Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended
December 31, 2000 Commission File Number 1-5620

SAFEGUARD SCIENTIFICS, INC.
(Exact name of Registrant as specified in its charter)

Pennsylvania 23-1609753
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)

800 The Safeguard Building
435 Devon Park Drive, Wayne, PA 19087
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (610) 293-0600

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

Name of each exchange
Title of Each Class on which registered
- ------------------- -------------------
Common Stock ($.10 Par Value) New York Stock Exchange

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

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

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

Aggregate market value of common stock held by non-affiliates (based on the
closing price on the New York Stock Exchange) on March 21, 2001 was
approximately $556.8 million. For purposes of determining this amount only,
Registrant has defined affiliates as including (a) the executive officers named
in Part III of this 10-K report, (b) all directors of Registrant, and (c) each
stockholder that has informed Registrant by March 21, 2001 that it is the
beneficial owner of 10% or more of the outstanding common stock of Registrant.

The number of shares outstanding of the Registrant's Common Stock, as of
March 21, 2001 was 117,299,573.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference in this Form 10-K:

PART I
Item 1(b) Note 20 on pages 60 to 62 of the Annual Report to
Stockholders for the year ended December 31, 2000,
which pages are filed as part of Exhibit 13 to this
Form 10-K.
PART II
Items 5, 6, 7 and 8 Pages 25 to 64 of the Annual Report to Stockholders for
the year ended December 31, 2000, which pages are filed
as part of Exhibit 13 to this Form 10-K.
PART III
Items 10, 11, 12 and 13 Definitive Proxy Statement for the May 23, 2001 annual
meeting of stockholders of Registrant, to be filed
within 120 days after the end of the year covered by
this Form 10-K Report.

PART I

Item 1. Business

General

Safeguard is a leader in identifying, developing and operating emerging
technology companies through its extensive network of partner companies and
private equity funds. Safeguard acquires interests in developing infrastructure
technology companies with a focus on three sectors: software, communications
and e-Services. We accelerate their growth and integrate these companies into
our network. The Safeguard network consists of more than 40 direct partner
company holdings and an extended network of more than 260 network companies.
This network provides Safeguard's partner companies such resources as strategic
partners, customers, test beds and sales channels. Safeguard believes its
experience developing and operating technology companies, our expertise in and
focus on technology, and the reach of our network enable us to identify and
attract companies with significant potential for success in the technology
market.

Safeguard's principal mission is to create long-term shareholder value. We
believe shareholder value is maximized by retaining and promoting the
entrepreneurial culture of the partner companies that we operate. The
entrepreneurs of our partner companies generally retain significant equity
interests in their businesses, and their interests as shareholders remain
aligned with ours. We provide a full range of operational and management
services to each of our partner companies through dedicated teams of Safeguard
professionals. Each team has expertise in the areas of business and technology
strategy, sales and marketing, operations, finance, human resource support and
legal and transactional support, and provides hands-on assistance to the
management of the partner company in support of its growth. The level of
involvement varies and in some circumstances includes the provision of full-time
interim personnel. Safeguard pursues various strategies to maximize the long-
term value of our partner companies. These strategies include preparing our
partner companies for initial public offerings, assisting with mergers and
acquisitions and facilitating additional capital raising activities. Safeguard
ultimately attempts to create shareholder value from these emerging companies by
(i) taking them public, either in a normal initial public offering or a rights
or subscription offering, and subsequently by liquidating Safeguard's interest
in the company over a period of time; or (ii) achieving other liquidity events
for these companies (such as sales or mergers), which provides additional cash
for Safeguard's operations.

During 2000, Safeguard announced interests in 18 new partner companies and
expanded its technology consulting and services operating businesses. Safeguard
completed the sale of three private partner companies for total proceeds to
Safeguard of more than $50 million. Safeguard also completed initial public
offerings of two of its partner companies, eMerge Interactive (February) and
Opus360 Corporation (April), using the Safeguard Subscription Program.

Safeguard's network also includes its participation in the management of 12
private equity funds, which are located on our corporate campus and have total
capital committed or invested of more than $2.7 billion. In addition, Safeguard
is a limited partner in six other private equity funds which have total capital
committed or invested of approximately $1.1 billion. Collectively, these 18
private equity funds augment our network by providing us with an expanded base
through which to conduct our operations, including acquisition syndication
opportunities and approximately $100 million in distributions to us during 2000.
We believe our network of private equity funds creates opportunities for us and
our partner companies to form strategic alliances and partnerships that may
develop or enhance their businesses. Also, the personal relationships and
expertise of the professionals employed by these funds are important resources
for developing and evaluating acquisition opportunities. We frequently refer

opportunities that do not fit our operating strategy to an appropriate fund.
The funds may pursue broader investment strategies and may invest at earlier
stages and at less significant ownership percentages than Safeguard. The
diversification within the funds allows Safeguard, through its network, to
identify and take advantage of a broader range of emerging technologies, to
maintain relationships with a greater number of promising entrepreneurs and to
evaluate perceived shifts in technologies. In 2000, the private equity funds
made over 95 new investments and had over 228 companies in their portfolios as
of December 31, 2000.

In April 2000, Safeguard completed its follow-on public offering, raising
approximately $414 million, and completed common stock placements with three
strategic investors (Compaq, IBM and Textron), raising an additional $200
million.

Safeguard was incorporated in Pennsylvania in 1953.

Opportunities for Developing Technology Companies

Safeguard focuses on three sectors that we believe provide the most
significant opportunities in the infrastructure technology sector:

. Software. Software providers develop and market software
applications, tools and related services that support electronic
commerce and integrate business functions. These include procurement
platforms, distributed content management, web-based customer
relationship management and supply chain management applications,
dynamic pricing platforms, enterprise and Internet application
integration, billing and payment systems and additional applications
that enable electronic commerce and information management and
communication.

. Communications. Communications providers develop networks and design,
and market products and services to support the communications
infrastructure required for all electronic commerce. Products and
services provided by these companies include network security and
quality measurement software, communications services including
wireline and wireless broadband access to Internet protocol networks,
optical and Internet protocol-based network infrastructure software,
and network management and optimization solutions.

. e-Services. Providers of Internet-related services, or e-Services,
develop, deploy and manage applications and Web sites to enable
electronic commerce and automate business processes. e-Service
providers may also offer the infrastructure to host applications from
a centrally managed site. Services provided by these companies also
include strategic guidance and implementation services that enable
companies to take competitive advantage of the Internet.

Challenges Facing Developing Technology Companies

We believe that to succeed in this rapidly evolving and highly competitive
market, developing companies with leading-edge technologies and solutions need
to understand the challenges and opportunities of global electronic commerce.
To establish market leadership, these companies must accelerate the process of
developing a sustainable enterprise, commercializing their core product or
service offerings and bringing these products and services to market. In
addition to capital, these companies require the resources to address the
following challenges in establishing market leadership:

. Technology. The strategic assessment of technology market
opportunities and the design, development and commercialization of
proprietary technology solutions, as well as access to complementary
technologies and strategic partnerships.

. Management. The recruitment and retention of an effective senior
management team capable of providing strategic direction for these
companies.

. Legal and Financial. The development of appropriate corporate, legal
and financial structures and the expertise to execute transactions.

. Marketing. The identification of the company's strategic market
position and the implementation of effective branding, launch and
marketing strategies.

. Operations. The establishment of facilities and administrative
processes to support the growing enterprise.

. Business Development. The creation of relationships that provide
initial reference customers, external marketing channels and growth
through strategic partnerships, joint ventures or acquisitions.

Our Solution and Strategy

Safeguard provides the resources to address the challenges facing
developing technology companies and enables these companies to capitalize on
their potential opportunities. We believe that our experience in developing and
operating technology companies and the reach of our network enable us to
identify and attract companies with the greatest potential for success and to
assist these companies to become market leaders. We believe that our network of
more than 40 direct partner company holdings and an extended network of more
than 260 network companies, in which we hold indirect interests through our
partner holding companies and private equity funds, is a unique resource that
provides us with competitive advantages in the development of technology
companies. The Safeguard network is broad and deep and supports our development
process from beginning to end.

We utilize our extensive network to meet the strategic and operational
needs of developing technology companies. Safeguard provides value acceleration
services to its partner companies and leverages its vast network of resources to
their benefit as strategic partners, customers, test beds and sales channels. In
addition to providing our partner companies with capital, we draw on our network
resources to offer strategic and operational services in a collaborative
environment that serves to accelerate their development and allow them to
rapidly capitalize on market opportunities. After a company achieves market
success, we continue to operate as a partner, providing the partner company with
ongoing access to our network resources and industry relationships.

We provide a full range of operational and management services to each of
our partner companies through dedicated teams of Safeguard professionals. Each
team has expertise in the areas of business and technology strategy, sales and
marketing, operations, finance and legal and transactional support, and human
resources, and provide hands-on assistance to the management of the partner
company in support of its growth. Each team is responsible for all elements of
the acquisition and development of our partner companies, providing consistency

to the relationship between Safeguard and the developing company and between the
developing company and our network resources. In the execution of each element
of our development process, the sector team coordinates the use of our network
resources to leverage Safeguard's own capital and management resources.

Our process for identifying, developing and operating the leading
technology companies consists of the following five elements: sourcing,
selection, planning, execution and operation. The first two, sourcing and
selection, refer to our methodology for identifying and assessing acquisition
opportunities. The last three, planning, execution and operation, refer to our
post-acquisition process for enhancing the value of our partner companies.

Sourcing

We believe the knowledge base of our management team, the sector expertise
and relationships of our business teams, and the market presence of the
companies in our broad network, including the networks of our partner holding
companies and private equity funds, enable us to understand industry and
technology trends in order to target potential technology leaders. Our teams
identify compelling market segments and have the mandate to acquire interests in
companies with technologies that best address the needs in that segment.

We identify potential candidates through three types of sourcing processes.
Acquisition opportunities may be directly sourced, co-sourced or outsourced.
Directly sourced opportunities are identified through the efforts of the
Safeguard management team and their network of industry and financial contacts.
Co-sourced opportunities are developed with Safeguard's partner holding
companies and private equity funds or result from spinouts from existing partner
companies. Our relationships with 18 private equity funds, 12 of which are
located on our campus, significantly expand our universe of co-sourced partner
company acquisition opportunities. Outsourced opportunities come from the
referrals, contacts and relationships of companies, entrepreneurs, managers and
consultants that comprise our network of industry relationships.

Selection

Our teams rapidly identify and acquire those companies that we believe have
the potential to be market leaders and are potentially synergistic with our
network. When we identify a company that appears to meet our current criteria,
we evaluate the company's potential, relying on both our management's own
expertise and rapid input from sources of expertise within our network. For
example, we may call upon the specific expertise or experience of management at
our partner companies or private equity funds, or we may call upon one of our
information technology operating partner companies, such as aligne incorporated,
to perform a rigorous technology assessment. We may also call upon a company in
our network to implement and evaluate a promising technology on a test bed,
trial basis. We believe that these resources permit us to make highly informed
judgments concerning a company's potential more rapidly than our competitors
that do not have similar resources. As a result of our business model and
extensive experience, we believe that we are able to complete acquisitions
quickly and efficiently.

We select potential partner companies using the following primary criteria:

. Industry-Leading Technology. We focus on companies that we believe
have the potential to be market leaders and whose technology or
processes provide them with a competitive advantage that prevents
competitors from easily entering their market. In addition, we look
for companies

with accomplished technical teams that we believe have the skills to
bring their concepts to market quickly.

. Markets. We focus on companies that offer products and services to
large and rapidly growing markets. We favor markets that are
sufficiently developed for the company to start aggressively
building its customer base, although we will also acquire companies
whose market opportunity anticipates important trends that we have
identified. We attempt to assess a company's potential market share
within its addressable market by evaluating the level of competition
presented by other companies, traditional businesses and potential
market entrants. We favor companies with strong competitive
positions where there is no dominant participant in their
addressable market.

. Compelling Business Model. We place an emphasis on companies with
compelling, sustainable business models. We require companies to be
able to achieve cash flow breakeven within 24 months. We target
companies that we believe have the potential to achieve and sustain
high profit margins.

. Management. We believe that entrepreneurial leadership is essential.
The identification and development of entrepreneurs is central to
our history and culture. We target entrepreneurs who we believe
demonstrate the leadership skills required to guide the strategy and
development of an early-stage company. In addition, we target
companies with highly qualified executive teams that will be able to
manage the rapid organizational development that we expect our
partner companies to achieve.

. Fit with Safeguard Network. As we continue to build our network, we
look for companies that will complement our existing partner
companies and create synergy with and provide support to other
companies in our network.

Among the companies that satisfy these criteria, we focus on acquiring
interests in companies that can benefit from services provided by us and our
network. In view of the operating resources we devote to the development of
companies, we seek opportunities to take a meaningful ownership position and
exercise significant operational influence. Our objective is to maintain an
interest of more than 30%, either directly or through our affiliated partner
companies or private equity funds, while ensuring that management and key
personnel still retain a significant equity stake in the company, although where
necessary, we can structure solutions to achieve significant influence with
lower ownership levels. Generally, we are the largest single shareholder,
exercise significant influence over the company and obtain significant board
representation. We believe that by limiting our acquisitions to situations in
which we can establish a substantial economic and operational relationship, we
are able to make more efficient use of our capital and management resources and
derive a greater benefit from the addition of new partner companies to our
network.

Planning

Once we acquire an interest in a partner company, we take an active role in
its strategic direction and provide operational support. Through our experience
in developing and operating technology companies, we have developed a
methodology for accelerating our partner companies' successes. Prior to closing
an acquisition, we begin to work with a prospective partner company to:

. define its near term strategic goals;

. identify the key milestones to reaching these goals;

. identify the business metrics that will be applied by Safeguard and
the markets to measure its success; and

. identify potential synergies with Safeguard's network of companies.

We conduct a needs assessment to determine the nature and timing of the
resources required to help the company achieve its goals. We then either
provide the company with appropriate services and support from within Safeguard
and its network or help them identify and negotiate to obtain these services
from third-party suppliers or strategic partners. We help our partner companies
measure their progress and continually reassess their objectives and
requirements. By helping our partner companies' management teams remain focused
on their critical objectives and providing them with resources not typically
available to early-stage companies, we believe we are able to significantly
accelerate their development and success.

Once a company has completed its early development process, we engage in an
ongoing planning and assessment process. Safeguard executives serve on the
board of directors of each of our partner companies and work with it to develop
its annual strategic plan. Achievement of its annual plan is monitored through
monthly reporting of strategic performance metrics and financial results. This
planning and reporting system for our more mature partner companies provides an
efficient means for our management to identify when additional involvement and
support may be required.

Execution

Our objective is to permit the entrepreneur to remain focused on the
company's core business objectives. If the partner company does not have
sufficient access to the resources required to execute its plan, the Safeguard
business partner responsible for the company will seek to utilize our network to
obtain the required resources. We believe these services provide our partner
companies with significant competitive advantages in competing in their
individual markets. The resources our partner companies draw upon to accelerate
their development include the following:

Technology. Our history as a developer of technology companies provides us
with ample resources to support the technology development of a new partner
company. We and our partner companies frequently call upon our e-Service
providers, such as aligne incorporated, to perform strategic and operational
technology assessments and to provide support for the commercialization of
technology solutions. In light of the demand for qualified technology workers,
the hundreds of consultants, developers, integration experts and other
technology specialists within our network provide our partner companies with a
unique competitive advantage. They also permit us to acquire companies that
possess break-through technologies that require substantial development to reach
commercialization. Through our network we are also able to identify and provide
preferred access to complementary technologies and promote strategic
partnerships with technology leaders.

Management. Through our network, we have access to entrepreneurial and
operational talent that is frequently called upon to serve on the board of
directors or advisory boards of our partner companies, or in temporary executive
capacities during the rapid development of a new partner company. We can also
assist a

partner company to respond to temporary demands for additional highly qualified
personnel through our consulting and service companies.

Legal and Financial. In addition to the business partner responsible for
the acquisition and overall development of each partner company, we assign a
financial and legal partner to each new partner company. These professional
partners are involved in the due diligence preceding the acquisition and are
responsible for assessing financial and legal issues, including the
recommendation of best practices within their areas of expertise. The expertise
of dedicated professional partners remains available to our partner companies
when they are seeking to execute major corporate or other financial
transactions.

Marketing. We provide our partner companies with strategic guidance
regarding market positioning, product launch and marketing and public relations.
Insights concerning market position are obtained from our internal research and
trend analysis and the collective intelligence of the companies within our
network.

Facilities. Our corporate campus in suburban Philadelphia currently
contains approximately 115,000 square feet of flexible office space that is home
to Safeguard, Internet Capital Group, 12 private equity funds, the Eastern
Technology Council, and from time to time, resident entrepreneurs. We are in
the process of expanding our corporate campus by approximately 25,000 square
feet of office space. In addition, our facilities partner, TechSpace, provides
facilities and support services to start-up and early stage companies.
TechSpace currently has two sites in New York and sites in Boston, San Francisco
and Toronto with an additional site under construction in Austin.

Business Development. Our business and professional partners offer
assistance in identifying, evaluating, structuring and negotiating joint
ventures, strategic alliances, joint marketing agreements, acquisitions and
other corporate transactions. In addition, we offer our partner companies a
variety of services designed to reduce their operating costs, enable them to
focus on product development and marketing and accelerate their time-to-market
with new products and services. Most importantly, our network of more than 300
companies provides opportunities for synergistic business development to new
partner companies. New partner companies are asked to identify and prioritize
the business relationships that they would like to establish within our network.
Our business partners then work closely with the partner company to support the
formation of these relationships. This active promotion of collaborative
opportunities within our network is central to our operating strategy.

Operation

Our business model is to develop, integrate and operate a network of
leading technology partner companies. We believe our operating model gives us
and each of our partner companies an advantage over other developing companies
that do not have access to the same network of resources. We also believe our
model provides advantages over large, established companies that do not have the
necessary entrepreneurial agility to compete in emerging, rapidly changing
markets. By operating through independent companies, we can attract talented
entrepreneurs to run our businesses and we can partner with emerging companies
that are creating ground-breaking technologies and services. We insist that our
entrepreneurs own significant equity stakes in their companies to provide
maximum financial incentive for excellence. We operate as partners, in a
horizontal organizational structure, in order to encourage our partners'
entrepreneurial energy and creative talents.

We believe that our collaborative network is particularly effective in
benefiting our companies. We promote the sharing of knowledge, industry
experience and business contacts that serve to accelerate technology

development and encourage cross-selling and marketing opportunities. We believe
that the sharing of information and development of strategic relationships among
our partner companies provides them with a competitive advantage. In addition,
we seek to leverage the aggregate purchasing power of our network of partner
companies to reduce their individual costs of obtaining third party services and
products. Our partner companies also capitalize on the industry relationships of
our management team and board of directors to facilitate strategic partnerships,
technology licensing agreements, distribution arrangements and co-marketing
relationships with other technology companies. In addition, we promote
collaboration through making introductions, conducting seminars and conferences,
identifying prospective alliances and monitoring the ongoing relationships among
our partner companies. Safeguard arranges several annual conferences for its
partner companies, including the "Think Again(TM)" annual conference, the annual
senior partners meeting, the annual chief financial officers' conference and
smaller on-campus and off-site conferences.

The Safeguard Network

Our network consists of more than 300 companies. We hold direct interests
in more than 40 companies, which we call partner companies, and indirect
interests in more than 260 additional companies, which we call network
companies, through Internet Capital Group and our other partner holding
companies and private equity funds.

We focus on developing and operating three types of technology companies:
software providers, communications providers, and e-Services providers. The
following are our core partner companies:

Software Communications e-Services
-------- -------------- ----------

Atlas Commerce NexTone Communications aligne
Buystream Pac-West Telecomm Cambridge Technology Partners
LifeFX SOTAS DataCenter Direct
Nextron Communications ThinAirApps eonDigital
Presideo WebTelecom iMedium
REALTIME MEDIA Wireless OnLine Kanbay
Sanchez Mi8
USDATA OAO Technology Solutions
Opus360
Palarco
Persona
TechSpace

The following tables provide a summary of our partner companies in our
three core sectors. Our ownership positions in the following tables have been
calculated as of March 15, 2001, based on the issued and outstanding voting
securities of each partner company, assuming the issuance of voting securities
on the conversion or exercise of non-voting preferred stock, but excluding the
effect of options, warrants and convertible debt. Our ownership percentages in
certain of the partner companies described below include equity interests that
have been acquired by our management subject to the restrictions and thresholds
of our long-term incentive plan. Our ownership percentage assumes the purchase
by Safeguard of equity securities upon satisfaction or waiver of all partner
company funding conditions. See Notes 4 and 5 of Notes to Consolidated

Financial Statements for information about the market value as of December 31,
2000 of our holdings in our publicly traded partner companies and publicly
traded companies that we account for as available for sale.

Software

Software providers develop and market software applications, tools and
related services that support electronic commerce and integrate business
functions. These include distributed content management, web-based customer
relationship management applications and supply chain management applications,
procurement platforms, dynamic pricing platforms, enterprise and Internet
application integration, billing and payment systems and additional applications
that enable electronic commerce and information management and communication.

% Owned
Company Description of Business By Safeguard
--------- ----------------------- ------------

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Atlas Commerce Atlas Commerce delivers Internet business applications for 35%
(www.atlascommerce.com) private eHubs. Atlas enables global organizations to turn their
existing business partnerships into competitive advantage by
automating strategic sourcing processes, improving management of
supply and demand, and integrating commerce transactions across
their entire value chain. The company demonstrates its expertise
with support for strategic sourcing of direct materials; global
commerce transactions; multi-tier supplier relationships;
collaborative planning, forecasting and replenishment; and XML
integration with legacy applications and trading exchanges. Atlas
offers proven value, helping its customers achieve increased
revenue, lower cost of goods sold, improved margins and faster
response times.
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Buystream Buystream's analytic solutions help companies manage their online 31%
(www.buystream.com) business by measuring only what matters. Buystream's solutions
analyze key business Eventstreams to deliver usable and
actionable information to improve online business processes and
maximize results. Buystream's solutions combine best-of-breed
software and E-Metric Research Group business consulting to
support e-companies through every phase of analysis and
re-engineering, from designing the site through managing buyer
conversion factors to optimizing visitor loyalty.
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LifeFX LifeFX (Nasdaq: LEFX) is creating the face of the Internet by 47%
(www.lifefx.com) developing photo-realistic, digital human faces, or LifeFX
(Nasdaq: LEFX) Stand-In(TM) virtual people, that can interact in real time.
LifeFX Stand-In(TM) virtual people will be used by Web businesses
as life-like customer-service and sales representatives, guides,
teachers and entertainers, while consumer applications will
include e-mail, instant messaging and chat rooms.
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Nextron Communications Nextron Communications is a software development company that 54%
(www.nextron.com) builds corporate Web sites for global companies and works with
partners such as Internet service providers, telecommunication
companies, and other major corporations to provide Web content
management products and services.
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Presideo Presideo is a security infrastructure software and services 41%
(www.presideo.com) company, which enables trusted exchanges of confidential
information primarily for the healthcare and benefits markets.
Presideo's Trust Services(SM) technology incorporates single
sign-on software, Public Key Infrastructures ("PKI"),
credentialing, regulation sensitive reporting and the ability to
launch these applications using multiple tokens including various
forms of biometrics. They are active in numerous industry
organizations that are establishing guidelines to meet the
requirements of Health Insurance Portability and Accountability
Act of 1996 ("HIPAA") and other regulations governing security
and privacy standard in electronic data.
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REALTIME MEDIA REALTIME MEDIA is a full-service online direct marketing 43%
(www.realtimemedia.com) that uses innovative promotional techniques to create awareness,
build traffic, and generate leads for its high-profile Internet
and traditional clients. REALTIME MEDIA was originally formed to
be an Internet promotional services company and is recognized as
an industry pioneer in online promotions, instant-win, and
sweepstakes technologies. The company has evolved from a product
promotions company to a full solutions provider for attracting
and keeping customers for both online and combination
online/offline companies.
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Sanchez Computer Sanchez Computer Associates (Nasdaq: SCAI) is a leading developer 25%
Associates and integrator of financial services software applications for
(www.sanchez.com) the world's largest institutions. Sanchez markets a suite of
(Nasdaq: SCAI) integrated banking, brokerage and financial services applications
called PROFILE(R). Products within the integrated suite are
multi-currency, multi-language and provide institutions with
comprehensive solutions for retail banking, brokerage and
financial services integration. PROFILE solutions are channel
independent and provide mission critical transactional processing
and integration across an institution's enterprise.
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USDATA USDATA (Nasdaq: USDC) is a global supplier of component-based production 40%
(www.usdata.com) software that is designed to help customers reduce operating
(Nasdaq: USDC) costs, shorten cycle times and improve product quality in their
manufacturing operations. The company's software enables
manufacturers to access accurate and timely information --
whether they are on the plant-floor, in the office, or around the
globe. USDATA's solutions span the full range of manufacturing,
from monitoring equipment to tracking product flow, and are
designed to integrate seamlessly with customer's existing
manufacturing and business software.
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Communications

Communications providers develop networks and design and market products
and services to support the communications infrastructure required for all
electronic commerce. Products and services provided by these companies include
network security and quality measurement software, communications services
including wireline and wireless broadband access to Internet protocol networks,
optical and Internet protocol-based network infrastructure software and network
management and optimization solutions.

% Owned
Company Description of Business By Safeguard
------- ----------------------- ------------
- ------------------------------------------------------------------------------------------------------------------

NexTone Communications Powering the Virtual Central Office, NexTone Communications is a 37%
(www.nextone.com) leading provider of advanced application creation and service
delivery systems for next-generation communication networks.
NexTone's iServer architecture enables rapid design and
deployment of powerful enhanced services and value-added
applications to small and medium-sized businesses in the most
simple and cost effective way.
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Pac-West Telecomm Pac-West Telecomm (Nasdaq: PACW) is a rapidly growing provider of 7%
(www.pacwest.com) integrated communications services throughout the western U.S.
(Nasdaq: PACW) Pac-West supplies Internet infrastructure and broadband services
to Internet service providers (ISPs), and integrated voice, data
and Internet services to small and medium-sized businesses. The
company currently has operations in California, Nevada,
Washington, Colorado, Utah and Arizona, and is rapidly expanding
its network into other western states.
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SOTAS SOTAS provides solutions that empower service providers to run 66%
(www.sotas.com) profitable networks and serve their customers by presenting the
right information, at the right time, to the right decision
makers. Using data gathered from existing network elements, such
as switches, test equipment from multiple vendors, legacy
systems, and databases, SOTAS' solutions give service providers
the tools to make decisions in real time in order to more
effectively, design, provision, diagnose, view, monitor, and
manage communications networks. SOTAS' provides an advanced
portfolio of analog and digital intrusive testing systems and
data management and reporting systems to help customers achieve
the full strategic potential of their networks. With headquarters
in Gaithersburg, Maryland USA, and offices in Bristol, England
and New Delhi, India, SOTAS serves service providers around the
globe.
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ThinAirApps ThinAirApps is a pioneer in wireless information access software 34%
(www.thinairapps.com) providing the most open platform for extending information to any
wireless device, and focused on enabling applications that
reflect the way people live and work in a mobile society. The
company is committed to delivering the most advanced and
easiest-to-use software and tools for end users, businesses,
developers, and service providers.
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WebTelecom WebTelecom is an Internet infrastructure company selling 53%
(www.webtele.com) communication services. The company provides complete solutions,
including technology, software and services, for the CRM market
and core technology in a variety of emerging markets. WebTelecom
has developed the first fully comprehensive solution for
real-time human-to-human (H\\2\\H) communications over the Internet.
Communications on demand is the "missing link" needed to grow
e-commerce and online productivity to optimal levels. WebTelecom
provide a single solution for Internet communication tools,
including voice, video, text-chat, co-browsing and additional
online collaboration capabilities.
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- ------------------------------------------------------------------------------------------------------------------
Wireless Online Wireless Online is a global leader in smart wireless equipment, 43%
(www.wireless-online.com) providing products from smart base stations and smart
applications to smart antenna systems. The company's proven,
patented smart technology enables network operators to achieve
better coverage and capacity with three to ten times fewer sites.
Wireless Online leverages its SeRFiT(TM), Spectral Reuse and
Filtering Technology, and its common platform architecture to
serve the multiple frequency bands, modulation schemes and
protocols that are prevalent in the wireless data industry.
- ------------------------------------------------------------------------------------------------------------------

e-Services

Providers of Internet-related services, or e-Services, develop, deploy and
manage applications and Web sites to enable electronic commerce and automate
business processes. e-Service providers may also offer the infrastructure to
host applications from a centrally managed site. Services provided by these
companies also include strategic guidance and implementation services that
enable companies to take competitive advantage of the Internet.

aligne aligne is an information technology consulting firm that assists 100%
(www.aligne.com) senior executives in optimizing their companies' investments in
technology. aligne offers businesses a variety of services
ranging from IT strategy development and enhancement to
applications development and infrastructure support by leveraging
proven methodologies for setting, measuring, achieving and
governing technology objectives. aligne develops and implements
technology strategies designed to align IT assets with business
objectives for medium and large enterprises.
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Cambridge Technology Cambridge Technology Partners (Massachusetts) (Nasdaq: CATP) 17%
Partners (Massachusetts) provides strategic and management consulting as well as systems
(www.ctp.com) integration services to transform its clients into electronic
(Nasdaq: CATP) businesses. Working in collaboration with Global 1000 and
high-velocity middle market companies, Cambridge combines a deep
understanding of electronic commerce issues with integrated,
end-to-end services and a record of shared risk and rapid,
guaranteed delivery. On March 12, 2001, Novell, Inc. (Nasdaq:
NOVL), a leading provider of Net services software, entered into
a definitive agreement to acquire Cambridge, subject to customary
closing conditions, including approval under the
Hart-Scott-Rodino Antitrust Improvements Act.
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DataCenter Direct DataCenterDirect is a managed services provider working with 76%
(www.datacenterdirect.com) global 2000 and emerging technology and e-commerce companies
seeking to outsource the design, management, deployment and
hosting of their Internet infrastructure. DataCenterDirect's
integrated solutions and proprietary software tools facilitate
the management of new internet applications and the transition
and integration of legacy systems to a web-based environment.
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eonDigital eonDigital provides web-hosted software to streamline and 11%
(www.eondigital.com) consolidate the process of developing and producing marketing
materials, customized communications and complex documents.
eonDigital has integrated best-of-class software products in
content management, collaboration, project management and
publishing into one end-to-end solution, providing companies with
one platform for the development of print, web and wireless
communications. The patent-pending application connects all
authorized parties, including colleagues, partners, and vendors,
involved in the development process through a centralized global
repository and provides them with the tools to better
collaborate, manage and produce the communications, delivering up
to 40% process efficiencies. eonDigital offers
specifically-tailored solutions to vertical industries, such as
advertising agencies, financial services, and pharmaceuticals.
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iMedium iMedium is a leading provider of hosted software solutions that 31%
(www.imedium.com) enable sales and marketing executives to get more value from
their marketing programs and sales support materials. iMedium
solutions record, measure and report on sales activity and
customer interactions using smart, interactive software that
helps sales personnel communicate with customers.
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Kanbay Kanbay is a global e-Enterprise Integrator that enables 30%
(www.kanbay.com) businesses to excel in the digital economy. Kanbay's proprietary
methodology, e*Path(TM), incorporates strategy, web enablement,
application development, and value chain integration,
transforming a client's business to an e-business. Its worldwide
delivery process, GlobalLink(SM), provides rapid implementation
of secure, scalable e-solutions.
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Mi8 Mi8 is a premier application service provider for advanced 27%
(www.mi8.com) messaging and collaboration software, enabling organizations to
reduce costs, accelerate deployments, and focus on core business
activities. Mi8 leverages high performance Internet and wireless
technologies to deliver these application services to any device,
anywhere, any time.
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OAO Technology Solutions OAO Technology Solutions (Nasdaq: OAOT) is a global provider of 31%
(www.oaot.com) information technology and e-Business solutions, providing rapid
(Nasdaq: OAOT) integration, effective management and ongoing support of IT
environments. By offering both custom integration and ASP
delivery with a single point of accountability, OAOT is able to
extend its client's IT investments through a customer-centric,
solutions-oriented structure. Strong partnerships with leading
industry providers and offices extending throughout North America
and abroad give OAOT the ability to deliver end-to-end services
and solutions.
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OPUS360 Opus360 (Nasdaq: OPUS) has developed and is marketing an 7%
(www.opus360.com) e-Business software solution, Workforce360, for efficiently
(Nasdaq: OPUS) managing and acquiring professionals. The company provides a
business-to-business, electronic commerce platform that enables
independent professionals, consultants and other knowledge
workers with technology, creative, strategic consulting, and
other expertise, to connect with businesses requiring
project-based resources.
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Palarco Palarco is a full service solution provider, including strategic 100%
(www.palarco.com) management and IT consulting, applications development, solutions
architecture, e-business implementation, hardware performance
benchmarking and sales, and technical support.
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Persona Persona designs, builds and manages Internet-based marketing 30%
(www.persona.com) systems and services that bring businesses and consumers together
in a permission-based relationship. These systems and services
enable businesses to benefit from richer, more accurate consumer
information thus optimizing the effectiveness of their marketing
investment. Consumers are empowered to control, manage, and
benefit from this information exchange.
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TechSpace TechSpace exists to help small companies grow and larger 45%
(www.techspace.com) companies expand. Through their network of high tech communities,
TechSpace provides plug and play office space, on-site tech
support, a menu of discounted business services, and access to
venture capital through its partner company, TechSpace Xchange.
By providing its member companies with an immediate solution for
great office space without the hassle of a long-term lease or the
sting of outrageous upfront costs, TechSpace makes it possible
for them to grow while focusing on their core businesses.
TechSpace's clients range from the lean start-up looking for
their first business address to established companies needing
seamless expansion into a new city. TechSpace currently operates
two facilities in New York, with additional sites in Boston,
Toronto and San Francisco with an additional site under
construction in Austin.
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Enabling Partner Companies

An important part of our strategy is to maintain long-term relationships
with partner companies that add value to our network. Certain partner companies
can provide services, technologies, or distribution channels to our other
companies, act as test sites for our companies' new products and services, or
are potential customers for them. Some of our partner companies follow
Safeguard's operating model of acquiring interests in, developing, and operating
their own network of companies, which expands the reach of our network. Still
other companies in our network help us to validate our market assumptions or
obtain competitive intelligence. Many of our partner companies fulfill more
than one of the above roles.

Internet Capital Group. Internet Capital Group (Nasdaq: ICGE) is an
Internet holding company actively engaged in business-to-business e-commerce
through a network of partner companies. It provides operational assistance,
capital support, expertise, and a strategic network intended to maximize the
long-term market potential of its business-to-business e-commerce partner
companies. Internet Capital Group was founded in 1996 by Safeguard executives
who anticipated the transformational effect of Internet business-to-business e-
commerce markets. The company has creatively adapted our operating model to
establish itself as a leading network of business-to-business e-commerce
companies. Internet Capital Group's network consists of over 70 companies.
Internet Capital Group is headquartered on our corporate campus, we remain its
largest shareholder and executives from Internet Capital Group and Safeguard
serve on each other's Board of Directors. We believe our affiliation with
Internet Capital Group helps us strengthen our own business model and provides
us insight into the fast-evolving business-to-business e-commerce market.
Internet Capital Group's network of business-to-business partner companies also
constitutes a significant group of potential customers for our own partner
companies. In addition, Safeguard and Internet Capital Group have collaborated
in the funding and development of companies. We believe that the relationship
between Safeguard and Internet Capital Group strengthens our respective partner
companies and creates a powerful combined network of companies to enable the
growth of e-commerce.

Other Business-to-Business Electronic Commerce Companies. In addition to
Internet Capital Group and its network of business-to-business electronic
commerce companies, we also have a direct interest in eMerge Interactive,
(Nasdaq: EMRG) which completed its initial public offering in February 2000.
eMerge Interactive has a powerful
17

business model designed to capture large segments of the livestock market for
electronic commerce, and add significant value to our electronic commerce
business. We also have interests in AgWeb, EqualFooting (d/b/a Equidity) and
GoCo-Op.

CompuCom. CompuCom Systems, Inc., (Nasdaq: CMPC) our majority-owned
subsidiary, plays a key role in the implementation of our strategy. CompuCom is
a leading provider of technology management services and information technology
products to large and medium-sized businesses throughout the United States.
CompuCom provides a wide range of services that are intended to simplify the
selection, integration and cost-effective, ongoing management of the digital
infrastructure of its clients. CompuCom markets and sells technology management
services and products through a direct sales force to approximately 6,000
business clients. CompuCom provides a substantial distribution channel and often
serves as a test site for Safeguard's other partner companies' products and
services.

Partner Holding Companies. In addition to Internet Capital Group, we are
involved in the management of and maintain holdings in a number of partner
holding companies that complement our operating strategy and enhance the value
of our network. These include: Redleaf Group, Inc., a technology operating
company that provides services and capital for pre-seed and seed-stage
technology companies; VennWorks (formerly known as incuVest LLC), a technology
operating company that partners with corporations, universities and others
seeking to profitably commercialize intellectual property; and Garage.com, a
venture capital investment bank that provides funding services for high
technology and life sciences startups. As each of these companies applies its
resources and capital to grow its own network of companies, the growth of
Safeguard's network will continue to accelerate.

Additional Partner Companies. Our additional partner companies are
primarily providers of information technology products and services, marketing
and branding services and business-to-consumer electronic commerce companies.
They include: ChromaVision Medical Systems, Inc., DocuCorp International, Inc.,
QuestOne Decision Sciences Corporation, Tangram Enterprise Solutions, Inc. and
Zer0 to 5ive. We also formed a strategic partnership with SRA International,
Inc., an information technology firm specializing in systems integration and
consulting. Our joint venture, SRA Ventures, focuses on developing and spinning
off companies based on SRA's intellectual property.

Private Equity Funds

In addition to our operating partner companies, we participate in managing
12 private equity funds, which are located on our corporate campus and have
total capital committed or invested of more than $2.7 billion. Also, Safeguard
is a limited partner in six other private equity funds which have total capital
committed or invested of approximately $1.1 billion. Collectively, these 18
private equity funds augment our network by providing us with an expanded base
through which to conduct our operations, including acquisition syndication
opportunities and approximately $100 million in distributions to us during 2000.
Investors in these funds increase our network's capital base and facilitate
strategic partner development. The funds also increase the geographic
penetration of our network, maintaining offices in Palo Alto, New York, Los
Angeles, Boston and Austin. The personal relationships and expertise of the
professionals employed by these funds are important resources for developing and
evaluating acquisition opportunities. Safeguard frequently refers opportunities
that do not fit Safeguard's operating strategy to an appropriate fund. The
funds may pursue broader investment strategies and may invest at earlier stages
and at less significant ownership percentages than Safeguard. These funds
currently invest primarily in early-stage, rapidly growing Internet and other
technology companies. The diversification within the funds allows Safeguard,
through its network, to identify and take advantage of a broader range of

emerging technologies, to maintain relationships with a greater number of
promising entrepreneurs and to evaluate perceived shifts in technologies.

The funds made over 95 new investments in 2000 and had over 228 companies
in their portfolios as of December 31, 2000. The funds typically have a seven
to ten-year life. Following is a list of the private equity funds located on
our corporate campus:

TL Ventures (5 funds)
SCP Private Equity Partners (2 funds)
Pennsylvania Early Stage Partners (2 funds)
EnerTech Capital Partners (2 funds)
Safeguard International Fund

Mechanisms to Realize Shareholder Value

Our principal mission is to create shareholder value from our partner
companies by (i) taking them public, either in a normal initial public offering
or a rights or subscription offering, and subsequently by liquidating
Safeguard's interest in the company over a period of time; or (ii) achieving
other liquidity events for these companies (such as sales or mergers), which
provides additional cash for Safeguard's operations.

Safeguard Subscription Program

We assist a number of our partner companies to complete their initial
public offerings. Generally, in connection with our initial acquisition of our
equity interest in a partner company, our partner companies agree to offer
shares to our shareholders through the Safeguard Subscription Program as part of
the partner company's initial public offering. The program gives our
shareholders the opportunity to participate in the initial public offerings of
our partner companies. The offering ratio varies, but is based on the number of
shares being offered under the program by the partner company in relation to the
number of Safeguard shares then outstanding at the time. We purchase any shares
in the program that are not purchased by our shareholders.

Five of our partner companies, Internet Capital Group, US Interactive, Pac-
West Telecomm, eMerge Interactive and OPUS360 completed their initial public
offerings under the Safeguard Subscription Program.

Rights Offerings

Historically, we assisted our partner companies with their initial public
offerings by offering rights to purchase a partner company's stock solely to
Safeguard shareholders in a "Rights Offering." A Rights Offering is an initial
public offering in which the shares of a partner company are purchased by our
shareholders by the exercise of rights that are obtained based upon the number
of shares of Safeguard common stock held by the purchasing shareholder. One or
more standby underwriters purchase shares not purchased upon the exercise of
rights. We completed Rights Offerings for Novell, Inc. and CompuCom in 1985,
Tangram Enterprise Solutions in 1987, Cambridge Technology Partners in 1993,
Coherent Communications Systems Corporation in 1994, USDATA in 1995, Sanchez
Computer Associates and Integrated Systems Consulting Group, Inc. in 1996,
Diamond Technology Partners, ChromaVision Medical Systems and OAO Technology
Solutions in 1997 and DocuCorp International in 1998.

Mergers and Acquisitions

We have also historically assisted our partner companies in considering and
evaluating merger and acquisition opportunities to promote shareholder value.
We help our partner companies identify acquisition partners or targets, evaluate
these companies, negotiate terms and document the transactions. We have
assisted our partner companies in completing various mergers and acquisitions.
During 2000, Safeguard completed the sale of three private partner companies for
total proceeds to Safeguard of more than $50 million.

Market Transactions

We have sold shares of our public partner companies in open-market or
privately negotiated transactions from time to time.

REVENUES OF CORE PARTNER COMPANIES

Because we account for most of our partner companies under the equity
method, our consolidated revenue figures reported in our consolidated financial
statements do not reflect the aggregate revenue of our partner companies. The
aggregate revenue (adjusted as described below) of our 26 core partner companies
described in the preceding tables has grown from $1.043 million for 1999 and to
$1.103 million for 2000. This data excludes revenues of our 15 other partner
companies that enhance our network but are not in the software, communications
or e-Services sector, such as CompuCom, which had revenues of $2.7 billion in
2000.

Growth in aggregate partner company revenue is not indicative of growth in
any particular partner company's revenue. The foregoing data includes revenue
of all our core partner companies for all periods presented but excludes
revenues of partner companies for years prior to the year we acquired an
interest in them. Our partner companies' revenue figures are based on the
unaudited financial statements prepared by each partner company. We do not
believe these adjustments have a significant impact on the aggregate partner
company revenue data disclosed above. In addition, these figures are
preliminary in nature and are subject to change. They may differ from figures
previously reported by each partner company due to any necessary corrections,
changes resulting from differing interpretations of accounting principles upon
review by the SEC or changes in accounting literature. For these reasons, we
cannot assure you of the accuracy of the revenue figures. Also, since we do not
consolidate the majority of our partner companies for financial reporting
purposes and we do not include our largest consolidated subsidiary in the above
table, the aggregate partner company revenue data disclosed above is not
intended to represent the revenues that we have reported or will report on a
consolidated basis in accordance with accounting principles generally accepted
in the United States of America. In each case, these revenues are subject to the
numerous risks and uncertainties elsewhere described in this report.

RISKS RELATED TO US

Our business depends upon the performance of our partner companies, which is
uncertain

If our partner companies do not succeed, the value of our assets, our results
of operations and the price of our common stock could decline. The material
risks relating to our partner companies include:

. demand for the products and services of many of our partner companies
depends on widespread commercial use of the Internet;

. intensifying competition affecting the products and services our
partner companies offer, which could lead to the failure of some of our
partner companies;

. inability to adapt to the rapidly changing marketplace;

. many of our partner companies are in the early stages of their
development with limited operating history, little revenue and
substantial losses and limited capital resources;

. funding sources, unless Safeguard funds its partner companies, the
partner companies may not have alternative funding sources;

. inability to manage growth;

. weakness in the public and private capital markets for technology
companies may affect our ability to realize value for our partner
companies through initial public offerings; and

. the operating results of our partner companies.

These risks are discussed in greater detail under the caption "-Risks Related to
Our Partner Companies" below.

Fluctuations in the price of the common stock of our publicly traded partner
companies may affect the price of our common stock

The aggregate market value of our equity interests in our publicly traded
partner companies is $369 million as of March 15, 2001. Fluctuations in the
market price of the common stock of our publicly traded partner companies are
likely to affect the price of our common stock. The market price of many of our
public partner companies' common stock has been highly volatile and subject to
fluctuations unrelated or disproportionate to its operating performance.

Our success is dependent on the retention of our executive management

Our success is dependent on our ability to retain executive management. If
one or more of the members of our executive management were unable or unwilling
to continue in their present position, our business could be disrupted.

Our ability to borrow funds may be limited

Our ability to draw down on our credit facilities is dependent in part upon
the market value of our equity interests in our publicly traded partner
companies. If there is a significant decline in the market value of these equity
interests, our ability to access our credit facilities may be limited or we may
need to repay some of the amounts outstanding. At December 31, 2000, we were
not in compliance with a financial covenant under our credit facilities. In
2001, our bank group waived this covenant through March 30, 2001. Unless our
bank group extends this waiver beyond March 30, 2001, we will not be able to
make draws under our existing credit facilities. We are currently negotiating a
new credit facility totaling $100 million, but there can be no assurance that we
will be able to complete this agreement. Any limitation on our access to our
credit facilities may reduce our ability to execute our business plan.

Intense competition from other acquirers of interests in infrastructure
technology companies could result in lower returns or losses on acquisitions

We face intense competition from companies with business strategies similar
to our own and capital providers as we develop and acquire interests in
technology companies. Some of our competitors have more

experience identifying and acquiring equity interests in technology companies
and have greater financial and management resources, brand name recognition or
industry contacts than we do. Although most of our acquisitions will be made at
a stage when our partner companies are not publicly traded, we may pay higher
prices for those equity interests because of higher trading prices for
securities of similar public infrastructure technology companies and competition
from other acquirers and capital providers which would result in lower returns
or losses on our equity investments. In addition, our strategy of actively
operating and integrating our partner companies generally requires us to acquire
majority or controlling interests in partner companies. This may place us at a
competitive disadvantage to some of our competitors because they have more
flexibility than we do in structuring acquisitions.

We may be unable to obtain maximum value for our partner company interests

We have significant positions in our partner companies. If we were to
divest all or part of our interest in a partner company, we may not receive
maximum value for this position. The realizable value of our interests in our
partner companies may ultimately prove to be lower than the carrying value
currently reflected in our consolidated financial statements. For partner
companies with publicly traded stock, we may be unable to sell our interest at
then-quoted market prices. The trading volume and public float in the common
stock of many of our publicly traded partner companies are small relative to our
holdings of common shares of the partner company. As a result, any significant
divestiture by us of our holdings in these partner companies would likely have a
material adverse effect on the market price of the partner company's common
stock and on our proceeds from such a divestiture. For other partner companies,
like Internet Capital Group, the absolute size of our holdings may affect our
ability to realize their market value. In addition, registration and other
requirements of applicable securities laws may adversely affect our ability to
dispose of our interest in partner companies on a timely basis.

Our business strategy may not be successful if valuations of technology-related
companies decline

Our strategy involves creating value for our shareholders and the owners of
our partner companies by helping our partner companies grow and access the
public and private capital markets. Therefore, our success is dependent on
acceptance by the public and private capital markets of technology-related
companies in general and of initial public offerings of those companies in
particular. If the capital markets for technology-related companies or the
market for initial public offerings of those companies weaken for an extended
period of time, we may not be able to take our partner companies public as a
means of creating shareholder value. In addition, reduced market interest in
technology companies may cause the market value of our publicly traded partner
companies to decline.

We may have to buy, sell or retain assets when we would otherwise not wish to in
order to avoid registration under the Investment Company Act

We believe that we are actively engaged in the business of providing
infrastructure products and services through our network of majority-owned
subsidiaries and companies that we are considered to "control". Under the
Investment Company Act, a company is presumed to control another company if it
owns more than 25% of that company's voting securities and is the largest voting
shareholder. A company may be required to register as an investment company if
more than 45% of its total assets consists of, or more than 45% of its
income/loss over the last four quarters is derived from, securities of companies
it does not control or companies which are themselves considered investment
companies. Because many of our partner companies are not majority-owned
subsidiaries, because some of our partner companies may be considered or may
become investment companies, and because we own 25% or less of the voting
securities of a number of our partner companies, changes in the value of our
interest in our partner companies and the income/loss attributable to our
partner companies or changes in the status of our partner companies under the
Investment Company Act could subject us to regulation

under the Investment Company Act unless we take precautionary steps. For
example, in order to avoid having excessive income from "non-controlled"
interests, we may choose not to sell minority interests we would otherwise want
to sell or we may have to generate non-investment income by selling interests in
partner companies that we are considered to control. We may also need to ensure
that we retain more than 25% ownership interests in our partner companies after
any issuance by our partner companies of additional equity in offerings,
acquisitions or other dilutive transactions. In addition, we may have to acquire
additional income or loss generating majority-owned or controlled interests that
we might not otherwise have chosen to acquire or may not be able to acquire
"non-controlling" interests in companies that we would otherwise want to
acquire. In the alternative, we may have to file an application with the SEC
seeking to rebut the presumption that we do not control a company in situations
where we own less than 25% of the voting securities. Issuing orders granting
relief under these applications involves the discretion of the SEC and orders
may be revoked or modified if the SEC finds an order to be no longer consistent
with the facts. We have received orders issued by the SEC determining that we
control Cambridge Technology Partners and Internet Capital Group though we own
25% or less of their voting securities. If these companies issue significant
amounts of additional shares of common stock in offerings, acquisitions or other
dilutive transactions, our ownership interest could be diluted to the point that
we would no longer be able to rely on the orders received from the SEC. We
cannot be certain that we will be able to preserve our percentage ownership at
or near current levels. Our ownership levels may also be affected if these
companies or our other partner companies are acquired by third parties. It is
not feasible for us to be regulated as an investment company because the
Investment Company Act rules are inconsistent with our strategy of actively
managing, operating and promoting collaboration by and among our network of
partner companies.

Accounting conventions may require us to change the presentation of our
financial statements

Because we generally obtain less than a 50% voting interest in our partner
companies, we generally do not consolidate the results of operations of our
partner companies with our results of operations. We consolidate the results of
operations of four companies, CompuCom, Tangram Enterprise Solutions, aligne and
SOTAS because we own more than 50% of the outstanding voting securities.

At December 31, 2000, we owned approximately 59% of the aggregate voting
interests of CompuCom. If our voting ownership of CompuCom were to decrease
below 50% as a result of the issuance of stock in an acquisition or other
transaction, we may no longer be able to consolidate the results of operations
of CompuCom with our results of operations that would cause our revenues to
decline significantly. CompuCom had revenue of $2.7 billion during 2000.

Our partner companies could make business decisions that are not in our best
interests or with which we do not agree, which could impair the value of our
partner company interests

Although we generally seek a significant equity interest and participation
in the management of our partner companies, we may not be able to control
significant business decisions of our partner companies. We may have shared
control or no control over some of our partner companies. In addition, although
we currently own a controlling interest in many of our partner companies, we may
not maintain this controlling interest. Acquisitions of interests in partner
companies in which we share control or have no control or the dilution of our
interests in, and control over, partner companies will involve additional risks
that could cause the performance of our interests and our operating results to
suffer, including:

. the management of a partner company having economic or business
interests or objectives that are different than ours; and
. partner companies not taking our advice with respect to the financial
or operating difficulties that they may encounter.

Our inability to prevent dilution of our ownership interests in our partner
companies or our inability to otherwise have a controlling influence over the
management and operations of our partner companies could have an adverse impact
on our status under the Investment Company Act. Our inability to adequately
control our partner companies also could prevent us from assisting them,
financially or otherwise, or could prevent us from liquidating our interests in
them at a time or at a price that is favorable to us. Additionally, our partner
companies may not collaborate with each other or act in ways that are consistent
with our business strategy. These factors could hamper our ability to maximize
returns on our interests and cause us to recognize losses on our interests in
partner companies.

RISKS RELATED TO OUR PARTNER COMPANIES

The success of many of our partner companies depends on the development of the
infrastructure technology market, which is uncertain

In general, our partner companies rely on the Internet as a medium for
commercial transactions for the success of their businesses. The development of
the electronic commerce market is in its early stages. If widespread commercial
use of the Internet does not continue to develop, or if the Internet does not
develop as an effective medium for providing products and services, our partner
companies may not succeed.

Our long-term success depends on widespread market acceptance of the
Internet as a medium for electronic commerce. A number of factors could prevent
such continued acceptance, including the following:

. the unwillingness of businesses to shift from traditional processes to
Internet-based processes;
. the failure to continue the development of the necessary network
infrastructure for substantial growth in usage of the Internet;
. increased government regulation or taxation may adversely affect the
viability of the Internet infrastructure market; and
. the growth in bandwidth may not keep pace with the growth in Internet
traffic, which could result in slower response times for the users of
Internet-based commercial transactions.

Our partner companies face intense competition, which could adversely affect
their business, financial condition, results of operations and prospects of
growth

There is intense competition in the technology marketplace, and we expect
competition to intensify in the future. Our partner companies compete against
companies outside our network of companies. Additionally, the intense
competition within the technology marketplace may cause our partner companies to
compete among themselves. Our business, financial condition, results of
operations and prospects for growth will be materially adversely affected if our
partner companies are not able to compete successfully with companies outside
our family of companies or compete among themselves. We expect that additional
competitors will enter the infrastructure technology market with competing
products as the size and visibility of the infrastructure technology market
opportunity increases. Many of the present and potential competitors may have
greater

financial, technical, marketing and other resources than those of our partner
companies. This may place our partner companies at a disadvantage in responding
to the offerings of their competitors, technological changes or changes in
client requirements. Also, our partner companies may be at a competitive
disadvantage because many of their competitors have greater name recognition,
more extensive client bases and a broader range of product offerings.

Our partner companies may fail if they do not adapt to the rapidly changing
technology marketplace

If our partner companies fail to adapt to rapid changes in technology and
customer and supplier demands, they may not become or remain profitable. We
cannot assure you that the products and services of our partner companies will
achieve market acceptance or commercial success, nor can we assure you that the
businesses of our partner companies will be successful.

The technology marketplace in general and infrastructure technology market
in particular are characterized by:

. rapidly changing technology;
. evolving industry standards;
. frequent new products and services;
. shifting distribution channels; and
. changing customer demands.

Our future success will depend on our partner companies' ability to adapt
to this rapidly evolving marketplace. They may not be able to adequately or
economically adapt their products and services, develop new products and
services or establish and maintain effective distribution channels for their
products and services. If our partner companies are unable to offer competitive
products and services or maintain effective distribution channels, they will
sell fewer products and services and forego potential revenue, possibly causing
them to lose money. In addition, we and our partner companies may not be able to
respond to the rapid technology changes occurring in Internet products and
services in an economically efficient manner, and our partner companies may
become or remain unprofitable.

Many of our partner companies have a limited operating history and may never be
profitable

Many of our partner companies are early-stage companies with limited
operating history, have significant historical losses and may never be
profitable. Many of these companies have incurred substantial costs to develop
and market their products, have incurred net losses and cannot fund their cash
needs from operations. We expect that the operating expenses of these companies
will increase substantially in the foreseeable future as they continue to
develop products, increase sales and marketing efforts and expand operations.

Many of our partner companies may grow rapidly and may be unable to manage their
growth

We expect many of our partner companies to grow rapidly. Rapid growth often
places considerable operational, managerial and financial strain on a business.
Many of our partner companies have only recently begun developing their
financial reporting systems and controls. To successfully manage rapid growth,
our partner companies must, among other things:

. rapidly improve, upgrade and expand their business infrastructures;
. attract and maintain qualified personnel; and
. maintain adequate levels of liquidity.

If our partner companies are unable to manage their growth successfully,
their ability to respond effectively to competition and to achieve or maintain
profitability will be adversely affected.

Some of our partner companies may be unable to protect their proprietary rights
and may infringe on the proprietary rights of others

Our partner companies assert various forms of intellectual property
protection. This intellectual property may constitute an important part of our
partner companies' assets and competitive strengths. Federal law, most
typically, copyright, patent, trademark and trade secret, generally protects
intellectual property rights. Although we expect the partner companies will take
reasonable efforts to protect the rights to this intellectual property, the
complexity of international trade secret, copyright, trademark and patent law,
coupled with the limited resources of these young companies and the demands of
quick delivery of products and services to market, create a risk that their
efforts will prove inadequate. Some of our partner companies also license
intellectual property from third parties and it is possible that they could
become subject to infringement actions based upon the intellectual property
licensed from those third parties. Our partner companies generally obtain
representations as to the origin and ownership of such licensed intellectual
property; however, this may not adequately protect them. Any claims against our
partner companies' proprietary rights, with or without merit, could subject our
partner companies to costly litigation and the diversion of their technical and
management personnel. If our partner companies incur costly litigation and their
personnel are not effectively deployed, the expenses and losses incurred by our
partner companies will increase and their profits, if any, will decrease.

Our partner companies' operations may be disrupted by technological problems

Some of our partner companies' businesses depend on the efficient and
uninterrupted operation of their computer and communications hardware systems.
It may be difficult to project the capacity limits on the technology,
transaction processing systems and network hardware and software of our partner
companies or of third parties they rely on. Our partner companies and the third
parties they rely on may not be able to expand and upgrade their systems to meet
increased use. As Internet usage increases the strain on the infrastructure of
the Internet, our partner companies will need to expand the capacity of their
technology, transaction processing systems and network hardware and software or
find third parties to provide these services. In addition, our partner companies
may not be able to expand and upgrade their systems and network hardware and
software capabilities to accommodate increased use of their web sites or find
third parties to provide these services. If our partner companies are unable to
appropriately upgrade their systems and network hardware and software or find
third parties to provide these services, their operations and processes may be
disrupted.

Our partner companies' success depends on their ability to retain key personnel

Our partner companies are dependent upon their ability to attract and
retain senior management and key personnel, including trained technical and
marketing personnel. Our partner companies will also need to continue to hire
additional personnel as they expand. A shortage in the availability of the
requisite qualified personnel would limit the ability of our partner companies
to grow, to increase sales of their existing products and services and to launch
new products and services.

Concerns regarding security of transactions and transmitting confidential
information over the Internet may have an adverse impact on our partner
companies

We believe that concern regarding the security of confidential information
transmitted over the Internet prevents many from using the Internet as a medium
for communicating or engaging in electronic commerce. If our partner companies
that depend on the growing use of the Internet do not add sufficient security
features to their future product releases, our partner companies may not gain
market acceptance or may have additional legal exposure.

Despite the measures some of our partner companies have taken, the
infrastructure of each of them is potentially vulnerable to physical or
electronic break-ins, viruses or similar problems. If a person circumvents the
security measures imposed by any one of our partner companies, he or she could
misappropriate proprietary information or cause interruption in operations of
the partner company. Security breaches that result in access to confidential
information could damage the reputation of any one of our partner companies and
expose the partner company affected to a risk of loss or liability. Some of our
partner companies may be required to make significant investments and efforts to
protect against or remedy security breaches.

Government regulations and legal uncertainties may place financial burdens on
our business and the businesses of our partner companies

Currently, there are few laws or regulations directed specifically at
electronic commerce. However, because of the Internet's popularity and
increasing use, new laws and regulations may be adopted. These laws and
regulations may cover issues such as the collection and use of data from Web
site visitors and related privacy issues, pricing, content, copyrights,
distribution and quality of goods and services. The enactment of any additional
laws or regulations may impede the growth of the Internet and the Internet
infrastructure market, which could decrease the revenue of our partner companies
and place additional financial burdens on our business and the businesses of our
partner companies.

Laws and regulations directly applicable to Internet communications are
becoming more prevalent. For example, the United States Congress recently
enacted laws regarding online copyright infringement and the protection of
information collected online from children. Although these laws may not have a
direct adverse effect on our business or those of our partner companies, they
add to the legal and regulatory burden faced by Internet infrastructure
companies.

Congress enacted a three-year moratorium, ending on October 21, 2001, on
the application of "discriminatory" or "special" taxes by the states on Internet
access or on products and services delivered over the Internet and on the
application of federal taxes on electronic commerce. However, this moratorium
does not prevent states from taxing activities or goods and services that the
states would otherwise have the power to tax.

Furthermore, the moratorium does not apply to certain state taxes where taxes
were in place before the moratorium was enacted.

COMPUCOM

CompuCom Systems, Inc. (Nasdaq: CMPC) is a leading provider of technology
management services and information technology products to large and medium-
sized businesses throughout the United States. CompuCom provides a wide range of
services that are intended to simplify the selection, integration and cost-
effective, ongoing management of the digital infrastructure of its clients.
CompuCom markets and sells technology management services and products through a
direct sales force to approximately 6,000 business clients.

To meet its customers' needs, CompuCom offers a variety of technology
management services including IT strategic consulting, enterprise help desk
services, asset management, multi-vendor hardware maintenance and support,
logistics, integration, product configuration and distribution, software
management, network and systems management, enterprise architecture, storage
solutions, and mobile and wireless products, consulting and support. In
addition, CompuCom is an authorized dealer of major personal computer products,
networking and related products, computer-related peripheral equipment, mobile
computing products and software for a number of manufacturers, including Compaq,
IBM, Hewlett-Packard, Microsoft and Palm.

CompuCom has been profitable every year since its inception and has
achieved revenue growth of 13% compounded over the past five years. This
revenue growth has been achieved both by internal growth and through
acquisitions, the most notable of which occurred in May 1999 when CompuCom
purchased the Technology Acquisition Services Division ("TASD") of Entex
Information Services, Inc. However, in comparing 2000 with 1999, CompuCom
experienced an 8.2% decline in revenue and a 55.8% decline in net earnings,
including the combined impact of a restructuring charge of $5.2 million ($3.1
million after-tax) and a net gain on the sale of securities of $1.0 million
($0.6 million after-tax). After recording a net loss in the first quarter of
2000, CompuCom returned to profitability in each of the following three
quarters. During the first quarter of 1999, CompuCom recorded its first net loss
from operations, but returned to profitability in each of the following three
quarters. In the fourth quarter of 1998, CompuCom recorded its first quarterly
net loss as a result of a $16.4 million ($9.9 million after-tax) restructuring
charge.

On January 10, 2001, CompuCom completed the purchase of certain assets of
MicroAge Technology Services, L.L.C. ("MTS") for approximately $81 million in
cash, subject to certain post-closing adjustments. The assets acquired included
certain trade and vendor accounts receivable, product inventory and prepaid
assets. As part of the acquisition, CompuCom hired certain of MTS' national
sales force, technical service personnel and administrative personnel.

CompuCom believes the key to improving its earnings performance is the
expansion of its higher margin services business, as well as focusing on
lowering its cost structure through expense control and participation in
programs designed to increase working capital efficiency. CompuCom's strategy
is to focus on the growth of its services business, through both internal means
as well as strategic acquisitions and alliances, while continuing to provide
clients the ability to acquire multi-vendor products from a single source.
However, as major manufacturers expand their plans to market and distribute
products directly to CompuCom's clients, CompuCom anticipates continued pressure
on product revenue and product gross margin, which may result in lower product
revenues and product gross margin dollars.

CompuCom currently operates primarily in two business segments - 1)
computer products and 2) services - which include technology support services,
IT consulting, network integration and configuration. Prior to April 1999,
CompuCom also operated in a third business segment, customized application
programming, primarily through its majority-owned subsidiary ClientLink, Inc. In
April 1999, CompuCom completed the merger of ClientLink with E-Certify
Corporation. The combined operations of ClientLink and E-Certify are conducted
under the name E-Certify, Inc. CompuCom accounts for the ongoing operation of E-
Certify, Inc. using the equity method.

CompuCom's product sales accounted for 88% of Safeguard's total net sales
in 2000, compared to 88% in 1999 and 87% in 1998. CompuCom's services sales
accounted for 10% of Safeguard's total net sales in 2000, compared to 10% in
1999 and 12% in 1998. CompuCom's business tends to be subject to seasonal
fluctuations, with the highest revenue levels generally occurring in the fourth
quarter. Backlog is not considered to be a meaningful indicator of CompuCom's
future business prospects due to the short order fulfillment cycle. Large
corporate businesses accounted for the majority of CompuCom's net sales in 2000.
However, no one customer accounted for more than 10% sales in either products or
services. During 2000, 76% of CompuCom's product revenues derived from sales of
Compaq, IBM and Hewlett-Packard products. CompuCom has agreements with these
vendors that have been regularly renewed. These agreements are generally
terminable by the vendor without cause on 30 to 90 days notice. However,
CompuCom believes its relationships with these vendors are good but a material
adverse effect on CompuCom's business would occur if a supply agreement with a
key vendor was materially revised, was not renewed or was terminated or the
supply of products was insufficient or interrupted.

CompuCom's industry is characterized by intense competition and is
currently experiencing a significant amount of consolidation. In the future,
CompuCom may face fewer, but larger and better-financed competitors as a
consequence of such consolidation. In addition, several computer manufacturers
have expanded their channels of distribution and now actively compete for
CompuCom's clients with their direct fulfillment initiatives. These initiatives
accelerated in 2000 and CompuCom's management expects them to accelerate even
further in 2001. In the highly fragmented computer services business, CompuCom
competes with several larger competitors, corporate resellers pursuing services
opportunities, as well as many smaller computer services companies. As CompuCom
continues to focus on the growth of its services business, it also competes with
service providers that have marketed and delivered the services CompuCom
provides on a much larger scale and for a longer period of time. Some of these
competitors have financial, technical, manufacturing, sales, marketing and other
resources that are substantially greater than those of CompuCom. In addition,
the computer products and services industry is characterized by intense price
competition, which may adversely affect CompuCom's results of operations. There
can be no assurance CompuCom will be able to continue to compete successfully
with new or existing competitors.

If CompuCom uses its stock for acquisitions or if some other dilutive event
were to occur, Safeguard's voting interest in CompuCom could be diluted below
50%, in which event Safeguard would no longer consolidate CompuCom's financial
results under current generally accepted accounting principles. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - General."

CompuCom employed approximately 4,100 full-time employees as of December
31, 2000.

FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS

Information on net sales, net income and assets employed for each operating
segment of Safeguard's business for the three-year period ended December 31,
2000 is contained in Note 20 to the Consolidated

Financial Statements on pages 60 to 62 of Safeguard's Annual Report to
Stockholders for the year ended December 31, 2000, which is filed as part of
Exhibit 13 hereto and is incorporated herein by reference.

OTHER INFORMATION

Export sales in each segment for the three-year period ended December 31,
2000 were less than 5% of the segment's total sales in each of those years.
Backlog is not considered to be a meaningful indication of future business
prospects for any of the Company's operating segments.

The operations of Safeguard and its partnership companies are subject to
environmental laws and regulations. Safeguard does not believe that
expenditures relating to those laws and regulations will have a material adverse
effect on the business, financial condition or results of operations of
Safeguard.

EMPLOYEES

At December 31, 2000, Safeguard and its consolidated subsidiaries have
approximately 4628 employees, of which CompuCom employs approximately 89%.
Safeguard believes relations with employees are good.

EXECUTIVE OFFICERS

Information about Safeguard's executive officers can be found in Part III
of this report under "Item 10. Directors and Executive Officers of Registrant."

Item 2. Properties

We own the office park in which our corporate headquarters and
administrative offices are located in Wayne, Pennsylvania. The office park
currently contains approximately 115,000 square feet, most of which we lease to
our affiliated private equity funds, certain partner companies including
Internet Capital Group, and other tenants. We are in the process of expanding
our corporate facilities by approximately 25,000 square feet of office space.
Our headquarters building is subject to a $3.6 million mortgage bearing interest
at 9.75%, which amortizes over a 30-year term ending 2022 and is callable by the
lender at any time beginning in 2002. We believe the properties are in good
condition and repair and are adequate for the particular operations for which
they are used. Additionally, we lease approximately 2,400 square feet of office
space in Palo Alto, California. Our partner companies have various facilities
throughout the United States, and they believe they can readily obtain
additional facilities as needed to support their anticipated needs.

CompuCom's executive and administrative facility in Dallas, Texas contains
approximately 250,000 square feet of office space in two buildings on 20 acres.
In 1999, CompuCom sold this facility and leased it back for a 20-year term with
two five-year renewal options. CompuCom also leases 42,500 square feet of
office space in Mason, Ohio, which lease expires July 2005 with a five-year
renewal option. CompuCom leases configuration, warehouse and distribution
centers in New Jersey, North Carolina and California under leases that expire
from 2001 to 2004 with various renewal options. In September 2000, CompuCom
closed its warehouse space in California and consolidated its operations to its
New Jersey facility. In February 2000, CompuCom closed its co-location facility
located at Compaq's headquarters and manufacturing campus in Houston, Texas.

Item 3. Legal Proceedings

We are not a party to any material legal proceedings.

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

No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of 2000.

PART II

Item 5. Market For The Registrant's Common Equity and Related Stockholder
Matters

Incorporated by reference to page 37 of its Annual Report to Stockholders
for the year ended December 31, 2000, which page is filed as part of Exhibit 13
hereto.

On October 20, 2000, we acquired from the shareholders of Data Center
Direct, Inc. ("DCD") 76% of the outstanding capital stock of DCD. Pursuant to
the terms of the stock purchase agreement, among other things, we issued an
aggregate of 87,404 shares of our common stock, with a market value of
approximately $1.375 million on the date of acquisition, to the stockholders of
DCD in exchange for 8 million outstanding shares of DCD. We believe the shares
of common stock were exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, since the sale was made to a limited group
of persons, each of whom was believed to have been a sophisticated investor who
was acquiring the shares for investment without a view to further distribution.
No underwriters were involved with the issuance and sale of the shares of common
stock.

On January 19, 2001, we acquired all of the outstanding capital stock of
Palarco, Inc. and Palarco International, Inc. (collectively, "Palarco").
Pursuant to the terms of the stock purchase agreement, among other things, we
issued 316,702 shares of our common stock, with a market value of approximately
$2.8 million on the date of acquisition to Steven Siegfried, the sole
stockholder of Palarco, in exchange for all of the outstanding shares of
Palarco. We believe the shares of common stock were exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended, since the sale was
made to an individual who we believed to have been a sophisticated investor who
was acquiring the shares for investment without a view to further distribution.
No underwriters were involved with the issuance and sale of the shares of common
stock.

Item 6. Selected Financial Data

Incorporated by reference to page 25 of its Annual Report to Stockholders
for the year ended December 31, 2000, which page is filed as part of Exhibit 13
hereto.

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

Incorporated by reference to pages 26 through 37 of its Annual Report to
Stockholders for the year ended December 31, 2000, which pages are filed as part
of Exhibit 13 hereto.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Incorporated by reference to pages 36 and 37 of its Annual Report to
Stockholders for the year ended December 31, 2000, which pages are filed as part
of Exhibit 13 hereto.

Item 8. Financial Statements and Supplementary Data

Incorporated by reference to pages 38 through 64 of its Annual Report to
Stockholders for the year ended December 31, 2000, which pages are filed as part
of Exhibit 13 hereto.

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

None.

PART III

Item 10. Directors and Executive Officers Of The Registrant

EXECUTIVE OFFICERS:

The following persons were executive officers of Safeguard on March 20, 2001:

Director,
Executive
Officer or
Key Employee
Name Age Position(s) Since
- ---- --- ----------- -----

Warren V. Musser 74 Chairman of the Board and Chief Executive 1953
Officer
Harry Wallaesa 50 President, Chief Operating Officer and Director 1999
Gerald A. Blitstein 41 Executive Vice President and Chief Financial 2000
Officer
John K. Halvey 40 Executive Vice President 1999
Jerry L. Johnson 53 Executive Vice President 1995
N. Jeffrey Klauder 48 Executive Vice President and General Counsel 2000
J. Edward Coleman 49 Chief Executive Officer of CompuCom
Systems, Inc. 1999

Warren V. Musser has served as Chairman and Chief Executive Officer since
1953. Mr. Musser is Chairman of the Board of Cambridge Technology Partners
(Massachusetts), Inc. He is also a Director of CompuCom Systems, Inc., Internet
Capital Group, Inc., and TyCom, Ltd. and a trustee of Brandywine Realty Trust.
Mr. Musser serves on a variety of civic, educational and charitable boards of
directors, and serves as Vice President/Development, Cradle of Liberty Council,
Boy Scouts of America; Vice Chairman of The Eastern Technology Council; and
Chairman of the Pennsylvania Partnership on Economic Education.

Harry Wallaesa became a Director of Safeguard in February 1999 and
President and Chief Operating Officer of Safeguard in March 1999. Mr. Wallaesa
served as President and Chief Executive Officer of aligne incorporated, which he
co-founded in 1996, until Safeguard acquired a majority of the company in March
1999.

From 1985 to 1995, Mr. Wallaesa was the Chief Information Officer and Vice
President of Management Information Systems at Campbell Soup Company, a global
manufacturer and marketer of branded food products. Mr. Wallaesa is Chairman of
the Board of CompuCom Systems, Inc. and a Director of Bowne, Inc., Redleaf Group
Inc., aligne incorporated, Atlas Commerce, Pennsylvania Academy of the Fine Arts
and University of Pennsylvania Health Systems.

Gerald A. Blitstein joined Safeguard as Senior Vice President and Chief
Financial Officer in February 2000 and became Executive Vice President in
December 2000. From 1994 until joining Safeguard, Mr. Blitstein was a Managing
Director of PaineWebber Incorporated. While a Managing Director at PaineWebber,
Mr. Blitstein served as Managing Director, Executive Assistant to the Chairman
from 1994 to 1996, Managing Director of Reengineering from 1997 to 1998, and
Managing Director of Global Equities from 1998 to 2000.

John K. Halvey joined Safeguard as a Senior Vice President in June 1999 and
became Executive Vice President in December 2000. Prior to joining Safeguard,
Mr. Halvey was a partner in the law firm, Milbank, Tweed, Hadley and McCloy,
from 1994 to June 1999, where he was the head of its Business Technology Group.
Mr. Halvey is a Director of OPUS360 Corporation, Buystream, Persona, Inc., Zer0
to 5ive LLC, TechSpace Xchange LLC and TechSpace Inc.

Jerry L. Johnson joined Safeguard as Senior Vice President in September
1995 and became Executive Vice President in March 1999. Prior to joining
Safeguard, Mr. Johnson served at US West, Inc., a regional Bell operating
company, from 1985 through 1995, most recently as Vice President of Network
Technology Services, a division of US West, Inc. Mr. Johnson is the Chairman of
the Board of OAO Technology Solutions, Inc., Pac-West Telecomm, Inc., and SOTAS,
Inc., and a Director of Dynegy, Inc., Kanbay, and QuestOne Decision Sciences
Corporation.

N. Jeffrey Klauder joined Safeguard as Senior Vice President in April 2000
and became Executive Vice President and General Counsel in December 2000. Prior
to joining Safeguard, Mr. Klauder was a partner in Morgan, Lewis & Bockius LLP,
a law firm, since 1986, where he was Co-Chair of the firm's Mergers &
Acquisitions Group and a member of the firm's Advisory Board. Mr. Klauder is a
Director of iMedium, Inc.

J. Edward Coleman has been Chief Executive Officer of CompuCom Systems,
Inc. since December 1999 and a Director of CompuCom since February 2000. Prior
to that time, Mr. Coleman served as Business Development Executive and Director
of Marketing for Computer Services Corporation, an information technology
services company, since March 1995. From September 1993 until March 1995, Mr.
Coleman was Executive Vice President of McCallister's Technical Services, Inc.,
a provider of systems integration services.

DIRECTORS:

Incorporated by reference to the portion of the Definitive Proxy Statement
entitled "Election Of Directors."

Item 11. Executive Compensation

Incorporated by reference to the portion of the Definitive Proxy Statement
entitled "Executive Compensation & Other Arrangements."

Item 12. Security Ownership of Certain Beneficial Owners and Management

Incorporated by reference to the portion of the Definitive Proxy Statement
entitled "Stock Ownership of Directors and Officers as of April 6, 2001."

Item 13. Certain Relationships and Related Transactions

Incorporated by reference to the portion of the Definitive Proxy Statement
entitled "Relationships and Related Transactions with Management and Others."

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) The Following Financial Statements and Schedules are Filed as Part of This
Report:

Consolidated Financial Statements
Balance Sheets - December 31, 2000 and 1999
Statements of Operations - years ended December 31, 2000, 1999 and 1998
Statements of Shareholders' Equity - years ended December 31, 2000, 1999
and 1998
Statements of Comprehensive Income (Loss) - years ended December 31, 2000,
1999 and 1998
Statements of Cash Flows - years ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Independent Auditors' Report
Statement of Management's Financial Responsibility
Financial Statement Schedules
Independent Auditors' Report
Schedule I - Condensed Consolidated Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the fourth quarter of 2000.

The exhibits required to be filed as part of this Report are listed in the
exhibit index below.

(d) Financial Statement Schedules

Separate financial Statements of Subsidiaries Not Consolidated

The 2000 consolidated financial statements of Internet Capital Group, Inc.,
required to be included in this report pursuant to Rule 3-09 of Regulation S-X,
are filed as Exhibit 99.1.

FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report

The Board of Directors and Shareholders
Safeguard Scientifics, Inc.:

Under date of March 15, 2001, we reported on the consolidated balance sheets of
Safeguard Scientifics, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity,
comprehensive income (loss) and cash flows for each of the years in the three-
year period ended December 31, 2000, as contained in the 2000 annual report to
shareholders. These consolidated financial statements and our report thereon are
included in the annual report on Form 10-K for the year 2000. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedules as listed in the
accompanying index. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.

In our opinion, the financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

/s/ KPMG LLP
Philadelphia, Pennsylvania
March 15, 2001

SAFEGUARD SCIENTIFICS, INC.
SCHEDULE I
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)

Assets 2000 1999
---------- ----------

Current Assets
Cash and cash equivalents, restricted cash and short-term investments.. $ 204,004 $ 33,536
Notes and other receivables............................................ 13,611 32,275
Prepaid expenses and other current assets.............................. 19,857 6,929
---------- ----------
Total current assets.................................................... 237,472 72,740
Property and equipment, net............................................. 27,156 24,865
Ownership interests in and advances to affiliates....................... 759,914 687,925
Available-for-sale securities........................................... 214,233 302,940
Deferred taxes.......................................................... 39,216 --
Other................................................................... 47,043 20,719
---------- ----------
Total Assets............................................................ $1,325,034 $1,109,189
========== ==========

Liabilities and Shareholders' Equity
2000 1999
---------- ----------

Current Liabilities
Current maturities of long-term debt................................... $ 1,533 $ 6,758
Accounts payable....................................................... 9,384 174
Accrued expenses....................................................... 31,982 28,689
---------- ----------
Total current liabilities............................................ 42,899 35,621
Long-term debt.......................................................... 13,421 14,354
Deferred taxes.......................................................... -- 109,716
Other long-term liabilities............................................. 164,277 174,797
Convertible subordinated notes.......................................... 200,000 200,000
Shareholders' Equity
Common stock........................................................... 11,815 10,475
Additional paid-in capital............................................. 758,946 133,969
Retained earnings...................................................... 172,716 385,120
Accumulated other comprehensive income (loss).......................... (712) 45,137
Treasury stock, at cost................................................ (38,328) --
---------- ----------
Total shareholders' equity........................................... 904,437 574,701
---------- ----------
Total Liabilities and Shareholders' Equity.............................. $1,325,034 $1,109,189
========== ==========

See notes to condensed consolidated financial statements.

SAFEGUARD SCIENTIFICS, INC.
SCHEDULE I
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

2000 1999 1998
---- ---- ----

Revenue.................................... $ 37,614 $ 14,849 $ 12,769
Operating Expenses......................... 108,770 45,093 25,868
--------- -------- --------
(71,156) (30,244) (13,099)
Gains on issuance of stock by affiliates... -- 175,662 3,782
Other income, net.......................... 92,115 128,404 209,646
Interest income............................ 18,729 5,231 3,119
Interest expense........................... (25,775) (18,245) (10,706)
--------- -------- --------
Income Before Income Taxes and Equity Loss.. 13,913 260,808 192,742
Income taxes............................... 102,462 (61,884) (61,010)
Equity loss................................ (328,779) (75,398) (21,609)
--------- -------- --------
Net Income (Loss)........................... $(212,404) $123,526 $110,123
========= ======== ========

Net Income (Loss) Per Share
Basic...................................... $ (1.86) $ 1.22 $ 1.15
Diluted.................................... $ (1.87) $ 1.16 $ 1.07

Average Common Shares Outstanding
Basic...................................... 114,068 101,134 95,499
Diluted.................................... 114,068 110,910 104,742

See notes to condensed consolidated financial statements.

SAFEGUARD SCIENTIFICS, INC.
SCHEDULE I
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)

2000 1999 1998
---- ---- ----

Operating Activities
Net income (loss)............................................. $(212,404) $ 123,526 $ 110,123
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Depreciation and amortization............................... 5,109 1,664 1,443
Deferred income taxes....................................... (127,505) 39,217 41,447
Equity loss................................................. 328,779 75,398 21,609
Gains on issuance of stock by affiliates.................... -- (175,662) (3,782)
Stock-based compensation.................................... 12,603 434 --
Tax benefit of stock option exercises....................... (4,099) (7,051) (1,869)
Other income, net........................................... (92,115) (128,404) (209,646)
Cash provided (used) by changes in working capital items:
Other receivables, net........................................ 4,270 2,998 (17,408)
Accounts payable, accrued expenses and other.................. 13,549 2,021 36,049
--------- --------- ---------
Net cash used in operating activities......................... (71,813) (65,859) (22,034)
Investing Activities
Proceeds from sales of available-for-sale securities.......... 98,649 53,565 3,319
Proceeds from sales of and distributions from affiliates...... 74,199 84,522 89,888
Advances to affiliates........................................ (32,293) (56,417) (32,161)
Repayment of advances to affiliates........................... 15,550 8,150 7,689
Acquisitions of ownership interests in affiliates............. (478,729) (212,294) (112,903)
Capital expenditures.......................................... (5,136) (2,882) (3,142)
Increase in short-term investments and restricted cash........ (86,230) -- --
Other, net.................................................... 3,015 (6,209) (120)
--------- --------- ---------
Net cash used in investing activities....................... (410,975) (131,565) (47,430)
Financing Activities
Borrowings on revolving credit facilities..................... 100,000 182,000 185,007
Repayments on revolving credit facilities..................... (100,000) (290,107) (99,100)
Borrowings on long-term debt.................................. 55 -- 909
Repayments on long-term debt.................................. (1,514) (765) (140)
Proceeds from issuance of convertible subordinated notes...... -- 200,000 --
Payment of financing costs on convertible subordinated notes.. -- (6,178) --
Proceeds from financial instruments........................... -- 139,309 --
Repurchase of Company common stock............................ (46,486) (2,695) (18,672)
Issuance of Company common stock, net......................... 614,971 7,910 2,266
--------- --------- ---------
Net cash provided by financing activities................... 567,026 229,474 70,270
--------- --------- ---------
Net increase in cash and cash equivalents...................... 84,238 32,050 806
Cash and cash equivalents at beginning of period............... 33,536 1,486 680
--------- --------- ---------
Cash and cash equivalents at end of period..................... $ 117,774 $ 33,536 $ 1,486
========= ========= =========

See notes to condensed consolidated financial statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - PRINCIPLES OF CONSOLIDATION

The Condensed Consolidated (also referred to as "Parent Company") Financial
Statements include the accounts of Safeguard Scientifics, Inc. (the Company) and
its wholly owned subsidiaries. Parent Company Financial Statements are provided
to present the financial position and results of operations of the Company as if
the consolidated companies were accounted for under the equity method of
accounting for all periods presented during which the Company owned its interest
in these companies. CompuCom Systems, Inc. and Tangram Enterprise Solutions,
Inc. were consolidated in 2000, 1999 and 1998. During 1999, the Company acquired
controlling majority voting interests in aligne, incorporated, SOTAS, Inc. and
Arista Knowledge Systems, Inc. In August 2000, aligne acquired 100% of K
Consultants. Each one of these partner companies was consolidated from the date
the Company acquired directly or indirectly more than 50% of the outstanding
voting securities interest. Arista was sold in July 2000 and is included in our
consolidated operating results through its date of sale.

The Company's revenue consists of administrative service fees charged to certain
partner companies and private equity funds for operational and management
services. Effective April 1, 2000, the Company no longer charges administrative
service fees to its partner companies.

On February 28, 2000, the Board of Directors approved a three-for-one stock
split to the Company's shareholders of record on March 13, 2000. All share and
per share data have been restated to reflect a three-for-one split of the
Company's common stock as if the stock split had occurred as of December 31,
1997.

Certain prior year amounts have been reclassified to conform to the current year
presentation.

NOTE 2 - CASH AND CASH EQUIVALENTS

The Company considers all highly liquid instruments with an original maturity of
90 days or less at the time of purchase to be cash equivalents. At December 31,
2000, cash and cash equivalents consist of commercial paper and other deposits
that are readily convertible into cash. Restricted cash of $35 million is
primarily invested in money market instruments and is used as collateral under a
guarantee arrangement. Short-term investments of $51 million represent
commercial paper with original maturities ranging from 92 to 208 days.

NOTE 3 - LONG-TERM DEBT

2000 1999
---- ----
(in thousands)

Mortgage note, 9.75%, payable monthly through 2002.......... $ 3,337 $ 3,380
Mortgage notes, 6.1% to 7.8%, payable monthly through 2017.. 4,452 4,691
Mortgage note, 7.75%, payable monthly through 2021.......... 6,011 6,130
Other....................................................... 1,154 6,911
------- -------
Total debt.................................................. 14,954 21,112
Current maturities of long-term debt........................ (1,533) (6,758)
------- -------
Long-term debt.............................................. $13,421 $14,354
======= =======

Aggregate maturities of long-term debt during future years are as follows (in
millions): $1.5 - 2001; $0.6 - 2002; $0.5 - 2003; $0.5 - 2004; $0.5 - 2005 and
$11.3 - thereafter.

Interest paid in 2000, 1999 and 1998 was $12.5 million, $14.0 million and $11.5
million, respectively, of which $10.0 million, $7.3 million and $4.9 million in
2000, 1999 and 1998, respectively, related to the Company's Convertible
Subordinated Notes.

SAFEGUARD SCIENTIFICS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

Balance Additions
Beginning Charged to Balance
DESCRIPTION of Year Operations Deductions Other End of Year
- ----------- ------- ---------- ---------- ----- -----------

Allowance for doubtful accounts (1)
Year ended December 31, 1998.... $2,872 $3,049 $1,350 $198 (2) $4,769
Year ended December 31, 1999.... $4,769 $2,719 $1,884 $ - $5,604
Year ended December 31, 2000.... $5,604 $3,487 $4,859 $ 96 (2) $4,328

(1) Net write-offs.

(2) Acquisition of Dataflex (1998) and K Consultants (2000).

Exhibits

The following is a list of exhibits required by Item 601 of Regulation S-K
filed as part of this Report. Where so indicated by footnote, exhibits that
were previously filed are incorporated by reference. For exhibits incorporated
by reference, the location of the exhibit in the previous filing is indicated in
parentheses.

Exhibit No. Exhibit
- ----------- -------

2.1 Asset Purchase Agreement, dated as of May 10, 1999 by and between
CompuCom Systems, Inc. and Entex Information Services, Inc. (8)
(Exhibit 2.1)

2.2 Purchase Agreement dated as of December 22, 2000, by and between
CompuCom Systems, Inc., MicroAge Technology Services, L.L.C. and
MicroAge, Inc. (16) (Exhibit 2.1)

3.1 Amended and Restated Articles of Incorporation of Safeguard (4)
(Exhibit 3.1)

3.2 * By-laws of Safeguard, as amended

4.1 ** 1990 Stock Option Plan, as amended (4) (Exhibit 4.3)

4.2 ** Stock Option Plan for Non-Employee Directors (2) (Exhibit 4.8)

4.3 */** Safeguard Scientifics, Inc. 1999 Equity Compensation Plan, as
amended

4.4 Indenture, dated as of June 9, 1999, between Safeguard Scientifics,
Inc. and Chase Manhattan Trust Company, National Association, as
trustee, including the form of 5.0% Convertible Subordinated Note
due 2006 (10) (Exhibit 4.2)

4.5 Purchase Agreement of Safeguard Scientifics, Inc. to issue and sell
to Credit Suisse First Boston Corporation Convertible Subordinated
Notes due June 15, 2006 (exhibits omitted) (9) (Exhibit 4.3)

4.6 Registration Rights Agreement between Safeguard Scientifics, Inc.
and Credit Suisse First Boston Corporation (10) (Exhibit 4.4)

4.7 Rights Agreement dated as of March 1, 2000 between Safeguard
Scientifics, Inc. and ChaseMellon Shareholder Services LLC, as
Rights Agent (12) (Exhibit 4)

4.8 Designation of Series A Junior Participating Preferred Shares (13)
(Exhibit 4.11)

10.1 ** Safeguard Scientifics, Inc. Long Term Incentive Plan, as amended
and restated effective June 15, 1994 (3) (Exhibit 10.6)

10.2 ** Safeguard Scientifics, Inc. Deferred Compensation Plan (1) (Exhibit
10.12)

10.3 Stock Exchange Agreement dated as of February 26, 1999 among
Safeguard Scientifics, Inc., aligne incorporated, and the
shareholders of aligne incorporated (exhibits and schedules
omitted) (7) (Exhibit 10.12)

10.4 Transaction Agreement dated February 28, 2000 between Safeguard
Scientifics, Inc. and Textron Inc. (12) (Exhibit 10)

Exhibit No. Exhibit
- ----------- -------

10.5 Amended and Restated Credit Agreement dated April 18, 2000, among
Safeguard Scientifics, Inc., Safeguard Scientifics (Delaware),
Inc., Safeguard Delaware, Inc., and PNC Bank, N.A. (exhibits
omitted) (15) (Exhibit 10.4)

10.5.1 * Amendment to Amended and Restated Credit Agreement dated as of
February 21, 2001, among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc., Safeguard Delaware, Inc., and PNC
Bank, N.A.

10.6 Sails Mandatorily Exchangeable Securities Contract dated as of
March 25, 1999 among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc., Credit Suisse Financial Products and
CSFP Capital Inc. as Agent (14) (Exhibit 10.40)

10.7 Sails Pledge Agreement dated as of March 25, 1999 among Safeguard
Scientifics (Delaware), Inc, Credit Suisse Financial Products, and
Credit Suisse First Boston, New York, as Collateral Agent (exhibits
omitted) (14) (Exhibit 10.41)

10.8 Sails Mandatorily Exchangeable Securities Contract dated as of
August 30, 1999 among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc., Credit Suisse Financial Products and
CSFP Capital, Inc. as Agent (14) (Exhibit 10.42)

10.9 Sails Pledge Agreement dated as of August 30, 1999 among Safeguard
Scientifics (Delaware), Inc., Credit Suisse Financial Products, and
Credit Suisse First Boston, New York, as Collateral Agent (exhibits
omitted) (14) (Exhibit 10.43)

10.10 ** Form of Promissory Notes dated June 11, 1999 given by certain
executives for advances by Safeguard of income tax withholdings on
restricted stock grants. (7) (Exhibit 10.2)

10.11 ** Form of Promissory Notes dated August 27, 1999 given by certain
executives for advances by Safeguard of income tax withholdings on
restricted stock grants. (11) (Exhibit 10.9)

10.12 ** Form of Promissory Notes dated November 3, 1999 given by certain
executives for advances by Safeguard of income tax withholdings on
restricted stock grants (13) (Exhibit 10.35)

10.13 ** Form of Promissory Notes dated December 1, 1999 given by certain
executives for advances by Safeguard of income tax withholdings on
restricted stock grants (13) (Exhibit 10.36)

10.14 ** Form of Promissory Notes dated February 3, 2000 given by certain
executives for advances by Safeguard of income tax withholdings on
restricted stock grants (13) (Exhibit 10.37)

10.15 ** Form of Promissory Notes dated April 6, 2000 given by certain
executives for advances by Safeguard of income tax withholdings on
restricted stock grants (15) (Exhibit 10.3)

10.16 ** Term Note dated July 22, 1999, between Safeguard Delaware, Inc. and
John Halvey (11) (Exhibit 10.10)

10.17 ** Stock Option Grant by Safeguard Scientifics, Inc. to Harry Wallaesa
dated March 1, 1999 (13) (Exhibit 10.38)

Exhibit No. Exhibit
- ----------- -------

10.18 ** Restricted Stock Grant Letter dated February 28, 2000 from
Safeguard Scientifics, Inc. to a certain executive (exhibits
omitted) (15) (Exhibit 10.1)

10.19 ** Term note dated April 13, 2000 from a certain executive to
Safeguard Scientifics, Inc. (15) (Exhibit 10.2)

10.20 */** Guaranty of Account, dated October 4, 2000, between Legg Mason Wood
Walker, Inc. and Safeguard Scientifics, Inc.

10.21 */** Reimbursement Letter Agreement dated October 4, 2000, as amended
November 8, 2000, from Warren V. Musser to Safeguard Scientifics,
Inc.

10.22 */** Assumption of Guaranty of Account, between Legg Mason Wood Walker,
Inc., Safeguard Scientifics, Inc. and Bonfield Insurance, Ltd.,
dated November 13, 2000.

10.23 */** Grid Term Note, dated October 18, 2000, by Warren V. Musser to
Safeguard Scientifics, Inc.

10.24 */** Security Agreement, dated October 18, 2000, between Warren V.
Musser and Safeguard Scientifics, Inc.

10.25 Amended and Restated Credit Agreement, dated as of November 3,
1997, among CompuCom Systems, Inc., certain lenders party hereto,
and NationsBank of Texas, N.A., as administrative lender (exhibits
and schedules omitted) (5) (Exhibit 10.27)

10.25.1 Amendment No. 1 to Amended and Restated Credit Agreement, dated as
of June 26, 1998, among CompuCom Systems, Inc., certain lenders
party hereto, and NationsBank of Texas, N.A., as administrative
lender (exhibits omitted) (6) (Exhibit 10.2)

10.26 CompuCom Receivables MasterTrust I Pooling and Servicing Agreement,
dated as of May 7, 1999, between Norwest Bank Minnesota National
Association, CompuCom Systems, Inc., and CSI Funding, Inc. (9)
(Exhibit 10.14)

10.26.1 CompuCom Receivables MasterTrust I Pooling and Servicing Agreement
Series 1999-1 Supplement, dated as of May 7, 1999, among PNC Bank,
National Association, Market Street Capital Corporation, Norwest
Bank Minnesota, National Association, CompuCom Systems, Inc., and
CSI Funding, Inc. (9) (Exhibit 10.5)

10.26.2 Receivables Contribution and Sale Agreement dated May 7, 1999
between CompuCom Systems, Inc. and CSI Funding, Inc. (9) (Exhibit
10.8)

10.27 Series 2000-1 Supplement, among CSI Funding, Inc., as the
Transferor, CompuCom Systems, Inc., as Servicer, Lloyds TSB Bank
PLC, as Initial Series 2000-1 Certificateholder, and Wells Fargo,
as Trustee on behalf of the Certificateholders, dated as of October
2, 2000 (17)(Exhibit 10(zz))

10.28 Inventory and Working Capital Financing Agreement, dated as of May
11, 1999, between IBM Credit Corporation and CompuCom Systems, Inc.
(9) (Exhibit 10.6)

Exhibit No. Exhibit
- ----------- -------

10.28.1 Attachment A to Inventory and Working Capital Financing Agreement
dated May 11, 1999 (9) (Exhibit 10.7)

10.28.2 First Amendment to Inventory and Working Capital Financing
Agreement dated as of July 28, 1999 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit 10(ab))

10.28.3 Second Amendment to Inventory and Working Capital Financing
Agreement dated as of July 1, 2000 by and between CompuCom Systems,
Inc. and IBM Credit Corporation (17) (Exhibit (10(ac))

10.28.4 Third Amendment to Inventory and Working Capital Financing
Agreement dated as of October 31, 2000 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit 10(ad))

10.28.5 Fourth Amendment to Inventory and Working Capital Financing
Agreement dated as of January 10, 2001 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit 10(ae))

10.29 Non-Competition, Referral and Non-Disclosure Agreement dated as of
May 10, 1999, by and between CompuCom Systems, Inc. and ENTEX
Information Services, Inc. (8) (Exhibit 10.1)

10.30 ** Executive Employment Agreement dated November 1, 1999 between J.
Edward Coleman and CompuCom Systems, Inc. (13) (Exhibit 10.39)

11 Computation of Per Share Income (included in Note 15 to the
Consolidated Financial Statements on page 57 of Safeguard's Annual
Report to Stockholders for year ended December 31, 2000, which page
is filed as part of Exhibit 13 hereto)

13 * Pages 25 to 64 of Annual Report to Stockholders for year ended
December 31, 2000

21 * List of Subsidiaries

23.1 * Consent of KPMG LLP, Independent Auditors

23.2 * Consent of KPMG LLP, Independent Auditors

99.1 Consolidated Financial Statements of Internet Capital Group, Inc.
(18)

(8) Filed on May 10, 1999 as an exhibit to Form 8-K and incorporated herein by
such reference.
(9) Filed on August 16, 1999 as an exhibit to Form 10-Q for the quarter ended
June 30, 1999 and incorporated herein by such reference.
(10) Filed on September 2, 1999 as an exhibit to Form 10-Q/A for the quarter
ended June 30, 1999 and incorporated herein by such reference.
(11) Filed on November 15, 1999 as an exhibit to Form 10-Q for the quarter
ended September 30, 1999 and incorporated herein by such reference.
(12) Filed on February 29, 2000 as an exhibit to Form 8-K and incorporated
herein by reference.
(13) Filed on March 22, 2000 as an exhibit to Form 10-K and incorporated herein
by reference.
(14) Filed on April 18, 2000 as an exhibit to Form 10-K/A 2 and incorporated
herein by reference.
(15) Filed on May 15, 2000 as an exhibit to Form 10-Q for the quarter ended
March 31, 2000 and incorporated herein by reference.
(16) Filed on January 25, 2001 as an exhibit to Form 8-K and incorporated herein
by reference.
(17) Incorporated herein by reference to the exhibits filed by CompuCom Systems,
Inc. (SEC File No. 000-14371) under Part IV, Item 14(c) of the Annual
Report on Form 10-K for the year ended December 31, 2000.
(18) Incorporated herein by reference to page 49 and Part II, Item 8, pages 53
to 88, of the Annual Report on Form 10-K for the year ended December 31,
2000, filed by Internet Capital Group, Inc. (SEC File No. 000-26929)

SIGNATURES

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

Dated: March 30, 2001 SAFEGUARD SCIENTIFICS, INC.

By: /s/ Warren V. Musser
------------------------------------
Warren V. Musser,
Chairman and Chief Executive Officer

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

Dated: March 30, 2001 /s/ Warren V. Musser
-----------------------------------------
Warren V. Musser,
Chairman and Chief Executive Officer
(Principal Executive Officer)

Dated: March 30, 2001 /s/ Gerald A. Blitstein
-----------------------------------------
Gerald A. Blitstein,
Executive Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)

Dated: March 30, 2001 /s/ Vincent G. Bell, Jr.
-----------------------------------------
Vincent G. Bell, Jr., Director

Dated: March 30, 2001 /s/ Michael J. Emmi
-----------------------------------------
Michael J. Emmi, Director

Dated: March 30, 2001 /s/ Walter W. Buckley, III
-----------------------------------------
Walter W. Buckley, III, Director

Dated: March 30, 2001 /s/ Robert A. Fox
-----------------------------------------
Robert A. Fox, Director

Dated: March 27, 2001 /s/ Robert E. Keith, Jr.
-----------------------------------------
Robert E. Keith, Jr., Director

Dated: March 30, 2001 /s/ Jack L. Messman
-----------------------------------------
Jack L. Messman, Director

Dated: March 30, 2001 /s/ Russell E. Palmer
-----------------------------------------
Russell E. Palmer, Director

Dated: March 30, 2001 /s/ John W. Poduska Sr.
-----------------------------------------
John W. Poduska Sr., Director

Dated: _______, 2001 _________________________________________
Heinz Schimmelbusch, Director

Dated: March 23, 2001 /s/ Hubert J. P. Schoemaker
-----------------------------------------
Hubert J. P. Schoemaker, Director

Dated: March 30, 2001 /s/ Harry Wallaesa
-----------------------------------------
Harry Wallaesa, Director

Dated: _______, 2001 ________________________________________
Carl J. Yankowski, Director

Exhibits

Exhibit No. Exhibit
- ----------- -------

2.1 Asset Purchase Agreement, dated as of May 10, 1999 by and between
CompuCom Systems, Inc. and Entex Information Services, Inc. (8)
(Exhibit 2.1)

2.2 Purchase Agreement dated as of December 22, 2000, by and between
CompuCom Systems, Inc., MicroAge Technology Services, L.L.C. and
MicroAge, Inc. (16) (Exhibit 2.1)

3.1 Amended and Restated Articles of Incorporation of Safeguard (4)
(Exhibit 3.1)

3.2 * By-laws of Safeguard, as amended

4.1 ** 1990 Stock Option Plan, as amended (4) (Exhibit 4.3)

4.2 ** Stock Option Plan for Non-Employee Directors (2) (Exhibit 4.8)

4.3 */** Safeguard Scientifics, Inc. 1999 Equity Compensation Plan, as
amended

4.4 Indenture, dated as of June 9, 1999, between Safeguard
Scientifics, Inc. and Chase Manhattan Trust Company, National
Association, as trustee, including the form of 5.0% Convertible
Subordinated Note due 2006 (10) (Exhibit 4.2)

4.5 Purchase Agreement of Safeguard Scientifics, Inc. to issue and
sell to Credit Suisse First Boston Corporation Convertible
Subordinated Notes due June 15, 2006 (exhibits omitted) (9)
(Exhibit 4.3)

4.6 Registration Rights Agreement between Safeguard Scientifics, Inc.
and Credit Suisse First Boston Corporation (10) (Exhibit 4.4)

4.7 Rights Agreement dated as of March 1, 2000 between Safeguard
Scientifics, Inc. and ChaseMellon Shareholder Services LLC, as
Rights Agent (12) (Exhibit 4)

4.8 Designation of Series A Junior Participating Preferred Shares
(13) (Exhibit 4.11)

10.1 ** Safeguard Scientifics, Inc. Long Term Incentive Plan, as amended
and restated effective June 15, 1994 (3) (Exhibit 10.6)

10.2 ** Safeguard Scientifics, Inc. Deferred Compensation Plan (1)
(Exhibit 10.12)

Exhibit No. Exhibit
- ----------- -------

10.4 Transaction Agreement dated February 28, 2000 between Safeguard
Scientifics, Inc. and Textron Inc. (12) (Exhibit 10)

10.6 Sails Mandatorily Exchangeable Securities Contract dated as of
March 25, 1999 among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc., Credit Suisse Financial Products
and CSFP Capital Inc. as Agent (14) (Exhibit 10.40)

10.7 Sails Pledge Agreement dated as of March 25, 1999 among Safeguard
Scientifics (Delaware), Inc, Credit Suisse Financial Products,
and Credit Suisse First Boston, New York, as Collateral Agent
(exhibits omitted) (14) (Exhibit 10.41)

10.8 Sails Mandatorily Exchangeable Securities Contract dated as of
August 30, 1999 among Safeguard Scientifics, Inc., Safeguard
Scientifics (Delaware), Inc., Credit Suisse Financial Products
and CSFP Capital, Inc. as Agent (14) (Exhibit 10.42)

10.9 Sails Pledge Agreement dated as of August 30, 1999 among
Safeguard Scientifics (Delaware), Inc., Credit Suisse Financial
Products, and Credit Suisse First Boston, New York, as Collateral
Agent (exhibits omitted) (14) (Exhibit 10.43)

10.10 ** Form of Promissory Notes dated June 11, 1999 given by certain
executives for advances by Safeguard of income tax withholdings
on restricted stock grants. (7) (Exhibit 10.2)

10.11 ** Form of Promissory Notes dated August 27, 1999 given by certain
executives for advances by Safeguard of income tax withholdings
on restricted stock grants. (11) (Exhibit 10.9)

10.12 ** Form of Promissory Notes dated November 3, 1999 given by certain
executives for advances by Safeguard of income tax withholdings
on restricted stock grants (13) (Exhibit 10.35)

10.13 ** Form of Promissory Notes dated December 1, 1999 given by certain
executives for advances by Safeguard of income tax withholdings
on restricted stock grants (13) (Exhibit 10.36)

10.14 ** Form of Promissory Notes dated February 3, 2000 given by certain
executives for advances by Safeguard of income tax withholdings
on restricted stock grants (13) (Exhibit 10.37)

10.15 ** Form of Promissory Notes dated April 6, 2000 given by certain
executives for advances by Safeguard of income tax withholdings
on restricted stock grants (15) (Exhibit 10.3)

Exhibit No. Exhibit
- ----------- -------

10.16 ** Term Note dated July 22, 1999, between Safeguard Delaware, Inc.
and John Halvey (11) (Exhibit 10.10)

10.17 ** Stock Option Grant by Safeguard Scientifics, Inc. to Harry
Wallaesa dated March 1, 1999 (13) (Exhibit 10.38)

10.18 ** Restricted Stock Grant Letter dated February 28, 2000 from
Safeguard Scientifics, Inc. to a certain executive (exhibits
omitted) (15) (Exhibit 10.1)

10.19 ** Term note dated April 13, 2000 from a certain executive to
Safeguard Scientifics, Inc. (15) (Exhibit 10.2)

10.20 */** Guaranty of Account, dated October 4, 2000, between Legg Mason
Wood Walker, Inc. and Safeguard Scientifics, Inc.

10.21 */** Reimbursement Letter Agreement dated October 4, 2000, as amended
November 8, 2000, from Warren V. Musser to Safeguard Scientifics,
Inc.

10.22 */** Assumption of Guaranty of Account, between Legg Mason Wood
Walker, Inc., Safeguard Scientifics, Inc. and Bonfield Insurance,
Ltd., dated November 13, 2000.

10.23 */** Grid Term Note, dated October 18, 2000, by Warren V. Musser to
Safeguard Scientifics, Inc.

10.24 */** Security Agreement, dated October 18, 2000, between Warren V.
Musser and Safeguard Scientifics, Inc.

10.25 Amended and Restated Credit Agreement, dated as of November 3,
1997, among CompuCom Systems, Inc., certain lenders party hereto,
and NationsBank of Texas, N.A., as administrative lender
(exhibits and schedules omitted) (5) (Exhibit 10.27)

10.25.1 Amendment No. 1 to Amended and Restated Credit Agreement, dated
as of June 26, 1998, among CompuCom Systems, Inc., certain
lenders party hereto, and NationsBank of Texas, N.A., as
administrative lender (exhibits omitted) (6) (Exhibit 10.2)

10.26 CompuCom Receivables MasterTrust I Pooling and Servicing
Agreement, dated as of May 7, 1999, between Norwest Bank
Minnesota National Association, CompuCom Systems, Inc., and CSI
Funding, Inc. (9) (Exhibit 10.14)

10.26.1 CompuCom Receivables MasterTrust I Pooling and Servicing
Agreement Series 1999-1 Supplement, dated as of May 7, 1999,
among PNC Bank, National Association, Market Street Capital
Corporation, Norwest Bank Minnesota, National Association,
CompuCom Systems, Inc., and CSI Funding, Inc. (9) (Exhibit 10.5)

Exhibit No. Exhibit
- ----------- -------

10.26.2 Receivables Contribution and Sale Agreement dated May 7, 1999
between CompuCom Systems, Inc. and CSI Funding, Inc. (9) (Exhibit
10.8)

10.28 Inventory and Working Capital Financing Agreement, dated as of
May 11, 1999, between IBM Credit Corporation and CompuCom
Systems, Inc. (9) (Exhibit 10.6)

10.28.1 Attachment A to Inventory and Working Capital Financing Agreement
dated May 11, 1999 (9) (Exhibit 10.7)

10.28.2 First Amendment to Inventory and Working Capital Financing
Agreement dated as of July 28, 1999 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit 10(ab))

10.28.3 Second Amendment to Inventory and Working Capital Financing
Agreement dated as of July 1, 2000 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit (10(ac))

10.28.4 Third Amendment to Inventory and Working Capital Financing
Agreement dated as of October 31, 2000 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit 10(ad))

10.28.5 Fourth Amendment to Inventory and Working Capital Financing
Agreement dated as of January 10, 2001 by and between CompuCom
Systems, Inc. and IBM Credit Corporation (17) (Exhibit 10(ae))

10.29 Non-Competition, Referral and Non-Disclosure Agreement dated as
of May 10, 1999, by and between CompuCom Systems, Inc. and ENTEX
Information Services, Inc. (8) (Exhibit 10.1)

10.30 ** Executive Employment Agreement dated November 1, 1999 between J.
Edward Coleman and CompuCom Systems, Inc. (13) (Exhibit 10.39)

11 Computation of Per Share Income (included in Note 15 to the
Consolidated Financial Statements on page 57 of Safeguard's
Annual Report to Stockholders for year ended December 31, 2000,
which page is filed as part of Exhibit 13 hereto)

13 * Pages 25 to 64 of Annual Report to Stockholders for year ended
December 31, 2000

21 * List of Subsidiaries

Exhibit No. Exhibit
- ----------- -------

23.1 * Consent of KPMG LLP, Independent Auditors

23.2* Consent of KPMG LLP, Independent Auditors

99.1 Consolidated Financial Statements of Internet Capital Group, Inc.
(18)

* Filed herewith
** These exhibits relate to management contracts or compensatory plans,
contracts or arrangements in which directors and/or executive officers of
the registrant may participate.
(1) Filed on March 30, 1987 as an exhibit to Form 10-K and incorporated herein
by reference.
(2) Filed on March 30, 1994 as an exhibit to Form 10-K and incorporated herein
by reference.
(3) Filed on March 30, 1995 as an exhibit to Form 10-K and incorporated herein
by reference.
(4) Filed on March 31, 1997 as an exhibit to Form 10-K and incorporated herein
by reference.
(5) Filed March 31, 1998 as an exhibit to Form 10-K and incorporated herein by
reference.
(6) Filed August 14, 1998 as an exhibit to Form 10-Q and incorporated herein by
reference.
(7) Filed on March 31, 1999 as an exhibit to Form 10-K and incorporated herein
by reference.
(8) Filed on May 10, 1999 as an exhibit to Form 8-K and incorporated herein by
such reference.
(9) Filed on August 16, 1999 as an exhibit to Form 10-Q for the quarter ended
June 30, 1999 and incorporated herein by such reference.
(10) Filed on September 2, 1999 as an exhibit to Form 10-Q/A for the quarter
ended June 30, 1999 and incorporated herein by such reference.
(11) Filed on November 15, 1999 as an exhibit to Form 10-Q for the quarter
ended September 30, 1999 and incorporated herein by such reference.
(12) Filed on February 29, 2000 as an exhibit to Form 8-K and incorporated
herein by reference.
(13) Filed on March 22, 2000 as an exhibit to Form 10-K and incorporated herein
by reference.
(14) Filed on April 18, 2000 as an exhibit to Form 10-K/A 2 and incorporated
herein by reference.
(15) Filed on May 15, 2000 as an exhibit to Form 10-Q for the quarter ended
March 31, 2000 and incorporated herein by reference.
(16) Filed on January 25, 2001 as an exhibit to Form 8-K and incorporated herein
by reference.
(17) Incorporated herein by reference to the exhibits filed by CompuCom Systems,
Inc. (SEC File No. 000-14371) under Part IV, Item 14(c) of the Annual
Report on Form 10-K for the year ended December 31, 2000.
(18) Incorporated herein by reference to page 49 and Part II, Item 8, pages 53
to 88, of the Annual Report on Form 10-K for the year ended December 31,
2000, filed by Internet Capital Group, Inc. (SEC File No. 000-26929)