1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(Mark One)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 1999
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934

For the Transition period from _______ to _______

Commission File No. 1-9410

COMPUTER TASK GROUP, INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)

State of New York 16-0912632
- ---------------------------------- -------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)

800 Delaware Avenue, Buffalo, New York 14209
- ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)

(716) 882-8000
-------------------------------------
Registrant's telephone number,
including area code:

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

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------

Common Stock, $.01 par value New York Stock Exchange
Rights to Purchase Series A
Participating Preferred Stock New York Stock Exchange

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

None
----

(Title of class)

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. [ ]

The aggregate market value of the Registrant's voting stock held by
non-affiliates at March 15, 2000 was $197,645,761. Solely for the purposes of
this calculation, all persons who are or may be executive officers or directors
of the Registrant and all persons who have filed a Schedule 13D with respect to
the Registrant's stock have deemed to be affiliates.

The total number of shares of Common Stock of the Registrant outstanding at
March 15, 2000 was 20,875,056.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in the
following parts of this report: Parts I, II and IV - the Registrant's 1999
Annual Report to Shareholders; Parts II and III - the Registrant's definitive
Proxy Statement as filed with the Securities and Exchange Commission and as used
in connection with the solicitation of proxies for the Registrant's annual
meeting of shareholders to be held on April 26, 2000.

PART I
------

FORWARD-LOOKING STATEMENTS

Statements included in this document, or incorporated herein by
reference, that do not relate to present or historical conditions are "forward
looking statements" within the meaning of that term in Section 27A of the
Securities Act of 1933, as amended, and Section 21F of the Securities Exchange
Act of 1934, as amended. Additional oral or written forward looking statements
may be made by the Company from time to time, and such statements may be
included in documents that are filed with the Securities and Exchange
Commission. Such forward looking statements involve risks and uncertainties
which could cause results or outcomes to differ materially from those expressed
in such forward looking statements. Forward-looking statements may include,
without limitation, statements relating to the Company's plans, strategies,
objectives, expectations and intentions and are intended to be made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Words such as "believes," "forecasts," "intends," "possible," "expects,"
"estimates," "anticipates," or "plans" and similar expressions are intended to
identify forward-looking statements. Among the important factors on which such
statements are based are assumptions concerning the anticipated growth of the
information technology industry, the continued need of current and prospective
customers for the Company's services, the availability of qualified professional
staff, and price and wage inflation.

ITEM 1. BUSINESS

Computer Task Group, Incorporated (the Company, CTG, or the Registrant)
was incorporated in Buffalo, New York on March 11, 1966, and its corporate
headquarters are located at 800 Delaware Avenue, Buffalo, New York 14209
(716-882-8000). CTG provides information technology (IT) professional services.
CTG employs approximately 5,200 people worldwide and serves customers through an
international network of offices in North America and Europe. The Company has
nine operating subsidiaries: CTG Services, Inc., CTG HealthCare Solutions
(Kansas), Inc., CTG HealthCare Solutions (Ohio), Inc., and Zenius, Inc.,
providing services primarily in North America, Inc.; Computer Task Group of
Canada, Inc.; Computer Task Group (U.K.) Ltd.; Computer Task Group Nederland
B.V.; Computer Task Group Luxembourg S.A.; and Computer Task Group Belgium N.V.

BACKGROUND

The Company operates in one industry segment, providing IT professional
services. A typical customer is an organization with large, complex information
and data processing requirements. Approximately 82.9 percent of consolidated
1999 revenue of $472.0 million was generated in North America, and 17.1 percent
in Europe. In order to better market its services, in 2000 CTG trademarked its
four primary services.

CTG Exemplar(TM) plans, designs, implements, and maintains
start-to-finish application and IT solutions for some of the world's leading
companies. At the planning stage, Exemplar helps clients assess their IT needs.
Exemplar's IT and vertical industry experts examine the client organization's
current technology, application portfolio, and data architecture. Solutions
ranging from selection and implementation of existing software to the
construction of new systems are then recommended. Once a solution has been
defined, CTG Exemplar's state-of-the-art design, development, and testing
services are delivered by skilled technicians supported by intensive training
programs and proprietary best practices. During a project's implementation
phase, new technology is integrated seamlessly into existing systems. Once
implementation is complete, CTG Exemplar supports the requirements of managing
and maintaining enterprise software, from rollout to subsequent updates,
conversions, hosting, and help desk activities.

CTG ITCapital(TM) recruits, retains, and manages IT talent for our
clients. While our Global 1000 customers focus on their core businesses, CTG
manages the acquisition and deployment of the professionals they depend on for
IT solutions. Using an assessment methodology to define each client's staffing
needs, IT Capital builds a customized supply model to streamline everything from
technical requisitions to invoices. IT Capital's strategic staffing Web tool,
CTG ITCapital Select(TM), allows our clients to submit requests for help, review
progress on their requisitions, and access candidate resumes online.

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ITCapital assets include Internet-based requisitions, service level agreements,
customized reporting, vendor management programs, and EDI payments. Internet
recruiting, recruiting to hot skills, hiring to profile, and a centralized
global recruiting center define our approach. Hiring and retaining prime IT
resources is closely linked with effectively managing those resources. Clients
receive the benefit of a sole source provider who is closely aligned to their
strategies and who can deliver resources on a national basis.

CTG HealthCare Solutions(TM), is a leading provider of information
technology consulting services to health care providers and payors in North
America. Using its proprietary Intellectual Advantage(TM) storehouse of
knowledge and experience and its AssureWare(TM) Web-enabled
engagement-management methodology, CTG HealthCare Solutions delivers services
that include software application support, systems integration, information
technology management, infrastructure support, and a full suite of e-business
solutions. Software expertise includes SMS(R), McKessonHBOC, Lawson Software(R),
IDX(TM), Cerner(R), MEDITECH, STC, HIE, and Neon, among others. In a climate of
new legislation such as the Health Insurance Portability and Accountability Act
of 1996 (HIPAA) and the Balanced Budget Act of 1997, health care industry
clients rely on CTG HealthCare Solutions to help them attain their financial and
clinical objectives by maximizing their return on their IT hardware and software
investments.

In early 2000 CTG created Zenius to capitalize on the e-commerce market
place. CTG Zenius(TM) leverages CTG's expertise in supply chain management,
enterprise resource planning, and customer relationship management to capitalize
on the growing demand for integrated e-commerce solutions. Zenius's ability to
address the enterprise integration needs behind the Web site sets Zenius apart
in the marketplace. Our experience with legacy systems is a significant
advantage for e-commerce initiatives of established enterprises -- the `bricks
and mortar' market. Zenius' approach protects the investments companies have
made in enterprise-wide applications while taking full advantage of the power of
the Internet. Applying business and industry knowledge, along with our unique
strategic approach using solution architects and Web developers at our Zenius
High-Performance Institute, Zenius enables our clients to win in the Internet
economy. We do this by adapting our clients' business strategy and building a
comprehensive solution. Zenius draws on CTG's network of alliances to deliver
the best combination of products, tools, and expertise to support customized
e-business solutions.

International Business Machines Corporation (IBM) is CTG's largest
customer. CTG's IT Capital and Exemplar businesses provide services to various
IBM divisions in approximately 50 locations. In January 1999, CTG renewed a
contract with IBM for one year as one of IBM's national technical service
providers for the United States. In December 1999, this contract was extended
until March 2000. The contract represents 81.6 percent of the total services
provided to IBM by CTG in 1999. IBM accounted for a total of $128.9 million or
27.3 percent of 1999 consolidated revenue; a total of $151.4 million or 32.4
percent of 1998 consolidated revenue; and a total of $142.2 million or 34.9
percent of CTG's 1997 consolidated revenue. Although revenues from IBM were
constrained in 1999, the Company expects to continue to derive a significant
portion of its business from IBM in 2000 and future years. While the decline in
revenue from IBM has had an adverse impact on the Company's revenue and profits,
the Company believes the simultaneous loss of all IBM business is unlikely to
occur due to the existence of the national contract, the diversity of the
projects performed for IBM, and the number of locations and divisions involved.

The Company has registered its symbol and logo with the U.S. Patent and
Trademark Office. It has entered into agreements with various software and
hardware vendors from time to time in the normal course of business, none of
which are material to the business.

No employees are covered by a collective bargaining agreement or are
represented by a labor union. CTG is an equal opportunity employer.

ACQUISITION

On February 23, 1999, the Company acquired the stock of Elumen
Solutions, Inc. (Elumen). The transaction was valued at $89 million, of which
$86 million was paid in cash or through the assumption of debt, and the
remainder was satisfied through the issuance of approximately 128,000 shares of
CTG common stock. The acquisition was accounted for as a purchase, and the
results of Elumen have been included in the Company's consolidated financial
statements since the date of acquisition. CTG recorded

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approximately $84.9 million of goodwill and other identifiable intangibles from
the transaction, which are being amortized on a straight-line basis over periods
ranging from 10 years to 25 years.

PRICING AND BACKLOG

The majority of CTG's IT professional services business is performed on
a time-and-materials basis. Rates vary based on the type and level of skill
required by the customer, as well as geographic location. Agreements for work
performed on a time-and-materials basis generally do not specify any dollar
amount as services are rendered on an "as required" basis.

The Company performs a portion of its business on a monthly fee basis,
as well as a portion of its project business on a fixed-price basis. These
contracts generally have different terms and conditions regarding cancellation
and warranties, and are usually negotiated based on the unique aspects of the
project. Contract value for fixed-price contracts is generally a function of the
type and level of skills required to complete the related project and the risk
associated with the project. Risk is a function of the project deliverable,
completion date and CTG's management and staff performance. Fixed-price
contracts accounted for under the percentage of completion method represented
approximately two percent, one percent and two percent of the Company's 1999,
1998 and 1997 consolidated revenue, respectively. Revenue from all fixed-price
and monthly-fee contracts represented 11 percent, 16 percent and 17 percent of
consolidated revenue in 1999, 1998, and 1997, respectively. As of December 31,
1999 and 1998, the backlog for fixed-price and managed-support contracts was
approximately $42 million in both years. Approximately 78 percent of the
December 31, 1999 backlog of $42 million, or $33 million, is expected to be
earned in 2000. Of the $42 million of backlog at December 31, 1998,
approximately 78 percent, or $33 million was earned in 1999. Revenue is subject
to seasonal variations, with a minor downturn in months of high vacation and
legal holidays (July, August, and December). Backlog does not tend to be
seasonal, however, it does fluctuate based upon the timing of long-term
contracts.

COMPETITION

The IT services market is highly competitive. The market is also highly
fragmented among many providers with no single competitor maintaining a clear
market leadership. The Company's competition varies by location, the type of
service provided, and the customer to whom services are provided. Competition
comes from four major channels: large national or international vendors,
including major accounting and consulting firms; hardware vendors and suppliers
of packaged software systems; small local firms or individuals specializing in
specific programming services or applications; and, a customer's internal data
processing staff. CTG competes against all four of these for its share of the
market.

CTG has implemented a Global Management System, with a goal to achieve
continuous, measured improvements in services and deliverables. As part of this
program, CTG has developed specific methodologies for providing high value
services that result in unique solutions and specified deliverables for its
clients. The Company believes these methodologies will enhance its ability to
compete. Most of CTG's offices are already ISO 9001 certified and others are
preparing for certification.

The Company believes that to compete successfully it is necessary to
have a local geographic presence, offer appropriate IT solutions, provide
skilled professional resources, and price its services competitively.

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FINANCIAL INFORMATION RELATING TO FOREIGN AND DOMESTIC OPERATIONS

(amounts in thousands)
1999 1998 1997
------ ------ ------

Revenue from Unaffiliated Customers:
North America $ 391,496 $ 394,609 $ 360,849
Europe 80,512 73,229 46,739
--------- --------- ---------
$ 472,008 $ 467,838 $ 407,588
========= ========= =========

Operating Income (Expense):
North America $ 36,434 $ 46,427 $ 36,324
Europe 9,860 8,243 3,663
Corporate and other (15,461) (14,819) (11,031)
--------- --------- ---------
$ 30,833 $ 39,851 $ 28,956
========= ========= =========

Identifiable Assets:
North America (1) $ 154,951 $ 67,128 $ 57,519
Europe 22,736 22,999 15,777
Corporate and Other (2)(3) 21,472 66,682 34,445
--------- --------- ---------
$ 199,159 $ 156,809 $ 107,741
========= ========= =========

(1) When comparing 1999 to 1998, the increase in 1999 is due to the
goodwill resulting from the acquisition of Elumen.

(2) Corporate and other identifiable assets consists principally of cash
and temporary cash investments and other assets.

(3) When comparing 1999 to 1998, the decrease is due to the acquisition of
Elumen, where the Company used the majority of its available cash and
temporary cash investment balances to satisfy a portion of the purchase
price.

EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------

PERIOD DURING OTHER POSITIONS
WHICH SERVED AS AND OFFICES WITH
NAME AGE OFFICE EXECUTIVE OFFICER (1) REGISTRANT
- ---- --- ------ --------------------- ----------------

Gale S. Fitzgerald 49 Chairman of the Board May 6, 1991 to date Director
and Chief Executive Officer

Jonathan R. Asher 54 Vice President December 16, 1996 to date None

James R. Boldt 48 Vice President and February 12, 1996 to date Treasurer
Chief Financial Officer

Janice M. Cole 54 Vice President July 2, 1998 to date None

Gary M. Gershon 51 Vice President January 1, 1999 to date None

Nico H. Molenaar 44 Vice President January 1, 1996 to date None

John F. Moore 44 Vice President July 2, 1998 to date None

Thomas J. Niehaus 38 Vice President July 22, 1999 to date None

Peter P. Radetich 46 General Counsel April 28, 1999 to date Secretary

(1) BUSINESS EXPERIENCE

Ms. Fitzgerald was appointed chairman of the board and chief executive
officer as of October 3, 1994 and president and chief operating officer as of
July 1, 1993. She joined the Company in May 1991 as senior vice president
responsible for the Company's Northeastern U.S. and Canadian operations. She was
previously vice president, Professional Services at International Business
Machines Corporation (IBM).

Mr. Asher joined the Company as a vice president in December 1996 and
is currently responsible for CTG's North American Exemplar business. He was
previously director of information technology services with IBM.

Mr. Boldt joined the Company as a vice president, chief financial
officer and treasurer in February 1996. He was previously vice president of
finance, secretary and chief financial officer of Pratt and Lambert United, Inc.

Ms. Cole joined the Company in April 1980, and was promoted to vice
president, career development in July 1998. Prior to her promotion, Ms. Cole was
a director of training services.

Mr. Gershon joined the Company as a vice president in January 1999.
Prior to that he was a founder of an advanced software and consulting company.

Mr. Molenaar was promoted to vice president in January 1996 and has
been employed by the Company since 1985. He has held a variety of management
positions and is presently responsible for CTG's European Exemplar business.

Mr. Moore joined the Company in November 1984, and was promoted to vice
president in July 1998. He is responsible for CTG's ITCapital business. Prior to
his promotion, Mr. Moore was a director of business development with CTG's IBM
National Team.

Mr. Niehaus joined the Company in February 1999, and was promoted to
vice president of CTG HealthCare Solutions in July 1999. Previously, Mr. Niehaus
was executive vice president of Elumen Solutions, Inc. from September 1997 to
February 1999. Prior to that, Mr. Niehaus was vice president of Exemplar
Systems.

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Mr. Radetich joined the Company in June 1988, and was promoted to
general counsel and secretary in April 1999. Previously, Mr. Radetich was
associate general counsel.

ITEM 2. PROPERTIES

The Company occupies a headquarters building at 800 Delaware Avenue,
and an office building at 700 Delaware Avenue, both located in Buffalo, New
York. Corporate headquarters consists of approximately 40,000 square feet and is
occupied by the corporate administrative operations. The office building
consists of approximately 39,000 square feet and is also occupied by corporate
administrative operations. There are no mortgages on either of these buildings.

The Company also owns a 37,000 square foot building in Melbourne,
Florida with a net book value of $1.9 million which it has leased to a third
party under a five-year lease. This lease expires in 2000.

The remainder of the Company's locations are leased facilities. Most of
these facilities serve as sales and support offices and their size varies,
generally in the range of 1,000 to 16,000 square feet, with the number of people
employed at each office. The Company's lease terms generally vary from periods
of less than a year to five years and generally have flexible renewal options.
The Company believes that its present owned and leased facilities are adequate
to support its current and anticipated future needs.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings, including
litigation arising in the normal course of business. In the opinion of
management, an adverse outcome to any of these proceedings will not have a
material effect on the financial condition of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II
-------

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Information relating to the market for, and market prices of, the
Company's Common Stock, the approximate number of Company shareholders, and the
Company's dividend history for the past two years is included under the caption
"Stock Market Information" in the Company's Annual Report to Shareholders for
the year ended December 31, 1999, submitted herewith as an exhibit, and
incorporated herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

A five-year summary of certain financial information relating to the
financial condition and results of operations of the Company is included under
the caption "Consolidated Summary - Five-Year Selected Financial Information" in
the Company's Annual Report to Shareholders for the year ended December 31,
1999, submitted herewith as an exhibit, and incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's discussion and analysis of financial condition and results
of operations is included in the Company's Annual Report to Shareholders for the
year ended December 31, 1999, under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition," submitted herewith
as an exhibit, and incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company does not have any on or off balance sheet market risk
sensitive instruments for which disclosure is required, and historically the
Company has not been subject to material effects from foreign currency exchange
rate fluctuations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company and the required
Supplementary Data information are included in the Company's Annual Report to
Shareholders for the year ended December 31, 1999, submitted herewith as an
exhibit, and incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

The information in response to this item is incorporated by reference
to the information under the caption "Change in Independent Accountants from
Prior Periods" presented in the Company's definitive Proxy Statement filed or to
be filed under Regulation 14A and used in connection with the Company's 2000
Annual Meeting of Shareholders to be held on April 26, 2000.

II-1

PART III
--------

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information in response to this item is incorporated herein by
reference to the information set forth on pages 2 and 4 in the Company's
definitive Proxy Statement filed or to be filed under Regulation 14A and used in
connection with the Company's 2000 annual meeting of shareholders to be held on
April 26, 2000, except insofar as information with respect to executive officers
is presented in Part I, Item 1 hereof pursuant to General Instruction G(3) of
Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information in response to this item is incorporated herein by
reference to the information under the caption "Information about Management"
presented in the Company's definitive Proxy Statement filed or to be filed under
Regulation 14A and used in connection with the Company's 2000 annual meeting of
shareholders to be held on April 26, 2000, excluding the Compensation Committee
Report on Executive Compensation and the Company's Performance Graph.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information in response to this item is incorporated herein by
reference to the information under the caption "Security Ownership of the
Company's Common Shares by Certain Beneficial Owners and by Management"
presented in the Company's definitive Proxy Statement filed or to be filed under
Regulation 14A and used in connection with the Company's 2000 annual meeting of
shareholders to be held on April 26, 2000.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information in response to this item is incorporated herein by
reference to the information under the captions "Indebtedness of Management" and
"Compensation Committee Interlocks and Insider Participation" presented in the
Company's definitive Proxy Statement filed or to be filed under Regulation 14A
and used in connection with the Company's 2000 annual meeting of shareholders to
be held on April 26, 2000, excluding the Compensation Committee Report on
Executive Compensation and the Company's Performance Graph.

III-1

PART IV
-------

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

(1) The following Consolidated Financial Statements and related information are
incorporated by reference from the 1999 Annual Report to Shareholders:

1999 ANNUAL REPORT
PAGE REFERENCE
--------------

Independent Auditors' Report 16
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Cash Flows 19
Consolidated Statements of Changes in
Shareholders' Equity 20
Notes to Consolidated Financial Statements 22

(2) Index to Consolidated Financial Statement Schedules

1999 FORM 10-K
PAGE REFERENCE
--------------

Report of Independent Auditors IV-2

Report of Independent Auditors on
Financial Statement Schedule IV-3

Report of Independent Auditors on
Financial Statement Schedule IV-4

Financial statement schedule:

Valuation and Qualifying Accounts
(Schedule VIII) IV-5

(B) REPORTS ON FORM 8-K

None.

The Exhibits to this Form 10-K Annual Report are listed on the attached
Exhibit Index appearing on pages E-1 to E-3.

(D) OTHER FINANCIAL STATEMENT SCHEDULES

None

IV-1
11

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Computer Task Group, Incorporated:

We have audited the consolidated statements of income, changes in shareholders'
equity and cash flows of Computer Task Group, Incorporated and subsidiaries for
the year ended December 31, 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Computer Task Group, Incorporated and subsidiaries for the year ended December
31, 1997, in conformity with generally accepted accounting principles.

KPMG LLP
February 4, 1998
Rochester, New York

IV-2

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REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Shareholders of
Computer Task Group, Incorporated:

Under date of February 4, 1998, we reported on the consolidated statement of
income, changes in shareholders' equity, and cash flows of Computer Task Group,
Incorporated and subsidiaries, for the year ended December 31, 1997, as
contained in the 1999 Annual Report on Form 10-K. In connection with our audit
of the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule insofar as it relates to the
year ended December 31, 1997 as listed in Item 14(A) of this Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
insofar as it relates to the year ended December 31, 1997 based on our audit.

In our opinion, such financial statement schedule, insofar as it relates to the
year ended December 31, 1997 when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

KPMG LLP
February 4, 1998
Rochester, New York

IV-3

12
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REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULE

Board of Directors and Shareholders
Computer Task Group, Incorporated
Buffalo, New York

We have audited the consolidated financial statements of Computer Task Group,
Incorporated and subsidiaries as of December 31, 1999 and 1998 and for the years
then ended, and have issued our report thereon dated February 4, 2000. Such
financial statements and report are included in your 1999 Annual Report to
Shareholders and are incorporated herein by reference. Our audit also included
the consolidated financial statement schedule of Computer Task Group,
Incorporated and subsidiaries, listed in Item 14. This consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. In our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

DELOITTE & TOUCHE LLP
Buffalo, New York
February 4, 2000

IV-4

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COMPUTER TASK GROUP, INCORPORATED
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)

BALANCE AT NET BALANCE AT
DESCRIPTION JANUARY 1 CHANGE DECEMBER 31
- ----------- ---------- ------ -----------

1999
ACCOUNTS DEDUCTED FROM ASSETS

Allowance for Doubtful Accounts $ 1,105 $ 1,205 (A) $ 2,310

Reserve for Projects $ 1,000 $ (109) $ 891

1998
ACCOUNTS DEDUCTED FROM ASSETS

Allowance for Doubtful Accounts $ 951 $ 154 (A) $ 1,105

Reserve for projects $ 1,000 $ - $ 1,000

Net Deferred Tax Assets Valuation Allowance $ 927 $ (927) (B) $ 0

1997
ACCOUNTS DEDUCTED FROM ASSETS

Allowance for Doubtful Accounts $ 975 $ (24) (A) $ 951

Reserve for projects $ - $ 1,000 (C) $ 1,000

Net Deferred Tax Assets Valuation Allowance $ 495 $ 432 (D) $ 927

(A) Reflects additions charged to costs and expenses, additions as part of the
acquisition of Elumen, less accounts written off and translation
adjustments.

(B) Reflects utilization of foreign net operating losses that were previously
offset completely by the valuation allowance.

(D) Reflects a provision for additional foreign net operating losses for which
no benefit was anticipated.

IV-5

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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.

COMPUTER TASK GROUP, INCORPORATED

By /s/ GALE S. FITZGERALD
-------------------------------
Gale S. Fitzgerald, Chairman of
the Board and Chief Executive Officer

Dated: March 29, 2000

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

SIGNATURE TITLE DATE
- --------- ----- ----

(i) Principal Executive Officer: Chairman of the March 29, 2000
Board and Chief
/s/ GALE S. FITZGERALD Executive Officer
-----------------------------------
(Gale S. Fitzgerald)

(ii) Principal Accounting and Vice President, March 29, 2000
Financial Officer Chief Financial
Officer

/s/ JAMES R. BOLDT
------------------
(James R. Boldt)

(iii) Directors

/s/ GEORGE B. BEITZEL Director March 29, 2000
-----------------------------------
(George B. Beitzel)

/s/ RICHARD L. CRANDALL Director March 29, 2000
-----------------------------------
(Richard L. Crandall)

/s/ R. KEITH ELLIOTT Director March 29, 2000
-----------------------------------
(R. Keith Elliott)

/s/ GALE S. FITZGERALD Director March 29, 2000
-----------------------------------
(Gale S. Fitzgerald)

/s/ RANDOLPH A. MARKS Director March 29, 2000
-----------------------------------
(Randolph A. Marks)

/s/ BARBARA Z. SHATTUCK Director March 29, 2000
-----------------------------------
(Barbara Z. Shattuck)

15
16

EXHIBIT INDEX

PAGE OR
EXHIBIT DESCRIPTION (REFERENCE)
- ------- ----------- -----------

2. Plan of acquisition, reorganization, arrangement, *
liquidation or succession.

3. (a) Restated Certificate of Incorporation of Registrant. (1)

(b) Restated By-laws of Registrant. (2)

4. (a) Specimen Common Stock Certificate. (3)

(b) Rights Agreement dated as of January 15, 1989, and (1)
amendment dated June 28, 1989, between Registrant
and The First National Bank of Boston, as Rights Agent.

9. Voting Trust Agreement. *

10. (a) Non-Compete Agreement, dated as of March 1, 1984, (3)
between Registrant and Randolph A. Marks.

(b) Stock Employee Compensation Trust Agreement, dated (3)
May 3, 1994, between Registrant and Thomas R. Beecher,
Jr., as trustee.

(c) Promissory Notes, dated May 3, 1994, and December 7, 1994, (3)
between Registrant and Thomas R. Beecher, Jr., as Trustee
of the Computer Task Group, Incorporated Stock Employee
Compensation Trust

(d) Severance Compensation Agreement dated October 31, 1994, (3)
between Registrant and Gale S. Fitzgerald.

(e) Stock Purchase Agreement, dated as of February 25, 1981, (4)
between Registrant and Randolph A. Marks.

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

* None or requirement not applicable.

(1) Filed as an Exhibit to the Registrant's Form 8-A/A filed
on January 13, 1999, and incorporated herein by reference.

(2) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.

(3) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.

(4) Filed as an Exhibit to the Registrant's Registration
Statement No. 2- 71086 on Form S-7 filed on February 27,
1981, and incorporated herein by reference.

E-1

16
17

EXHIBIT INDEX (Continued)

PAGE OR
EXHIBIT DESCRIPTION (REFERENCE)
- ------- ----------- -----------

10. (f) Description of Disability Insurance and Health (5)
Arrangements for Executive Officers.

(g) Nondisclosure and Nonsolicitation Agreement, dated (6)
July 1, 1993, between Registrant and Gale S. Fitzgerald.

(h) 1999 Key Employee Compensation Plans. (7)

(i) Management Stock Purchase Plan. (8)

(j) CTG Non-Qualified Key Employee Deferred Compensation Plan (9)

(k) 1991 Employee Stock Option Plan, as Amended (10)

(l) 1991 Restricted Stock Plan (10)

(m) Executive Supplemental Benefit Plan 1997 Restatement (11)

(n) Executive Compensation Plans and Arrangements. 19

(o) Credit Agreement among Computer Task Group, Incorporated
and The Chase Manhattan Bank, as administrative agent. 20

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

(5) Filed as an Exhibit to Amendment No. 1 to Registration
Statement No. 2-71086 on Form S-7 filed on March 24, 1981,
and incorporated herein by reference.

(6) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993, and
incorporated herein by reference.

(7) Included in the Registrant's definitive Proxy Statement
dated March 29, 2000 on page 8 under the caption entitled
"Annual Cash Incentive Compensation," and incorporated
herein by reference.

(8) Filed as an Appendix to the Registrant's definitive Proxy
Statement dated March 27, 1992, and incorporated herein by
reference.

(9) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.

(10) Filed as an Exhibit to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996, and
incorporated herein by reference.

(11) Filed as an Exhibit to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 28, 1997, and
incorporated herein by reference.

E-2

EXHIBIT INDEX (Continued)

PAGE OR
EXHIBIT DESCRIPTION (REFERENCE)
- ------- ----------- -----------

11. Statement re: computation of per share earnings 94

12. Statement re: computation of ratios *

13. Annual Report to Shareholders 95

16. Letter re: change in certifying accountant. (12)

18. Letter re: change in accounting principles. *

21. Subsidiaries of the Registrant. 131

22. Published report regarding matters submitted to a vote *
of security holders.

23. (a) Consent of experts and counsel. 132

(b) Consent of experts and counsel. 133

24. Power of Attorney. *

27. (a) Financial Data Schedules - 1999. 134

(b) Financial Data Schedules - 1998. 135

28. Information from reports furnished to state insurance
regulatory authorities *

99. Additional exhibits. *

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

(12) Filed as an Exhibit to the Registrants Current Report on
Form 8-K as of July 7, 1998, and incorporated herein by
reference.

E-3