10,849

$
6,299

$
1,994

$
8,293


(1)Represents
the stock-based compensation expense impact of adopting ASC 718 on January 1, 2006.


Advent capitalized stock-based compensation expense of $228,000, $313,000 and $369,000 during fiscal 2009, 2008 and 2007, respectively, associated
with the Company's software development, internal-use software and professional services implementation projects.

As
of December 31, 2009, total unrecognized compensation cost related to unvested awards not yet recognized under all equity compensation plans, adjusted for estimated
forfeitures, was $27.3 million and is expected to be recognized through the remaining vesting period of each grant. As of December 31, 2009, the weighted average remaining period was
2.5 years.

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)

Valuation Assumptions

Advent uses the Black-Scholes option pricing model to determine the fair value of equity compensation awards (stock options, RSUs and
SARs and employee stock purchase plan shares, consistent with the provisions of ASC 718, "CompensationStock Compensation".

The
fair value of each equity award grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the
following assumptions:

Fiscal Years2009

2008

2007Stock Options / Stock Appreciation RightsRisk-free interest rate

1.8% - 3.0%

2.0% - 3.9%

3.7% - 5.2%Volatility

38.5% - 57.7%

41.8% - 56.4%

32.9% - 39.7%Expected life

4 - 5 years

4 - 6 years

4 - 5 yearsExpected dividends

None

None

NoneEmployee Stock Purchase Plan*Risk-free interest rate

0.2% - 0.4%

0.4% - 3.4%

3.4% - 5.0%Volatility

29.5% - 72.8%

43.8% - 72.8%

35.5% - 43.8%Expected life

6 months

6 months

6 monthsExpected dividends

None

None

None


*The
ESPP periods begin every six months in the second and fourth quarter of each year.


The
expected stock price volatility for fiscal 2009, 2008 and 2007 was determined based on an equally weighted average of historical and implied volatility of the Company's common stock.
Advent determined that a blend of implied volatility and historical volatility is more reflective of the market conditions and a better indicator of expected volatility than using purely historical
volatility. The expected life for fiscal 2009, 2008 and 2007 was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards,
vesting schedules and expectations of future employee behavior. The risk-free interest rate is based on the US Treasury yield curve in effect at the time of grant for periods corresponding
with the expected life of the option or SAR. The dividend yield assumption is based on the Company's history of not paying dividends and the resultant future expectation of zero dividend payouts.

The
fair value of RSUs on the date of grant is the Advent closing share price.

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)

Equity Award Activity

A summary of the status of the Company's stock option, SAR and warrant activity for the total Company for the period presented is as
follows (in thousands, except weighted average exercise price):

2009

2008

2007Number of
Shares

Weighted
Average
Exercise
Price

Number of
Shares

Weighted
Average
Exercise
Price

Number of
Shares

Weighted
Average
Exercise
PriceOutstanding at beginning of year


4,093

$
28.26


3,818

$
24.61


5,292

$
20.08Options and SARs granted


628

$
32.09


926

$
41.68


731

$
37.79Options and SARs exercised


(538
)
$
21.16


(420
)
$
18.15


(1,735
)
$
16.19Options, SARs and warrants canceled


(238
)
$
39.90


(231
)
$
40.09


(470
)
$
25.16Outstanding at end of year


3,945

$
29.14


4,093

$
28.26


3,818

$
24.61Exercisable at end of year


2,458

$
25.85


2,416

$
23.92


2,044

$
21.19


The
aggregate intrinsic value of options and SARs outstanding and exercisable as of December 31, 2009 was $47.8 million and $37.6 million, respectively. The
intrinsic value is calculated as the difference between the Company's closing stock price of $40.73 as of December 31, 2009 and the exercise price of the underlying awards for options or SARs
that were in-the-money as of that date.

The
weighted average grant date fair value of options and SARs granted for the total Company (as determined under ASC 718), total intrinsic value of options and SARS exercised and cash
received from option exercises during fiscal 2009, 2008 and 2007 were as follows (in thousands, except weighted average grant date fair value):

2009

2008

2007Options and SARsWeighted average grant date fair value

$
14.73

$
18.04

$
13.49Total intrinsic value of awards exercised

$
7,992

$
9,341

$
43,825OptionsCash received from exercises

$
8,637

$
6,095

$
27,475


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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)

The
options and SARs outstanding and currently exercisable for the total Company by exercise price at December 31, 2009 were as follows:

Options and
SARs Outstanding

Options and
SARs ExercisableExercise Price

Number
of Shares
(in thousands)

Weighted
Average
Remaining
Contractual
Life (in years)

Weighted
Average
Exercise
Price

Number
Exercisable
(in thousands)

Weighted
Average
Exercise
Price$13.92 - $17.95


489


4.66

$
17.51


435

$
17.50$18.06 - $18.25


404


4.50

$
18.18


401

$
18.18$18.70 - $20.10


401


3.09

$
19.11


401

$
19.11$20.16 - $27.46


400


5.79

$
23.87


274

$
23.60$27.55 - $31.47


399


6.76

$
28.98


237

$
28.48$31.60 - $32.41


458


8.85

$
32.30


67

$
31.67$32.60 - $37.14


608


7.15

$
35.67


295

$
35.71$37.72 - $41.76


553


7.31

$
40.93


238

$
40.65$42.17 - $56.88


232


6.90

$
48.01


109

$
49.19$60.38 - $60.38


1


0.87

$
60.38


1

$
60.38As of December 31, 2009


3,945


6.18

$
29.14


2,458

$
25.85Expected to vest at December 31, 2009


3,755


6.05

$
28.83


The
aggregate intrinsic value of options and SARs expected to vest at December 31, 2009 was $46.6 million.

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)

The
equity awards available for grant for the total Company for the periods presented were as follows (in thousands):

Fiscal Years2009

2008

2007Beginning balance


1,361


1,507


2,138Awards authorized


1,800


944


Options and SARs granted


(628
)

(926
)

(730
)Options and SARs canceled


238


231


467Options expired


(1
)




(80
)SARs exercised, settled for taxes or proceeds, and returned to plan





24


17RSUs granted


(212
)

(280
)

(356
)RSUs vested, settled for taxes and returned to plan








1RSUs canceled


63


33


50RSU adjustment(1)(2)


(76
)

(172
)

Ending balance


2,545


1,361


1,507


(1)Effective
with our 2002 Stock Plan amended on April 1, 2009, awards of restricted stock, restricted stock units, performance shares or performance
units reduce the number of shares available under the Plan by 1.52 shares for each share covered by such awards.(2)Effective
with our 2002 Stock Plan amended on April 1, 2008, awards of restricted stock, restricted stock units, performance shares or performance
units reduce the number of shares available under the Plan by 1.75 shares for each share covered by such awards.


During
fiscal 2009, 2008 and 2007, the Company granted RSUs under its 2002 Stock Plan. A summary of RSU activity for the total Company during for 2009, 2008 and 2007 is as follows:

2009

2008

2007Number of
Shares
(in thousands)

Weighted
Average
Grant Date
Fair Value

Number of
Shares
(in thousands)

Weighted
Average
Grant Date
Fair Value

Number of
Shares
(in thousands)

Weighted
Average
Grant Date
Fair ValueOutstanding and unvested at beginning of period


700

$
37.89


571

$
34.62


266

$
29.81RSUs granted


212

$
32.99


280

$
41.17


356

$
37.92RSUs vested


(164
)
$
37.78


(118
)
$
29.83


(1
)
$
28.18RSUs canceled


(63
)
$
38.68


(33
)
$
37.92


(50
)
$
32.78Outstanding and unvested at end of period


685

$
36.33


700

$
37.89


571

$
34.62


113

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)

The weighted average grant date fair value was determined based on the closing market price of the Company's common stock on the date of the award. Aggregate intrinsic value of RSUs
outstanding at December 31, 2009 was $27.9 million, based on the closing price of $40.73 per share as of December 31, 2009.

Description of Plans



Advent has equity awards outstanding under three stock option plans, the 2002 Stock Plan (the "Plan"), the 1998
Non-statutory Stock Option Plan (the "Non-statutory Plan") and the 1995 Director Option Plan (the "Director Plan").

The Plan.On May 13, 2009 the Company's stockholders approved the amendment and restatement of Advent's 2002 Stock Plan, originally
approved
by the Board of Directors (the "Board") and stockholders in February and May, respectively, of 2002. Under the Plan, the Company may grant options to purchase common stock to employees, consultants
and directors. The Plan also permits the award of restricted stock, RSUs, SARs, performance shares, and performance units.

Options
granted may be incentive stock options or non-statutory stock options and shall be granted at a price not less than fair market value on the date of grant. Fair
market value (as defined in the Plan) and the vesting of these options shall be determined by the Board. The options generally vest over 5 years (for grants prior to February 2009) or
4 years (for grants after February 2009) and expire no later than 10 years from the date of grant. Upon exercise, stock options will be settled in shares of Advent common stock.

The
RSUs are awards of restricted stock units that generally vest over four years in two equal installments on the second and fourth anniversaries of the date of grant. Upon vesting, the
RSUs will convert into an equivalent number of shares of common stock. The value of the RSUs is based on the closing market price of the Company's common stock on the date of grant and is amortized on
a straight-line basis over the four-year requisite service period.

A
SAR is the right to receive the appreciation in fair market value of common stock between the exercise date and the date of grant. SARs generally vest over 5 years (for grants
prior to February 2009) or 4 years (for grants after February 2009) and expire no later than 10 years from the date of grant. Upon exercise, SARs will be settled in shares of Advent
common stock.

Unvested
RSUs, stock options and SARs are canceled on termination of employment and returned to the Plan.

Non-employee
directors were eligible to receive option grants under the Director Plan, which terminated in November 2005. Effective April 1, 2005, each
non-employee director became eligible to receive the following awards under the 2002 Plan:

Initial option grant upon joining the Board(1)


30,000 sharesAnnual option grant upon re-election to the Board(2)


12,000 shares


(1)Vests
over four years with 25% of the shares vesting after one year of service and the remainder vesting in equal monthly installments over the ensuing
three years.


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ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)

(2)Vests
in twelve equal monthly installments.


On
February 26, 2007, the Board, upon recommendation by the Corporate Governance and Nominating Committee, approved the form and amount of revised equity awards automatically
granted to non-employee directors. Effective February 26, 2007, each non-employee director became eligible to receive the following awards of SARs and restricted stock
units RSUs under the 2002 Plan:

Initial SAR grant upon joining the Board(1)


21,000 sharesInitial RSU grant upon joining the Board(2)


4,500 sharesAnnual SAR grant upon re-election to the Board(3)


8,400 sharesAnnual RSU grant upon re-election to the Board(3)


1,800 shares


(1)Vests
over four years with 25% of the shares vesting one year after the date of grant and the remainder vesting in equal monthly installments over the
ensuing three years.(2)Vests
over four years with 50% of the shares vesting two years after the date of grant and 50% vesting four years after the date of grant.(3)Vests
100% one year after the date of grant.


In
the event of a merger with or into another corporation, or other change in control, each non-employee director shall fully vest in and have the right to exercise all of
his or her
outstanding equity compensation (including outstanding stock options, SARs, RSUs, or performance shares). Upon a director's retirement from the Board, the director's unvested options, SARs and RSUs
are canceled and returned to the Plan.

Non-Statutory Plan.In November 1998, the Board approved the 1998 Non-statutory Stock Option Plan and reserved 300,000 shares
of common stock for issuance thereunder. Under the Company's 1998 Non-statutory Plan, Advent may grant options to purchase common stock to employees and consultants, excluding persons who
are executive officers and directors. Options granted are non-statutory stock options and shall be granted at a price not less than fair market value on the date of grant. Fair market
value (as defined in the Non-statutory Plan) and the vesting of these options shall be determined by the Board. The options generally vest over 5 years and expire no later than
10 years from the date of grant. Unvested options on termination of employment are canceled and returned to the Non-statutory Plan. On February 26, 2007, the Board terminated
the Non-statutory Plan.



All individuals employed by Advent are eligible to participate in the ESPP if Advent employs them for at least 20 hours per week
and at least five months per year. The ESPP permits eligible employees to purchase Advent common stock through payroll deductions at a price equal to 85% of the lower of the closing sale price for the
Company's common stock reported on the NASDAQ National Market at the beginning or the end of each six-month offering period. In any calendar year, eligible employees can withhold up to 10%
of their salary and certain variable compensation.

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ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 11Stock-Based Compensation (Continued)



On May 18, 2005, Advent's shareholders approved the 2005 ESPP with 2,000,000 shares of common stock reserved for issuance. The
following table summarizes the Company's issuance of common stock for the total Company under the 2005 ESPP:

Fiscal Years2009

2008

2007Common shares issued


276,410


199,381


126,978Average price

$
20.33

$
25.17

$
30.81


As
of December 31, 2009, common shares of 1,214,282 were reserved for future issuance under the 2005 ESPP.



Advent sponsors a 401(k) Plan to provide retirement benefits for its US employees. This Plan provides for tax-deferred
salary deductions for eligible employees. Employees may contribute between 1% and 70% of their compensation to this Plan, limited by an annual maximum amount as determined by the Internal Revenue
Service. The Company also makes a 50% matching contribution of up to 6% of employee compensation. The Company's matching contributions to this plan totaled $3.1 million, $2.8 million,
and $2.4 million for fiscal 2009, 2008 and 2007, respectively. In addition to the employer matching contribution, Advent may make profit sharing contributions at the discretion of the Board of
Directors. Advent did not make any profit sharing contributions in fiscal 2009, 2008 or 2007.

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 12Net Income per Share

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

Fiscal Years2009

2008

2007Numerator:Net income:Continuing operations

$
20,774

$
17,316

$
10,043Discontinued operation


16,109


1,579


2,588Total operations

$
36,883

$
18,895

$
12,631Denominator:Denominator for basic net income per share-weighted average shares outstanding


25,450


26,640


26,495Dilutive common equivalent shares: Employee stock options and other


1,004


1,253


1,572Denominator for diluted net income per share-weighted average shares outstanding, assuming exercise of potential dilutive common
shares


26,454


27,893


28,067Basic:Continuing operations

$
0.82

$
0.65

$
0.38Discontinued operation


0.63


0.06


0.10Total operations

$
1.45

$
0.71

$
0.48Diluted:Continuing operations

$
0.79

$
0.62

$
0.36Discontinued operation


0.61


0.06


0.09Total operations

$
1.39

$
0.68

$
0.45


Weighted
average stock options, SARs and RSUs of approximately 1.9 million, 1.6 million and 0.7 million were excluded from the computation of diluted net income per
share for fiscal 2009, 2008 and 2007, respectively, because their inclusion would have been anti-dilutive.

Note 13Common Stock Repurchase Programs

Advent's Board has approved common stock repurchase programs authorizing management to repurchase shares of the Company's common stock. The timing and actual number of shares subject to
repurchase have been made at the discretion of Advent's management and are contingent on a number of factors and limitations, including the price of Advent's stock, corporate and regulatory
requirements, alternative investment opportunities and other market conditions. The stock repurchase programs specify a maximum number of shares subject to repurchase, do not have an expiration date
and may be

117

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 13Common Stock Repurchase Programs (Continued)

limited
or terminated at any time without prior notice. Repurchased shares are returned to the status of authorized and un-issued shares of common stock.

The
following is a summary of the repurchase programs authorized by Advent's Board since fiscal 2007 (in thousands):

Date of Authorization

Number
of Shares
AuthorizedFebruary 2007


2,250May 2008


1,000October 2008


3,000Total


6,250


The
following is a summary of the Company's repurchase activity by year since fiscal 2007 (in thousands, except per share data):

Fiscal Year

Total
Number
of Shares
Repurchased

Cost

Average
Price
Paid Per
Share2007


2,580

$
91,157

$
35.332008


2,331

$
61,572

$
26.422009


690

$
14,578

$
21.13Total


5,601

$
167,307

$
29.87


At
December 31, 2009, there remained approximately 1.0 million shares authorized by the Board for repurchase.

In
addition to the above, Advent has withheld shares through net share settlements upon the vesting of restricted stock units and the exercise of stock-settled stock appreciation rights
under its equity compensation plan to satisfy tax withholding obligations.

Note 14Segment, Significant Customer and Geographical Information



ASC 280, "Segment Reporting" establishes standards for reporting information about operating segments in a company's financial
statements. Advent's organizational structure is based on a number of factors that the chief operating decision maker ("CODM") uses to evaluate, view and run its business operations which include, but
are not limited to, customer base, homogeneity of products and technology. Advent's operating segments are based on this organizational structure and information reviewed by Advent's CODM to evaluate
the operating segment results.

Historically,
the Company determined that its operations were organized into two reportable segments: Advent Investment Management and MicroEdge. On October 1, 2009, Advent
completed the sale its MicroEdge subsidiary pursuant to an Agreement entered into on July 27, 2009. Accordingly, the results of MicroEdge have been classified as a discontinued operation in the
consolidated financial

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14Segment, Significant Customer and Geographical Information (Continued)

statements
for all periods presented. The Company now operates under a single reportable segment, Advent Investment Management. See Note 3, "Discontinued Operation", for further information
regarding the divestiture of MicroEdge.



The results of the operating segments are derived directly from Advent's internal management reporting system. The accounting policies
used to derive operating segment results are substantially the same as those used by the consolidated company. Management measures the performance of each operating segment based on several metrics,
including income from operations. These results are used, in part, to evaluate the performance of, and to assign resources to, each of the operating segments. Certain operating expenses, including
stock-based compensation, amortization of developed technology and other intangibles and acquired in-process research and development, which Advent manages separately at the corporate
level, are not allocated to the operating segments. Advent does not separately accumulate and review asset information by segment.

Segment
information for the periods presented is as follows (in thousands):

Fiscal Years2009

2008

2007Net revenues:Advent Investment Management

$
259,508

$
237,884

$
191,490Other








80Total net revenues

$
259,508

$
237,884

$
191,570Income from continuing operations:Advent Investment Management

$
53,325

$
38,724

$
23,750Other








80Unallocated corporate operating costs and expenses:Stock-based compensation


(18,162
)

(16,108
)

(12,886
)Amortization of developed technology


(5,618
)

(3,061
)

(1,412
)Amortization of other intangibles


(1,666
)

(1,160
)

(1,444
)Acquired in-process research and development





(400
)

Total income from continuing operations

$
27,879

$
17,995

$
8,088


Since
2007, all depreciation expense is associated with the Advent Investment Management segment and was $9.4 million, $8.4 million and $7.2 million in 2009, 2008
and 2007, respectively.



No single customer represented 10% or more of Advent's total net revenues in any fiscal year presented.

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ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 14Segment, Significant Customer and Geographical Information (Continued)



Geographical information as of and for the periods presented is as follows (in thousands):

December 312009

2008Long-lived assets(1):United States

$
42,346

$
48,833International


1,241


1,237Total long-lived assets

$
43,587

$
50,070




Fiscal Years2009

2008

2007Geographic net sales(2):United States

$
226,860

$
203,649

$
164,947International


32,648


34,235

$
26,623Total net sales

$
259,508

$
237,884

$
191,570


(1)Long-lived
assets exclude goodwill, intangible assets, private equity investments and deferred tax assets.(2)Geographic
net sales are based on the location to which the product is shipped. International sales denotes products shipped to EMEA.


Note 15Fair Value Measurements

Effective January 1, 2008, Advent implemented ASC 820, "Fair Value Measurements and Disclosures" for the Company's financial assets and liabilities that are measured and reported
at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. In accordance with
supplemental guidance issued by the FASB in February 2008, the Company elected to defer implementation of ASC 820 as it relates to non-financial assets and non-financial
liabilities that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis until January 1, 2009.

The
adoption of ASC 820 to Advent's financial assets and liabilities and non-financial assets and liabilities that are measured and reported at fair value at least annually
did not have an impact on the Company's financial results.

ASC
820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis
for considering such

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ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15Fair Value Measurements (Continued)

assumptions,
ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level Input

Input DefinitionLevel I

Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.Level II

Inputs other than quoted prices included in Level I that are observable for the asset or liability through corroboration with market data at the measurement date.Level III

Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.


This
hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining inputs and determining
fair value. The Company measures certain financial assets and liabilities at fair value on a recurring basis and the fair value of these certain financial assets was determined using the following
inputs as of December 31, 2009 (in thousands):

Fair Value Measurements at
Reporting Date UsingTotal

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)AssetsMoney Market Funds(1)

$
49,645

$
49,645

$


$
US government debt securities(2)


39,505


39,505





Corporate debt securities(2)


20,263





20,263


Total

$
109,413

$
89,150

$
20,263

$



(1)Included
in cash and cash equivalents on the Company's consoldiated balance sheets(2)Included
in marketable securities (short or long-term) on the Company's consolidated balance sheets


Money
market funds consist of cash equivalents with remaining maturities of three months or less at the date of purchase and are composed primarily of US government and
treasury obligation money market mutual funds. Our US government debt securities are securities sponsored by the federal government. The fair value of the money market funds and US government debt
securities are determined through market, observable and corroborated sources. The fair value of the corporate debt securities are determined using observable inputs, including interest rate curves,
credit spreads and volatilities. Advent does not have any significant assets that utilize unobservable or Level 3 inputs.

The
carrying amounts of cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities approximate fair value based on the
short-term maturities of these instruments. At December 31, 2009, the Company had no debt outstanding.

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ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 15Fair Value Measurements (Continued)

Non-marketable
investments, which totaled $0.5 million at December 31, 2009, represent the Company's investments in a privately held company.
Non-marketable investments are priced at the lower of cost or fair value and reviewed for impairment due to an absence of market activity and market data, and are not reported in the above
table of assets measured at fair value as of December 31, 2009.

Note 16Subsequent Events

In accordance with ASC 855, "Subsequent Events" the Company evaluated subsequent events after the balance sheet date of December 31, 2009 through March 12, 2010, which is
the date the financial statements were issued.

From
January 1, 2010 through March 12, 2010, the Company repurchased approximately 140,000 shares of stock, under the repurchase program that was approved by the Board of
Directors on October 30, 2008, at an average price of $40.93.

In
February 2010, Advent's Credit Facility expired in accordance with the terms of the senior secured facility agreement with Wells Fargo Foothill, Inc. Advent elected not to
renew the Credit Facility as the Company determined its existing cash, cash equivalents, short-term and long-term marketable securities, together with cash expected to be
generated from operations, would be sufficient to fund its operating activities, anticipated capital expenditures and potential stock repurchases.

In
March 2010, the Company's wholly-owned Norwegian subsidiary, Advent Norway AS, acquired the entire share capital of Goya AS, a Norwegian software company that provides transfer
agency-related solutions to mutual fund managers and mutual fund distributors. Cash consideration of approximately $5 million was paid upon closing in March 2010.

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Table of Contents

ADVENT SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16Subsequent Events (Continued)

Supplementary Quarterly Financial Data (Unaudited)

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter(in thousands, except per share data)2009(1)(2):Net revenues

$
66,325

$
63,068

$
63,782

$
66,333Gross margin

$
45,408

$
42,695

$
42,753

$
46,107Income from continuing operations

$
8,388

$
7,226

$
5,837

$
6,428Net income from continuing operations

$
5,363

$
7,159

$
3,902

$
4,350Net income from discontinued operation

$
866

$
863

$
770

$
13,610Net income

$
6,229

$
8,022

$
4,672

$
17,960Basic net income per share:Continuing operations

$
0.21

$
0.28

$
0.15

$
0.17Discontinued operation

$
0.03

$
0.03

$
0.03

$
0.53Total operations

$
0.25

$
0.32

$
0.18

$
0.70Diluted net income per share:Continuing operations

$
0.21

$
0.27

$
0.15

$
0.16Discontinued operation

$
0.03

$
0.03

$
0.03

$
0.50Total operations

$
0.24

$
0.31

$
0.18

$
0.672008(1)(3)(4):Net revenues

$
55,264

$
57,979

$
58,152

$
66,489Gross margin

$
37,614

$
38,925

$
35,887

$
43,953Income from continuing operations

$
3,779

$
4,822

$
3,184

$
6,210Net income from continuing operations

$
2,675

$
7,182

$
1,823

$
5,636Net income (loss) from discontinued operation

$
(40
)
$
173

$
889

$
557Net income

$
2,635

$
7,355

$
2,712

$
6,193Basic net income (loss) per share:Continuing operations

$
0.10

$
0.27

$
0.07

$
0.21Discontinued operation

$
(0.00
)
$
0.01

$
0.03

$
0.02Total operations

$
0.10

$
0.28

$
0.10

$
0.23Diluted net income (loss) per share:Continuing operations

$
0.10

$
0.26

$
0.06

$
0.21Discontinued operation

$
(0.00
)
$
0.01

$
0.03

$
0.02Total operations

$
0.09

$
0.26

$
0.10

$
0.23


(1)On
October 1, 2009, Advent completed the sale of its MicroEdge segment. Accordingly, the results of MicroEdge have been reclassified as a
discontinued operation for all periods presented.(2)In
the second quarter of 2009, Advent recorded a gain on sale of its private equity investment of $2.1 million.(3)In
the second quarter of 2008, Advent recorded a gain on sale of its private equity investment of $3.4 million.(4)In
the fourth quarter of 2008, Advent recorded in-process research and development expense of $0.4 million associated with its
acquisition of Tamale Software, Inc. Additionally, Advent recorded an impairment charge of $0.8 million to write-off MicroEdge related assets resulting from the segment's
decision to sunset a product.


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Table of Contents

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

None.

Item 9A.    Controls and Procedures

Evaluation of disclosure controls and procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are designed to ensure that information required to be disclosed in the Company's reports under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the
Company's Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company's management evaluated, with the
participation of the Principal Executive Officer and Principal Financial Officer, the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this
Annual Report on Form 10-K. Based on this evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were
effective as of December 31, 2009.

Management's annual report on internal control over financial reporting

See "Management's Report on Internal Control over Financial Reporting" on page 74.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting which were identified in connection with the evaluation required
by Rule 13a-15(e) of the Exchange Act that occurred during the fourth quarter ended December 31, 2009 that has materially affected, or is reasonably likely to materially
affect, Advent's internal control over financial reporting.

Item 9B.    Other Information

None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

The information on Directors appearing under the heading "Corporate Governance", "Corporate Governance and Nominating Committee
Matters" and "Proposal No. 1: Election of Directors" in the Notice of the 2010 Annual Meeting of Stockholders and 2010 Proxy Statement, to be filed pursuant to Rule 14a-6(b)
under the Securities and Exchange Act of 1934 (the "Exchange Act"), in connection with the Company's 2010 Annual Meeting of Stockholders (the "2010 Proxy Statement"), is incorporated by reference in
this Annual Report on Form 10-K. Information required by this Item related to the executive officers can be found in the section captioned "Executive Officers of the Registrant"
under Part I, "Item 1. Business" of this Annual Report on Form 10-K, and is also incorporated herein by reference. Information required by this Item regarding any
material changes to the process by which security holders may recommend nominees to the Board of Directors appears under the heading "Procedural Matters" in our 2010 Proxy Statement and is
incorporated herein by reference.

The
information contained under the heading "Beneficial Ownership Reporting Compliance Section 16(a)" in the 2010 Proxy Statement are incorporated by reference in this Annual
Report on Form 10-K.

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Table of Contents

The
current members of the audit committee are Christine S. Manfredi, James D. Kirsner and Wendell Van Auken (Chair), each of whom is "independent" as defined by current Nasdaq listing
standards. The Board has determined that all members of the audit committee are financial experts as defined by Item 401(h) of Regulation S-K of the Exchange Act.

The
Company has a code of business ethics and conduct that applies to all of the Company's employees, including its Principal Executive Officer, Principal Financial Officer and its Board
of Directors. A copy of this code, "Code of Business Ethics and Conduct", is available on the Company's website at http://investor.advent.com/phoenix.zhtml?c=96626&p=irol-govHighlights.

The
Company intends to disclose any changes in or waivers from its code of ethics by posting such information on its website.

Item 11.    Executive Compensation

Information required by this Item is incorporated by reference to our Proxy Statement for our 2010 Annual Meeting of Stockholders,
where it is included under the caption "Compensation Committee Matters."

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this Item is incorporated by reference to our Proxy Statement for our 2010 Annual Meeting of Stockholders,
where it is included under the captions "Beneficial Security Ownership of Management and Certain Beneficial Owners," and "Equity Compensation Plan Information."

Item 13.    Certain Relationships and Related Transactions, and Director Independence

Information required by this Item is incorporated by reference to our Proxy Statement for our 2010 Annual Meeting of Stockholders,
where it is included under the caption "Certain Relationships and Related Transactions" and "Corporate Governance."

Item 14.    Principal Accountant Fees and Services

Information required by this Item is incorporated by reference to our Proxy Statement for our 2010 Annual Meeting of Stockholders,
where it is included under the caption "Fees to Independent Registered Public Accounting Firm."

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Table of Contents

PART IV

Item 15.    Exhibits and Financial Statement Schedules



The
following are included in Item 8:

PageManagement's Report on Internal Control Over Financial Reporting

74Report of Independent Registered Public Accounting Firm

75Consolidated Balance Sheets as of December 31, 2009 and 2008

76Consolidated Statements of Operations for the years ended December 31, 2009, 2008, and 2007

77Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 2009, 2008, and
2007

78Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008, and 2007

79Notes to Consolidated Financial Statements

80




The
following financial statement schedule for the years ended December 31, 2009, 2008 and 2007 should be read in conjunction with the consolidated financial statements of Advent
Software, Inc. filed as part of this Annual Report on Form 10-K:

Schedule II  ADVENT SOFTWARE, INC  VALUATION AND QUALIFYING ACCOUNTS  For the years ended December 31, 2009, 2008 and 2007

Balance at
Beginning
of Period

Additions
(Reductions)
Charged
to Expense

Write-offs /
Adjustments

Balance at
End
of Period(in thousands)Allowance for doubtful accounts:2007

$
270

$
79

$
168

$
1812008

$
181

$
327

$
161

$
3472009

$
347

$
215

$
295

$
267Allowance for sales returns:2007

$
2,135

$
118

$
168

$
2,0852008

$
2,085

$
219

$


$
2,3042009

$
2,304

$
315

$


$
2,619Deferred tax asset valuation allowance:2007

$
11,576

$
(3,065
)
$
2,474

$
6,0372008

$
6,037

$
(344
)
$
(1,168
)(1)
$
6,8612009

$
6,861

$
(5,560
)
$


$
1,301


(1)In
2007, Advent wrote-off a deferred tax asset relating to expiring capital losses which had a full valuation allowance against it. However, on
its 2007 tax return, the Company was able to utilize a portion of those losses and create a different type of deferred tax asset that necessitated a valuation allowance. This amount reflects the
impact of that tax position.


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Table of Contents

Schedules other than those listed above have been omitted since they are either not required, not applicable, or because the information required is included in
the consolidated financial statements or the notes thereto.



Incorporated by ReferenceExhibit
Number



Filed
HerewithExhibit Description

Form

Date

Number2.1

Agreement and Plan of Merger by and among Advent Software, Inc. ("Advent"), Kayak Acquisition Corp., and Kinexus Corporation dated as of December 31, 2001

8-K

3/1/2002

2.12.2

Agreement and Plan of Reorganization by and among the Registrant, Tamale Software, Inc., Tenor Corporation and Tenor LLC dated as of September 4, 2008

8-K

9/5/2008

2.12.3

Agreement and Plan of Merger by and among MicroEdge Holdings, LLC, MicroEdge Merger Sub, LLC, MicroEdge, Inc., Advent Software, Inc., and with respect to Articles VII, VIII and IX only, U.S. Bank
National Association as Escrow Agent, dated July 27, 2009

8-K

7/28/2009

2.13.1

Second Amended and Restated Certificate of Incorporation of Registrant

10-K

3/12/2001

3.13.2

Amended and Restated Bylaws of Registrant

8-K

2/18/2010

3.14.1

Specimen Common Stock Certificate of Registrant

SB-2

11/15/1995

***10.1

Form of Indemnification Agreement for Executive Officers and Directors*

SB-2

11/15/1995

***10.2

1992 Stock Plan, as amended*

S-8

5/28/1999

4.110.3

1993 Profit Sharing & Employee Savings Plan, as amended*

SB-2

11/15/1995

***10.4

1995 Employee Stock Purchase Plan*

SB-2

11/15/1995

***10.5

1995 Director Option Plan*

S-8

8/11/2000

4.110.6

2002 Stock Option Plan, as amended*

DEF 14A

4/22/2005

Appendix B10.7

Office Lease dated July 22, 1999, between 405 Lexington, L.L.C. and Advent for facilities located at 666 Third Avenue in New York, New York

10-K

3/17/2000

10.1510.8

2005 Employee Stock Purchase Plan*

DEF 14A

4/22/2005

Appendix A10.9

Office Lease dated January 6, 2006, between Toda Development, Inc. and Advent for facilities located at 600 Townsend Street in San Francisco, California.

8-K

1/12/2006

10.1


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Table of Contents

Incorporated by ReferenceExhibit
Number



Filed
HerewithExhibit Description

Form

Date

Number10.10

Executive Severance Plan dated March 14, 2006*

10-K

3/31/2006

10.1310.11

Summary of Plan Terms for 2008 Executive Short-Term Incentive Plan*

8-K

2/5/2008

10.110.12

2002 Stock Plan, as amended

DEF 14A

4/4/2008

Appendix A10.13

Summary of Plan Terms for 2009 Executive Short-Term Incentive Plan*

8-K

1/26/2009

10.110.14

Office Lease dated September 30, 2009 between 1114 6th Avenue Co. LLC and Advent for facilities located at 1114 Avenue of the Americas in New York, New York.

8-K

10/6/2009

10.110.15

2002 Stock Plan, as amended

DEF 14A

4/1/2009

Appendix A10.16

Description of Director Compensation







X10.17

Summary of Plan Terms for 2010 Executive Short-Term Incentive Plan*

8-K

2/18/2010

10.121.1

Subsidiaries of Advent







X23.1

Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm







X24.1

Power of Attorney (included on page 130 of this Form 10-K)







X31.1

Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002







X31.2

Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002







X32.1

Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002







X32.2

Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002







X


*Denotes
management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K.**Confidential
treatment requested as to certain portions of this exhibit.***Incorporated
by reference to the exhibit filed with Advent's registration statement filed on Form SB-2 (commission file
number 33-97912-LA), declared effective on November 15, 1995.


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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized, on this 12th day of March, 2010.

ADVENT SOFTWARE, INC.By:

/s/ JAMES S. COX James S. Cox Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)


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Table of Contents

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephanie G. DiMarco and
James S. Cox his or her attorney-in-fact, with full power of substitution, for him in any and all capacities, to sign any amendments to this Report on
Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date/s/ STEPHANIE G. DIMARCO Stephanie G. DiMarco

Chief Executive Officer and Director (Principal Executive Officer)

March 12, 2010/s/ JAMES S. COX James S. Cox

Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

March 12, 2010/s/ A. GEORGE BATTLE A. George Battle

Director

March 12, 2010/s/ JAMES D. KIRSNER James D. Kirsner

Director

March 12, 2010/s/ CHRISTINE S. MANFREDI Christine S. Manfredi

Director

March 12, 2010/s/ JAMES P. ROEMER James P. Roemer

Director

March 12, 2010/s/ JOHN H. SCULLY John H. Scully

Chairman of the Board

March 12, 2010/s/ WENDELL G. VAN AUKEN Wendell G. Van Auken

Director

March 12, 2010


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