Introduction

Walker Interactive Systems, Inc. (hereinafter "Walker" or the "Company") was incorporated in California in 1973 and reincorporated in Delaware in March 1992. Walker designs, develops, markets and supports, on a worldwide basis, a family of enterprise financial, operational and analytical software products that enable large and medium-sized organizations, higher education institutions, and federal, state and government agencies to optimize their business processes, reduce business costs, and improve management information needed to run their business. The Company derives its revenues primarily from software licenses, software maintenance and professional consulting services. The Company's e-business solutions and Horizon series of analytic applications are licensed to large and mid-size companies and similarly sized governmental organizations worldwide.

The Company divested its IMMPOWER product line in April 2000 and its Aptos product line in October 2000. Total revenues from these product lines were $3.7 million for fiscal 2000, compared with $13.6 million for fiscal 1999.

In June 2000, the Company formed a wholly owned subsidiary, RareVision, Inc., to further the development and market testing of a business-to-business internet model for a web-based, knowledge management analytical application for smaller businesses

During the quarter ended September 30, 2000, the Board of Directors approved a strategic restructuring plan designed to reduce costs and strengthen the Company's position to successfully execute its e-business strategy. The Company recorded pretax restructuring charges totaling $1.9 million comprised mainly of severance costs related to the involuntary termination of employees in the Company's US and UK operations and costs arising from the consolidation of facilities in San Francisco and Aylesbury (UK).

The Company periodically evaluates capitalized software carrying amounts against related estimated future undiscounted cashflows. During the third quarter of 2000, this evaluation indicated that the estimated future undiscounted cashflows were not sufficient to recover the carrying values of certain assets and resulted in an impairment charge of $4.8 million, primarily related to the legacy Tamaris product.

The Company received a Nasdaq Staff Determination indicating that the Company failed to comply with the net tangible assets requirement set forth in Marketplace Rule 4450(a)(3) and the requirements of Maintenance Standard 2 for market capitalization, market value of public float, and minimum bid price, and that its securities were, therefore, subject to delisting from The Nasdaq National Market. The Company attended an appeal hearing before a Nasdaq Listing Qualifications Panel ("Panel") to review the Staff Determination on February 15, 2001. A determination was made by the Panel on March 5, 2001 to delist the Company's securities from the Nasdaq Stock Market effective with the open of business March 6, 2001. As of March 6, 2001, the Company's common stock trades on the Over the Counter ("OTC") Bulletin Board.

Strategic Direction

During 1999, Walker changed its strategic direction to emphasize the e-business solutions and Horizon product lines, concentrating on refocusing the Company as a provider of e-business solutions. As part of its strategic redirection, Walker redesigned its software products specifically for the Internet architecture and business to business "B2B" e-business models. The Company believes that its architecture is among the most scalable and adaptable for enterprise-level business software. The Company's strategy is to offer enterprise financial, operational and analytical e-business solutions to a variety of industries. Walker's e-business solutions support and enhance enterprise-wide financial, operational and analytic processes, including procurement, revenue management, financial management and insight, business planning, budgeting, forecasting and financial consolidation. The Company's software products utilize the Microsoft Windows operating systems on the desktop, NT, UNIX and S/390 operating systems on the server and industry-leading On Line Analytical Processing ("OLAP"), Relational Database Management Systems ("RDBMS") including IBM's DB2 and DB2 OLAP server, Hyperion Solutions' Essbase and Microsoft SQL/Server. Walker e-business solutions utilize the latest-generation IBM eServer zSeries Web Application Server. In addition, Walker utilizes iSeries, pSeries and xSeries as an integral part of its e-business strategy for Walker's analytic solutions.

The e-business solutions line represents the Company's core suite of business and financial solutions utilizing the power of the enterprise server for highly scalable transaction processing and reliability/availability, with the thin client architecture of the browser based interface. This Internet-based architecture provides an optimized platform for delivery of B2B e-business solutions. The Company also develops and markets analytical applications, which provide financial reporting, budgeting and financial consolidation solutions for large and mid-sized organizations. These analytic applications integrate with the e-business solutions and also work on a standalone basis with leading Enterprise Resource Planning ("ERP") applications.

The Company's software products include productivity tools that allow the Company's applications to be extensively customized to fit the customer's particular requirements. The Company complements its software products by providing specialized consulting services to assist customers with customization and implementation.

The Company derives its revenues primarily from software licenses, software maintenance and professional consulting services. The Company's e-business solutions are licensed primarily to Global 2000 companies and similarly sized business and governmental organizations worldwide. Its solutions and services are marketed primarily through direct sales forces located in the United States and the United Kingdom.

    Large, geographically diverse organizations generate enormous amounts of financial, operational, sales, marketing and other data. The transaction-oriented information systems used by these organizations are strategic resources that are critical to their efficiency, productivity and competitiveness, providing the availability of continuous and simultaneous information to employees, customers and suppliers. In the day-to-day operations of large organizations, transactional data needs to be promptly and easily retrieved from a variety of financial and operational systems, summarized and organized into meaningful business information that has a consistent business context. The process of integrating the data is complex because large organizations employ multiple accounting systems, operational systems and transactional databases, spread their business across many different geographies and have different information requirements by function and across the organization. Furthermore, the current business climate of deregulation and merger/acquisition activities in many industries has added additional complications as well as the need for scalable and adaptable business processes.

    Organizations have attempted to collect, summarize, organize and present information from heterogeneous computer systems and transactional data sources in various ways. Reports are assembled through entry of data into spreadsheets and by using data from accounting systems and other operational systems. Many organizations have tried to automate information systems through the use of software developed internally or through assistance by outside consultants. These custom-built systems are becoming increasingly obsolete because they are rigid in structure, expensive and time consuming to create and maintain, and difficult to update when business processes and requirements change. Moreover, growing competition has increased the demand for more timely business information specific to each function within the organization.

The following market dynamics are important factors shaping Walker's strategy moving forward:

    The term e-business means many things to many people, but is well defined as the transformation of key business processes through the use of Internet technologies. The core processes that are the foundation of business are merged with the standards, simplicity and connectivity of the Internet. This melding of Internet technologies with key business processes creates opportunities for powerful interactive, transaction-intensive solutions that let companies do business in ever more efficient and effective ways. Innovative companies of all sizes are using the Web to communicate with their suppliers, their customers and their partners, to connect with their back-end data-systems, and to transact commerce. The opportunities presented by this new model of business enables organizations to collaborate more fully with their suppliers, customers and partners in a seamless manner. This opportunity has now defined itself as B2B e-business. The market potential for B2B e-business solutions is significant, according to leading analysts such as IDC, Meta Group and Gartner Group. Walker's B2B e-business solutions will allow current business processes to be streamlined, thereby improving operating efficiencies, which in turn will strengthen the value to the customer.

    The need for better business information has created a growing need for analytic application software to help organizations gain business knowledge from the large volumes of transactional data available from daily operations. These software solutions work on a stand-alone basis, or in conjunction with core financial systems to translate data into business insight and thus to maximize the value of financial information. Walker's analytical applications, by integrating financial applications and analytic solutions, deliver a solution that links business goals to operational data so organizations have deeper insight into their business operations.

    Over the last two years the market has seen the rapid adoption of thin client/large server architecture models, a significant contrast to the client/server architectures that have been so prevalent since the mid-1990's. Network computing enables companies to protect their existing information technology investments while taking advantage of new technologies by dynamically linking Internet, client/server and legacy systems. The Company believes that the Internet architecture model has created opportunities for competitive advantage in its market, and for its customers, through a combination of business processes optimized for the Internet model, improved collaboration, browser based interfaces, enhanced services, shared services and lower transaction costs. Walker e-business solutions are designed to support this integrated Internet architecture and e-business process model.

    Large organizations can reduce the costs and complexity of information systems by centralizing many administrative functions. These centralized functions are now being combined with distributed operational procedures. Walker's high-volume, e-business solutions support both models for distributing information when and where it is needed within the extended organization, significantly enhancing the availability of timely information.

    Large, geographically diverse organizations generate large volumes of transactions and data. As organizations extend their business beyond traditional boundaries with B2B e-business, their transaction-oriented systems will require increasing scalability to handle the increased volume from additional users and ever-growing transaction volumes. The Company believes that its solutions provide scalable, cost-effective, high transaction volume capabilities.

The Company's objective is to be a leading provider of e-business solutions for the enterprise. The Company's strategy is as follows:

    The Company believes that the e-business enablement of key business processes has created opportunities for competitive advantage in its market through Internet/intranet-enabled solutions. These e-business solutions allow organizations to transform core business processes utilizing existing information technology investments while taking advantage of powerful interactive, transaction-intensive solutions that let companies do business in ever more efficient and effective ways. Walker customers now have the ability to extend the reach of their business applications directly to employees, customers and suppliers worldwide.

    The Company has significant experience in certain vertical markets, and has begun to customize its application suites for key industries including utilities, retail, education, and transportation. These large, complex businesses are best understood in a multidimensional context, by key performance indicators and across business units, time periods, geographies and product lines. Walker is able to capture and warehouse key business processes and business information while retaining the business context of the information through our analytical solutions. These solutions analyze the transactional data within the applications to deliver information that allow managers to be more informed about their organization's performance. Empowered by management insight, managers at all levels of the organization have the opportunity to better run their area of the business, enhancing competitiveness and bottom-line profitability. The Company's solutions use OLAP database technology, which was developed specifically for multidimensional business analysis.

    The Company's focus is on analytic applications for budgeting, consolidation, and management reporting, which it believes offers the greatest short-term market potential. These applications provide analytical analysis and reporting capabilities not available in traditional transaction systems. Most organizations recognize the need to integrate enterprise-wide financial and operational data to monitor company-wide performance. To respond to this need, the Walker series of analytic applications integrate data from both Walker and non-Walker applications, including leading ERP and best-of-breed applications vendors.

    The Company has expanded its existing strategic relationships with leading hardware and software suppliers such as IBM, Microsoft, Hyperion Solutions, Inc., Commerce One, Inc., Information Builders, Inc., and Showcase Corporation, as well as with third-party providers including global accounting and consulting firms. The Company believes that the development of its relationships with these partners, as well as the expanded scope of the relationships to include e-business and e-commerce solutions, will contribute to its future revenue growth.

    While many vendors of enterprise software solutions are focusing their technology efforts on supporting a distributed client/server model, Walker intends to continue to build and enhance its e-business solutions for the IBM z900 as an e-business server, and build collaborative applications called portlets using IBM's WebSphere. This puts Walker in a position to support a high-volume network computing environment. The Company believes that this is, with the growth of B2B collaboration, Internet bandwidth and processes that reflect an e-business way of working, supporting both shared and distributed service models, a far more cost effective model than other distributed architecture models available in the market today.

    The Company intends to continue to focus on generating additional revenues from existing customers through software licenses, the introduction of new e-business solutions and services and warranty maintenance. In addition, providing consulting and support services to existing customers represents a significant portion of the Company's total revenues. Follow-on revenues create efficiencies for deployment of sales and marketing resources and strengthen the Company's relationships with its customers.

    The Company's e-business solutions for the enterprise are designed to improve core business processes and to provide the functionality to create competitive advantage in an ever-changing global marketplace. Walker achieves this by offering solutions that combine flexible e-business solutions, analytic applications, deep industry knowledge and best practices expertise.

The Walker family of products and services include:

e-business solutions for Global 2000 organizations

Walker HorizonÔ Series of analytic applications for better managing company performance

e-Business Solutions for the Enterprise

Walker's e-business solutions assist businesses in mission critical areas:

By turning massive amounts of transactional data into powerful business information and intelligence; and

By allowing organizations to exploit the new business processes that have changed as a result of greater business collaboration through the use of Internet technologies and the Web.

    These highly scalable applications are designed to adapt quickly and easily to changing business conditions such as deregulation, technology innovations and structural reorganizations including mergers and acquisitions. The Company also broadens the scope of its e-business offerings with the addition of analytic solutions that work with transactional data to provide in-depth insight into the enterprise. This combination of e-business solutions and analytic applications allows Walker customers the opportunity to better manage company-wide performance.

Walker's e-business solutions are organized into five key operational areas:

e-procurement - B2B based procurement, covering all aspects of the procurement cycle from requisition through payment.

e-revenue - B2B based revenue, covering all aspects of electronic billing through collections and cash application.

e-insight - delivery of management insight on company-wide performance through a portal.

e-technology - consists of the architecture, technologies and components that enable and support e-business. This technology is designed for large-scale, e-business environments.

e-services - knowledgeable resources with a tried and proven approach to plan and implement our e-business solutions efficiently and cost effectively.

    The Horizon suite of analytic applications includes the planning, forecasting, financial consolidation and reporting solutions that organizations need to better manage company performance. By significantly reducing the time and effort expended on the budgeting and consolidation process, Horizon allows companies to focus on the analysis of financial data, instead of the preparation.

    The Horizon suite employs a flexible architecture that leverages a single OLAP engine for all its applications. This provides companies with a solution that ensures data integrity and is easy to deploy and maintain. As a result, organizations can gain the ability to make fast, informed business decisions and continually monitor performance improvement at all levels of the organization. Additionally, Horizon's architecture allows companies to be more forward thinking and to preview the effect of potential business decisions.

    Horizon is available for multiple operating systems and OLAP databases. It allows companies to track performance metrics that are specific to their organization. Any combination of these applications complements Walker's e-business solutions as well as non-Walker financial and operational solutions.

The Horizon suite includes:

Planning and Forecasting: Automates the planning, forecasting and budgeting processes - reducing planning cycles, facilitating continuous planning and enabling the prediction of company performance.

Consolidated Reporting: Manages the collection, adjustment and reporting of consolidated results for enterprise-wide statutory, management and tax reporting.

OLAP Reporting & Analysis: A powerful reporting and analysis solution for enabling financial reports and analysis using any OLAP technology.

    The Company continually enhances its existing products and develops new products to meet its customers' ever-changing requirements. The Company's success will depend in part on its ability to develop product enhancements and new products that keep pace with technological changes and changes in customers' business practices. Software development costs, including amortization of capitalized software development costs, were 35% of total revenues in 2000, 22% in 1999, and 20% in 1998.

    Due to the layered architecture of the Company's e-business solutions, and the Company's efforts to continually enhance its products to respond to evolving technologies, the Company believes that its core products have long life cycles. As operating systems, databases and presentation software technologies evolve, the Company is able to modify its e-business solutions through an upgrade and by changing only the corresponding layer of software without having to change the other components of the system. Therefore, the Company's customers do not have to completely replace the Company's products in response to technological change. The Company works closely with its customers and prospective customers to determine their requirements and to define the functionality of the Company's new products and enhancements to its existing products.

PROFESSIONAL SERVICES AND IT CONSULTING SERVICES

    Organizations are increasingly leveraging information technology to accomplish their business objectives. Large, global organizations rely heavily on their software investments to remain competitive.

    Walker provides a full range of services to support these needs. The Company's professional services organization adds significant incremental value, offering implementation, customization, migration, training and related services to its customers. Walker has suites of reusable tools and utilities that enable customers to complete customizations efficiently and cost effectively.

Some of the areas addressed by Walker services include:

Integration - to integrate the customers existing applications into the e-business solution.

Performance tuning - to increase computer throughput, reduce processing time and otherwise improve performance.

Migration - assistance in making cost-effective migrations to a new release or from one platform to another.

Conversion and integration - to integrate third-party applications into the Walker framework or convert these products to Walker applications through Walker's re-usable components, methodologies and e-technology.

IT consulting and outsourcing - shortening time-to-benefit and reducing costs for large-scale computing environments and applications.

    The Company's customer support and maintenance program includes 24-hour hotline telephone support for problem determination and resolution, account management, ongoing functional and technical enhancements for installed products, and membership in the Company's user group, which meets annually and holds periodic regional conferences throughout the year.

    The Company's products and services are considered a single reportable segment. Information regarding domestic and international revenues and assets are contained in Note 11 to the Consolidated Financial Statements.

    Walker sells its products primarily through its direct sales force in North America and the United Kingdom. In support of its sales force, the Company conducts marketing programs, which include direct mail, public relations, advertising, seminars, trade shows and ongoing customer communication programs. The sales cycle begins with the generation of a sales lead, or often the receipt of a request for proposal ("RFP") from a prospect, which is followed by qualification of the lead, an analysis of the customer's needs, response to a RFP (one or more presentations to the customer), customer internal sign-off activities and contract negotiation and finalization. While the sales cycle varies by product and from customer to customer, the sales cycle has historically required three to twelve months.

    Walker markets its products primarily to large or complex organizations with e-business collaboration requirements, and intensive data processing and information management requirements. In each of the last three fiscal years, a substantial portion of the Company's product revenue arose from additional licensing by existing customers of either new products or products for additional sites.

    The Company regards its professional services and product development organizations as integral parts of its marketing strategy because of the length and technical nature of the sales process. Professional services and product development employees participate directly in the sales cycle and educate prospective customers on the advantages of using the Company's solutions rather than those developed internally or by other third parties.

    The business and financial applications software market for large complex organizations is intensely competitive. The Company's principal competitors with the e-business solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. The Company primarily competes with Hyperion Software Corporation and Comshare, Inc. with its analytical applications.

    The Company also competes to a lesser extent with other independent software application vendors. Some of the Company's current and potential competitors have substantially greater financial, technical, marketing and sales resources than the Company. Some of these competitors also offer business application products not offered by the Company, primarily in the areas of human resources and manufacturing. However, Walker remains one of the few companies committed to providing and enhancing applications for the IBM z900 e-business server. Most of Walker's competitors offer UNIX-based applications.

    The Company encounters competition from a broader range of firms in the market for professional services. These competitors include the consulting divisions of the major accounting firms, which possess greater resources than the Company, and small independent firms that compete primarily on the basis of price of services provided.

    The Company regards its products as proprietary and attempts to protect them with a combination of trade secret, copyright and trademark laws, its license agreements with customers and its internal security systems, confidentiality procedures and employee agreements. Although the Company takes steps to protect its trade secrets, there can be no assurance that misappropriation will not occur. In addition, the laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States.

    The Company typically provides its products to users under non-exclusive, non-transferable perpetual licenses. Under the general terms and conditions of the Company's standard product license agreement, the licensed software may be used only for internal operations on designated computers at specific sites. The Company makes source code for some of its products available to its customers under agreements that restrict access to and use of the source code.

    The Company seeks to protect its software, documentation and other written materials under copyright laws, which afford only limited protection. It also asserts trademark rights in its product names. The Company has not sought to protect its products under patent laws. 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, name recognition, maintenance and support of software products and the Company's ability to develop, enhance, market and acquire software products and services.

    Although the Company believes that its products do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against the Company in the future with respect to current or future products or that any such assertions will not require the Company to enter into royalty arrangements or result in costly litigation.

    For a description of certain proprietary risk factors, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Additional Risk Factors."

    As of December 31, 2000, the Company had 203 employees, of which 152 were based in the United States and 51 were based internationally. Of the total, 30 of such employees were engaged in sales and marketing, 22 were in customer support, 58 were in professional services, 51 were in product development and 42 were in data processing, administration and finance positions.

The Company's corporate headquarters are located in San Francisco, California, in a leased facility consisting of approximately 55,000 square feet of office space. The Company occupies all 55,000 square feet governed by a lease that expires in September 2007. Additionally, the Company leases office space aggregating approximately 71,000 square feet in the metropolitan areas of Atlanta, Georgia; Birmingham, Alabama; Chicago, Illinois; Aylesbury, England; and Toronto, Canada. The Company believes that it has adequate facilities to accommodate the Company's operations in the near term and that additional space will be available at commercially reasonable terms as needed.

    As of December 31, 2000, approximately 37,900 square feet of office space in Birmingham, Alabama; Toronto, Canada; and Aylesbury, England is not occupied by the Company and is considered excess capacity. Of the excess, approximately 9,150 square feet is sublet. The Company has provided approximately $3.3 million for its excess capacity lease commitments net of expected sublease income. This is included in accrued liabilities and other long-term obligations at December 31, 2000. The leases in respect of the Company's excess office space expire at varying dates through 2009.

    The Company is not party to any legal proceedings other than ordinary routine litigation incidental to the Company's business. The following sentence is a forward-looking statement. The Company believes that the ultimate resolution of these matters will not have a material adverse effect on the Company's financial condition or results of operations.

    No matters were submitted to a vote of security holders during the quarter ended December 31, 2000.

    Walker Interactive Systems, Inc. common stock is traded on the Over the Counter ("OTC") Bulletin Board under the symbol "WALK." As of March 8, 2001, there were approximately 4,142 stockholders of record of the Company's common stock. The Company has not paid any cash dividends and does not anticipate paying any cash dividends in the foreseeable future. The high and low daily closing prices per share, for the periods set forth below, are as reported by the Nasdaq National Stock Market System and the OTC. As of March 6, 2001 the Company's stock is traded on the OTC.

                                                 QUARTER ENDING
                              -------------------------------------------------
                              DECEMBER 31, SEPTEMBER 30,  JUNE 30,    MARCH 31,
PRICE RANGE PER COMMON SHARE      2000         2000         2000        2000
----------------------------- -----------  -----------  ----------- -----------

Price range per common share:
High......................... $  3 1/4     $  4 1/8     $  7 9/16   $ 11
Low..........................    1 5/32       2 11/16      3           7


                              DECEMBER 31, SEPTEMBER 30,  JUNE 30,    MARCH 31,
PRICE RANGE PER COMMON SHARE      1999         1999         1999        1999
----------------------------  -----------  -----------  ----------- -----------

Price range per common share:
High......................... $  9 1/2     $  3 3/16    $  4 1/4    $  6 25/32
Low..........................    2 1/2        2 5/8        2 5/8       3 27/32

The following table should be read in conjunction with the financial statements of the Company and notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10- K.

                                                       YEARS ENDED DECEMBER 31,
                                         -------------------------------------------------
                                         2000 (1)  1999 (2)    1998    1997 (3)  1996 (4)
                                         --------- --------- --------- --------- ---------
                                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Statement of Operations Data:
Total revenues..........................  $51,422   $87,978  $101,413   $71,409   $62,834
Income (loss) before income taxes.......  (26,565)  (24,887)    7,266    (2,179)       86
Net income (loss).......................  (26,747)  (37,788)    4,525    (3,477)     (116)

Per Share Data:
Basic net income (loss) per share ......   ($1.84)   ($2.67)    $0.32    ($0.26)   ($0.01)
Diluted net income (loss) per share ....   ($1.84)   ($2.67)    $0.31    ($0.26)   ($0.01)

Shares:
Shares utilized to compute basic net
 income (loss) per share................   14,535    14,154    14,012    13,291    13,223

Shares utilized to compute diluted net
 income (loss) per share................   14,535    14,154    14,688    13,291    13,223

Balance Sheet Data:
Cash, cash equivalents and investments..   $9,619   $22,014   $22,597   $27,690   $38,170
Total assets............................   27,560    57,950    95,097    91,334    82,319
Stockholders' equity (deficit)..........   (5,223)   19,119    57,051    51,689    46,772

    The following discussion of results of operations and financial condition of the Company should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this Form 10-K. The report on this Form 10-K contains forward-looking statements, including statements related to industry trends and demand for mainframe products, expected resolution of legal proceedings, cash commitments, and working capital requirements. Discussions containing such forward-looking statements may be found in the material set forth under "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," generally and specifically therein under the captions "Liquidity and Capital Resources" and "Additional Risk Factors," as well as elsewhere in this Annual Report on Form 10-K. Actual events or results may differ materially from those discussed herein. The Company disclaims any obligation to update these forward-looking statements as a result of subsequent events. The risk factors on pages 24 through 30, among others, should be considered in evaluating the Company's prospects and future financial performance.

The Company received a Nasdaq Staff Determination indicating that the Company failed to comply with the net tangible assets requirement set forth in Marketplace Rule 4450(a)(3) and the requirements of Maintenance Standard 2 for market capitalization, market value of public float, and minimum bid price, and that its securities were, therefore, subject to delisting from the Nasdaq National Market. The Company attended an appeal hearing before a Nasdaq Listing Qualifications Panel ("Panel") to review the Staff Determination on February 15, 2001. A determination was made by the Panel on March 5, 2001 to delist the Company's securities from the Nasdaq Stock Market effective with the open of business March 6, 2001. As of March 6, 2001 the Company's stock trades on the Over the Counter ("OTC") Bulletin Board. This is generally considered a less efficient market, and the Company's stock price, as well as the liquidity of its common stock, may be adversely affected as a result.

The Company divested its IMMPOWER product line in April 2000 and its Aptos product line in October 2000. Total revenues from these product lines were $3.7 million for fiscal 2000, compared with $13.6 million for fiscal 1999.

In June 2000, the Company formed a wholly owned subsidiary, RareVision, Inc., to further the development and market testing of a business-to-business internet model for a web-based, knowledge management analytical application for smaller businesses.

During the quarter ended September 30, 2000, the Board of Directors approved a strategic restructuring plan designed to reduce costs and strengthen the Company's position to successfully execute its e-business strategy. The Company recorded pretax restructuring charges totaling $1.9 million comprised mainly of severance costs related to the involuntary termination of employees in the Company's US and UK operations and costs arising from the consolidation of facilities in San Francisco and Aylesbury (UK).

The Company periodically evaluates capitalized software carrying amounts against related estimated future undiscounted cashflows. During the third quarter of 2000, this evaluation indicated that the estimated future undiscounted cashflows were not sufficient to recover the carrying values of certain assets and resulted in an impairment charge of $4.8 million, primarily related to the legacy Tamaris product.

2000 compared to 1999

Total revenues in 2000 were $51.4 million, a decrease of $ 36.6 million, or 41.5%, as compared to 1999. Approximately $9.9 million of this decrease is due to the divestiture of the IMMPOWER and Aptos product lines as described in "Recent Developments." A further $7.3 million of this decrease is attributable to the reduction in Year 2000 related projects.

License revenues in 2000 were $5.1 million, a decrease of $9.4 million, or 64.8%, as compared to 1999. The license revenue decrease partly reflects the Company's longer sales cycle resulting from its transition to e-business, as the transition to collaborative commerce involves coordination with multiple vendors that can delay the sales process. License revenues were also negatively impacted by the divestiture of the IMMPOWER and Aptos product lines. License revenues for these two product lines were less than $0.1 million in fiscal 2000, compared with $4.1 million for fiscal 1999.

Maintenance revenues in 2000 were $26.7 million, a decrease of $4.6 million, or 14.7%, as compared to 1999. Approximately $1.7 million of IMMPOWER and Aptos maintenance revenues were recorded in fiscal 2000, compared with $3.3 million in fiscal 1999. In addition, maintenance revenues were adversely affected by the decrease in license revenues.

Consulting revenues in 2000 were $19.6 million, a decrease of $22.5 million, or 53.5%, as compared to 1999. The Company believes the decrease in consulting revenues is attributable to a reduction in implementation engagements as a consequence of the decreased license revenues and a decrease in non-implementation related projects (e.g., Year 2000, migration and best practice solutions engagements). Consulting revenues from Year 2000 engagements were $7.3 million in 1999. Consulting revenues from the divested businesses amounted to $2.0 million in fiscal 2000, compared with $6.3 million in fiscal 1999.

COSTS OF LICENSES, MAINTENANCE AND CONSULTING

Cost of licenses, maintenance and consulting in 2000 were $25.7 million, a decrease of $16.2 million, or 38.6%, as compared to 1999, and represented 50.0% and 47.6% of total revenues in 2000 and 1999, respectively.

The costs of licenses as a percentage of license revenues increased in 2000 as compared to 1999. The increase in 2000 results from a greater proportion of license revenues generated from the Company's products that utilize technology licensed from third parties.

The cost of maintenance, as a percentage of related revenue, decreased in 2000 compared to 1999. The decrease is mainly due to lower employee related costs in fiscal 2000 resulting from the Company's restructuring actions in the third quarter of the year.

The costs of consulting, as a percentage of related revenue, increased in 2000 as compared to 1999. The increase in 2000 is primarily attributable to lower than expected consulting revenues and lower profit margins associated with certain fixed fee consulting engagements.

Sales and marketing costs in 2000 were $17.9 million, a decrease of $4.0 million, or 18.1%, as compared to 1999. The decrease is mostly attributable to reduced discretionary spending and reduced sales and marketing employee related costs. As a percentage of total revenues, sales and marketing expenses were 34.9% and 24.9% in 2000 and 1999, respectively. Sales and marketing expenses increased as a percentage of revenues because of the decrease in fiscal 2000 revenues compared to fiscal 1999.

 PRODUCT DEVELOPMENT

Product development related expenses, excluding amortization of capitalized software, were as follows (in thousands):

                                          2000     1999
                                        -------- --------
Product development expenditures....... $16,671  $19,262
Less:
   Additions to capitalized software...  (3,441)  (5,052)
                                        -------- --------
Product development expense............ $13,230  $14,210
                                        ======== ========

    Product development expenses decreased $1.0 million, or 6.9%, in 2000 as compared to 1999 and were 25.7% and 16.2% of total revenues in 2000 and 1999, respectively. Additions to capitalized software decreased $1.6 million or 31.9% in 2000 as compared to 1999 and were 20.6% and 26.2% of product development expenditures in 2000 and 1999, respectively. The decrease in software costs capitalized in 2000 is primarily attributable to product development resources being allocated to projects that did not meet the criteria for capitalization.

In June 2000, the Company formed a wholly owned subsidiary, RareVision, Inc., to further the development and market testing of a business-to-business internet model for a web-based, knowledge management analytical application for smaller businesses. Product development expenses attributable to RareVision, Inc. amounted to $3.3 million in fiscal 2000.

The Company divested its IMMPOWER product line in April 2000 and its Aptos product line in October 2000. Product development expenses attributable to the IMMPOWER and Aptos product lines were $1.5 million and $4.4 million in 2000 and 1999, respectively.

Capitalized software amortization in 2000 was $4.8 million, a decrease of $0.6 million, or 11.7%, as compared to 1999. Additional amortization resulting from the Company's new product releases during the year was offset by a decrease in software amortization associated with products written off as part of the Company's restructuring actions during 2000.

General and administrative expenses in 2000 were $10.5 million, a decrease of $5.1 million, or 32.7%, as compared to 1999. As a percentage of total revenues, general and administrative expenses were 20.4% and 17.7% in 2000 and 1999, respectively. The absolute decrease in 2000 is mainly due to lower employee and facilities costs resulting from the Company's restructuring actions and a reduction in the provision for doubtful accounts in 2000 as compared to 1999. General and administrative expenses increased as a percentage of revenue because of the decrease in revenues in 2000 as compared to the previous year.

    Impairment and restructuring charges for fiscal 2000 were $6.7 million, comprised of $1.9 million for employee reductions and facilities consolidation and $4.8 million for the impairment of capitalized software, primarily related to the legacy Tamaris product line. In 1999 the Company recorded charges of $14.9 million in connection with its change in strategic direction and the related restructuring costs. The 1999 charges include $7.2 million for impairment of IMMPOWER and Aptos capitalized software costs and $3.2 million of goodwill impairment. In addition, restructuring charges of $4.5 million include $2.5 million for office consolidations and $2.0 million for workforce reductions.

In 2000, the Company provided $0.2 million for state and foreign income taxes that could not be offset against net operating loss carryforwards. In 1999, the Company provided $12.9 million for income taxes on a pretax loss of $24.9 million. The 1999 provision for income taxes included additions of $12.5 million to the deferred tax valuation allowance, fully reserving the Company's previously recorded net deferred tax assets. The increase in the valuation allowance was the result of management's assessment of the effect of the change in strategic direction and the timing of expiration of certain tax operating loss carryforwards and credits.

1999 compared to 1998

Total revenues in 1999 were $88.0 million, a decrease of $ 13.4 million, or 13.2%, as compared to 1998.

License revenues in 1999 were $14.6 million, a decrease of $7.7 million, or 34.7%, as compared to 1998. The decrease in license revenues was primarily attributable to a continued softness in the enterprise application software market as potential customers utilized available resources to ensure existing applications were Year 2000 compatible rather than acquiring and implementing new software applications.

Maintenance revenues in 1999 were $31.3 million, an increase of $0.1 million, or 0.2%, as compared to 1998.

Consulting revenues in 1999 were $42.1 million, a decrease of $5.8 million, or 12.1%, as compared to 1998. The decrease in consulting revenues was attributable to a reduction in implementation engagements as a consequence of the decreased license revenues and a decrease in non-implementation related projects (e.g., Year 2000, migration and best practice solutions engagements).

COSTS OF LICENSES, MAINTENANCE AND CONSULTING

Costs of licenses, maintenance and consulting were $41.9 million in both 1999 and 1998 and represented 47.6% and 41.4% of total revenues in 1999 and 1998, respectively.

The costs of licenses as a percentage of license revenues increased in 1999 as compared to 1998. The increase in 1999 results from a greater proportion of license revenues generated from the Company's products that utilize technology licensed from third parties.

The cost of maintenance, as a percentage of related revenue, was relatively unchanged in 1999 compared to 1998.

The costs of consulting, as a percentage of related revenue, increased in 1999 as compared to 1998. The increase in 1999 was primarily attributable to lower than expected consulting revenues, lower profit margins associated with certain fixed fee consulting engagements and an increase in the use of outside contractors.

SALES AND MARKETING

Sales and marketing costs in 1999 were $21.9 million, a decrease of $1.1 million, or 4.7%, as compared to 1998. As a percentage of total revenues, sales and marketing expenses were 24.9% and 22.7% in 1999 and 1998, respectively. The 1999 sales and marketing expenses increased as a percentage of revenue because, while 1999 revenues declined, costs associated with marketing promotions for existing customers and marketing costs associated with efforts to promote the Company, its multiple product lines and its consulting services were ongoing.

PRODUCT DEVELOPMENT

Product development related expenses, excluding amortization of capitalized software, were as follows (in thousands):

                                          1999     1998
                                        -------- --------
Product development expenditures....... $19,262  $20,261
Less:
   Additions to capitalized software...  (5,052)  (7,391)
                                        -------- --------
Product development expense............ $14,210  $12,870
                                        ======== ========

Product development expenses increased $1.3 million, or 10.4%, in 1999 as compared to 1998 and were 16.2% and 12.7% of total revenues in 1999 and 1998, respectively. Additions to capitalized software decreased $2.3 million, or 31.6% in 1999 as compared to 1998 and were 26.2% and 36.5% of product development expenditures in 1999 and 1998, respectively. The decrease in software costs capitalized in 1999 was primarily attributable to product development resources being allocated to projects that did not meet the criteria for capitalization.

AMORTIZATION OF CAPITALIZED SOFTWARE

Capitalized software amortization in 1999 was $5.4 million, an increase of $0.4 million, or 8.6%, as compared to 1998. The increase in 1999 was due to additional amortization associated with the Company's ongoing practice of evaluating the useful lives of capitalized software products, offset by a decrease in software amortization associated with products written off as part of the Company's restructuring actions during 1999.

GENERAL AND ADMINISTRATIVE

General and administrative expenses in 1999 were $15.6 million, an increase of $3.1 million, or 25.3%, as compared to 1998. As a percentage of total revenues, general and administrative expenses were 17.7% and 12.3% in 1999 and 1998, respectively. The absolute dollar increase in 1999 was due primarily to an increase of $3.1 million in the allowance for doubtful accounts provision in 1999. In addition, in 1999 the Company had increased compensation costs, in part resulting from the increased use of outside contractors, partially offset by the effect on compensation and facilities costs of the Company's restructuring actions during the second half of 1999.

IMPAIRMENT AND RESTRUCTURING CHARGES

In 1999 the Company recorded charges of $14.9 million in connection with its change in strategic direction and the related restructuring costs. The charges include $7.2 million for impairment of IMMPOWER and Aptos capitalized software costs and $3.2 million of goodwill impairment. In addition, restructuring charges of $4.5 million include $2.5 million for office consolidations and $2.0 million for workforce reductions. No impairment or restructuring charges were recorded in 1998.

INCOME TAX EXPENSE

In 1999, the Company provided $12.9 million for income taxes on a pretax loss of $24.9 million. The 1999 provision for income taxes includes additions of $12.5 million to the deferred tax valuation allowance, fully reserving the Company's previously recorded net deferred tax assets. The increase in the valuation allowance was a result of management's assessment of the effect of the change in strategic direction and the timing of expiration of certain tax operating loss carryforwards and credits. In 1998, the Company provided income taxes equal to 38% on pretax income of $7.3 million. The Company's tax provisions for both years include the generation, expiration, and true up of tax credits and net operating losses.

As of December 31, 2000, the Company's principal sources of liquidity included cash, cash equivalents and short- and long-term investments aggregating $9.6 million and funds from operations. In addition, in March 2001, the Company replaced its $6.0 million line of credit, secured by marketable securities, with a new credit facility. Under the terms of the new credit facility, which is renewable annually, the Company may borrow up to $6.0 million, dependent upon the amount of eligible domestic accounts receivable, as defined in the agreement. The Company's operating activities used cash of $10.3 million in 2000, and provided cash of $6.8 million in 1999 and $5.9 million in 1998. The net loss in 2000 of $26.7 million included $4.8 million of non-cash charges related to impairment of certain capitalized software assets. The net loss in 1999 of $37.8 million included $22.9 million of non-cash charges related to impairment of certain capitalized software and goodwill and increases in valuation allowances for net deferred tax assets. In 1998, the Company's net income was the primary reason for the cash provided by operations.

Financing activities provided cash of $1.9 million in 2000, and used cash of $0.2 million and $1.1 million in 1999 and 1998, respectively. In 2000, 1999 and 1998, proceeds from the issuance of stock under the Company's employee stock purchase plan and proceeds from stock options exercised provided $1.9 million, $1.1 million and $2.8 million in cash, respectively. The Company used cash in the amount of $1.1 million and $2.4 million in 1999 and 1998, respectively, for the purpose of repurchasing Company stock. No stock was repurchased in fiscal 2000. All stock repurchases were made pursuant to resolutions of the Company's Board of Directors in 1995 authorizing the repurchase of the Company's outstanding shares of common stock, not to exceed a total cost of $17.5 million. Through December 31, 2000, the Company had acquired 1,059,500 shares of its common stock at an aggregate cost of $11.1 million. As of December 31, 2000, the Company had reissued 1,059,500 of the repurchased shares in connection with the Company's employee stock purchase plan, one of its employee stock option plans, and the acquisition of Revere.

Investing activities provided $3.4 million in cash during 2000, used $12.9 million in cash during 1999, and provided $3.1 million of cash in 1998. The major cash flows in 2000 comprised net inflows from investments totaling $7.5 million, offset by additions to capitalized software of $3.4 million and fixed asset purchases of $0.6 million. Cash flows from investing activities for 1999 primarily reflected net outflows from investments totaling $5.9 million, additions to capitalized software of $5.1 million, and fixed asset purchases of $2.0 million. Cash flows from investing activities for 1998 primarily reflected net inflows from investments totaling $13.0 million, additions to capitalized software of $7.4 million, and fixed asset purchases of $2.5 million.

In connection with the December 1997 acquisition of Revere, Inc., the Company assumed a line of credit with an outstanding balance of $1.5 million. The outstanding balance on the assumed line of credit was subsequently paid in full in January 1998.

The Company believes that its principal sources of liquidity, which include cash and cash equivalents of $9.6 million as of December 31, 2000 and funds expected from operations will satisfy the Company's currently anticipated working capital and capital expenditure requirements for at least the next twelve months. In addition, the Company has a credit facility that provides for up to $6.0 million of borrowings, dependent upon the amount of eligible domestic accounts receivable, as defined in the agreement. During the fourth quarter of 2000, the Company began to realize the benefits of the actions taken in the third quarter of 2000 to reduce operating costs in its core business, and believes such cost reductions are sustainable in 2001. However, there can be no assurance that the Company will not need to raise additional capital to fund operations within this period. There can be no assurance that additional financing can be obtained on acceptable terms, or at all. If additional funds are raised by issuing equity securities, dilution to stockholders may result. If adequate funds are not available, the Company may be harmed.

    The Company operates in a rapidly changing environment that involves numerous risks and uncertainties which could have a material adverse effect on the Company. The following discussion details some, but not all, of these risks and uncertainties.

The Company's operating results fluctuate as a result of a variety of factors including:

(i) the execution of new license agreements;

(ii) the shipment of software products;

(iii) customer acceptance criteria for services performed;

(iv) completion of milestone or other significant development requirements pursuant to the Company's license agreements;

(v) the financial terms of consulting agreements and the inclusion of fixed as opposed to variable pricing;

(vi) third-party royalty payments for licensed software;

(vii) the demand for the Company's products and services;

(viii) changes in the Company's product mix;

(ix) the development and launch of new products, and the life cycles of the Company's existing products;

(x) research and development expenditures required to update and expand the Company's product portfolio and related third-party consulting costs;

(xi) sales and marketing expenses generally related to the entry into new markets with new or existing products and maintenance of market share in existing markets;

(xii) acquisitions and the integration and development of acquired entities or products;

(xiii) competitive conditions in the industry; and

(xiv) general economic conditions.

    As a result, the Company believes that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as indications of future performance.

The Company's quarterly operating results are particularly dependent on the number of license agreement bookings executed in each quarter. The amount of quarterly bookings has varied substantially from quarter to quarter due to a variety of reasons including:

(i) a high proportion of license agreements are negotiated during the latter part of each quarter and these negotiations may not be completed before the quarter end;

(ii) the sales cycles for some of the Company's products are relatively long due to the Company's focus on "enterprise solutions" as opposed to individual products, which adds complexity to the customer's selection, negotiation and approval process;

(iii) the Company's longer sales cycle resulting from its transition to e- business, as the transition to collaborative commerce involves coordination with multiple vendors that can delay the sales process;

(iv) the amount related to each booking may vary significantly due to the need for different solutions for different customers;

(v) procurement procedures may vary from customer to customer, which may affect the timing of the bookings;

(vi) the period for a customer to complete product evaluations and to complete any subsequent purchase approval may be delayed due to resource limitations; and

(vii) economic, political and industrial conditions can adversely affect business opportunities without notice.

    In addition, bookings that are executed during a particular quarter may not be recognized as revenue during such quarter because such bookings may not have met the Company's revenue recognition criteria. No assurance can be given that the Company will be able to effect new bookings in accordance with historical results or management's expectations, and the inability of the Company to do so could have a material adverse effect on the Company's operating results.

    While the Company typically sells its software under a standard license agreement, license agreements associated with large enterprise solutions often require the negotiation of terms and conditions that differ substantially from the Company's standard license agreement terms. The negotiation of these agreements may extend the sales cycle. The Company may not always obtain terms and conditions that permit the recognition of revenue upon shipment of the licensed product or under the percentage of completion method of contract accounting rules. Accordingly, revenue may not be recognized after shipment of a product because specified milestones have not been met or because applicable services have not been completed.

    The Company has and expects to enter into fixed-price consulting agreements, particularly in response to increased competition in the industry. The Company has recognized lower profit margins on certain fixed-price service agreements when compared to variable agreements. No assurance can be given that the Company will be able to conclude fixed-price agreements on terms that will allow the Company to achieve acceptable operating margins.

    The Company has historically generated a majority of its consulting revenue from pre- and post-implementation services. The Company has provided services that include, but are not limited to, Year 2000 readiness engagements, best practice solution engagements and other hardware and software solutions. The Company intends to continue its pursuit of consulting engagements for which the Company believes it is qualified. There can be no assurances that these engagements will result in profit margins equal to or greater than those engagements that are specific to a customer's product implementation. Also, there can be no assurances that consulting revenue generated from non-implementation related projects will continue in the future.

    Employee and facility related expenditures comprise a significant portion of the Company's operating costs and expenses, and are therefore relatively fixed over the short term. In addition, the Company's expense levels are based, in significant part, on the Company's forecasted revenue. If revenue levels fall below expectations, operating results are likely to be adversely affected. There can be no assurance that the Company will be able to achieve profitability on a quarterly or annual basis in the future. Any of the foregoing factors could cause the Company's future operating results to fall below the expectations of public securities market analysts, which could have an adverse effect on the trading price of the Company's common stock. See "Volatility of Stock Price."

The Company received a Nasdaq Staff Determination indicating that the Company failed to comply with the listing requirements of the Nasdaq National Market. The Company attended an appeal hearing before a Nasdaq Listing Qualifications Panel ("Panel") to review the Staff Determination on February 15, 2001. The Company attended an appeal hearing before a Nasdaq Listing Qualifications Panel ("Panel") to review the Staff Determination on February 15, 2001. A determination was made by the Panel on March 5, 2001 to delist the Company's securities from the Nasdaq Stock Market effective with the open of business March 6, 2001. As of March 6, 2001 the Company's stock trades on the Over the Counter ("OTC") Bulletin Board. This is generally considered a less efficient market, and the Company's stock price, as well as the liquidity of its common stock, may be adversely affected as a result.

    Technology companies, including the Company, frequently experience volatility in their common stock prices. Factors such as quarterly fluctuations in results of operations, announcements of technological innovations by the Company or its competitors or the introduction of new products by the Company or its competitors and macroeconomic conditions in the computer hardware and software industries generally may have a significant adverse impact on the market price of the Company's stock. If revenues or earnings in any quarter fail to meet the expectations of the investment community, there could be an immediate impact on the Company's stock price. In addition, the Company has issued shares and stock options, which, if sold directly or exercised and sold on the open market in large concentrations, could cause the Company's stock price to decline in the short term. Furthermore, the stock market has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for many technology companies, in some cases unrelated to the operating performance of those companies. These broad market fluctuations may materially adversely affect the market price of the stock of the Company.

    The Company generates revenue from internally developed software products, some of which utilize technology licensed from third parties. The Company expects to continue utilizing third party technology and may enter into agreements with additional business partners. If sales of software utilizing third party technology increase disproportionately, gross margins may be below historical levels due to third party royalty obligations. There can be no assurances that the third parties will renew existing agreements with the Company or will not require financial conditions that are unfavorable to the Company. In addition, there can be no assurances that existing third party agreements will not be terminated.

    Certain software companies, including the Company, have experienced significant economic downturns as a result of technological shifts and competitive pressures. These downturns are characterized by decreased product demand, price erosion, work slowdowns and layoffs. The Company's operations may, in the future, experience substantial fluctuations from period to period because of such industry patterns and general economic and political conditions which could affect the timing of orders from customers. There can be no assurance that such factors will not have a materially adverse effect on the Company's business, operating results or financial condition.

    The Company will continue its presence in international markets by marketing its B2B e-business solutions for the enterprise to Global 2000 organizations. Risks associated with such pursuits include, but are not limited to, the following: changing market demands, economic and political conditions in foreign markets, foreign exchange fluctuations, longer collections cycles, difficulty in managing a geographically dispersed organization and changes in international tax laws. Operating results are likely to be adversely affected if the Company's operations in international markets are not successful.

    The business and financial applications software market for large, complex organizations is intensely competitive. The Company's principal competitors with e-business solutions are SAP AG, Oracle Corporation and PeopleSoft, Inc. With the Horizon suite of analytic applications, the Company principally competes with Hyperion Solutions Corporation and Comshare, Inc.

    The Company also competes to a lesser extent with other independent software application vendors. Some of the Company's current and potential competitors have substantially greater financial, technical, marketing and sales resources than the Company. Some of these competitors also offer business application products not offered by the Company, primarily in the areas of human resources and manufacturing. However, Walker remains one of the few companies committed to providing and enhancing applications for the mainframe environment. Most of the competitors listed above compete with Walker by offering UNIX-based applications.

    The Company encounters competition from a broader range of firms in the market for professional services. Principal competitors include Accenture (formerly Andersen Consulting) and IBM Global Services, the consulting divisions of the major accounting firms, all of which possess greater resources than the Company, and niche-consulting firms that specialize in the Company's products and compete primarily on the basis of price of services provided.

    The principal competitive factors in the market for business and financial applications software and services include product functionality, flexibility, portability, integration, reliability, performance, product availability, speed of implementation, quality of customer support and user documentation, vendor reputation, experience, financial stability, cost effectiveness and price. The Company believes that it competes favorably with respect to these factors. There can be no assurance, however, that the Company will be able to compete successfully in the future.

    The software industry is characterized by rapid technological change. The pace of change has accelerated due to advances in mainframe and client/server technology and the growth in Internet, Intranet and extranet utilization. The Company expects to evaluate potential opportunities and may invest in those that are compatible with the Company's strategic direction. However, there can be no assurance that any such investments will be profitable. The Company's products are also designed primarily for use with certain mainframe and client/server systems. The introduction of products embodying new technologies and the emergence of new industry standards can render existing products obsolete. Accordingly, the Company's future success depends in part upon its ability to continue to enhance its current products and to develop and introduce new products that respond to evolving customer requirements and keep pace with technological development and emerging industry standards, such as new operating systems, hardware platforms, interfaces and third party applications software.

There can be no assurances that:

(i) the Company will be successful in developing and marketing product enhancements or new products that respond to technological change, changes in customer requirements or emerging industry standards;

(ii) the Company will not experience difficulties that could delay or prevent the successful development, introduction and marketing of such products and enhancements; or

(iii) any new products or enhancements that it may introduce will achieve market acceptance.

    The Company's continued success is dependent on its continued ability to introduce, develop and market new and enhanced versions of its software products, although there can be no assurance that this process can be maintained. The Company plans to continue its investment in product development in future periods. However, there can be no assurance that revenues will be sufficient to support the future product development that is required for the Company to be competitive. Although the Company may be able to release new products in addition to enhancements to existing products, there can be no assurance that the Company's new or upgraded products will be accepted, will not be delayed or canceled, or will not contain errors or "bugs" that could affect the performance of the product or cause damage to users' data.

    The Company regards its products as proprietary. Through its license agreements with customers and its internal security systems, confidentiality procedures and employee agreements, the Company has taken steps to maintain the trade secrecy of its products. However, there can be no assurances that misappropriation will not occur. In addition, the laws of some countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States. There can be no assurance that the confidentiality of any proprietary information will provide any meaningful competitive advantage. The Company has no patents relating to its products. The Company believes that, because of the rapid pace of technological change in the computer software industry, that patents and copyrights are less significant than factors such as the knowledge, ability and experience of the Company's employees, frequent product enhancements and the timeliness and quality of support services. There can be no assurance that the Company's current efforts to retain its products as proprietary will be adequate.

    Although the Company believes that its products do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against the Company in the future with respect to current or future products or that any such assertions will not require the Company to enter into royalty arrangements or result in costly litigation.

    The Company's license agreements with its customers contain provisions designed to limit the Company's exposure to potential product liability claims. It is possible, however, that the limitation of liability provisions contained in such license agreements may not be enforced as a result of international, federal, state and local laws or ordinances or unfavorable judicial decisions. The license and support of the Company's software for use in mission critical applications creates the risk of product liability claims against the Company. Damage liability or injunctive relief resulting from such a claim could cause a materially adverse impact on the Company's business, operating results and financial condition.

    The Company believes that its continued success will depend in large part upon its ability to attract, train and retain highly skilled technical, sales, marketing and managerial personnel. Because of the high level of demand, competition for such personnel is intense and the Company sometimes experiences difficulty in locating candidates with appropriate qualifications or within desired geographic locations. Revenue growth is dependent on the Company's ability to attract, train, retain and productively manage such personnel.

    The Company has its headquarters in San Francisco under a lease that expires in 2007. Although commercial building vacancy rates have been low in San Francisco, recent changes in the technology sector have resulted in a significant increase in available office space. The Company's San Francisco headquarters office space exceeds its current needs, and the Company is seeking to reduce this excess office space. Failure to do so on commercially acceptable terms may adversely affect the Company's financial results.

    The Company has acquired and may continue to acquire complimentary businesses, products or technology. The process of integrating an acquired company's business into the Company's operations may result in unforeseen operating difficulties and expenditures and may require significant management attention that would otherwise be available for the ongoing development of the Company's business. There can be no assurance that any anticipated benefits of an acquisition will be realized. Future acquisitions by the Company could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization related to goodwill and other intangible assets, which could materially affect the Company's operating results and financial condition. Acquisitions involve numerous risks, including difficulties in the assimilation of operations, technologies and products of the acquired company, risks associated with entering markets in which the Company has no or limited direct prior experience and the potential loss of key employees of the acquired company.

    The Company has U.S. dollar interest-bearing investments that are subject to interest rate risk. The Company analyzed its investments at year-end to determine the sensitivity to interest rate changes. The fair values of these instruments were determined by net present values. The Company's sensitivity analysis used the same change in interest rates for all maturities. All other factors were held constant. If interest rates changed by 1%, the expected effect on net income related to the Company's investments would be immaterial.

    The majority of the Company's revenues are denominated in the U.S. dollar. The Company does not engage in interest rate swaps or enter into foreign currency forward contracts.

WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

                                                             December 31,
                                                        ----------------------
                                                           2000        1999
                                                        ----------  ----------
                        ASSETS
Current Assets:
    Cash and equivalents.............................. $    4,219  $    9,187
    Short-term investments............................      5,400       6,642
    Accounts receivable, net of allowance for doubtful
     accounts of $1,528 in 2000 and $4,554 in 1999....      8,816      17,368
    Prepaid expenses..................................        854       2,471
    Other receivables.................................        370         812
                                                        ----------  ----------
           Total current assets.......................     19,659      36,480
Long-term investments.................................        --        6,185
Property and equipment, net...........................      2,121       4,169
Capitalized software, net of accumulated amortization
      of $56,932 in 2000 and $47,379 in 1999..........      4,541      10,653
Long-term accounts receivable.........................      1,144         --
Other assets..........................................         95         463
                                                        ----------  ----------
Total assets.......................................... $   27,560  $   57,950
                                                        ==========  ==========
    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
    Accounts payable.................................. $    2,625  $    4,203
    Accrued liabilities...............................     11,614      12,788
    Deferred revenue..................................     12,706      17,168
                                                        ----------  ----------
           Total current liabilities..................     26,945      34,159
Deferred revenue......................................      2,551       1,697
Other long-term obligations...........................      3,287       2,975
                                                        ----------  ----------
           Total liabilities..........................     32,783      38,831
                                                        ----------  ----------
Commitments and contingencies (see Note 10)
Stockholders' equity (deficit):
      Common stock, $.001 par value: 50,000 shares
       authorized; issued 14,661 shares - December
       31, 2000; 14,257 shares - December 31, 1999....         15          14
      Additional paid-in capital......................     76,458      74,566
      Accumulated other comprehensive income..........        501          33
      Accumulated deficit.............................    (82,197)    (55,450)
      Treasury stock, at cost (26 shares - December
       31, 1999)......................................        --          (44)
                                                        ----------  ----------
           Total stockholders' equity (deficit).......     (5,223)     19,119
                                                        ----------  ----------
Total liabilities and stockholders' equity (deficit).. $   27,560  $   57,950
                                                        ==========  ==========

WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   Year Ended December 31,
                                              ----------- ----------------------
                                                 2000        1999        1998
                                              ----------  ----------  ----------
REVENUES:
     License................................ $    5,131  $   14,565  $   22,291
     Maintenance............................     26,706      31,322      31,248
     Consulting.............................     19,585      42,091      47,874
                                              ----------  ----------  ----------
         Total revenues.....................     51,422      87,978     101,413
OPERATING EXPENSES:
     Costs of revenues:
         Costs of licenses, maintenance
           and consulting...................     25,696      41,864      41,944
         Amortization of capitalized
           software.........................      4,755       5,388       4,963
     Sales and marketing....................     17,929      21,895      22,973
     Product development....................     13,230      14,210      12,870
     General and administrative.............     10,482      15,581      12,439
     Impairment of capitalized
       software and goodwill................      4,799      10,427           -
     Restructuring charges..................      1,905       4,518           -
                                              ----------  ----------  ----------
         Total operating expenses...........     78,796     113,883      95,189
Operating income(loss)......................    (27,374)    (25,905)      6,224
         Interest income, net...............        809       1,018       1,042
                                              ----------  ----------  ----------
Income (loss) before income taxes...........    (26,565)    (24,887)      7,266
         Provision for income taxes.........        182      12,901       2,741
                                              ----------  ----------  ----------
NET INCOME (LOSS)........................... $  (26,747) $  (37,788) $    4,525
                                              ==========  ==========  ==========
BASIC NET INCOME (LOSS) PER SHARE........... $    (1.84) $    (2.67) $     0.32
                                              ==========  ==========  ==========
Shares utilized to compute basic
  net income (loss) per share...............     14,535      14,154      14,012
                                              ==========  ==========  ==========
DILUTED NET INCOME (LOSS) PER SHARE......... $    (1.84) $    (2.67) $     0.31
                                              ==========  ==========  ==========
Shares utilized to compute diluted
  net income (loss) per share...............     14,535      14,154      14,688
                                              ==========  ==========  ==========

WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                                                                                     Accumulated
                                                                                        Other                    Total
                                                                                     Comprehen-                 Stock-
                                     Common Stock     Treasury Stock     Additional     sive                   holders'
                                 ------------------- ------------------   Paid-in      Income     Accumulated   Equity/
                                   Shares     Amount  Shares    Amount    Capital      (Loss)       Deficit    (Deficit)
                                 -----------  ------ ---------  -------  ----------  -----------  -----------  ---------
Balance at December 31, 1997.... 13,973,457  $   14       --   $   --   $   73,622  $       240  $   (22,187) $  51,689
Common stock issued under
    stock option and employee
    stock purchase plans........    211,594     --    160,703    2,165         626           --           --      2,791
Treasury stock acquired.........         --     --   (200,000)  (2,417)        --            --           --     (2,417)
Tax benefit from exercise
    of stock options............         --     --        --       --          475           --           --        475
Other...........................       (366)    --     (9,910)    --            (4)          --           --         (4)
Comprehensive income (loss):
     Currency translation
      adjustment................         --     --        --       --          --           (21)          --
     Unrealized gain on
      investments...............         --     --        --       --          --            13           --
     Net income for 1998........         --     --        --       --          --          --          4,525
     Total comprehensive
      income....................         --     --        --       --          --            --           --      4,517
                                 -----------  ------ ---------  -------  ----------  -----------  -----------  ---------
Balance at December 31, 1998.... 14,184,685      14   (49,207)    (252)     74,719          232      (17,662)    57,051
Common stock issued under
    stock option and employee
    stock purchase plans........     72,500     --    245,616    1,260        (153)          --           --      1,107
Treasury stock acquired.........         --     --   (222,500)  (1,052)        --            --           --     (1,052)
Comprehensive income (loss):
     Currency translation
      adjustment................         --     --        --       --          --          (116)          --
     Unrealized (loss) on
      investments...............         --     --        --       --          --           (83)          --
     Net loss for 1999..........         --     --        --       --          --            --      (37,788)
     Total comprehensive
      (loss)....................         --     --        --       --          --            --           --    (37,987)
                                 -----------  ------ ---------  -------  ----------  -----------  -----------  ---------
Balance at December 31, 1999.... 14,257,185      14   (26,091)     (44)     74,566           33      (55,450)    19,119
Common stock issued under
    stock option and employee
    stock purchase plans........    403,394       1    26,091       44       1,892           --           --      1,937
Comprehensive income (loss):
     Currency translation
      adjustment................         --     --        --       --          --           398           --
     Unrealized (gain) on
      investments...............         --     --        --       --          --            70           --
     Net loss for 2000..........         --     --        --       --          --            --      (26,747)
     Total comprehensive
      (loss)....................         --     --        --       --          --            --           --    (26,279)
                                 -----------  ------ ---------  -------  ----------  -----------  -----------  ---------
Balance at December 31, 2000.... 14,660,579  $   15       --   $   --   $   76,458  $       501  $   (82,197) $  (5,223)
                                 ===========  ====== =========  =======  ==========  ===========  ===========  =========

WALKER INTERACTIVE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                   Year Ended December 31,
                                                                -------------------------------
                                                                  2000       1999       1998
                                                                ---------  ---------  ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss).......................................... $ (26,747) $ (37,788) $   4,525
   Adjustments to reconcile net income
       (loss) to net cash provided (used)
        by operating activities:
        Depreciation and amortization.........................     6,806      8,282      8,446
        Increase/(decrease) in allowance for
          doubtful accounts...................................    (3,026)     3,176          2
        Deferred tax provision................................     --        12,501      1,131
        Impairment of capitalized
          software and goodwill...............................     4,799     10,427      --
   Changes in operating assets and liabilities:
        Accounts receivable...................................    10,876      9,101     (7,351)
        Prepaids and other assets.............................     1,617       (124)      (346)
        Accounts payable......................................    (2,524)    (1,232)      (523)
        Accrued liabilities...................................    (1,080)      (134)       336
        Deferred revenue......................................    (3,608)     2,446       (327)
        Proceeds from divestitures..............................     946      --         --
        Disposals of fixed assets in divested activities........   1,122      --         --
        Other.................................................       493        103         32
                                                                ---------  ---------  ---------
            Net cash provided (used) by operating activities..   (10,326)     6,758      5,925
                                                                ---------  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from employee stock purchase plan
         issuances and stock options exercised................     1,937      1,107      2,787
       Treasury stock acquired................................     --        (1,052)    (2,417)
       Capital lease payments.................................       (21)      (295)       (74)
       Repayment of borrowings................................     --         --        (1,422)
                                                                ---------  ---------  ---------

            Net cash provided (used) by financing activities..     1,916       (240)    (1,126)
                                                                ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of short-term  and long-term investments.....    (3,635)   (14,771)    (4,449)
       Maturities of short-term investments...................       500      7,375     10,950
       Sales of short-term investments........................    10,611      1,507      6,506
       Purchases of property..................................      (614)    (2,031)    (2,533)
       Additions to capitalized software......................    (3,441)    (5,052)    (7,391)
       Other..................................................        21         85         28
                                                                ---------  ---------  ---------

            Net cash provided (used) by investing activities..     3,442    (12,887)     3,111
                                                                ---------  ---------  ---------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS........................................    (4,968)    (6,369)     7,910
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD...............     9,187     15,556      7,646
                                                                ---------  ---------  ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD..................... $   4,219  $   9,187  $  15,556
                                                                =========  =========  =========

Supplemental Disclosure:
   Cash paid for income taxes................................. $     305  $   1,334  $     299
                                                                =========  =========  =========

WALKER INTERACTIVE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                  Year Ended December 31,
                                             ----------- ----------- ----------
                                                2000        1999        1998
                                             ----------  ----------  ----------

Net income (loss).......................... $  (26,747) $  (37,788) $    4,525
     Currency translation adjustment.......        398        (116)        (21)
     Unrealized gain/(loss) on investments.         70         (83)         13
                                             ----------  ----------  ----------
Total comprehensive income (loss).......... $  (26,279) $  (37,987) $    4,517
                                             ==========  ==========  ==========

                                                     Gross        Gross
                                       Amortized   Unrealized  Unrealized     Fair
         December 31, 2000               Costs       Gains       Losses      Value
------------------------------------  -----------  ----------  -----------  --------

Short-term investments.............. $     5,398  $        3  $        (1) $  5,400
                                      ===========  ==========  ===========  ========

                                                     Gross        Gross
                                       Amortized   Unrealized  Unrealized     Fair
         December 31, 1999               Costs       Gains       Losses      Value
------------------------------------  -----------  ----------  -----------  --------

Short-term investments.............. $     6,657  $    --     $       (15) $  6,642
Long-term investments...............       6,235       --              50     6,185
                                      -----------  ----------  -----------  --------
    Total........................... $    12,892  $    --     $        35  $ 12,827
                                      ===========  ==========  ===========  ========

                                              December 31,
                                      ------------ ----------
                                         2000         1999
                                      -----------  ----------

Equipment........................... $    17,462  $   21,169
Furniture and fixtures..............       2,314       2,534
Leasehold improvements..............       1,306       1,668
Property under capital leases:
    Equipment.......................       2,233       2,182
    Furniture.......................       1,780       1,760
                                      -----------  ----------
                                          25,095      29,313
Less:
    Accumulated depreciation........     (22,974)    (25,144)
                                      -----------  ----------
Property and equipment, net......... $     2,121  $    4,169
                                      ===========  ==========

                                                 December 31,
                                             ----------- ----------
                                                2000        1999
                                             ----------  ----------

Salaries, commissions, and other
     compensation.......................... $    2,651  $    3,964
Federal, state, foreign and other taxes....      1,841       2,297
Accrued facilities expenses................      1,949         845
Royalties..................................        742         781
Current portion of capital leases..........        221         156
Other accrued expenses.....................      4,210       4,745
                                             ----------  ----------
                                            $   11,614  $   12,788
                                             ==========  ==========

                                                    December 31,
                                             ----------- ----------
                                                2000        1999
                                             ----------  ----------

Accrued facilities expenses................ $    1,309  $    1,533
Long term portion of capital leases........        153         146
Income taxes...............................        443         443
Other......................................      1,382         853
                                             ----------  ----------
                                            $    3,287  $    2,975
                                             ==========  ==========

                                                      December 31,
                                                  ----------------------
                                                     2000        1999
                                                  ----------  ----------

Deferred Tax Assets:

Deferred revenue recognized for tax............. $      281  $      302
Excess book depreciation over tax depreciation..        326         594
Accrued liabilities and reserves................      2,122       3,119
Software development costs capitalized for tax....    3,296       --
Research and development credits................      3,390       2,972
Alternative minimum tax credit carryforwards....        486         491
Net operating loss carryforwards................     10,944       9,538
Foreign tax credits carryforwards...............      2,399       3,413
Foreign losses..................................      4,420       2,837
Other...........................................        606         464
                                                  ----------  ----------
                                                     28,270      23,730
                                                  ----------  ----------
Deferred Tax Liabilities:

Capitalized software development costs
  expensed for tax purposes.....................      --         (1,834)
                                                  ----------  ----------
                                                      --         (1,834)
                                                  ----------  ----------

Valuation allowance.............................    (28,270)    (21,896)
                                                  ----------  ----------
Deferred Tax Assets - net....................... $    --     $    --
                                                  ==========  ==========

2000:                      Current      Deferred       Total
                         -----------  ------------  ------------

Federal................ $    --      $     --      $     --
State..................          52        --                52
Foreign................         130        --               130
                         -----------  ------------  ------------
Total.................. $       182  $     --      $        182
                         ===========  ============  ============


1999:                      Current      Deferred       Total
                         -----------  ------------  ------------

Federal................ $        61  $      8,654  $      8,715
State..................         140         2,466         2,606
Foreign................         199         1,381         1,580
                         -----------  ------------  ------------
Total.................. $       400  $     12,501  $     12,901
                         ===========  ============  ============

1998:                      Current      Deferred       Total
                         -----------  ------------  ------------
Federal................ $       (92) $      1,048  $        956
State..................         137           274           411
Foreign................       1,565          (191)        1,374
                         -----------  ------------  ------------
Total.................. $     1,610  $      1,131  $      2,741
                         ===========  ============  ============

Year ended December 31,                            2000      %      1999      %      1998      %
------------------------------------------------ -------- ------- -------- ------- -------- -------

Provision (benefit) at statutory rate - Federal. ($8,964)    -34% ($8,666)    -35%  $2,471      34%
State income and capital taxes..................  (1,474)     -5%  (1,210)     -5%     358       5%
Provision at statutory rates of controlled
 foreign subsidiaries...........................     247       1%     259       1%     (35)     -1%
Goodwill........................................      --            1,173       5%     232       3%
Federal research and development credit, net of
 expired credits................................    (150)     -1%    (174)     -1%    (164)     -2%
Decrease in tax credits resulting from the
 true-up of assessments and changes in tax
 accounting methods.............................      --       --   1,687       7%     859      12%
Valuation allowance.............................   6,374      24%  19,052      77%      --     --
Decrease/(Increase) in net operating losses
 resulting from the true-up of assessments and .
 sale of subsidiary..............................  2,819      11%      --     --      (828)    -11%
Decrease in tax credits resulting from the
 true up of assessments and sale of subsidiary..   1,658       6%      --     --        --     --
Other, net......................................    (328)     -1%     780       3%    (152)     -2%
                                                 -------- ------- -------- ------- -------- -------
Total income tax expense........................    $182       1% $12,901      52%  $2,741      38%
                                                 ======== ======= ======== ======= ======== =======

                                                                 YEAR ENDED DECEMBER 31,
                                                        2000             1999             1998
                                                 ---------------- ---------------- ----------------
                                                          WEIGHTED         WEIGHTED         WEIGHTED
                                                          AVERAGE          AVERAGE          AVERAGE
                                                          EXERCISE         EXERCISE         EXERCISE
                                                 OPTIONS   PRICE  OPTIONS   PRICE  OPTIONS   PRICE
                                                 -------- ------- -------- ------- -------- -------

Outstanding-beginning of period.................   4,592   $5.71    3,827   $8.22    2,902   $9.78
Granted.........................................   1,772    4.35    2,486    3.08    2,716    9.63
Exercised.......................................    (298)   4.66      (73)   5.04     (210)   7.29
Canceled or expired.............................  (1,314)   5.53   (1,648)   7.22   (1,581)  13.65
                                                 -------- ------- -------- ------- -------- -------
Outstanding-end of period.......................   4,752   $5.30    4,592   $5.71    3,827   $8.22
                                                 ======== ======= ======== ======= ======== =======
  Exercisable-end of period.....................   2,151            1,982            1,250
                                                 ========         ========         ========

                             Options Outstanding            Options Exercisable
                    ------------------------------------ -------------------------
                                  Weighted
                    Outstanding    Average    Weighted    Exercisable   Weighted
     Range of            at       Remaining    Average        at         Average
     Exercise       December 31, Contractual  Exercise   December 31,   Exercise
       Price            2000        Life        Price        2000         Price
------------------- ------------ ----------- ----------- ------------- -----------

$0.35 to $3.19.....       1,596         9.1       $2.87           410       $2.67
3.31 to 4.93.......       1,065         8.9        3.36           275        3.32
5.38 to 7.00.......       1,175         5.4        6.09           946        5.90
7.12 to 12.88......         643         7.1        9.30           286        9.62
13.12 to 16.00.....         273         6.3       14.34           234       14.08
                    ------------ ----------- ----------- ------------- -----------
                          4,752         7.7       $5.30         2,151       $6.34
                    ============ =========== =========== ============= ===========

                                                      Year Ended December 31,
                                             ----------- ----------- ----------
                                                2000        1999        1998
                                             ----------  ----------  ----------

Dividend yield.............................        0.0%        0.0%        0.0%
Volatility.................................      309.9%      108.0%       65.3%
Risk free interest rate....................        5.6%        6.1%        4.5%
Expected term, in years....................        0.5         0.5         0.5

                                                     Year Ended December 31,
                                             ----------- ----------- ----------
                                                2000        1999        1998
                                             ----------  ----------  ----------

Dividend yield.............................        0.0%        0.0%        0.0%
Volatility.................................      309.9%      108.0%       65.3%
Risk free interest rate....................        5.6%        6.1%        4.6%
Expected term, in years....................        6.0         4.3         4.4

                                                     Year Ended December 31,
                                             ----------- ----------- ----------
                                                2000        1999        1998
                                             ----------  ----------  ----------

Net income (loss):
    As reported............................ $  (26,747) $  (37,788) $    4,525
    Pro forma.............................. $  (28,265) $  (40,160) $      785
Diluted net income (loss) per share:
    As reported............................ $    (1.84) $    (2.67) $     0.31
    Pro forma.............................. $    (1.94) $    (2.84) $     0.05

2001....................................... $    3,046
2002.......................................      2,695
2003.......................................      2,500
2004.......................................      2,240
2005.........................................    2,359
Thereafter.................................      9,474
                                             ----------
          Total minimum payments........... $   22,314
                                             ==========

                                   YEAR ENDED DECEMBER 31,
                         ---------------------------------------
                            2000          1999          1998
                         -----------  ------------  ------------
       Revenues:
-----------------------
North America.......... $    36,909  $     64,756  $     71,654
Europe, Middle East and      12,909        21,048        26,357
Asia Pacific...........       1,604         2,174         3,402
                         -----------  ------------  ------------
Total revenues......... $    51,422  $     87,978  $    101,413
                         ===========  ============  ============

                                   YEAR ENDED DECEMBER 31,
                         ---------------------------------------
                            2000          1999          1998
                         -----------  ------------  ------------
 Identifiable assets:
-----------------------
North America.......... $     9,696  $     12,977  $     23,156
Europe, Middle East and       3,475        11,523        12,477
Asia Pacific...........         229           783         2,604
Corporate..............      14,160        32,667        56,860
                         -----------  ------------  ------------
Total assets........... $    27,560  $     57,950  $     95,097
                         ===========  ============  ============

                                                  Year Ended December 31,
                                             ----------- ----------- ----------
                                                2000        1999        1998
                                             ----------  ----------  ----------

Shares used to compute basic EPS...........     14,535      14,154      14,012
Add:  effect of dilutive securities........      --          --            676
                                             ----------  ----------  ----------
Shares used to compute diluted EPS.........     14,535      14,154      14,688
                                             ==========  ==========  ==========

                                                   Quarters ended
                                      March 31,    June 30,    Sept. 30,    Dec. 31,
                                      -----------  ----------  -----------  --------
2000 (1)
Revenues.............................$    14,450  $   14,215  $    12,669  $ 10,087
Loss from operations..................    (5,656)     (3,945)     (14,311)   (3,461)
Loss before provision for income taxes    (5,359)     (3,764)     (14,117)   (3,325)
Net loss..............................    (5,407)     (3,814)     (14,167)   (3,359)
Basic net loss per share .............     (0.38)      (0.26)       (0.97)    (0.23)
Diluted net loss per share ...........     (0.38)      (0.26)       (0.97)    (0.23)

1999 (2)
Revenues.............................$    23,907  $   25,344  $    20,688  $ 18,039
Loss from operations..................    (1,913)    (12,968)      (3,205)   (7,819)
Loss before provision for income taxes    (1,674)    (12,734)      (2,932)   (7,547)
Net loss..............................    (1,038)    (25,871)      (3,132)   (7,747)
Basic net loss per share .............     (0.07)      (1.85)       (0.22)    (0.54)
Diluted net loss per share ...........     (0.07)      (1.85)       (0.22)    (0.54)

    Not applicable.

    The information required by this Item is incorporated herein by reference to the Company's Proxy Statement in connection with its 2001 Annual Meeting of Stockholders under the captions "Proposal 1 - Election of Directors," "Additional Information - Management" and "Additional Information - Section 16(a) Beneficial Ownership Reporting Compliance."

    The information required by this Item is incorporated herein by reference to the Company's Proxy Statement in connection with its 2001 Annual Meeting of Stockholders under the caption "Executive Compensation."

    The information required by this Item is incorporated herein by reference to the Company's Proxy Statement in connection with its 2001 Annual Meeting of Stockholders under the caption "Security Ownership of Certain Beneficial Owners and Management."

    The information required by this Item is incorporated herein by reference to the Company's Proxy Statement in connection with its 2001 Annual Meeting of Stockholders under the caption "Certain Transactions."

2. Consolidated Financial Statement Schedule

All other financial statement schedules not listed above are omitted as the required information is not applicable or the information is presented in the consolidated financial statements or related notes.

The following exhibits are filed herewith or incorporated by reference:

WALKER INTERACTIVE SYSTEMS, INC.

EXHIBIT INDEX

----------------

----------------

(1) Incorporated by reference to the corresponding exhibit to the Current Report on Form 8-K, filed July 13, 1995.

(2) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1992.

(3) Incorporated by reference to the corresponding exhibit to the Registration Statement on Form S-1, as amended (Registration No. 33-45737).

(4) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending September 30,1995.

(5) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1995.

(6) Incorporated by reference to the corresponding exhibit to the Current Report on Form 8-K, filed December 11, 1997.

(7) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending September 30, 1998.

(8) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending June 30, 1998.

(9) Incorporated by reference to the attachment of the Company's 1998 Proxy Statement.

(10) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1997.

(11) Incorporated by reference to the attachment of the Company's 1999 Proxy Statement.

(12) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1998.

(13) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending March 31, 1999.

(14) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending June 30, 1999.

(15) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending September 30, 1999.

(16) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending March 31, 2000.

(17) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending June 30, 2000.

(18) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1999.

* Indicates a management contract or compensatory plan.

    (b) Reports on Form 8-K

    During the quarter ended December 31, 2000, the Company did not file any reports on Form 8-K.

WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, Walker Interactive Systems, Inc., a Delaware corporation, has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on March 27, 2001.

POWER OF ATTORNEY

    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Frank Richardson and Stanley V. Vogler, and each or any one of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SCHEDULE II

WALKER INTERACTIVE SYSTEMS, INC.
FORM 10-K
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

                                  Balance   Additions                      Balance
                                    at     Charged to   Amounts              at
                                 Beginning  Costs and   Written            End of
Allowance for Doubtful Accounts: of Period  Expenses      Off     Other (1 Period
-------------------------------- --------- ----------- ---------- ------- ---------
Year Ended December 31, 2000....   $4,554         603      1,517   2,112    $1,528
Year Ended December 31, 1999....   $1,378       3,605        429      --    $4,554
Year Ended December 31, 1998....   $1,376         506        504      --    $1,378

(1) Relates to the divestiture of the IMMPOWER product line in April 2000 and the Aptos produ

WALKER INTERACTIVE SYSTEMS, INC.

EXHIBIT INDEX

________________

(1) Incorporated by reference to the corresponding exhibit to the Current Report on Form 8-K, filed July 13, 1995.

(2) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1992.

(3) Incorporated by reference to the corresponding exhibit to the Registration Statement on Form S-1, as amended (Registration No. 33-45737).

(4) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending September 30,1995.

(5) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1995.

(6) Incorporated by reference to the corresponding exhibit to the Current Report on Form 8-K, filed December 11, 1997.

(7) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending September 30, 1998.

(8) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending June 30, 1998.

(9) Incorporated by reference to the attachment of the Company's 1998 Proxy Statement.

(10) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1997.

(11) Incorporated by reference to the attachment of the Company's 1999 Proxy Statement.

(12) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1998.

(13) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending March 31, 1999.

(14) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending June 30, 1999.

(15) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending September 30, 1999.

(16) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending March 31, 2000.

(17) Incorporated by reference to the corresponding exhibit to the Quarterly Report on Form 10-Q for the quarter ending June 30, 2000.

(18) Incorporated by reference to the corresponding exhibit to the Annual Report on Form 10-K for the year ending December 31, 1999.

* Indicates a management contract or compensatory plan.