<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                            ------------------------
                                   FORM 10-K
                            ------------------------
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
 
                   FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
           FOR THE TRANSITION PERIOD FROM             TO
 
                          COMMISSION FILE NO. 0-12192
 
                               BGS SYSTEMS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                            ------------------------
 
<TABLE>
<S>                                             <C>
                 MASSACHUSETTS                                     04-2559993
            (STATE OF INCORPORATION)                  (IRS EMPLOYER IDENTIFICATION NUMBER)
</TABLE>
 
              ONE FIRST AVENUE, WALTHAM, MASSACHUSETTS 02254-9111
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (617) 891-0000
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
<TABLE>
<S>                                             <C>
          COMMON STOCK, $.10 PAR VALUE                      THE NASDAQ STOCK MARKET
                (TITLE OF CLASS)                         (EXCHANGE ON WHICH REGISTERED)
</TABLE>
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-K or any amendment to this
Form 10-K. [X]
 
     The aggregate market value of the registrant's voting stock held by
non-affiliates (excluding shares as to which beneficial ownership is disclaimed
by affiliates), as of March 21, 1997, was $90,985,080.
 
 Indicate the number of shares outstanding of the registrant's common stock, as
                               of March 21, 1997:
        Common Shares: 6,289,084 (exclusive of 160,614 Treasury Shares)
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the proxy statement for the Annual Meeting of Stockholders to
be held June 10, 1997 are incorporated by reference into Part III.

================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1.  BUSINESS
 
     BGS Systems, Inc., hereinafter referred to as "the Company," is a
Massachusetts corporation which was organized in 1975. The Company designs,
develops, markets and supports the BEST/1(R) Performance Assurance(R) line of
performance management and capacity planning software products which can
measure, analyze, report or predict the performance of a customer's computer
system or network. These software products enable customers to make more
efficient use of their existing hardware, software and computer personnel
resources, and plan for the cost-effective expansion of their computer
operations to meet growing demands. This process can result in substantial
savings for the customer.
 
     The Company focuses on a single specialty: performance and capacity
management software products. Many of the Company's products make use of
proprietary performance modeling technology as well as intellectual data display
technology, developed by the Company's research staff. The Company believes it
is the leading supplier of computer performance and capacity management
products.
 
INDUSTRY REQUIREMENTS
 
     The past few years have seen the accelerated usage of computer systems in
large enterprises and in every aspect of business, from the desktop to the
departmental client/server database to the corporate mainframe information
warehouse. Typically, these systems are linked together by local and wide area
communications facilities to form corporate-wide networks of often dissimilar
hardware and software platforms. Increasingly, these diverse computing platforms
are being used as components to deliver mission critical applications such as
airline, hotel and automobile reservations, credit card authorizations, banking
(especially automatic teller machines), stock market quotations and many others,
on a 24-hour per day seven day-a-week basis.
 
BGS PERFORMANCE ASSURANCE PRODUCT FUNCTIONS
 
     Assuring good performance has become an integral part of managing these
mission critical computing systems. Performance management requires software
tools to monitor current performance, detect and report performance problems,
analyze the causes of performance exceptions, and predict the effect of proposed
hardware and software changes. The Company believes that BEST/1 Performance
Assurance products cover the widest scope of functions including performance
monitoring, reporting, exceptions, performance data base, trending, tuning and
"What If?" modeling for capacity planning.
 
BGS PRODUCTS SUPPORT MULTIPLE COMPUTING ENVIRONMENTS
 
     BGS Systems, Inc. and its BEST/1 Performance Assurance product family are
widely known and recognized as industry leaders in the performance field. The
Company believes that BEST/1 Performance Assurance tools cover the broadest
range of computing environments including all of the major mainframe, midrange,
and workstation platforms. BGS performance products support hardware platforms
from leading vendors including IBM System/390 architecture MVS and VM
mainframes, IBM AS/400 and OS/2 workstations, UNIX systems including versions
from IBM, Hewlett-Packard and Sun, OpenVMS systems and IBM SNA networks,
Microsoft Windows NT, Novell and some network environments.
 
CUSTOM CONSULTING SERVICES
 
     The Company offers custom consulting services to those customers who
request them. These consulting services are generally provided in those cases
where a customer has an unusual business problem to solve which demands special
expertise.
 
SUPPORT SERVICES
 
     All customers who license BGS products are entitled to subscribe to the
annual maintenance services for an extra fee. The service includes product
upgrades (such as enhancements to reflect new product releases and
<PAGE>   3
 
the correction of "bugs," if any), a "telephone hotline" for answering
customers' questions, product training classes, and "Technical Release Notes"
which are published periodically and made available to customers.
 
     Approximately 87% of the Company's customers subscribe to the annual
maintenance services. The annual maintenance services are billed and payable in
one lump sum at the beginning of each maintenance year.
 
PRINCIPAL MARKETS
 
     The Company's customers include manufacturers, banks, insurance companies,
retailers, educational institutions, government agencies, health providers,
transportation companies, service companies, telecommunications companies,
utilities and several other categories of organizations. More than 32,000
products have been shipped. No individual customer has accounted for more than
10% of the Company's revenues in any of the past three fiscal years. License
revenues from exports (which do not include sales by the Company's
subsidiaries), all of which were billed in U.S. dollars, accounted for 4% of
total revenue in 1997, 4% in fiscal year 1996 and 4% in fiscal year 1995. See
"Foreign and Domestic Operations and Export Sales." Inasmuch as the Company's
products are designed for use with moderately expensive computer hardware
equipment, most of its customers have the resources to make a substantial
commitment to data processing and computer installations. Many of the companies
in the 1997 Fortune directory of the 500 largest industrial corporations in the
United States, as well as a number of the nation's largest insurance companies
and financial institutions and federal and government agencies, are customers
for one or more of the Company's products. The Company is expanding its foreign
marketing and, to date, has made sales to over 200 major foreign companies.
 
MARKETING
 
     The Company generates market awareness and prospective leads for its
products through a combination of direct mail, telemarketing, product seminars,
attendance at appropriate trade groups, and through its product newsletter and
technical papers.
 
     The Company sells its products through its own direct sales force in North
America and through wholly-owned BGS subsidiaries in the U.K., Germany, Italy,
Australia and BGS Systems, Ltd.'s branches in France and Spain. Other global
markets such as Latin America and the Pacific Rim are covered by third party
distributors. IBM markets and sells BEST/1 for the AS/400 under a worldwide
distribution agreement.
 
WORLD WIDE WEB HOME PAGE
 
     The Company maintains a publicly accessible Home Page on the Internet World
Wide Web for Company product and financial information. BGS information can be
obtained by reference to the World Wide Web URL http://www.bgs.com.
 
NEW STRATEGIC ALLIANCES FOR OPEN SYSTEMS MARKETPLACE
 
     Today's ever changing distributed client/server environments require close
cooperation with leading hardware platform and applications vendors so that BGS'
BEST/1 Performance Assurance products can keep up with rapidly evolving
technology. Over the past few years, BGS has formed alliances with IBM, Hewlett-
Packard, Sun, NCR, Sybase, Oracle, Informix, Siemens Nixdorf, Microsoft, Bull
and Dell.
 
     In many cases, such alliances permit BGS to rapidly support more computer
platforms and to obtain timely information about changes in existing platforms
so that BGS products can properly represent the performance of the hardware,
software and workloads in use by customers.
 
NEW NETWORK PRODUCTS
 
     The Company invested heavily in the development of new network products.
Early commercial versions are anticipated for 1997. As with most early versions,
these products are not expected to generate significant revenue in the initial
years. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations."
 
                                        2
<PAGE>   4
 
BACKLOG
 
     Since orders are normally filled within one week of receipt, the Company
does not typically maintain a significant backlog for its products except
occasionally at the end of quarters.
 
RESEARCH AND PRODUCT DEVELOPMENT
 
     Costs of software were $4,606,730 in 1997, $3,028,052 in 1996, and
$2,651,834 in 1995. Costs of maintenance and support were $8,777,179 in 1997,
$6,471,298 in 1996, and $5,426,111 in 1995. Consulting, development contracts
and other costs were $953,543 in 1997, $679,347 in 1996, and $761,098 in 1995.
The Company's research and development costs were $2,751,234 in 1997, $1,965,232
in 1996, and $1,887,749 in 1995. During fiscal year 1997, the Company
capitalized $964,063 of software costs relating to products that will be
released during the coming year and amortized $456,250 of previously capitalized
software costs. The Company believes that its future success will depend on its
ability to continue to improve its existing software products and to develop or
acquire additional software products.
 
     From time to time, each hardware supplier (IBM, HP, SUN, DEC, NCR) changes
its operating systems, computer hardware, and monitor data. Since its inception,
the Company has successfully adapted its products to accommodate these changes
but there is no assurance that it will be able to do so in the future. The
Company has designed into its products a number of facilities to ease the task
of maintaining compatibility.
 
COMPETITION
 
     Management believes that it is the only company that has a related suite of
performance and capacity modeling products covering major operating systems
described above. However, the Company believes that approximately 5-15 companies
compete directly with the Company in at least one product area.
 
     Those companies who have competing products include: Computer Associates,
Digital Equipment Corporation, Compuware Corporation, Candle Corporation,
Hewlett-Packard, BMC Software, Landmark Systems Corporation and IBM. The Company
believes that these competitors have some (negative) impact on the Company's
sales and requires the Company to increase its marketing and sales efforts and
expenditures in response.
 
     The Company believes that the important considerations for potential
purchasers of the products are product capabilities, reputation for reliability
and customer service, integration and breadth of the product line, the continual
flow of new product features, the financial stability of the Company, and to a
lesser extent, price.
 
PRODUCT PROTECTION
 
     The Company generates new revenue through the sales of software licenses.
These licenses do not transfer title to the products; they "license" the right
to use the products for a period of time and under conditions controlled by the
Company's Master License Agreement.
 
     The Company regards its software as proprietary and attempts to protect it
with copyrights, trade secret laws and internal and external nondisclosure
safeguards as well as restrictions on disclosure and transferability
incorporated in its software license agreements. Despite these restrictions, it
may be possible for competitors or users to copy aspects of the Company's
products or to obtain information which the Company regards as its trade
secrets. The Company believes that the rapid pace of technological change in the
computer industry makes patent or copyright protection of less significance than
such factors as the knowledge and experience of management and personnel and the
Company's ability to develop, enhance, market and acquire new systems and
services.
 
EMPLOYEES
 
     As of January 31, 1997, the Company and consolidated subsidiaries had 276
employees, 220 domestically and 56 internationally.
 
                                        3
<PAGE>   5
 
WORKING CAPITAL REQUIREMENTS
 
     The Company's business has not thus far required working capital
significantly in excess of levels considered normal in the computer software
industry.
 
GOVERNMENT CONTRACTS
 
     The Company does not believe that any material portion of its business is
subject to renegotiation of profits or termination of contracts at the election
of the United States government.
 
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
 
     In fiscal years 1984, 1990, 1992, and 1994, the Company established
subsidiaries in the United Kingdom, Germany, Italy and Australia, respectively.
In fiscal years 1992 and 1994, BGS Systems, Ltd. established branches in France
and Spain, respectively. Export revenues (which do not include revenues from
sales and service by these Company subsidiaries) were $2,001,025 in 1997,
$1,780,826 in 1996, and $1,468,641 in fiscal year 1995. These revenues were
derived from sales and service by the Company's network of independent
distributors. A description of revenues, profits and assets attributable to the
operations of the Company's international subsidiaries is set forth in Note 8 to
the Company's Consolidated Financial Statements.
 
ITEM 2.  PROPERTIES
 
     On December 28, 1995, the Company purchased the land, building and
improvements (collectively the "Property") known as One First Avenue, Waltham,
Massachusetts. The land consists of approximately 4.45 acres improved by an
80,000 s.f. single-story, brick building. The Property serves as the Company's
world-wide headquarters. The Company subleases office space in its building to a
tenant under a non-cancelable sublease which expires in fiscal year 2009.
 
     In addition, the Company leases office space under operating leases
expiring in various years through 1998. The Company's subsidiaries lease office
space in the United Kingdom, Germany, Italy, Australia, France and Spain. Total
rent expense amounted to $1,359,221 in 1997, $1,672,590 in 1996, and $1,558,353
in 1995.
 
ITEM 2A.  EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Set forth below is certain information with respect to the executive
officers of the Company during the fiscal year 1997 or at March 28, 1997.
 
<TABLE>
<CAPTION>
NAME                               AGE     POSITION WITH THE COMPANY
----                               ---     -------------------------
<S>                                <C>     <C>
Harold S. Schwenk, Jr............   55     Chief Executive Officer, Chairman of the Board of
                                           Directors, President and Director

Jeffrey P. Buzen.................   53     Chief Scientist, Senior Vice President, Treasurer,
                                           Clerk and Director

James S. McGuire.................   53     Chief Operating Officer

Normand Bilodeau.................   47     Chief Financial Officer

John P. Pryor....................   54     Vice President, Marketing and Sales

C. Russel Hansen, Jr.............   50     Vice President and General Counsel
</TABLE>
 
     Harold S. Schwenk, Jr. has served as President and Director of the Company
since it was founded in 1975, and as Chief Executive Officer since 1983. He also
served as the Chief Financial Officer until September 13, 1984, and was the
acting Chief Financial Officer from April 1985 to April 1990. Dr. Schwenk
received his Ph.D. in Applied Mathematics from Harvard University in 1972.
 
     Jeffrey P. Buzen is Chief Scientist, Treasurer and Senior Vice President of
the Company and has served as Clerk and Director of the Company since it was
founded in 1975. Dr. Buzen developed the mathematical techniques upon which many
of the Company's products are based. In addition to his work at the Company, Dr.
Buzen has held faculty positions at Harvard and Brown Universities and has
published numerous articles
 
                                        4
<PAGE>   6
 
on the theory and practice of capacity management. Dr. Buzen received a Ph.D. in
Applied Mathematics from Harvard University in 1971.
 
     James S. McGuire has been Chief Operating Officer since November 1990. He
joined the Company in 1986 as Vice President of Sales and Marketing and Vice
President of Product Development. Mr. McGuire received his B.A. in Economics and
Classics from Holy Cross College in 1965.
 
     Normand Bilodeau, CPA has been Chief Financial Officer since April 1990.
Mr. Bilodeau joined the Company in 1984 and prior to his promotion held the
position of Controller. From March 1983 until he joined BGS, he was the Manager
of General Accounting for the Boston Consulting Group. Mr. Bilodeau received his
B.S. in accounting from Bryant College in 1976.
 
     John Pryor has been Vice President, Marketing and Sales since September
1995. He joined the Company in February 1995 as Vice President for International
Operations. From September 1990 until he joined BGS, he was Vice President of
Sales for NYNEX Information Resources Co. where he was responsible for sales and
service of NYNEX directory advertising throughout the New England states. Mr.
Pryor received his B.A. in Economics and Business from Wagner College in 1965
and his M.B.A. from Fairleigh Dickinson University in 1971.
 
     C. Russel Hansen, Jr. has been Vice President and General Counsel of the
Company for more than 5 years and Vice President and General Counsel of PCD Inc.
since July 1996. A graduate of Harvard College and Harvard Law School and a
former Senior Partner at Hale and Dorr, Mr. Hansen has also been Chairman of The
Governance Institute since 1996 and Editor-Publisher of Van Rensselaer Press
since 1995.
 
ITEM 3.  LEGAL PROCEEDINGS
 
     There are no pending legal proceedings to which the Company is a party or
to which any of its property is subject other than ordinary routine litigation
incidental to its business.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     The Company did not submit any matter during the fourth quarter of the
fiscal year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market(SM) under the symbol: BGSS.
 
     Dividends on the Registrant's common stock are declared by the Board of
Directors and normally paid to shareholders as of the record dates in April,
July, October and January.
 
     Information on market prices and dividends is set forth below:
 
                            COMMON STOCK SALE PRICES
 
<TABLE>
<CAPTION>
                                                               FY 1997              FY 1996
                                                          ----------------    ----------------
    FISCAL QUARTER                                         HIGH      LOW       HIGH      LOW
    --------------                                        ------    ------    ------    ------
    <S>                                                  <C>        <C>       <C>       <C>
    First............................................     18 5/8    15        15 1/8    12 3/8
    Second...........................................     25        14 7/8    17        14 1/4
    Third............................................     23 1/2    20 7/8    19 1/8    16 1/8
    Fourth...........................................     31 3/4    22        20 1/2    17 3/8
                                                          
</TABLE>
 
                                        5
<PAGE>   7
 
                              CASH DIVIDENDS PAID
 
<TABLE>
<CAPTION>
    FIRST QUARTER                                                    1997          1996
    -------------                                                    ----        ---------
    <S>                                                              <C>        <C>
    First......................................................      $.13             $.12
    Second.....................................................      $.25             $.13
    Third......................................................      $.25             $.12
    Fourth.....................................................      $.30        $.13-$.63
              TOTAL............................................      $.93            $1.13
</TABLE>
 
     In addition to the regular quarterly dividend, the Board of Directors
authorized the payment of a special dividend of $.63 per share in the fourth
quarter of FY 1996.
 
     As of March 21, 1997, there were 228 holders of record of the Company's
common stock.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
<TABLE>
<CAPTION>
                                                            YEARS ENDED JANUARY 31
                                         ------------------------------------------------------------
                                           1997         1996         1995         1994        1993
                                         ---------    ---------    ---------    ---------   ---------
                                              (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S>                                      <C>          <C>          <C>          <C>         <C>
Operating Revenue....................... $  48,578    $  41,056    $  35,381    $  32,052   $  30,322
Cost and Expenses.......................    35,597       29,627       24,798       22,589      21,456
Investment and Other Income.............     1,079          932          812        1,088       1,345
Income Before Income Taxes.............. $  14,060    $  12,360    $  11,395    $  10,551   $  10,211
Net Income.............................. $   9,113    $   7,982    $   7,405    $   7,195   $   6,727
Net Income Per Share.................... $    1.44    $    1.27    $    1.19    $    1.12   $    1.05
Dividends Per Share..................... $     .93    $    1.13    $    1.10    $    1.00   $    1.29
Weighted Average Shares Outstanding..... 6,343,975    6,264,090    6,233,220    6,446,538   6,412,764
Working Capital......................... $   7,056    $   7,220    $  11,934    $  12,301   $  13,567
Total Assets............................ $  40,934    $  35,381    $  31,093    $  28,192   $  27,984
Long-Term Debt..........................        --           --           --           --          --
Stockholders' Equity.................... $  18,242    $  14,961    $  13,723    $  13,784   $  14,706
</TABLE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION
 
MATERIAL CHANGES IN RESULTS OF OPERATIONS
 
     Fiscal year 1997 operating revenues were $48,578,000 an increase of 18%
from the $41,056,000 produced in fiscal year 1996. Revenue from license fees
grew 28% to $28,121,000, maintenance fees increased 6% to $17,986,000 and
consulting, development contracts and other revenue increased 17% from the
levels of the prior fiscal year.
 
     Sales of the Company's products for distributed systems increased 84% over
the prior year's levels and now account for 49% of the Company's revenue from
new license fees. The majority of the growth in license fee revenue came from
the Company's domestic operations which posted an increase of 39% over the prior
fiscal year. License fee revenue from the Company's international operations
grew 9% over the prior fiscal year. The Company's domestic operations benefited
from a number of large purchases of products for distributed systems and
sustained demand for the Company's Datacenter products for mainframe computers.
The continuation of this growth in domestic license fee revenue is dependent
upon the Company's products remaining current with changes in both technology
and the marketplace. The Company's new network product was negatively impacted
during the year. As the Company's offering for LAN's was nearing market
readiness, the licensor of a component imbedded in the product was acquired and
the negotiations with the acquiror to extend the license agreement have proved
difficult. While the Company does have a similar product under development,
which will be in beta test in the latter part of fiscal year 1998, it had been
targeted at a different segment part of the network market and the Company has
now had to extend the scope of our internally developed product, leading to
additional development costs and market delays.
 
                                        6
<PAGE>   8
 
     All of the Company's international operating units, with the exception of
our Italian subsidiary, posted gains in license fee revenue over the prior
fiscal year. The Company did focus its marketing resources for the UNIX and
network products first in the domestic marketplace and subsequently in the
international area. Consequently, the growth in revenue from these newer
products in the international area is expected to be delayed from the growth
realized domestically. The Company's international operations have been
primarily focusing their attention on the slower growing mainframe area.
 
     Revenue from maintenance fees grew 6% for the year down from the 13% growth
of fiscal year 1996 over fiscal year 1995. The Company continued to experience a
deterioration of the maintenance renewals from its older Crystal, VM and SNA
network product lines as maintenance fee revenue from these products declined
31% from the prior year's levels. In fiscal year 1996 these products accounted
for 18% of maintenance fee revenue and accounted for only 12% in fiscal year
1997. The Company's average maintenance renewal rate improved slightly to 87%
percent as compared to 83% experienced the prior year and the 87% in fiscal year
1995. Maintenance fee revenue is recognized ratably over the term of the
contract, and the majority of our maintenance contracts encompass portions of
two fiscal years. As a result, the effect of fiscal year 1996's lower renewal
rate had an adverse impact on fiscal year 1997 maintenance fee revenue.
Conversely, fiscal year's 1997's improved renewal rate should provide a basis
for improved growth in fiscal year 1998. Renewals of the Company's UNIX products
are just beginning to occur in meaningful quantities. As of now, the Company's
ability to forecast these revenues is limited.
 
     Consulting, development contracts and other revenue increased 17% to
$2,471,000 on the strength of improved levels of consulting work completed
during the year. A greater number of the Company's customers chose to have our
fee based personnel help with newly purchased products and provide onsite
training and consulting. Revenue from these sources tends to come from the
Company's existing customer base primarily for the support of our product sales.
Revenue from development contracts and other revenue were at levels similar to
those of the prior year.
 
     Fiscal year 1997's aggregate costs and expenses increased 20% to
$35,597,000 from $29,627,000 the prior fiscal year, which had increased 19% over
fiscal year 1995's expenses. The cost of software increased 52% to $4,607,000
and was greater than anticipated. The shortages of qualified labor along with
the desire to bring products to the marketplace more rapidly combined to
accelerate growth of these expenses. As the Company pursues the development of
new products, it requires the services of software engineers with expertise
other than that which its current employees possess. There has been a growing
shortage of qualified software engineers and technical support people. This has
resulted in higher labor and hiring costs. Additionally, the Company has also
found that in many instances it is unable to hire people with the required
expertise when they were needed and has had to incur even higher costs to bring
in outside consultants to keep these projects on schedule. The combination of
these events resulted in fiscal year 1997 costs being higher than planned. It is
expected that the Company will continue to experience rapidly rising labor
related expenses. The margin on license fee revenue dropped to 84% from 86% for
each of the prior two fiscal years. During the year the Company capitalized
$964,000 of software development costs and amortized $456,000 of previously
capitalized costs.
 
     The cost of maintenance and support increased 36% as the Company provided
additional resources to provide support for its growing product base. As with
the cost of software, the cost of both hiring additional people with the
expertise necessary to provide quality services and to retain the qualified
people we have has had a negative impact on our cost of maintenance. As the
Company adds new products these increases will continue. The margin on
maintenance fee revenue declined to 51% from 62% last year and 64% in fiscal
year 1995. The cost of consulting, development contracts and other revenue
increased principally as a result of adding more consultants to the Company's
payroll. Margin was 61% versus 68% last year and 59% in fiscal year 1995.
General and administrative expenses declined slightly from the prior year.
 
     Sales and marketing expenses increased 9% over the prior year which had
increased 26% over fiscal year 1995. While the cost of sales increased in
relation to the increase in commissionable revenue, that increase was partially
offset by the reduction of marketing costs versus the prior fiscal year that
were associated with the rollout of new products. Depending on the timing of the
release of products currently in development, the
 
                                        7
<PAGE>   9
 
Company may incur additional marketing costs in fiscal year 1998 relating to the
rollout of new products. Operating income increased 14% to $12,981,000 from
$11,428,000 which had increased 8% over fiscal year 1995. Operating margin
declined to 27% from 28% in fiscal year 1996.
 
     Investment income declined 39% to $569,000 in fiscal year 1997, compared to
$932,000 earned a year earlier. A decrease in the amount of funds invested in
interest bearing securities was the primary reason for the decline. In the
fourth quarter of fiscal year 1996 the Company used some of its cash reserves to
purchase and renovate a building that is now serving as its new headquarters.
Other income is primarily a one time payment from a former tenant of our new
headquarters to obtain an early release from its lease.
 
     Fiscal year 1997's net income grew 14% over last year's which had increased
8% over the prior fiscal year. Earnings per share increased 13% to $1.44 from
$1.27 last year which had increased 7% over fiscal year 1995. The effective tax
rate for all three year's was 35%.
 
MATERIAL CHANGES IN FINANCIAL CONDITION/LIQUIDITY
 
     Cash and marketable securities increased $737,000 as funds provided by
operations were used to renovate the Company's new headquarters, purchase
equipment for our development effort and to pay dividends. Dividends in the
amount of $5,785,000 were paid during the course of the year. During the year,
the Company twice increased the rate of the regular quarterly dividend to its
current rate of $.30 per share. Accounts receivable increased 2% or $309,000 to
$14,472,000 on an increased level of revenue. Prepaid expenses and other assets
increased primarily as a result of an increase in the prepayment of royalties.
Capitalized software increased $508,000 and represents a portion of the
Company's increased investment in products that will be released in the near
future.
 
     Accrued expenses increased primarily as a result of amounts owed in
connection with the renovation of the Company's new headquarters. Accrued
compensation declined by $439,000 as a greater percentage of incentive
compensation was paid throughout the year rather than after year end as was done
in fiscal year 1996.
 
     The $1,321,000 increase in deferred revenue represents both the increased
level of license fee revenue and an increase in prebilled maintenance.
 
     The Company had a two-for-one stock split effective November 1, 1996 and
subsequently increased its regular quarterly dividend to a rate of $.30 per
share from $.25 per share effective with the payment of its quarterly dividend
on January 3, 1997.
 
     The Company invests principally in short-term certificates of deposit,
money market funds, and high grade municipal bonds. The Company's cash resources
are considered sufficient to finance the Company's growth in the foreseeable
future.
 
TRENDS AND UNCERTAINTIES
 
     The Company has entered into a number of alliances with other software
vendors to use their products in conjunction with the Company's internally
developed products. As the Company has noted, one of these arrangements has not
worked out as the Company intended. While the Company does not expect this to
happen again, such unexpected changes in alliances could delay future product
introductions and result in added expense.
 
     The Company is continuing its aggressive product development plans for the
coming year. We will be adding products in the Distributed Systems and Network
areas as well as increasing costs to extend and renovate some older products.
These new products will expose the Company to new competitive forces and
uncertainties.
 
     The environment of rapid technological change and intense competition which
is characteristic of the software development industry results in frequent new
products and evolving industry standards. The Company's continued success
depends on its ability to enhance current products and develop new products on a
timely basis which keep pace with the changes in technology, evolving industry
standards and increasingly
 
                                        8
<PAGE>   10
 
sophisticated customer needs. The Company currently derives a significant
portion of its revenue from licenses and related maintenance fees of its
Datacenter and UNIX product lines. As a result, any factor adversely impacting
sales of Datacenter or UNIX would have a material adverse effect on the Company.
 
     The Company's foreign operations are subject to certain economic and
regulatory risks and uncertainties specific to each geographic region. Such
risks and uncertainties could disrupt the Company's foreign operations and have
a material impact on the Company's financial results.
 
     The Company does not expect inflation and price changes to have a material
effect on its operations.
 
     This Annual Report on Form 10-K contains forward-looking statements that
involve a number of risks and uncertainties. There are a number of factors that
could cause the Company's actual results to differ materially from those
forecast or projected in such forward-looking statements, including those
discussed above. Investors are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The financial information required by Item 8 is contained in Item 14 of
Part IV on pages 12 through 26 of this Report.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
 
     The response to this item is furnished in Item 2A contained in Part I of
this Form 10-K captioned "EXECUTIVE OFFICERS OF THE REGISTRANT." The name, age
and background information for each of the Company's directors and nominees are
incorporated herein by reference to the section of the Company's Proxy Statement
for its 1997 Annual Meeting of Shareholders captioned "ELECTION OF DIRECTORS"
and "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE."
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     Information on compensation of the Company's executive officers and
directors is incorporated herein by reference to the sections of the Company's
Proxy Statement for its 1997 Annual Meeting of Shareholders captioned: "MEETINGS
AND COMMITTEES," "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION,"
" COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION," "EXECUTIVE
COMPENSATION," "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS," "EMPLOYMENT
ARRANGEMENTS," "AGGREGATED YEAR-END OPTION VALUES," AND GRAPHICAL COMPARISONS OF
COMMON STOCK TO MARKET INDICES."
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The number of Common Shares of the Company beneficially owned by each five
percent shareholder, director or current nominee for director, and by all
directors and officers as a group as of April 14, 1997 is incorporated herein by
reference to the sections of the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders captioned "SECURITY OWNERSHIP BY CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" and "ELECTION OF DIRECTORS."
 
                                        9
<PAGE>   11
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information concerning transactions with management, certain business
relationships and indebtedness of management is incorporated herein by reference
to the section of the Company's Proxy Statement for its 1997 Annual Meeting of
Shareholders captioned "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULE, AND REPORTS ON FORM 8-K
 
     (a)(1) Financial Statements
 
     The following consolidated financial statements of BGS Systems, Inc. and
subsidiaries are included in Item 8 and set forth on pages 12 through 26 of this
Report.
 
          Report of Ernst & Young LLP, Independent Auditors
 
          Consolidated Balance Sheets -- January 31, 1997 and 1996
 
          Consolidated Statements of Income -- years ended January 31, 1997,
          1996 and 1995
 
          Consolidated Statements of Stockholders' Equity -- years ended January
          31, 1997, 1996 and 1995
 
          Consolidated Statements of Cash Flows -- years ended January 31, 1997,
          1996 and 1995
 
          Notes to Consolidated Financial Statements (Including Supplementary
          Data)
 
     (a)(2) The following consolidated financial statement schedule is included
     in Item 14(d):
 
          Schedule II            Valuation Accounts           Page 27
 
          All other schedules for which provision is made in the applicable
     accounting regulations of the Securities and Exchange Commission are not
     required under the related instructions or are inapplicable and, therefore,
     have been omitted.
 
     (a)(3) Listing of Exhibits
 
          Exhibits required by 14(a)(3) and 14(c) are shown in the "Exhibit
     Index" on page 28.
 
     (b) Reports on Form 8-K
 
          The Company did not file any reports on Form 8-K during the last
     quarter of the period covered by this Report.
 
     (c) Exhibits
 
          The exhibits as shown in the "Exhibit Index" are filed as part of this
     Report.
 
          Each management contract or compensatory plan or arrangement is
     identified as such in the Exhibit Index herein incorporated, and such
     identification is so herein incorporated.
 
     (d) Other Financial Statements
 
          There are no financial statements required to be filed by Regulation
     S-X which are excluded from the annual report to shareholders by Rule
     14a-3(b).
 
                                       10
<PAGE>   12
 
                                   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.
 
                                          BGS SYSTEMS, INC.
 
                                          By:   /s/ HAROLD S. SCHWENK, JR.
                                            ------------------------------------
                                            Harold S. Schwenk, Jr.
                                            Chairman of the Board, President and
                                            Chief Executive Officer
 
Date:  April 21, 1997
 
     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.
 
<TABLE>
<S>   <C>                                                 <C>
By:             /s/ HAROLD S. SCHWENK, JR.                Date:  April 21, 1997
      ----------------------------------------------
                  Harold S. Schwenk, Jr.
           Chairman of the Board, President and
                 Chief Executive Officer
              (Principal Executive Officer)
 
By:           /s/ C. RUSSEL HANSEN, JR. FOR               Date:  April 21, 1997
      ----------------------------------------------
                     Jeffrey P. Buzen
                         Director
 
By:           /s/ C. RUSSEL HANSEN, JR. FOR               Date:  April 21, 1997
      ----------------------------------------------
                      Paul R. Duncan
                         Director
 
By:           /s/ C. RUSSEL HANSEN, JR. FOR               Date:  April 21, 1997
      ----------------------------------------------
                    Judith N. Goldberg
                         Director
 
By:                /s/ NORMAND BILODEAU                   Date:  April 21, 1997
      ----------------------------------------------
                     Normand Bilodeau
                 Chief Financial Officer
       (Principal Financial and Accounting Officer)
</TABLE>
 
                                       11
<PAGE>   13
 
                           ANNUAL REPORT ON FORM 10-K
 
                 ITEM 14(a)(1), (2) AND (3); 14(b), (c) AND (d)
                  FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
                          YEAR ENDED JANUARY 31, 1997
 
                               BGS SYSTEMS, INC.
                             WALTHAM, MASSACHUSETTS
 
                                       12
<PAGE>   14
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors and Stockholders
BGS Systems, Inc.
 
     We have audited the accompanying consolidated balance sheets of BGS
Systems, Inc. and subsidiaries as of January 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended January 31, 1997. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BGS Systems, Inc. and subsidiaries at January 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
 
                                            /s/ ERNST & YOUNG LLP
 
Boston, Massachusetts
March 20, 1997
 
                                       13
<PAGE>   15
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                            JANUARY 31
                                                                    ---------------------------
                                                                       1997            1996
                                                                    -----------     -----------
<S>                                                                 <C>             <C>
                                            ASSETS
Current assets:
  Cash and cash equivalents.......................................  $ 9,995,787     $11,228,411
  Marketable securities...........................................    3,010,000       1,040,000
  Accounts receivable, less allowance $365,000 in 1997 and
     1996 for doubtful accounts...................................   14,471,847      14,162,823
  Prepaid expenses and other assets...............................    1,309,325         951,033
  Prepaid income taxes............................................      172,413
  Deferred income taxes...........................................      282,728         257,398
                                                                    -----------     -----------
          Total current assets....................................   29,242,100      27,639,665
Capitalized software..............................................    1,282,813         775,000
Property, plant and equipment, net................................   10,409,412       6,966,134
                                                                    -----------     -----------
          Total assets............................................  $40,934,325     $35,380,799
                                                                    ===========     ===========
                                          LIABILITIES
Current Liabilities:
  Accounts payable................................................  $ 1,562,500     $ 1,343,665
  Accrued expenses................................................    1,975,772       1,162,102
  Accrued compensation and employee benefits......................    1,758,230       2,197,567
  Deferred revenue................................................   16,402,902      15,082,034
  Income taxes payable............................................                      421,159
  Billings in excess of costs and estimated earnings
     on uncompleted contracts.....................................      486,960         213,110
                                                                    -----------     -----------
          Total current liabilities...............................   22,186,364      20,419,637
Deferred income taxes.............................................      505,582
Stockholders' equity:
  Common stock, $.10 par value -- authorized 10,000,000 shares;
     issued and outstanding 6,429,698 shares in 1997 and 1996.....      642,971         642,971
  Capital in excess of par value..................................   14,156,285      14,065,919
  Retained earnings...............................................    6,410,407       3,082,920
  Equity adjustment from foreign currency translation.............   (1,090,124)       (700,680)
                                                                    -----------     -----------
                                                                     20,119,539      17,091,130
  Less cost of 160,614 shares (182,240 shares in 1996) of
     common stock in treasury.....................................    1,877,160       2,129,968
          Total stockholders' equity..............................   18,242,379      14,961,162
                                                                    -----------     -----------
          Total liabilities and stockholders' equity..............  $40,934,325     $35,380,799
                                                                    ===========     ===========
</TABLE>
 
                            See accompanying notes.
 
                                       14
<PAGE>   16
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED JANUARY 31
                                                          ---------------------------------------
                                                             1997          1996          1995
                                                          -----------   -----------   -----------
<S>                                                       <C>           <C>           <C>
REVENUES
  License fees..........................................  $28,121,034   $21,975,611   $18,516,896
  Maintenance fees......................................   17,985,698    16,967,017    14,990,795
  Consulting, development contracts and other...........    2,471,194     2,112,904     1,872,842
                                                          -----------   -----------   -----------
                                                           48,577,926    41,055,532    35,380,533
COSTS AND EXPENSES
  Cost of software......................................    4,606,730     3,028,052     2,651,834
  Cost of maintenance and support.......................    8,777,179     6,471,298     5,426,111
  Cost of consulting, development contracts and other...      953,543       679,347       761,098
  Sales and marketing...................................   14,691,667    13,495,746    10,706,677
  General and administrative............................    3,816,998     3,987,697     3,364,635
  Research and development..............................    2,751,234     1,965,232     1,887,749
                                                          -----------   -----------   -----------
                                                           35,597,351    29,627,372    24,798,104
                                                          -----------   -----------   -----------
Operating income........................................   12,980,575    11,428,160    10,582,429
Investment income.......................................      568,999       932,174       812,277
Other income............................................      510,214
                                                          -----------   -----------   -----------
                                                            1,079,213       932,174       812,277
                                                          -----------   -----------   -----------
Income before income taxes..............................   14,059,788    12,360,334    11,394,706
Income taxes............................................    4,947,070     4,378,417     3,989,407
                                                          -----------   -----------   -----------
Net income..............................................  $ 9,112,718   $ 7,981,917   $ 7,405,299
                                                          ===========   ===========   ===========
Net income per share....................................  $      1.44   $      1.27   $      1.19
                                                          ===========   ===========   ===========
</TABLE>
 
                            See accompanying notes.
 
                                       15
<PAGE>   17
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>                                                                         EQUITY
                                                                                ADJUSTMENT  
                                                                                   FROM 
                                COMMON STOCK       CAPITAL IN                     FOREIGN        TREASURY STOCK
                            --------------------    EXCESS OF     RETAINED       CURRENCY     ---------------------
                             SHARES      AMOUNT     PAR VALUE     EARNINGS      TRANSLATION    SHARES     AMOUNT         TOTAL
                            ---------   --------   -----------   -----------    -----------   -------   -----------   -----------
<S>                         <C>         <C>        <C>           <C>           <C>            <C>       <C>           <C>
BALANCE AT JANUARY 31,
  1994....................  6,429,698   $642,971   $14,246,955   $ 1,513,173    $  (561,371)  166,528   $(2,057,716)  $13,784,012
Shares issued under
  employee stock purchase
  and stock option
  plans...................                            (148,601)                               (47,158)      551,277       402,676
Tax benefit related to
  exercise of stock
  options.................                              22,126                                                             22,126
Dividends declared ($1.10
  per share)..............                                        (6,808,834)                                          (6,808,834)
Net income................                                         7,405,299                                            7,405,299
Translation adjustment....                                                           49,464                                49,464
Purchase of common stock
  for treasury............                                                                    106,400    (1,132,200)   (1,132,200)
                            ---------   --------   -----------   -----------    -----------   -------   -----------   -----------
BALANCE AT JANUARY 31,
  1995....................  6,429,698    642,971    14,120,480     2,109,638       (511,907)  225,770    (2,638,639)   13,722,543
Shares issued under
  employee stock purchase
  and stock option
  plans...................                            (125,661)                               (43,530)      508,671       383,010
Tax benefit related to
  exercise of stock
  options.................                              71,100                                                             71,100
Dividends declared ($1.13
  per share)..............                                        (7,008,635)                                          (7,008,635)
Net income................                                         7,981,917                                            7,981,917
Translation adjustment....                                                         (188,773)                             (188,773)
                            ---------   --------   -----------   -----------    -----------   -------   -----------   -----------
BALANCE AT JANUARY 31,
  1996....................  6,429,698    642,971    14,065,919     3,082,920       (700,680)  182,240    (2,129,968)   14,961,162
Shares issued under
  employee stock purchase
  and stock option
  plans...................                              90,366                                (21,626)      252,808       343,174
Dividends declared ($0.93
  per share)..............                                        (5,785,231)                                          (5,785,231)
Net income................                                         9,112,718                                            9,112,718
Translation adjustment....                                                         (389,444)                             (389,444)
                            ---------   --------   -----------   -----------    -----------   -------   -----------   -----------
BALANCE AT JANUARY 31,
  1997....................  6,429,698   $642,971   $14,156,285   $ 6,410,407    $(1,090,124)  160,614   $(1,877,160)  $18,242,379
                            =========   ========   ===========   ===========    ===========   =======   ===========   ===========
</TABLE>
 
                            See accompanying notes.
 
                                       16
<PAGE>   18
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED JANUARY 31
                                                          ---------------------------------------
                                                             1997          1996          1995
                                                          -----------   -----------   -----------
<S>                                                       <C>           <C>           <C>
OPERATING ACTIVITIES
Net income............................................... $ 9,112,718   $ 7,981,917   $ 7,405,299
Adjustments to reconcile net income to net cash provided
  by operating activities:
     Depreciation and amortization.......................   1,075,014       959,606       787,436
     Amortization of capitalized software................     456,250       137,500
     Gain on sales of available-for-sale securities......     (11,909)      (18,117)      (33,179)
     Deferred income taxes...............................     480,252       (72,424)      (54,638)
     Changes in operating assets and liabilities:
       Accounts receivable...............................     (62,631)   (1,946,918)   (1,648,942)
       Costs and estimated earnings in excess of billings
          on uncompleted contracts.......................     273,850       548,750      (306,000)
       Other current assets..............................    (416,110)      (98,856)     (230,439)
       Accounts payable and accrued expenses.............     535,892     1,052,300       105,138
       Deferred revenue..................................   1,283,787     2,043,830     2,036,458
       Income taxes......................................    (618,456)      105,367       576,196
                                                          -----------   -----------   -----------
          Net cash provided by operating activities......  12,108,657    10,692,955     8,637,329
 
INVESTING ACTIVITIES
Purchases of available-for-sale securities...............  (4,555,000)   (3,060,000)   (9,305,000)
Proceeds from maturity of available-for-sale
  securities.............................................   1,875,000     3,905,000     4,075,000
Proceeds from sale of available-for-sale securities......     721,909     4,573,117     4,221,912
Additions to property, plant and equipment...............  (4,515,247)   (6,403,427)     (758,436)
Additions to capitalized software costs..................    (964,063)     (637,500)     (275,000)
                                                          -----------   -----------   -----------
          Net cash used by investing activities..........  (7,437,401)   (1,622,810)   (2,041,524)
 
FINANCING ACTIVITIES
Purchases of common stock for treasury...................                              (1,132,200)
Proceeds from issuance of common stock...................     343,174       383,010       402,676
Dividends paid...........................................  (5,785,231)   (7,008,635)   (6,808,834)
                                                          -----------   -----------   -----------
          Net cash used in financing activities..........  (5,442,057)   (6,625,625)   (7,538,358)
 
Effect of exchange rate changes on cash and cash
  equivalents............................................    (461,823)     (300,731)      217,750
                                                          -----------   -----------   -----------
          Net increase (decrease) in cash and cash
            equivalents..................................  (1,232,624)    2,143,789      (724,803)
          Cash and cash equivalents at beginning of
            year.........................................  11,228,411     9,084,622     9,809,425
                                                          -----------   -----------   -----------
          Cash and cash equivalents at end of year....... $ 9,995,787   $11,228,411   $ 9,084,622
                                                          ===========   ===========   ===========
</TABLE>
 
                            See accompanying notes.
 
                                       17
<PAGE>   19
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                JANUARY 31, 1997
 
1.  SIGNIFICANT ACCOUNTING POLICIES
 
BUSINESS
 
     The environment of rapid technological change and intense competition which
is characteristic of the software development industry results in frequent new
products and evolving industry standards. The Company's continued success
depends on its ability to enhance current products and develop new products on a
timely basis which keep pace with the changes in technology, evolving industry
standards and increasingly sophisticated customer needs. The Company currently
derives a significant portion of its revenue from licenses and related
maintenance fees of its Datacenter and UNIX product lines. As a result, any
factor adversely impacting sales of Datacenter or UNIX would have a material
adverse effect on the Company.
 
PRINCIPLES OF CONSOLIDATION
 
     The consolidated financial statements include the accounts of BGS Systems,
Inc. (the Company) and its wholly-owned subsidiaries. Intercompany accounts and
transactions have been eliminated in consolidation.
 
USE OF ESTIMATES
 
     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates. Estimates used in the preparation of the Company's consolidated
financial statements include, but are not limited to: allowance for doubtful
accounts, revenue recognition and associated deferrals and amortization periods
of capitalized software.
 
FOREIGN CURRENCY TRANSLATION
 
     The balance sheet accounts of the foreign subsidiaries are translated into
U.S. dollars at current exchange rates; revenue and expense accounts are
translated at average exchange rates during the period. Translation gains and
losses are included in a separate component of stockholders' equity. Transaction
gains and losses, which are immaterial, are included in income.
 
REVENUE RECOGNITION
 
     License fees, which include fees from initial leases, are recognized as
revenue as follows: The portion which relates to maintenance, enhancements and
training of customer personnel for a one-year period is deferred and is
recognized ratably over such period. The remaining portion is recognized at the
time the computer tapes are shipped. Fees from maintenance and lease renewal
contracts are recognized ratably over the contract periods.
 
     Revenues from long-term contracts are recognized on the percentage of
completion method. Earned revenue is based on the percentage that incurred costs
to date bear to total estimated costs after giving effect to the most recent
estimates of total cost. The cumulative impact of revisions in total cost
estimates during the progress of work is reflected in the year in which these
changes become known. Earned revenue reflects the original contract price
adjusted for agreed upon claim and change order revenue, if any. Losses expected
to be incurred on jobs in process, after consideration of estimated minimum
recoveries from claims and change orders, are charged to income as soon as such
losses are known. Progress billings in accounts receivable are currently due in
accordance with contract terms.
 
                                       18
<PAGE>   20
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
CASH EQUIVALENTS
 
     Cash equivalents consist of certificates of deposit, money market funds,
and similar investments with maturities of three months or less at the date of
acquisition. The cost of all cash and cash equivalents approximates fair market
value due to the short maturity of the instruments.
 
MARKETABLE SECURITIES
 
     The Company accounts for marketable securities under Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Statement 115 establishes the accounting and reporting
requirements for all debt securities and for investments in equity securities
that have readily determinable fair value. All affected investment securities
must be classified as one of the following: held-to-maturity, available-for-sale
or trading. Held-to-maturity securities are carried at amortized cost.
Available-for-sale securities are carried at fair value, with unrealized holding
gains and losses reported as a separate component of stockholders' equity.
Trading securities are carried at fair value, with unrealized holding gains and
losses reported in the income statement. Realized gains and losses and declines
in value judged to be other-than-temporary on available-for-sale securities are
included in investment income. Interest and dividends on securities classified
as available-for-sale are included in investment income.
 
CONCENTRATION OF CREDIT RISK
 
     Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of cash and cash equivalents, marketable
securities and accounts receivable. The Company invests its excess cash
primarily in high quality securities and limits the amount of credit exposure to
any one financial institution. The investment policy limits the Company's
exposure to concentration of credit risk and changes in market conditions.
 
     The Company provides credit in the normal course of business, and
accordingly, performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. These allowances when realized, have
been within the range of management's expectations. Credit risk on trade
receivables is minimized as a result of the large and diverse nature of the
Company's worldwide customer base.
 
PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment is stated on the basis of cost. Depreciation
is computed by use of the straight-line method over the following estimated
useful lives:
 
<TABLE>
        <S>                                                  <C>
        Building..........................................       39.5 years
        Furniture and fixtures............................    6 to 10 years
        Computer equipment and software...................     3 to 5 years
</TABLE>
 
CAPITALIZED SOFTWARE
 
     Certain software development costs are capitalized when incurred.
Capitalization of software development costs begins upon the establishment of
technological feasibility. The establishment of technological feasibility and
the ongoing assessment of recoverability of capitalized software development
costs requires considerable judgment by management with respect to certain
external factors, including, but not limited to, technological feasibility,
anticipated future gross revenues, estimated economic life and changes in
software and hardware technologies. The Company capitalized $964,063, $637,500
and $275,000 of software development costs during 1997, 1996 and 1995,
respectively. Total amortization of capitalized software was $456,250 and
$137,500 in 1997 and 1996. There was no amortization in 1995.
 
                                       19
<PAGE>   21
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Amortization of capitalized software development costs is provided on a
product-by-product basis at the greater of the amount computed using (a) the
ratio of current gross revenues for a product to the total of current and
anticipated future gross revenues or (b) the straight-line method over the
remaining estimated economic life of the product, not to exceed two years. All
other research and development expenditures are charged to research and
development expense in the period incurred.
 
INCOME TAXES
 
     The Company provides for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under Statement
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
 
STOCK OPTIONS
 
     The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to or greater than the fair value of the shares at
the date of grant. The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related
interpretations in accounting for its stock-based compensation plans because the
alternative fair value accounting provided for under Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation"
(FAS 123), requires use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, when the exercise price of
options granted equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
 
NET INCOME PER SHARE OF COMMON STOCK
 
     Net income per share of Common Stock is based on the weighted average
number of common shares and common equivalents outstanding during each year
(6,343,975 shares in 1997, 6,264,090 shares in 1996, and 6,233,220 shares in
1995).
 
     Fully diluted earnings per share does not differ materially from primary
earnings per share.
 
STOCK SPLIT
 
     On November 1, 1996 the Company declared a 2-for-1 stock split of its
Common Stock. Weighted average shares outstanding and all stock option share and
per share amounts included in the accompanying consolidated financial statements
and notes are based on the increased numbers of shares giving retroactive effect
to the stock split.
 
     Certain amounts in 1996 and 1995 with respect to par value of common stock
and capital in excess of par have been reclassified to effect the stock split
and permit comparison.
 
NEW ACCOUNTING STANDARD
 
     In fiscal year 1997, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." The adoption of the new standard did not
have a material impact on the consolidated financial position or results of
operations of the Company.
 
                                       20
<PAGE>   22
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  MARKETABLE SECURITIES
 
     At January 31, 1997 and 1996 the Company's marketable securities consist of
$3,010,000 and $1,040,000 of tax free municipal bonds classified as
available-for-sale, respectively. Due to the nature of the securities, fair
value approximates cost at January 31, 1997 and 1996, and accordingly, no
unrealized gains or losses are reflected in stockholders' equity. Gross realized
gains from sales of available-for-sale securities were $11,909 in 1997, $18,117
in 1996 and $33,179 in 1995. The cost of securities sold is based on the
specific identification method. Based upon contractual maturities, all
securities held at January 31, 1997 are scheduled to mature in fiscal year 1998.
 
3.  PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment consists of the following at January 31:
 
<TABLE>
<CAPTION>
                                                               1997            1996
                                                            -----------     -----------
        <S>                                                 <C>             <C>
        Land..............................................  $ 2,258,360     $ 2,258,360
        Building..........................................    6,244,604       3,037,777
        Furniture and fixtures............................    1,311,118       1,607,098
        Computer equipment................................    5,700,204       6,488,993
                                                            -----------     -----------
                                                             15,514,286      13,392,228
        Less accumulated depreciation.....................    5,104,874       6,426,094
                                                            -----------     -----------
                                                            $10,409,412     $ 6,966,134
                                                            ===========     ===========
</TABLE>
 
4.  EMPLOYEE BENEFITS
 
PROFIT-SHARING RETIREMENT PLAN
 
     The Company has a profit-sharing retirement plan covering all employees and
officers who are at least 21 years of age and have completed at least one year
of service with the Company. Contributions under the plan are discretionary and
may not exceed 15% of the total compensation paid to all eligible participants
each year. Contributions were $72,500, $50,000 and $50,000 in 1997, 1996 and
1995, respectively.
 
EMPLOYEE STOCK PURCHASE PLAN
 
     In 1996, the Company adopted the 1995 Employee Stock Purchase Plan (the
ESPP), as the 1990 Employee Stock Purchase Plan expired on June 30, 1995. Under
the ESPP, an aggregate of 60,000 shares of Common Stock are reserved for
purchase by qualified employees, at 85% of the appropriate market price. The
ESPP has a term of two years with 15,000 shares being offered for purchase in
semiannual offerings. The ESPP provides that qualified employees may authorize
payroll deductions from 1% to 10% of their base pay to purchase shares at the
lower of the market price in effect on the day the offering starts or the day
the offering terminates. If more than 15,000 shares qualify to be purchased in
an offering, employees receive shares on a pro rata basis. The Company issued
the following shares under the ESPP: 11,514 shares and 10,112 shares at prices
of $14.88 and $17.00, respectively, in fiscal year 1997; 19,390 shares and
10,140 shares at prices of $9.35 and $14.03, respectively, in fiscal year 1996;
13,574 shares and 17,584 shares at prices of $11.05 and $10.04, respectively, in
fiscal year 1995.
 
1993 STOCK OPTION PLAN
 
     In 1994, the Company adopted the 1993 Stock Option Plan (the Plan). Under
the Plan, 300,000 shares of the Company's Common Stock are available for grant
to employees. Option prices and exercise periods are determined by the Board of
Directors on the date of grant. All options granted under the Plan become
 
                                       21
<PAGE>   23
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
exercisable in installments over a two-to-five year period commencing one year
from the date of grant and expire ten years from the date of grant.
 
OUTSIDE DIRECTOR STOCK OPTION PLAN
 
     In 1994, the Company adopted the 1993 Outside Director Stock Option Plan
(the Director's Plan). The Company has reserved 80,000 shares of Common Stock
under the Director's Plan. The Director's Plan authorizes a one time automatic
grant of options to acquire 20,000 shares of Common Stock as an initial award
for being an outside Director. Additionally, the Director's Plan also authorizes
the automatic grant to purchase 4,000 shares of Common Stock as an annual award
to outside Directors. Options granted under the initial award are exercisable
ratably over a five year period. Options granted under the annual award become
exercisable on the date of the fifth annual meeting of stockholders following
the date of grant. All options expire ten years from the date of grant and have
an exercise price equal to 115% of the fair market value of the Company's Common
Stock on the date of grant.
 
FAS 123 DISCLOSURES
 
     Pro forma information regarding net income is required by FAS 123, which
also requires that the information be determined as if the Company had accounted
for its employee stock options grants and shares issued pursuant to the ESPP
under the fair value method of that Statement. The fair values for these options
and shares issued pursuant to the ESPP were estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted-average
assumptions:
 
<TABLE>
<CAPTION>
                                                            OPTIONS              ESPP
                                                        ---------------     ---------------
                                                        1997      1996      1997      1996
                                                        -----     -----     -----     -----
    <S>                                                 <C>       <C>       <C>       <C>
    Expected life (years).............................  5.5       7.0       0.5       0.5
    Interest rate.....................................  6.12%     5.97%     5.33%     5.47%
    Volatility........................................   .36       .32       .36       .30
    Dividend yield....................................  4.5%      4.5%      4.5%      4.5%
</TABLE>
 
     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:
 
<TABLE>
<CAPTION>
                                                                 1997           1996
                                                              ----------     ----------
        <S>                                                   <C>            <C>
        Pro forma net income................................  $8,960,395     $7,789,107
        Pro forma net income per share......................  $     1.40     $     1.25
</TABLE>
 
     Because FAS 123 is applicable only to options granted and shares issued
pursuant to the ESPP subsequent to January 31, 1995, its pro forma effect will
not be fully reflected until fiscal year 1999.
 
                                       22
<PAGE>   24
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Option activity under the Plans is summarized below:
 
<TABLE>
<CAPTION>
                                                  1997                 1996                 1995
                                           ------------------   ------------------   ------------------
                                                     WEIGHTED             WEIGHTED             WEIGHTED
                                                     AVERAGE              AVERAGE              AVERAGE
                                                     EXERCISE             EXERCISE             EXERCISE
                                           SHARES     PRICE     SHARES     PRICE     SHARES     PRICE
                                           -------   --------   -------   --------   -------   --------
<S>                                        <C>       <C>        <C>       <C>        <C>       <C>
Outstanding at beginning of year.........  577,280    $15.60    503,280    $14.18    441,280    $14.18
Granted..................................   27,200    $23.22    118,000    $17.78     78,000    $16.11
Expired or canceled......................                       (30,000)   $16.11
Exercised................................                       (14,000)   $ 4.25    (16,000)   $ 4.76
                                           -------              -------              -------
Outstanding at end of year...............  604,480    $15.93    577,280    $15.60    503,280    $14.18
                                           =======              =======              =======
Exercisable at end of year...............  343,280    $13.24    263,280    $13.21    215,280    $10.70
                                           =======              =======              =======
Available for future grants..............  132,800              160,000              254,000
                                           =======              =======              =======
Weighted-average fair value of options
  granted during year....................             $ 6.10               $ 3.74
</TABLE>
 
     The following table presents weighted-average price and fair value
information about options granted equal to and greater than fair market value
during fiscal year 1997:
 
<TABLE>
<CAPTION>
                                                       NUMBER OF       WEIGHTED-        WEIGHTED-
                                                        OPTIONS         AVERAGE          AVERAGE
    EXERCISE PRICE ON DATE OF GRANT                     GRANTED      EXERCISE PRICE     FAIR VALUE
    -------------------------------                    ---------     --------------     ----------
    <S>                                                <C>           <C>                <C>
    Equal to Fair Market Value.......................    19,200          $23.50           $23.50
    Above Fair Market Value..........................     8,000          $22.55           $20.50
                                                         ------
                                                         27,200
                                                         ======
</TABLE>
 
     The following table presents weighted-average price and life information
about significant option groups outstanding at January 31, 1997:
 
<TABLE>
<CAPTION>
                                                     OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                                          -----------------------------------------   -----------------------
                                                            WEIGHTED       WEIGHTED                  WEIGHTED
                                                            AVERAGE        AVERAGE                    AVERAGE
                                            NUMBER         REMAINING       EXERCISE     NUMBER       EXERCISE
  RANGE OF EXERCISE PRICES                OUTSTANDING   CONTRACTUAL LIFE    PRICE     EXERCISABLE      PRICE
  ------------------------                -----------   ----------------   --------   -----------    --------
  <S>                                     <C>           <C>                <C>        <C>           <C>
  $ 2.94 -- $ 4.50......................     47,280           1 Year        $ 3.26       47,280       $ 3.26
  $13.80 -- $19.38......................    510,000          6 Years        $16.55      284,000       $16.02
  $20.13 -- $23.50......................     47,200          8 Years        $21.91       12,000       $20.13
                                            -------                                     -------
                                            604,480                                     343,280
                                            =======                                     =======
</TABLE>
 
                                       23
<PAGE>   25
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  LEASES
 
     The Company leases office space under operating leases expiring in various
years through 2001. Most of the leases include renewal options. Future minimum
payments under non cancelable operating leases with initial or remaining terms
of one year or more are as follows:
 
<TABLE>
<CAPTION>
                                                                       OPERATING
                                                                         LEASES
                                                                       ----------
            <S>                                                        <C>
            1998.....................................................  $  614,998
            1999.....................................................     540,829
            2000.....................................................     427,849
            2001.....................................................     285,642
            2002.....................................................     194,705
                                                                       ----------
            Total minimum lease payments.............................  $2,064,023
                                                                       ==========
</TABLE>
 
     Total rent expense amounted to $1,359,221 in 1997, $1,672,590 in 1996 and
$1,558,353 in 1995.
 
     The Company subleases office space in its building to a tenant under a
non-cancelable sublease which expires in fiscal year 2009. Payments received
under the sublease approximate $125,000 per year and are included in other
income. Aggregate future minimum rentals to be received under the sublease
approximate $1,500,000.
 
6.  SUPPLEMENTARY INCOME STATEMENT INFORMATION
 
     Consulting, development contracts and other consists of the following:
 
<TABLE>
<CAPTION>
                                                        1997           1996           1995
                                                     ----------     ----------     ----------
    <S>                                              <C>            <C>            <C>
    Consulting fees................................  $1,441,090     $1,046,174     $1,093,419
    Software development contracts.................     500,000        500,000        566,867
    Other..........................................     530,104        566,730        212,556
                                                     ----------     ----------     ----------
                                                     $2,471,194     $2,112,904     $1,872,842
                                                     ==========     ==========     ==========
</TABLE>
 
     Expenses incurred with regard to software development contracts were
$169,888, $177,266, and $203,135 for 1997, 1996 and 1995, respectively.
 
7.  INCOME TAXES
 
     For financial reporting purposes, income before income taxes includes the
following components:
 
<TABLE>
<CAPTION>
                                                     1997            1996            1995
                                                  -----------     -----------     -----------
    <S>                                           <C>             <C>             <C>
    Pretax income:
      Domestic..................................  $12,650,388     $11,368,217     $10,775,901
      Foreign...................................    1,409,400         992,117         618,805
                                                  -----------     -----------     -----------
                                                  $14,059,788     $12,360,334     $11,394,706
                                                  ===========     ===========     ===========
</TABLE>
 
                                       24
<PAGE>   26
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The provision for income taxes reflected in the statement of income
consists of the following:
 
<TABLE>
<CAPTION>
                                                        1997           1996           1995
                                                     ----------     ----------     ----------
    <S>                                              <C>            <C>            <C>
    Currently payable:
      Federal......................................  $3,730,888     $3,342,801     $3,076,102
      State........................................     465,614        809,617        744,272
      Foreign......................................     270,316        298,423        223,671
                                                     ----------     ----------     ----------
                                                      4,466,818      4,450,841      4,044,045
    Deferred.......................................     480,252        (72,424)       (54,638)
                                                     ----------     ----------     ----------
                                                     $4,947,070     $4,378,417     $3,989,407
                                                     ==========     ==========     ==========
</TABLE>
 
     A reconciliation of the federal statutory rate to the effective income tax
rate follows:
 
<TABLE>
<CAPTION>
                                                                     1997     1996     1995
                                                                     ----     ----     ----
    <S>                                                              <C>      <C>      <C>
    Federal statutory rate.........................................  35.0%    35.0%    34.0%
    State taxes, less federal benefit..............................   4.0      4.2      4.3
    Tax-exempt interest............................................  (0.7)    (1.4)    (1.4)
    Research and development credit................................  (2.4)    (1.4)    (2.1)
    Other..........................................................  (0.7)    (1.0)     0.2
                                                                     ----     ----     ----
    Effective tax rate.............................................  35.2%    35.4%    35.0%
                                                                     ====     ====     ====
</TABLE>
 
     Significant components of the Company's deferred tax assets as of January
31 are as follows:
 
<TABLE>
<CAPTION>
                                                                     1997          1996
                                                                   ---------     ---------
    <S>                                                            <C>           <C>
    Deferred tax assets:
      Net operating loss carry forwards..........................  $ 314,000     $ 479,686
      Allowance for doubtful accounts............................    120,207       120,207
      Vacation accrual...........................................    115,134        92,648
      Book over tax depreciation.................................     47,387        44,543
                                                                   ---------     ---------
                                                                     596,728       737,084
      Less: Valuation allowance for deferred tax assets..........   (314,000)     (479,686)
                                                                   ---------     ---------
                                                                     282,728       257,398
    Deferred Tax Liabilities:
      Capitalized software.......................................   (505,582)
                                                                   ---------     ---------
                                                                   $(222,854)    $ 257,398
                                                                   =========     =========
</TABLE>
 
     At January 31, 1997, the Company's German subsidiary had net operating loss
carry forwards of $628,000 for income tax purposes. For financial reporting
purposes, a valuation allowance of $314,000 has been recognized to offset the
deferred tax assets related to those carry forwards.
 
     The Company made income tax payments of $5,016,517, $4,111,689 and
$3,356,683 in fiscal years 1997, 1996 and 1995, respectively.
 
                                       25
<PAGE>   27
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  BUSINESS SEGMENT AND FOREIGN OPERATIONS
 
<TABLE>
<CAPTION>
                                                   UNITED                      OTHER
                                    DOMESTIC      KINGDOM       GERMAN     INTERNATIONAL
                                   OPERATIONS    OPERATIONS   OPERATIONS    OPERATIONS     ELIMINATION  CONSOLIDATED
                                   -----------   ----------   ----------   -------------   -----------  ------------
<S>                                <C>           <C>          <C>          <C>             <C>          <C>
Year ended January 31, 1997:
  Revenues........................ $32,132,913   $9,471,768   $4,243,632    $ 2,729,613                 $48,577,926
  Transfers between geographic
    areas.........................   6,871,328                                             $6,871,328
                                   -----------   ----------   ----------     ----------    ----------   -----------
                                   $39,004,241   $9,471,768   $4,243,632    $ 2,729,613    $6,871,328   $48,577,926
                                   ===========   ==========   ==========     ==========    ==========   ===========
  Income from operations.......... $11,755,341   $  785,114   $  309,348    $   130,772                 $12,980,575
                                   ===========   ==========   ==========     ==========    ==========   ===========
  Assets.......................... $27,155,332   $8,332,535   $3,214,456    $ 2,232,002                 $40,934,325
                                   ===========   ==========   ==========     ==========    ==========   ===========
Year ended January 31, 1996:
  Revenues........................ $26,553,132   $8,107,290   $4,015,292    $ 2,379,818                 $41,055,532
  Transfers between geographic
    areas.........................   6,229,301                                             $6,229,301
                                   -----------   ----------   ----------     ----------    ----------   -----------
                                   $32,782,433   $8,107,290   $4,015,292    $ 2,379,818    $6,229,301   $41,055,532
                                   ===========   ==========   ==========     ==========    ==========   ===========
  Income from operations.......... $10,765,831   $  465,537   $   37,460    $   159,332                 $11,428,160
                                   ===========   ==========   ==========     ==========    ==========   ===========
  Assets.......................... $25,908,218   $4,881,019   $2,436,489    $ 2,155,073                 $35,380,799
                                   ===========   ==========   ==========     ==========    ==========   ===========
Year ended January 31, 1995:
  Revenues........................ $22,953,987   $7,467,369   $3,156,421    $ 1,802,756                 $35,380,533
  Transfers between geographic
    areas.........................   5,287,758                                             $5,287,758
                                   -----------   ----------   ----------     ----------    ----------   -----------
                                   $28,241,745   $7,467,369   $3,156,421    $ 1,802,756    $5,287,758   $35,380,533
                                   ===========   ==========   ==========     ==========    ==========   ===========
  Income (loss) from operations... $10,208,424   $  408,915   $  (28,932)   $    (5,979)                $10,582,428
                                   ===========   ==========   ==========     ==========    ==========   ===========
  Assets.......................... $21,397,863   $6,171,723   $1,708,233    $ 1,814,992                 $31,092,811
                                   ===========   ==========   ==========     ==========    ==========   ===========
</TABLE>
 
     The Company operates in one business segment -- the sale of computer
software and related services.
 
     The Company's foreign operations are subject to certain economic and
regulatory risks and uncertainties specific to each geographic region. Such
risks and uncertainties could disrupt the Company's foreign operations and have
a material impact on the Company's financial results.
 
     Transfers to affiliates are made at prices above the Company's cost and
include charges for freight and handling.
 
9.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
<TABLE>
<CAPTION>
                                           FIRST          SECOND           THIRD          FOURTH
                                          QUARTER         QUARTER         QUARTER         QUARTER
                                        -----------     -----------     -----------     -----------
<S>                                     <C>             <C>             <C>             <C>
1997:
  Net revenues........................  $10,489,042     $11,317,892     $12,039,623     $14,731,369
  Gross profit........................  $ 7,326,810     $ 7,713,109     $ 8,242,088     $10,958,467
  Net income..........................  $ 2,101,630     $ 2,174,117     $ 2,214,754     $ 2,622,217
  Net income per share................  $       .33     $       .34     $       .35     $       .41
1996:
  Net revenues........................  $ 8,920,982     $ 9,707,384     $ 9,993,521     $12,433,645
  Gross profit........................  $ 6,676,829     $ 7,017,305     $ 7,328,956     $ 9,853,745
  Net income..........................  $ 1,872,683     $ 1,896,622     $ 1,949,547     $ 2,263,065
  Net income per share................  $       .30     $       .30     $       .31     $       .36
</TABLE>
 
     Gross profit is the result of total revenues less costs of software,
maintenance and support, and consulting, development contracts and other.
 
                                       26
<PAGE>   28
 
                                  SCHEDULE II
 
                               VALUATION ACCOUNTS
 
                       BGS SYSTEMS, INC. AND SUBSIDIARIES
              FOR THE YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
 
<TABLE>
<CAPTION>
                 COL. A                     COL. B            COL. C              COL. D        COL. E  
             --------------               ----------  -----------------------  -------------  ----------
                                                             ADDITIONS                                  
                                                      -----------------------                           
                                                                     (2)                      
                                                         (1)      CHARGED TO                     
                                          BALANCE AT  CHARGED TO    OTHER                     BALANCE AT  
                                           BEGINNING  COSTS AND   ACCOUNTS --  DEDUCTIONS --     END 
DESCRIPTION                                OF PERIOD   EXPENSES    DESCRIBE      DESCRIBE     OF PERIOD
-----------                               ----------  ---------   -----------  -------------  ----------
<S>                                        <C>        <C>          <C>          <C>            <C>
Year ended January 31, 1997:
  Allowance for doubtful accounts........  $365,000       0            0             0         $365,000
Year ended January 31, 1996:                             
  Allowance for doubtful accounts........  $365,000       0            0             0         $365,000
Year ended January 31, 1995:                             
  Allowance for doubtful accounts........  $365,000       0            0             0         $365,000
</TABLE>
 
                                       27
<PAGE>   29
 
                                 EXHIBIT INDEX
 
<TABLE>
<S>     <C>
 3.1    Articles of Organization, as amended (Incorporated by reference to Exhibit 3.1 to
        Registrant's Registration Statement on Form S-1 filed with the Securities and
        Exchange Commission on May 2, 1983, File No. 2-83449 ("Form S-1") and Exhibit A to
        the Registrant's Proxy Statement dated May 27, 1987).

 3.2    By-Laws, as amended (Incorporated by reference to Exhibit 3.2 to the Registrant's
        Form 10-K for the year ended January 31, 1995).

 4      Specimen copy of certificate for shares of Common Stock of the Registrant
        (Incorporated by reference to Exhibit 4 to Form S-1 filed with the Securities and
        Exchange Commission on June 1, 1983).

10.1    Lease between 128 Technology Trust and the Registrant (Incorporated by reference to
        Exhibit 10.1 to the Registrant's Form 10-K for the year ended January 31, 1991).

10.2    Lease between P.W. & Co. and BGS Systems, Ltd. (Incorporated by reference to Exhibit
        10.2 to the Registrant's form 10-K for the fiscal year ended January 31, 1991).

10.3    Lease between Axel Unteregger Bauunternehmung GmbH and BGS Systems GmbH (Incorporated
        by reference to Exhibit 10.3 to the Registrant's Form 10-K for the year ended January
        31, 1990).

10.4    Lease between Maria Rosa Bertot and BGS Systems, s.r.1. (Incorporated by reference to
        Exhibit 10.4 to the Registrant's Form 10-K for the fiscal year ended January 31,
        1992).

10.5    Lease between Reseaux et Communications Informatiques and BGS Systems, Ltd.
        (Incorporated by reference to Exhibit 10.4 to the Registrant's Form 10-K for the
        fiscal year ended January 31, 1992).

10.6    BGS Systems, Inc. 401(k) and Profit Sharing Retirement Plan, as amended and restated
        (Incorporated by reference to Exhibit 99 to the Registrant's Form 10-Q for the
        quarter ended October 31, 1994).

10.7    BGS Systems, Inc. 1993 Stock Option Plan (Incorporated by reference to Exhibit A to
        the Registrant's Proxy Statement dated June 8, 1993, File No. 33-64034).*

10.8    BGS Systems, Inc. 1993 Outside Director Stock Option Plan (Incorporated by reference
        to Exhibit B to the Registrant's Proxy Statement dated June 8, 1993, file No.
        33-64036).*

10.9    1990 Employee Stock Purchase Plan (Incorporated by reference to Exhibit A to the
        Registrant's Proxy Statement dated June 12, 1990, File No. 33-35625).*

10.10   BGS Systems, Inc. 1983 Stock Option Plan, as amended (Incorporated by reference to
        Exhibit 10.6 to the Registrant's Form 10-K for the year ended January 31, 1991, File
        No. 33-31162).*

10.11   Employment and Loan Arrangements with Mr. McGuire (Incorporated by reference to the
        portion of the Registrant's Proxy Statement dated June 8, 1993, set forth under the
        caption, "Employment Contracts and Termination Arrangements," and Exhibit 10.8 to the
        Registrant's Form 10-K for the year ended January 31, 1991).*

10.12   Lease between UNIPIERRE IV & V and BGS Systems Ltd. (Incorporated by reference to
        Exhibit 10.12 to Registrant's Form 10-K for the year ended January 31, 1994).

10.13   Lease between Elysee Pty. Ltd. and BGS Systems Pty. Ltd. (Incorporated by reference
        to Exhibit 10.13 to Registrant's Form 10-K for the year ended January 31, 1994).

10.14   BGS Systems, Inc. 1995 Employee Stock Purchase Plan. (Incorporated by reference to
        Exhibit A to Registrant's Definitive Proxy Statement dated June 13, 1995).*

10.15   Contract of Sale Between BGS Systems, Inc. and 580 Winter Street Corp. (Incorporated
        by reference to Exhibit 10.1 to Registrants Form 8-K dated October 26, 1995).

11      Statement Regarding Computation of Earnings Per Share (filed herewith).

21      Subsidiaries of the Registrant at January 31, 1997 (filed herewith).

23      Consent of Ernst & Young LLP, Independent Auditors (filed herewith).

24      Powers of Attorney. (Incorporated by reference to Exhibit 24 to Registrant's Form
        10-K for the year ended January 31, 1995).

27      Financial Data Schedule
</TABLE>
 
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* Compensatory plan or arrangement required to be filed as an exhibit pursuant
  to Item 14(c) of this Form 10-K.