EXHIBIT 13.1
SELECTED PORTIONS OF ADVENT'S 1997 ANNUAL REPORT TO STOCKHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Advent provides stand-alone and client/server software products, data
interfaces and related maintenance and services that automate, integrate and
support certain mission-critical functions of the front, middle and back office
of investment management organizations. Advent's clients vary significantly in
size and assets under management and include investment advisors, brokerage
firms, banks, hedge funds, corporations, public funds, universities and
non-profit organizations.
Initial Public Offering
In November 1995, Advent completed an initial public offering (IPO) in which
it sold 1,450,000 shares of its common stock at $18.00 per share which generated
net proceeds to Advent of $23.4 million.
Recent Developments
In February 1998, Advent issued 250,000 shares of Advent's common stock in
exchange for all of the outstanding shares of MicroEdge, Inc., a private
software development company based in New York. MicroEdge is the leading
provider of software products to foundations, corporations and other
organizations to manage their grant-making activities. This business combination
was accounted for as a pooling of interests. The results of operations as well
as the assets and liabilities of MicroEdge in 1997 and 1996 were not material to
the consolidated results of operations or financial position of Advent.
Acquisitions
In February 1996, Advent acquired Data Exchange, Inc. (the DX Group), a
private company based in New York, for $4.0 million in cash and an $800,000 note
payable. This note was paid during the third quarter of 1996 and did not bear
interest. The transaction was accounted for as a purchase. Advent incurred a
one-time charge of $5.6 million in connection with the write-off of in-process
research and development. This expense was recorded in purchased research and
development and other expenses.
In November 1996, Advent issued 35,000 shares of Advent's common stock in
exchange for all of the outstanding shares of Bold Software, Inc., a private
software development company based in New York. This business combination was
accounted for as a pooling of interests. Prior year amounts have not been
restated to include Bold Software's results of operations as such operations
were immaterial. As a result of this business combination, Advent introduced
Advent Partner, a tax layering and partnership allocation solution which
integrates with Axys.
-1-
Results of Operations For The Years Ended December 31, 1997, 1996 and 1995
Revenues
Net revenues were $48.6 million, $36.7 million and $26.0 million in 1997,
1996 and 1995, respectively, representing increases of 32% from 1996 to 1997 and
42% from 1995 to 1996. Advent's net revenues are derived from license and
development fees, maintenance and other recurring revenues, and professional
services related to its software products. Substantially all of Advent's net
revenues were from domestic sales, with international sales representing less
than 3% of net revenues in each of 1997, 1996 and 1995. License revenues are
derived from the licensing of software products. Development fees are derived
from development contracts that Advent has entered into with other companies.
Maintenance and other recurring revenues are derived from maintenance fees
charged in the initial licensing year, renewals of maintenance services in
subsequent years and revenues derived from client utilization of proprietary
interfaces to access pricing and other data supplied by third parties.
Professional services and other includes fees for consulting, systems
integration projects, custom programming and conversions of data from clients'
previous systems.
During 1995, Axys and its related products and services accounted for a
substantial majority of such net revenues. In 1996 and 1997, Advent has been
successful in increasing multi-product sales by emphasizing its suite of
products and, therefore, new products have accounted for an increasing portion
of net revenues.
Each of the major revenue categories has historically varied as a percentage
of net revenues and this variability is expected to continue in future periods.
This variability is primarily due to the timing of the introduction of new
products, the relative size and timing of individual licenses, as well as the
complexity of the implementation and the resulting proportion of the maintenance
and professional services components of these license transactions, Advent's
pricing model and the amount of client utilization of pricing and related data.
License and Development Fees. License and development fees revenues were
$23.7 million, $17.0 million and $12.1 million in 1997, 1996 and 1995,
respectively, representing increases of 40% in both the periods from 1996 to
1997 and from 1995 to 1996. License and development fees revenues as a
percentage of net revenues was relatively stable at 49%, 46% and 47% in 1997,
1996 and 1995, respectively. The growth in license revenues during 1996 and 1997
was due to continued demand for Advent's suite of products. Advent typically
licenses its products on a per server, per user basis with the price per site
varying based on the selection of the products licensed and the number of
authorized users. In addition, during 1997, development fees constituted a
larger portion of net revenues. As Advent carries out larger implementations and
continues its Internet Initiative, Advent may enter into further development
contracts through which it earns development fees.
-2-
Maintenance and Other Recurring. Maintenance and other recurring revenues
were $18.0 million, $14.7 million, and $9.9 million in 1997, 1996 and 1995,
respectively, representing increases of 23% from 1996 to 1997 and 49% from 1995
to 1996. Maintenance and other recurring revenues as a percentage of net
revenues was 37%, 40% and 38% in 1997, 1996 and 1995, respectively . The growth
in maintenance and other recurring revenues in both periods was primarily
attributable to a larger customer base and higher average maintenance fees.
Higher average maintenance fees are due to the increased complexity of the
maintenance services provided and increased client utilization of proprietary
interfaces to access pricing and other data supplied by external parties.
Advent's proprietary interfaces enable users of Axys to retrieve critical data
from external sources, including pricing, corporate actions, and analytical and
fundamental data via interfaces to information vendors, such as Interactive
Data. The impact of the change in higher average maintenance fees was more
pronounced in 1996 versus 1997 which led to a smaller percentage increase in
maintenance and other recurring revenues from 1996 to 1997. In addition, this
led to the increase in the percentage of these revenues as a percentage of net
revenues in 1996 and the subsequent decrease in 1997.
Professional Services and Other. Revenues from professional services and
other were $6.9 million, $5.1 million and $3.9 million in 1997, 1996 and 1995,
respectively, representing increases of 35% from 1996 to 1997 and 30% from 1995
to 1996. Professional services and other as a percentage of net revenues was
relatively stable at 14%, 14% and 15% in 1997, 1996 and 1995, respectively. The
growth in revenues from professional services and other in 1996 and 1997 was due
to additional consulting revenue associated with higher product sales activity,
and additional interface business resulting from higher market demand for
automated interfaces.
Cost of Revenues
Cost of License and Development Fees. Cost of license revenues were
$601,000, $600,000 and $469,000 in 1997, 1996 and 1995, respectively,
representing 3%, 4% and 4% of license revenues in these periods, respectively.
Cost of license revenues consists primarily of the cost of product media and
duplication, manuals, packaging materials and the direct labor involved in
producing and distributing Advent's software.
Cost of Maintenance and Other Recurring. Cost of maintenance and other
recurring revenues were $4.8 million, $3.8 million and $2.4 million in 1997,
1996 and 1995, respectively, representing 27%, 26% and 24% of maintenance and
other recurring revenues in these periods, respectively. These costs are
primarily comprised of the direct costs of providing technical support and other
services for recurring revenues and the engineering costs associated with
product updates. These expenses as a percentage of maintenance and other
recurring revenues increased in 1996 and 1997 due to increased resources
allocated to the support services.
-3-
Cost of Professional Services and Other. Cost of professional services and
other revenues were $3.6 million, $2.5 million and $2.0 million in 1997, 1996
and 1995, respectively, representing 53%, 49% and 52% of professional services
and other revenues in these periods, respectively. These costs consist primarily
of personnel related costs of the client services and support organization that
are incurred in providing consulting, systems integration projects, custom
programming, conversions of data from clients' previous systems, and
participating in Advent-sponsored conferences. To the extent that such personnel
are not fully utilized in consulting, training, conversion or custom programming
projects, they are allocated to presales, marketing and engineering activities
and the resultant costs are charged to operating expenses. Cost of professional
services and other increased in 1997 and 1996 primarily as a result of the
increased staffing necessary to provide services to an expanding installed base.
Cost of professional services increased as a percentage of the related revenues
in 1997 compared with 1996 due primarily to the increase in personnel dedicated
to accelerating the conversion of existing clients to Axys Release 2. Cost of
professional services decreased as a percentage of the related revenues in 1996
compared with 1995 due to economies of scale.
Operating Expenses
Sales and Marketing. Sales and marketing expenses were $15.6 million, $12.4
million and $9.3 million in 1997, 1996 and 1995, respectively, representing
increases of 25% from 1996 to 1997 and 34% from 1995 to 1996. Sales and
marketing expenses as a percentage of net revenues were 32%, 34% and 36% in
1997, 1996 and 1995, respectively. Sales and marketing expenses consist
primarily of costs of all personnel involved in the sales and marketing process,
sales commissions, advertising and promotional materials, sales facilities
expense, trade shows, and seminars. Sales and marketing expenses increased in
1997 and 1996 primarily due to the continued increase in sales and marketing
employees and expenses for marketing materials needed to address new sales
opportunities and to support the introduction of new products. The decrease in
sales and marketing expenses as a percentage of net revenues in both periods was
due primarily to the ability of Advent's sales and marketing organization to
support an increased revenue base. In addition, the decrease was due to
increased contribution of maintenance and other recurring revenues to net
revenues which did not have significant associated sales and marketing expenses.
Product Development. Product development expenses were $9.4 million, $6.7
million and $4.2 million in 1997, 1996 and 1995, respectively, representing
increases of 40% from 1996 to 1997 and 60% from 1995 to 1996. Product
development expenses as a percentage of net revenues were 19%, 18% and 16% of
net revenues in these periods, respectively. Product development expenses
consist primarily of personnel costs and, accordingly, the increase in product
development expenses in absolute dollars and as a percentage of net revenues in
each of these periods was primarily attributable to an increase in personnel as
Advent increased its product development efforts to accelerate the rate of new
product introductions. Advent anticipates that it will continue to devote
substantial resources to product development. Development costs subsequent to
achievement of technological feasibility have not been significant during these
periods and, accordingly, all such costs have been expensed as incurred.
-4-
General and Administrative. General and administrative expenses were $5.1
million, $4.4 million and $3.4 million in 1997, 1996 and 1995, respectively,
representing increases of 16% from 1996 to 1997 and 29% from 1995 to 1996.
General and administrative expenses as a percentage of net revenues were 11%,
12% and 13% in 1997, 1996 and 1995, respectively. General and administrative
expenses consist primarily of personnel costs for finance, administration,
operations and general management, as well as legal and accounting expenses. The
increase in general and administrative expenses in these periods was primarily
due to continued growth in finance, administration and operations which was
necessary to support Advent's growth. General and administrative expenses as a
percentage of net revenues decreased in 1997 and 1996 due to economies of scale.
Purchased Research and Development and Other. In the first quarter of 1996,
Advent incurred a one-time charge of $5.6 million in connection with the
write-off of in-process research and development due to the acquisition of the
DX Group.
Interest Income, Net
Interest income, net was $1,236,000, $1,165,000 and $447,000 and in 1997,
1996 and 1995, respectively. Interest income, net consists of interest income,
interest expense and miscellaneous non-operating income and expense items. The
increases were due to greater interest income generated in 1996 and 1997 from
higher cash and cash equivalent balances. The increase in cash and cash
equivalents in 1997 was due primarily to cash generated from operating
activities. The increase in 1996 was primarily as a result of the IPO.
Income Taxes
Advent had effective tax rates of 37%, 163% and 39% in 1997, 1996 and 1995,
respectively. The effective tax rate in 1996 reflected the $5.6 million
write-off of in-process research and development which was not deductible for
tax purposes. Excluding the effect of the write-off on the 1996 rate, these
rates differ from the federal statutory rate primarily due to state income tax,
offset by certain research and development credits.
Liquidity and Capital Resources
Advent funds its operations primarily from cash generated from operations.
Net cash provided by operating activities was $7.7 million, $1.6 million and
$5.7 million in 1997, 1996 and 1995, respectively. Net cash used in investing
activities was $14.1 million, $5.6 million and $1.0 million in 1997, 1996 and
1995, respectively. The 1997 amount includes $8.9 million in purchases of
short-term investments, net of maturities. Included in the 1996 amount for cash
used in investing activities was $4.0 million for the acquisition of the DX
Group. The remaining 1996 amount and the 1997 and 1995 amounts were primarily
for the acquisition of fixed assets. Net cash provided by financing activities
was $2.0 million in 1997 primarily from proceeds from the exercise of stock
options and from proceeds from the issuance of common stock through Advent's
employee stock purchase plan. Net cash provided
-5-
by financing activities was $601,000 in 1996 primarily from proceeds from the
issuance of common stock and from proceeds from the exercise of stock options
offset by the payment of debt assumed and a note issued in the DX Group
acquisition. Net cash provided by financing activities in 1995 was $22.7
million, primarily from net proceeds from the IPO. As of December 31, 1997,
Advent had $36.1 million in cash, cash equivalents and short-term investments.
Advent believes that its existing cash and cash equivalents, short-term
investments and cash expected to be generated from operations will be sufficient
to meet its cash and capital requirements at least through fiscal 1998.
Impact of Year 2000 Issue
Advent's products have been and will continue to be Year 2000 compliant.
Year 2000 compliant means that Advent's products will continue to operate
substantially in accordance with Advent's published documentation on and after
January 1, 2000. In addition, internal systems that Advent relies upon for
day-to-day operations are believed to be Year 2000 compliant. Accordingly,
Advent does not anticipate incurring significant expenditures related to Year
2000 issues.
New Accounting Pronouncements
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income", (SFAS 130) which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. It is effective for Advent's first quarter of fiscal year
1998.
In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments
of an Enterprise and Related Information", (SFAS 131) which changes current
practice under SFAS 14 by establishing a new framework on which to base segment
reporting (referred to as the "management" approach) and also requires interim
reporting of segment information. It is effective for Advent's fiscal year-end
1998.
In October 1997, the AICPA issued Statement of Position (SOP) 97-2 on
Software Revenue Recognition which supersedes SOP 91-1. The SOP is effective for
all fiscal years beginning after December 15, 1997 and will be effective for
Advent's fiscal year 1998.
Advent will be studying the implications of these standards and has not yet
determined the impact of their implementation on Advent's financial statements.
Forward-Looking Statements
The discussion in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contains trend analysis and other forward-looking
statements that are based on current expectations and assumptions made by
management. Words such as "expects", "anticipates", "intends", "plans",
"believes", "seeks", "estimates", and variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks
and uncertainties which are difficult to predict. Therefore, actual results
could differ materially from those expressed or forecasted in the
forward-looking
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statements as a result of the factors summarized below and other risks detailed
from time to time in reports filed with the Securities and Exchange Commission,
including Advent's 1997 Form 10-K Report. Additionally, the financial statements
for the periods presented are not necessarily indicative of results to be
expected for any future period. Advent undertakes no obligation to update any
forward-looking statements.
Advent operates in a rapidly changing environment that involves a number of
risks, some of which are beyond Advent's control. These risks include the
potential for period to period fluctuations in operating results and the
dependence on the successful development and market acceptance of new products
and product enhancements on a timely, cost effective basis, as well as the
stability of financial markets, maintenance of Advent's relationship with
Interactive Data and price and product/performance competition. In particular,
Advent's net revenues and operating results have varied substantially from
period-to-period on a quarterly basis and may continue to fluctuate due to a
number of factors. Advent's software products typically are shipped shortly
after receipt of a signed license agreement. License backlog at the beginning of
any quarter typically represents only a small portion of that quarter's expected
revenues. In addition, as Advent's licenses into multi-user networked
environments have increased both in individual size and number, the timing and
size of individual license transactions are becoming increasingly important
factors in Advent's quarterly operating results. The sales cycles for these
transactions are often lengthy and unpredictable, and the ability to close large
license transactions on a timely basis or at all could cause additional
variability in Advent's quarterly operating results. Advent's future success
will continue to depend upon its ability to develop new products, such as Moxy,
Qube, and Geneva, that address the future needs of its target markets and to
respond to emerging industry standards and practices. Advent is directing a
significant amount of its product development efforts on the on-going
development of Geneva. The failure to achieve widespread market acceptance of
Geneva on a timely basis would adversely affect Advent's business and operating
results. To take advantage of the Internet, Advent has launched an Internet
Initiative whereby it is developing services, both announced and unannounced, to
bring Internet based products and services to clients. The first of these
services, Rex, was launched during the second quarter of 1997. As Advent begins
development of new products and services under its Internet Initiative, it has
and will continue to enter into development agreements with information
providers, clients, or other companies in order to accelerate the delivery of
new products and services. There can be no assurance that Advent will be
successful in marketing Rex or in developing other Internet services. Advent's
failure to do so could adversely affect Advent's business and operating results.
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CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 1996
- ----------------------------------------------------------------------------
(in thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 26,025 $ 30,477
Short-term investments 10,031 1,173
Accounts receivable, net of allowance
for doubtful accounts of $265 in 1997
and $235 in 1996 12,226 8,499
Prepaid expenses and other 1,391 592
Deferred income taxes 1,418 1,064
------------ -------------
Total current assets 51,091 41,805
------------ -------------
Fixed assets, net 7,424 3,862
Other assets, net 770 1,024
------------ -------------
Total assets $ 59,285 $ 46,691
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 814 $ 646
Accrued liabilities 2,977 2,627
Deferred revenues 6,832 5,071
Income taxes payable 1,632 686
------------ -------------
Total current liabilities 12,255 9,030
------------ -------------
Long-term liabilities:
Other liabilities 537 599
------------ -------------
Total liabilities 12,792 9,629
------------ -------------
Stockholders' equity:
Preferred Stock, $0.01 par value
Authorized: 2,000 shares
Issued and outstanding: None - -
Common Stock, $0.01 par value
Authorized: 40,000 shares
Issued and outstanding: 7,582 shares
in 1997 and 7,344 shares in 1996 76 73
Additional paid-in-capital 37,776 35,061
Retained earnings 8,641 1,928
------------ -------------
Total stockholders' equity 46,493 37,062
------------ -------------
Total liabilities and stockholders'
equity $ 59,285 $ 46,691
============ =============
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
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CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------------------------
(in thousands, except per share data)
Revenues
License and development fees $ 23,710 $ 16,951 $ 12,146
Maintenance and other recurring 18,042 14,707 9,903
Professional services and other 6,861 5,086 3,908
---------------------------------------
Net revenues 48,613 36,744 25,957
---------------------------------------
Cost of revenues
License and development fees 601 600 469
Maintenance and other recurring 4,832 3,793 2,389
Professional services and other 3,638 2,513 2,049
---------------------------------------
Total cost of revenues 9,071 6,906 4,907
---------------------------------------
Gross margin 39,542 29,838 21,050
---------------------------------------
Operating expenses
Sales and marketing 15,580 12,446 9,268
Product development 9,439 6,731 4,206
General and administrative 5,125 4,422 3,418
Purchased research and
development and other - 5,648 -
---------------------------------------
Total operating expenses 30,144 29,247 16,892
---------------------------------------
Income from operations 9,398 591 4,158
Interest income, net 1,236 1,165 447
---------------------------------------
Income before income taxes 10,634 1,756 4,605
Provision for income taxes 3,921 2,855 1,786
---------------------------------------
Net income (loss) $ 6,713 $(1,099) $ 2,819
=======================================
NET INCOME (LOSS) PER SHARE DATA
Diluted
Net income (loss) per share $ 0.84 $ (0.16) $ 0.46
Shares used in per share calculations 8,017 7,070 6,160
Basic
Net income (loss) per share $ 0.89 $ (0.16) $ 0.82
Shares used in per share calculations 7,521 7,070 3,455
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ADDITIONAL
FOR THE YEARS ENDED PREFERRED STOCK COMMON STOCK PAID-IN- RETAINED TOTAL
-------------------- -----------------
DECEMBER 31, 1997, 1996 AND 1995 SHARES AMOUNT SHARES AMOUNT CAPITAL OTHER EARNINGS EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
BALANCES, DECEMBER 31, 1994 1,117 $ 7,530 2,918 $ 135 $ -- $ (13) $ 639 $ 8,291
Repurchase of common stock prior to
initial public offering (30) (19) (144) (163)
Reincorporation in Delaware (227) 227 --
Preferred stock converted to common stock (1,117) (7,530) 2,234 22 7,508 --
Initial public offering of common stock,
net of expenses of $2,677 1,450 14 23,409 23,423
Exercise of stock options and warrants 301 143 58 201
Realized loss on sale of investments 13 13
Net income 2,819 2,819
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1995 -- -- 6,873 68 31,202 -- 3,314 34,584
Exercise of stock options 383 4 702 706
Tax benefit from exercise of stock options 2,175 2,175
Common stock issued under employee
stock purchase plan 53 1 982 983
Pooling of interests with Bold Software 35 (287) (287)
Net loss (1,099) (1,099)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1996 -- -- 7,344 73 35,061 -- 1,928 37,062
Exercise of stock options 200 2 1,143 1,145
Tax benefit from exercise of stock options 704 704
Common stock issued under employee
stock purchase plan 38 1 868 869
Net income 6,713 6,713
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1997 -- $ -- 7,582 $ 76 $ 37,776 $ -- $ 8,641 $ 46,493
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities
Net income (loss) $ 6,713 $ (1,099) $ 2,819
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Purchased research and development and other - 5,648 -
Depreciation and amortization 1,970 1,528 1,016
Provision for doubtful accounts 248 (15) 191
Deferred income taxes (267) 247 (179)
Deferred rent (62) 129 (10)
Cash provided by (used in) operating assets
and liabilities:
Accounts receivable (3,975) (3,625) (2,069)
Income taxes receivable - - 335
Prepaid and other current assets (789) (213) (54)
Accounts payable 168 (885) 838
Accrued liabilities 350 234 682
Deferred revenues 1,761 (2,130) 1,390
Income taxes payable 1,565 1,780 726
---------- ---------- --------
Net cash provided by operating activities 7,682 1,599 5,685
---------- ---------- --------
Cash flow from investing activities
Net cash used in acquisition of the DX Group - (3,963) -
Acquisition of fixed assets (5,290) (1,384) (1,182)
Purchases of short-term investments (10,041) (1,167) (1,011)
Maturities of short-term investments 1,183 1,160 1,218
Other - (287) -
---------- ---------- --------
Net cash used in investing activities (14,148) (5,641) (975)
---------- ---------- --------
Cash flow from financing activities
Proceeds from exercise of stock options and
warrants 1,145 706 201
Proceeds from issuance of common stock 869 983 23,423
Payment of note issued in acquisition of the
DX Group - (800) -
Payment of debt assumed in the DX Group
acquisition - (288) -
Repurchase of common stock - - (163)
Principal payments of long-term debt - - (759)
---------- ---------- --------
Net cash provided by financing activities 2,014 601 22,702
---------- ---------- --------
Net increase (decrease) in cash and short-term
investments (4,452) (3,441) 27,412
Cash and cash equivalents at beginning of year 30,477 33,918 6,506
---------- ---------- --------
Cash and cash equivalents at end of year $ 26,025 $ 30,477 $ 33,918
========== ========== ========
Supplemental disclosure of cash flow information:
Cash paid during year for:
Income taxes $ 2,515 $ 1,012 $ 1,009
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
OPERATIONS Advent provides stand-alone and client/server software products,
data interfaces and related maintenance and services that automate, integrate
and support certain mission-critical functions of the front, middle and back
office of investment management organizations. Advent's clients vary
significantly in size and assets under management and include investment
advisors, brokerage firms, banks, hedge funds, corporations, public funds,
foundations, universities and non-profit organizations.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Advent and its wholly-owned subsidiaries. All intercompany
transactions and amounts have been eliminated.
FINANCIAL INSTRUMENTS Cash equivalents comprise highly liquid investments
purchased with a remaining maturity of 90 days or less. These investments are
maintained with major financial institutions.
Short- term investments are comprised of various marketable securities
carried at cost. These investments are maintained with major financial
institutions. Securities are considered to be held-to-maturity. Amounts reported
for short-term investments are considered to approximate the fair value based on
comparable market information available at the respective balance sheet dates.
Realized gains and losses have not been significant.
The amounts reported for cash equivalents, receivables, accounts payable,
accrued liabilities and other financial instruments are considered to
approximate their market values based on comparable market information available
at the respective balance sheet dates, and their short-term nature.
Financial instruments that potentially subject Advent to concentrations of
credit risks comprise, principally, cash, short-term investments, and trade
accounts receivable. Advent invests excess cash through banks, mutual funds, and
brokerage houses primarily in highly liquid investments with remaining
maturities of 90 days or less and has investment policies and procedures which
are reviewed periodically to minimize credit risk. Advent does not require
collateral from its customers but performs ongoing credit evaluations and
maintains reserves for potential credit losses which historically have been
within management's estimates.
DEPRECIATION AND AMORTIZATION Fixed assets are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful life of the
related assets, generally five years. Amortization of leasehold improvements is
computed using the straight-line method over the shorter of the estimated useful
life of the assets or the remaining lease term.
CAPITALIZED SOFTWARE Costs incurred for software development prior to
technological feasibility are expensed as product development costs in the
period incurred. Once the point of technological feasibility is reached,
production costs are capitalized. Such capitalized software costs were not
material in 1997, 1996 and 1995.
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REVENUE RECOGNITION Advent licenses application software programs and offers
annual maintenance programs which provides for technical support and updates to
software products. Advent's development agreements generally provide for
development of technologies and products which are expected to become part of
Advent's product or product offerings in the future. Certain of these agreements
may require royalty payments based on future sales of the developed products.
Such amounts will be included in cost of goods sold as accrued. Advent also
offers customers on-site consulting services, training, custom programming, and
other services.
License revenue is recognized upon the shipment of a product to the client
if collection is probable and Advent's remaining obligations with respect to
that contract are insignificant. License revenue for licenses with remaining
significant obligations is deferred until the product has been shipped and
Advent's related obligations become insignificant. Maintenance revenues are
recognized ratably over the term of the contract. Annual payments for
maintenance contracts are generally received in advance and are nonrefundable.
Revenues for interface and other development and custom programming are
recognized using the percentage of completion method of accounting based on the
costs incurred to date compared with the estimated cost of completion. Revenues
from professional services are recognized as work is performed.
NET INCOME (LOSS) PER SHARE Advent has adopted the provisions of Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128")
effective December 31, 1997. SFAS 128 requires the presentation of basic and
diluted net income (loss) per share. Basic net income (loss) per share is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding for that period. Diluted
net income (loss) per share is computed giving effect to all dilutive potential
common shares that were outstanding during the period. Dilutive potential shares
consist of incremental common shares issuable upon exercise of stock options and
warrants and conversion of preferred stock for all periods. All prior period net
income (loss) per share amounts have been restated to comply with SFAS No. 128.
RECLASSIFICATIONS Certain reclassifications have been made to the 1996 and
1995 financial statement amounts to conform to the 1997 presentation. These
reclassifications had no impact on net income (loss), working capital, or cash
flows.
NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued Statement No.
130, "Reporting Comprehensive Income", (SFAS 130) which establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. It is effective for Advent's first
quarter of fiscal year 1998.
In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments
of an Enterprise and Related Information", (SFAS 131) which changes current
practice under SFAS 14 by establishing a new framework on which to base segment
reporting (referred to as the "management" approach) and also requires interim
reporting of segment information. It is effective for Advent's fiscal year-end
1998.
In October 1997, the AICPA issued Statement of Position (SOP) 97-2 on
Software Revenue Recognition which supersedes SOP 91-1. The SOP is effective for
all fiscal years beginning after December 15, 1997 and will be effective for
Advent's fiscal year 1998.
-13-
Advent will be studying the implications of these standards and has not yet
determined the impact of their implementation on Advent's financial statements.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts. These estimates are based on
information available as of the date of the financial statements.
Actual results could differ from those estimates.
2. Acquisitions
In February 1996, Advent acquired Data Exchange, Inc. (the DX Group), a
private company based in New York, for $4.0 million in cash and an $800,000 note
payable. This note was paid during the third quarter of 1996 and did not bear
interest. The transaction was accounted for as a purchase. Advent incurred a
one-time charge of $5.6 million in connection with the write-off of in-process
research and development. This expense was recorded in purchased research and
development and other expenses.
In November 1996, Advent issued 35,000 shares of Advent's common stock in
exchange for all of the outstanding shares of Bold Software, Inc., a private
software development company based in New York. This business combination was
accounted for as a pooling of interests. Prior year amounts have not been
restated to include Bold Software's results of operations as such operations
were immaterial. As a result of this business combination, Advent introduced
Advent Partner, a tax layering and partnership allocation solution which
integrates with Axys.
3. Balance Sheet Detail
The following is a summary of fixed assets:
December 31,
------------------
1997 1996
---------------------------------------------- -------- ---------
(in thousands)
Fixed Assets
Computer equipment $6,997 $4,455
Leasehold improvements 4,676 2,273
Furniture and fixtures 837 726
Telephone systems 672 461
--- ---
13,182 7,915
Less accumulated depreciation and
amortization (5,758) (4,053)
------- -------
Total fixed assets, net $7,424 $3,862
====== ======
---------------------------------------------- -------- ---------
Depreciation expense was $1,728, $1,352, and $1,016 for the years ended December
31, 1997, 1996 and 1995 respectively.
-14-
The following is a summary of accrued liabilities:
December 31,
------------------
1997 1996
----------------------------------------------- --------- --------
(in thousands)
Accrued Liabilities
Salaries and benefits payable $1,577 $1,365
Commissions payable 752 583
Sales taxes payable 300 307
Other 348 372
--- ---
Total accrued liabilities $2,977 $2,627
====== ======
----------------------------------------------- --------- --------
4. Income Taxes
The provision for income taxes includes:
Year Ended December 31,
1997 1996 1995
------------------------ ---------- ---------- -----------
(in thousands)
Current
Federal $3,089 $1,994 $1,578
State 815 577 403
Deferred
Federal 26 227 (168)
State (9) 57 (27)
--- -- ----
Total $3,921 $2,855 $1,786
====== ====== ======
------------------------ ---------- ---------- -----------
Advent's effective tax rate, as a percent of pre-tax income, differs from
the statutory federal rate as follows:
Year Ended December 31,
----------------------------------
1997 1996 1995
---------------------------------- ----------- ---------- -----------
Statutory federal rate 35.0% 34.0% 34.0%
State taxes 7.6 23.8 6.9
Purchased research and
development -- 109.4 --
Research and development tax
credits (3.0) (5.1) (5.0)
Other (2.7) 0.5 2.9
----- --- ---
Total 36.9% 162.6% 38.8%
===== ====== =====
---------------------------------- ----------- ---------- -----------
The effective tax rate increased in 1996 due to the $5.6 million write-off
of in-process research and development which was not deductible for tax
purposes.
-15-
Deferred income taxes reflect the net tax effects of temporary differences
between the basis of assets and liabilities for financial reporting and income
tax purposes. The approximate tax effects of temporary differences which give
rise to net deferred tax assets are:
December 31,
-------------------------
1997 1996
--------------------------------------- ------------ ------------
(in thousands)
Current:
Deferred revenue $ 610 $ 718
Accrued liabilities 519 201
Reserves 211 145
State taxes 78 --
------ ------
1,418 1,064
------ ------
Noncurrent:
Depreciation and amortization 74 99
Deferred rent 218 262
------ ------
292 361
------ ------
Total deferred tax assets $1,710 $1,425
====== ======
--------------------------------------- ------------ ------------
5. Commitments
Advent leases office space and equipment under noncancelable operating lease
agreements, which expire at various dates through February 2004. Some operating
leases contain escalation provisions for adjustments in the consumer price
index. Advent is responsible for maintenance, insurance, and property taxes and
has five year extension options on its primary facilities leases. Future minimum
payments under the noncancelable operating leases consist of the following at
December 31, 1997 (in thousands):
1998 $2,184
1999 1,699
2000 1,563
2001 1,152
2002 914
2003 and thereafter 1,238
-----
Total minimum lease
payments $8,750
======
Rent expense for 1997, 1996, and 1995 was approximately $1,484,000,
$1,159,000, and $894,000, respectively.
-16-
6. Employee Benefit Plans
401(k) Plan
Advent has a 401(k) deferred savings plan covering substantially all
employees. Employee contributions, limited to 15% of compensation, are matched
50% by Advent, up to a maximum of $500 per employee per year. Matching
contributions by Advent in 1997, 1996 and 1995 were $103,000, $73,000, and
$61,000, respectively. In addition to the employer matching contribution, Advent
may make a profit sharing contribution at the discretion of the Board of
Directors. Advent made profit sharing contributions of $121,000, $87,000, and
$92,000 in 1997, 1996 and 1995, respectively.
1995 Employee Stock Purchase Plan
All individuals employed by Advent are eligible to participate in the
Employee Stock Purchase Plan (Purchase Plan) if they are employed by Advent for
at least 20 hours per week and at least five months per year. The Purchase Plan
permits eligible employees to purchase Advent's common stock through payroll
deductions at a price equal to 85% of the lower of the closing sale price for
Advent's common stock reported on the Nasdaq National Market at the beginning
and the end of each six-month offering period. In any calendar year, eligible
employees can withhold up to 10% of their salary and certain variable
compensation. A total of 100,000 shares of common stock have been reserved for
issuance under the Purchase Plan. In 1997, 38,000 shares were sold through the
Purchase Plan.
7. Net Income (Loss) Per Share
Year Ended December 31,
1997 1996 1995
---- ---- ----
Net income (loss) $6,713 $(1,099) $2,819
Reconciliation of shares used in basic
and diluted per share calculations
Basic
Weighted average common shares outstanding 7,521 7,070 3,445
----- ----- -----
Shares used in basic net income (loss) per
share calculation 7,521 7,070 3,445
===== ===== =====
Basic net income (loss) per share $0.89 $(0.16) $0.82
===== ======= =====
Dilutive
Weighted average common shares outstanding 7,521 7,070 3,455
Dilutive effect of convertible preferred stock -- -- 1,955
Dilutive effect of stock options and warrants 496 -- 750
------ ------- ------
Shares used in diluted net income (loss)
per share calculation 8,017 7,070 6,160
===== ===== =====
Diluted net income (loss) per share $0.84 $(0.16) $0.46
===== ======= =====
-17-
8. Stockholders' Equity
Common Stock
On November 15, 1995, Advent completed an IPO in which it sold 1,450,000
shares of its common stock at $18.00 per share which generated net proceeds to
Advent of $23.4 million. Prior to the effective date of Advent's IPO, Advent
reincorporated in the state of Delaware and exchanged each outstanding share of
no par common stock for one share of $0.01 par value common stock.
Stock Options
Under Advent's 1992 Stock Plan (the Plan) Advent may grant options to
purchase common stock to employees and consultants. Options granted may be
incentive stock options or nonstatutory stock options and shall be granted at a
price not less than fair market value on the date of grant. Fair market value
(as defined in the Plan) and the vesting of these options shall be determined by
the Board of Directors. The options expire no later than 10 years from the date
of grant. Unvested options on termination of employment are canceled and
returned to the Plan.
The activity under the Plan was as follows:
Outstanding Options
-----------------------------------------------------
Weighted
Aggregate Average
Available Number of Price Per Exercise Price Per
for Grant Options Share Price Share
--------- --------- --------- --------- ---------
Balances, December 31, 1994 298,000 682,000 $0.63 - $5.00 $1,432,000 $2.10
Authorized 300,000 -- -- -- --
Options granted (466,000) 466,000 5.00 - 12.00 2,940,000 6.31
Options exercised -- (101,000) 0.63 - 5.00 (115,000) 1.14
Options canceled 21,000 (21,000) 1.00 - 6.50 (97,000) 4.62
------ -------- ----------- -------- ----
Balances, December 31, 1995 153,000 1,026,000 0.63-12.00 4,160,000 4.05
Authorized 400,000 -- -- -- --
Options granted (412,000) 412,000 19.50-32.00 10,376,000 25.18
Options exercised -- (283,000) 0.63-12.00 (642,000) 2.27
Options canceled 58,000 (58,000) 1.00-19.50 (754,000) 13.00
------ -------- ---------- --------- -----
Balances, December 31, 1996 199,000 1,097,000 0.63-32.00 13,140,000 11.98
------- --------- ---------- ---------- -----
Authorized 600,000 -- -- -- --
Options granted (836,000) 836,000 25.00-28.75 21,737,000 26.00
Options exercised -- (198,000) 0.63-19.50 (853,000) 4.31
Options canceled 145,000 (145,000) 1.00-32.00 (2,902,000) 20.01
------- --------- ---------- ----------- -----
Balances, December 31, 1997 108,000 1,590,000 $0.63-$32.00 $31,122,000 $19.57
======= ========= ============ =========== ======
-18-
Of the 1,590,000 options under the Plan outstanding at December 31, 1997,
331,000 options were exercisable with an aggregate exercise price of $3,190,000.
In addition to the Plan, Advent had granted options to purchase common stock
to employees or consultants under special arrangements. These options have an
exercise price of $1.00 per share. There were 10,000, 12,000 and 16,000 of these
options outstanding at December 31, 1997, 1996 and 1995, respectively. The
change in each period was a result of the exercise of 2,000 and 4,000 options
during 1997 and 1996, respectively. The shares outstanding at December 31, 1997
are fully vested.
Advent's 1995 Director Option Plan (the Director Plan) provides for the
grant of nonstatutory stock options to nonemployee directors of Advent (Outside
Directors). Under the Director Plan, each Outside Director is granted a
non-qualified option to purchase 10,000 shares on the last to occur of the date
of effectiveness of the Director Plan or the date upon which such person first
becomes a director with an exercise price equal to the fair market value of
Advent's common stock as of the date of the grant. In subsequent years, each
Outside Director is automatically granted an option to purchase 2,000 shares on
December 1 with an exercise price equal to the fair value of the Advent's common
stock on that date. Options granted under the Director Plan vest over a five
year period and have a ten year term.
The activity under the Director Plan was as follows:
Outstanding Options
---------------------------------------------------
Weighted
Aggregate Average
Available Number of Price Per Exercise Price Per
for Grant Options Share Price Share
--------- --------- --------- ---------- ---------
Balances, December 31, 1994 -- -- $-- $-- $--
Authorized 75,000 -- -- -- --
Options granted (30,000) 30,000 18.00 540,000 18.00
-------- ------ ----- ------- -----
Balances, December 31, 1995 45,000 30,000 18.00 540,000 18.00
Options granted (6,000) 6,000 32.75 196,500 32.75
------- ----- ----- ------- -----
Balances, December 31, 1996 39,000 36,000 18.00-32.75 736,500 20.45
------ ------ ----------- ------- -----
Options exercised -- (2,800) 18.00 (50,400) 18.00
Options granted (24,000) 24,000 24.88-25.00 599,500 24.98
Options cancelled 9,200 (9,200) 18.00-32.75 (194,500) 21.14
----- ------- ----------- --------- -----
Balances, December 31, 1997 24,200 48,000 $18.00-$32.75 $1,091,100 $22.73
====== ====== ============= ========== ======
-19-
Of the 48,000 options under the Director Plan outstanding at December 31,
1997, 8,300 options were exercisable with an aggregate exercise price of
$150,000.
In addition to the Director Plan, Advent granted options prior to 1994 to an
Outside Director for the purchase of 96,000 shares of common stock with an
exercise price of $0.63 per share. These options were exercised during 1996.
At December 31, 1997, Advent had reserved 2,363,000 shares of common stock
for the exercise of stock options.
Advent has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for Advent's stock option
plans. Had compensation cost been determined based on the fair value at the
grant date for awards in 1997, 1996 and 1995 consistent with the provisions of
SFAS No. 123, Advent's net income (loss) and net income (loss) per share for the
year ended December 31, 1997, 1996 and 1995, respectively, would have been as
follows:
1997 1996 1995
---- ---- ----
Net income (loss) - as reported $6,713 $(1,099) $2,819
Net income (loss) - pro forma $5,233 $(1,528) $2,717
PER SHARE DATA
Diluted
Net income (loss) per share - as reported $0.84 $(0.16) $0.46
Net income (loss) per share - pro forma $0.65 $(0.22) $0.44
Basic
Net income (loss) per share - as reported $0.89 $(0.16) $0.82
Net income (loss) per share - pro forma $0.70 $(0.22) $0.79
Such pro forma disclosures may not be representative of future compensation
cost because options vest over several years and additional grants are made each
year.
The weighted-average grant-date fair value of options granted were $14.50,
$14.50, and $3.82 per option for the years ended December 31, 1997, 1996 and
1995, respectively.
-20-
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes valuation model with the following weighted average
assumptions:
1997 1996 1995
---- ---- ----
Risk-free interest rate 5.99% 6.03% 6.40%
Volatility 56.91 55.04 55.04
Expected life 5 years 5 years 5 years
Expected dividends None None None
The risk-free interest rate was calculated in accordance with the grant date
and expected life. Volatility was calculated using an analysis of an Advent peer
group of publicly traded companies. The weighted average expected life was
calculated based on the vesting period and the exercise behavior of the
participants.
The options outstanding and currently exercisable by exercise price at
December 31, 1997 are as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ -----------------------------------
Weighted
Average
Remaining Weighted average Weighted Average
Exercise Prices Number Contractual Exercise Price Number Exercise Price
Outstanding Life Exercisable
- ------------------ -------------- -------------- ------------------ -------------- -----------------
$0.63-$6.50 510,000 6.61 $4.70 261,000 $4.32
$18.00-$19.50 109,000 8.15 19.22 36,000 19.15
$24.88-$32.75 1,029,000 9.53 27.21 52,000 30.68
--------- ---- ----- ------ -----
1,648,000 8.54 $19.74 349,000 $9.65
========= ==== ====== ======= =====
9. Subsequent Event (unaudited)
In February 1998, Advent issued 250,000 shares of Advent's common stock in
exchange for all of the outstanding shares of MicroEdge, Inc., a private
software development company based in New York. MicroEdge is the leading
provider of software products to foundations, corporations and other
organizations to manage their grant-making activities. This business combination
was accounted for as a pooling of interests. The results of operations as well
as the assets and liabilities of MicroEdge in 1997 and 1996 were not material to
the consolidated results of operations or financial position of Advent.
-21-
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Advent Software, Inc.:
We have audited the accompanying consolidated balance sheets of Advent
Software, Inc. as of December 31, 1997 and 1996 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of Advent Software, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Advent
Software, Inc. as of December 31, 1997 and 1996 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
San Francisco, California
January 20, 1998
-22-
SELECTED
FINANCIAL DATA
SELECTED ANNUAL DATA
YEAR ENDED DECEMBER 31, 1997 1996* 1995 1994* 1993
- ------------------------------------------ ----------- ---------- ----------- ----------- -----------
(in thousands, except per share data)
STATEMENT OF OPERATIONS
Net revenues $48,613 $36,744 $25,957 $20,101 $16,240
Income from operations 9,398 591 4,158 1,648 2,061
Net income (loss) 6,713 (1,099) 2,819 1,064 1,259
Net income (loss) per share data
Diluted:
Net income (loss) per share 0.84 (0.16) 0.46 0.18 0.26
Shares used in per share calculation** 8,017 7,070 6,160 5,844 4,892
Basic:
Net income (loss) per share 0.89 (0.16) 0.82 0.36 0.40
Shares used in per share calculation** 7,521 7,070 3,455 2,925 3,159
BALANCE SHEET
Working capital $38,836 $32,775 $31,008 $5,093 $5,987
Total assets 59,285 46,691 44,750 15,594 18,066
Long-term liabilities 537 599 470 708 801
Stockholders' equity 46,493 37,062 34,584 8,291 8,157
SELECTED QUARTERLY DATA
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------------------- --------- ---------
(in thousands, except per share data)
(unaudited)
1997
Net revenues $9,553 $11,699 $12,958 $14,403
Income from operations 1,121 2,169 2,817 3,291
Net income 851 1,522 2,007 2,333
Net income per share - Diluted 0.11 0.19 0.25 0.29
Net income per share - Basic 0.12 0.20 0.27 0.31
1996*
Net revenues $6,975 $9,022 $10,146 $10,601
Income (loss) from operations (5,087) 1,376 1,920 2,383
Net income (loss) (5,102) 1,015 1,349 1,640
Net income (loss) per share - Diluted (0.74) 0.13 0.17 0.21
Net income (loss) per share - Basic (0.74) 0.15 0.19 0.23
PRICE RANGE OF COMMON STOCK
NASDAQ NATIONAL MARKET SYMBOL "ADVS"
HIGH LOW
- ------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997
First Quarter $30 3/4 $20 1/4
Second Quarter 33 18 5/8
Third Quarter 33 25 1/4
Fourth Quarter 31 3/4 22 1/2
YEAR ENDED DECEMBER 31, 1996
First Quarter $21 3/4 $14
Second Quarter 32 1/8 19
Third Quarter 32 3/4 20 1/4
Fourth Quarter 36 1/2 25 5/8
* In 1996 and 1994, Advent recognized non-recurring charges of $5.6 million and
$1.0 million, respectively, in connection with the write-off of purchased
research and development. Excluding these non-recurring charges, net income per
share - diluted would have been $0.58 and $0.27 in 1996 and 1994, respectively.
For further explanation, see "Purchased Research and Development and Other" in
Management's Discussion and Analysis of Financial Condition and Results of
Operations on page 5.
** For an explanation of shares used in per share calculations, see Note 1 of
the Notes to Consolidated Financial Statements.
Stock Information
Advent's common stock has traded on the Nasdaq National Market under the symbol
ADVS since it's initial public offering on November 15, 1995.
Advent has not paid cash dividends on its common stock and presently intends to
continue this policy in order to retain its earnings for the development of its
business.
Transfer Agent & Registrar
First National Bank of Boston is the Transfer Agent and Registrar of Advent's
common stock and maintains stockholder accounting records. Inquires regarding
lost certificates, consolidation of accounts, and changes in address, name or
ownership should be addressed to:
BankBoston, N.A.
c/o Boston EquiServe, LP
PO Box 8040
Boston, MA 02266-8040
Telephone: (781) 575-3120
Internet: www.equiserve.com