CRITICAL ACCOUNTING POLICIES

Certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our consolidated financial statements. In applying these policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of estimates. Those estimates are based on our historical experience, terms of existing contracts, management's observation of trends in the industry, information provided by our clients and information available from other outside sources, as appropriate. Actual results may differ significantly from the estimates contained in our consolidated financial statements. There have been no material changes to our critical accounting estimates and assumptions or the judgments affecting the application of those estimates and assumptions since the filing of our 2011 Form 10-K, except that the contingent foreign currency derivative contracts we entered into require significant judgment about a significant estimate related to their fair value. Our critical accounting policies are described in the 2011 Form 10-K and include:

• Revenue Recognition

• Long-Lived Assets, Intangible Assets and Goodwill

• Acquisition Accounting

• Income Taxes

Results of Operations for the Three Months Ended March 31, 2012 and 2011

The following table sets forth revenues (in thousands) and changes in revenues
for the periods indicated:



                                   Three Months Ended March 31,          Percentage
                                     2012                 2011             Change
    Revenues:
    Software licenses           $        3,810       $        6,573              (42 )%
    Maintenance                         19,498               19,447                0 %
    Professional services                5,792                5,267               10 %
    Software-enabled services           64,575               57,720               12 %

    Total revenues              $       93,675       $       89,007                5 %

The following table sets forth the percentage of our revenues represented by each of the following sources of revenues for the periods indicated:

                                          Three months ended March 31,
                                          2012                    2011
          Revenues:
          Software licenses                      4 %                     7 %
          Maintenance                           21 %                    22 %
          Professional services                  6 %                     6 %
          Software-enabled services             69 %                    65 %

          Total revenues                       100 %                   100 %

Revenues

Our revenues consist primarily of software-enabled services and maintenance revenues, and, to a lesser degree, software license and professional services revenues. As a general matter, our software license and professional services revenues fluctuate based on the number of new licensing clients, while fluctuations in our software-enabled services revenues are attributable to the number of new software-enabled services clients as well as the number of outsourced transactions provided to our existing clients and total assets under management in our clients' portfolios. Maintenance revenues vary based on the rate by which we add or lose maintenance clients over time and, to a lesser extent, on the annual increases in maintenance fees, which are generally tied to the consumer price index.

Revenues for the three months ended March 31, 2012 were $93.7 million compared to $89.0 million for the same period in 2011.

Software licenses. Software license revenues were $3.8 million and $6.6 million for the three months ended March 31, 2012 and 2011, respectively. The decrease in software license revenues of $2.8 million, or 42%, was due to a decrease in organic software license revenues. Software license revenues will vary depending on the timing, size and nature of our license transactions. For example, the average size of our software license transactions and the number of large transactions may fluctuate on a period-to-period basis. For the three months ended March 31, 2012, revenues from term licenses increased while the average size and number of perpetual license transactions decreased from those for the three months ended March 31, 2011. Additionally, software license revenues will vary among the various products that we offer, due to differences such as the timing of new releases and variances in economic conditions affecting opportunities in the vertical markets served by such products.

Maintenance. Maintenance revenues were $19.5 million and $19.4 million for the three months ended March 31, 2012 and 2011, respectively. The increase in maintenance revenues of $0.1 million was due to an increase in organic maintenance revenues. We typically provide maintenance services under one-year renewable contracts that provide for an annual increase in fees, which are generally tied to the percentage change in the consumer price index. Future maintenance revenue growth is dependent on our ability to retain existing clients, add new license clients and increase average maintenance fees.

Professional services. Professional services revenues were $5.8 million and $5.3 million for the three months ended March 31, 2012 and 2011, respectively. The increase of $0.5 million, or 10%, was primarily due to an increase of $0.3 million in organic professional services revenues and revenues from acquisitions, which contributed $0.2 million in the aggregate. Our overall software license revenue levels and market demand for professional services will continue to have an effect on our professional services revenues.

Software-enabled services. Software-enabled services revenues were $64.6 million and $57.7 million for the three months ended March 31, 2012 and 2011, respectively. The increase in software-enabled services revenues of $6.9 million, or 12%, was primarily due to an increase of $5.4 million in organic software-enabled services revenues and revenues from acquisitions, which contributed $1.6 million in the aggregate, partially offset by the unfavorable impact from foreign currency translation of $0.1 million. Future software-enabled services revenue growth is dependent on our ability to retain existing clients, add new clients and increase average fees.

Cost of Revenues

Total cost of revenues was $46.9 million and $44.5 million for the three months ended March 31, 2012 and 2011, respectively. The gross margin was 50% for each of the three-month periods ended March 31, 2012 and 2011. Our costs of revenues increased by $2.4 million, or 5%, primarily as a result of an increase of $1.9 million in costs to support organic revenue growth and our acquisitions, which added costs of revenues of $0.7 million in the aggregate, partially offset by a decrease in costs of $0.1 million related to foreign currency translation and a decrease in amortization expense of $0.1 million.

Cost of software licenses. Cost of software license revenues consists primarily of amortization expense of completed technology, royalties, third-party software, and the costs of product media, packaging and documentation. The cost of software license revenues was $1.3 million and $1.7 million for the three months ended March 31, 2012 and 2011, respectively. The decrease in cost of software licenses was due to a reduction of $0.4 million in amortization expense. Cost of software license revenues as a percentage of such revenues was 34% and 26% for the three-month periods ended March 31, 2012 and 2011, respectively.

Cost of maintenance. Cost of maintenance revenues consists primarily of technical client support, costs associated with the distribution of products and regulatory updates and amortization of intangible assets. The cost of maintenance revenues was $8.7 million for each of the three months ended March 31, 2012 and 2011. Cost of maintenance revenues as a percentage of these revenues was 44% for the three months ended March 31, 2012 compared to 45% for the three months ended March 31, 2011.

Cost of professional services. Cost of professional services revenues consists primarily of the cost related to personnel utilized to provide implementation, conversion and training services to our software licensees, as well as system integration, custom programming and actuarial consulting services. The cost of professional services revenues was $4.0 million and $3.6 million for the three months ended March 31, 2012 and 2011, respectively. The increase in costs of professional services revenues of $0.4 million, or 11%, was primarily related to an increase in costs of $0.3 million to support organic professional services revenues and our acquisitions, which added costs of professional services revenues of $0.1 million. Cost of professional services revenues as a percentage of these revenues was 69% for the three months ended March 31, 2012 compared to 68% for the three months ended March 31, 2011.

Operating Expenses

Total operating expenses were $24.8 million and $21.4 million for the three months ended March 31, 2012 and 2011, respectively. The increase in total operating expenses of $3.4 million, or 16%, was primarily due to transaction costs of $4.2 million associated with the merger and acquisition activity for GlobeOp and the PORTIA Business and our acquisitions of BXML, Ireland Fund Admin and TCI, which added $0.2 million in costs, partially offset by a decrease in costs of $0.5 million related to stock-based compensation, a decrease of $0.4 million in costs to support organic revenue growth and a decrease in costs of $0.1 million related to foreign currency translation. Total operating expenses as a percentage of total revenues were 26% for the three months ended March 31, 2012 compared to 24% for the three months ended March 31, 2011.

Selling and marketing. Selling and marketing expenses consist primarily of the personnel costs associated with the selling and marketing of our products, including salaries, commissions and travel and entertainment. Such expenses also include amortization of intangible assets, the cost of branch sales offices, trade shows and marketing and promotional materials. Selling and marketing expenses were $7.4 million and $6.9 million for the three months ended March 31, 2012 and 2011, respectively, representing 8% of total revenues in each of those periods. The increase in selling and marketing expenses of $0.5 million, or 7%, was primarily related to an increase in costs to support organic revenues.

Research and development. Research and development expenses consist primarily of personnel costs attributable to the enhancement of existing products and the development of new software products. Research and development expenses were $8.6 million and $8.0 million for the three months ended March 31, 2012 and 2011, respectively, representing 9% of total revenues in each of those periods. The increase in research and development expenses of $0.6 million, or 8%, was primarily related to an increase of $0.6 million in costs to support organic revenues and our acquisitions, which added $0.1 million in costs in the aggregate, partially offset by a decrease in costs of $0.1 million related to foreign currency translation.

General and administrative. General and administrative expenses consist primarily of personnel costs related to management, accounting and finance, information management, human resources and administration and associated overhead costs, as well as fees for professional services. General and administrative expenses were $4.6 million and $6.5 million for the three months ended March 31, 2012 and 2011, respectively, representing 9% of total revenues for the three months ended March 31, 2012 compared to 7% for the three months ended March 31, 2011. The decrease in general and administrative expenses of $1.9 million, or 30%, was primarily related to a decrease of $1.4 million in costs to support organic revenues and a decrease in costs of $0.5 million related to stock-based compensation.

Transaction costs. Transaction costs of $4.2 million consist of professional fees associated with ongoing merger and acquisition activity for Thomson Reuters' PORTIA business and GlobeOp as discussed in the Notes to our Condensed Consolidated Financial Statements and in Liquidity and Capital Resources.

Interest expense, net. Interest expense, net for the three months ended March 31, 2012 was $0.5 million, primarily related to interest expense on debt outstanding under our senior credit facility. Interest expense, net for the three months ended March 31, 2011 was $5.1 million primarily related to interest expense on debt outstanding under our prior senior credit facility and 11 3/4% senior subordinated notes due 2013. The decrease in interest expense of $4.6 million reflects the lower average debt balance resulting from the repayments and refinancing of our debt (discussed further in Liquidity and Capital Resources).

Other income (expense), net. Other income, net for the three months ended March 31, 2012 consisted of a gain recorded on foreign currency contracts associated with the potential acquisition of GlobeOp, which is discussed further in Note 5 to our Condensed Consolidated Financial Statements and in Liquidity and Capital Resources, partially offset by foreign currency losses. Other expense, net for the three months ended March 31, 2011 consisted of foreign currency losses and fees associated with the redemption of our 11 3/4% senior subordinated notes due 2013, which is discussed further in Liquidity and Capital Resources, partially offset by a refund of facilities charges.

Provision for income taxes. We had effective tax rates of 30.3% and 33.6% for the three months ended March 31, 2012 and 2011, respectively. The decrease was primarily due to the 2012 reversal of uncertain income tax positions. Our effective tax rate includes the effect of operations outside the United States, which historically have been taxed at rates lower than the U.S. statutory rate. While we have income from multiple foreign sources, the majority of our non-U.S. operations are in Canada and the United Kingdom, where we anticipate the statutory rates to be between 26.39% and 25.0% for the year ended December 31, 2012. Additionally, the foreign effective tax rate is benefited by certain other permanent items. The consolidated expected effective tax rate for the year ended December 31, 2012 is forecasted to be between 33% and 34%. A future proportionate change in the composition of income before income taxes from foreign and domestic tax jurisdictions could impact our periodic effective tax rate.

Liquidity and Capital Resources

Our principal cash requirements are to finance the costs of our operations pending the billing and collection of client receivables, to fund payments with respect to our indebtedness, to invest in research and development and to acquire complementary businesses or assets. We expect our cash on hand, cash flows from operations and availability under the revolving credit portion of our senior credit facilities to provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital spending for at least the next twelve months.

Our cash and cash equivalents at March 31, 2012 were $41.9 million, an increase of $1.6 million from $40.3 million at December 31, 2011. The increase in cash is due primarily to cash provided by operations, partially offset by net repayments of debt and capital expenditures.

Net cash provided by operating activities was $13.1 million for the three months ended March 31, 2012. Cash provided by operating activities was primarily due to net income of $17.9 million adjusted for non-cash items of $5.6 million, partially offset by changes in our working capital accounts totaling $10.3 million. The changes in our working capital accounts were driven by an increase in accounts receivable and prepaid expenses and other assets, and decreases in accrued expenses, partially offset by an increase in deferred revenues, accounts payable and income taxes payable. The increase in deferred revenues was primarily due to the collection of annual maintenance fees. The increase in accounts receivable was primarily due to an increase in days' sales outstanding. The decrease in accrued expenses was primarily due to the payment of annual employee bonuses.

Investing activities used net cash of $1.2 million for the three months ended March 31, 2012, primarily related to cash paid for capital expenditures.

Financing activities used net cash of $10.6 million for the three months ended March 31, 2012, representing $15.0 million in net repayments of debt, partially offset by proceeds of $3.9 million from stock option exercises and income tax windfall benefits of $0.5 million related to the exercise of stock options.

We have made a permanent reinvestment determination in certain non-U.S. operations that have historically generated positive operating cash flows. At March 31, 2012, we held approximately $16.3 million in cash and cash equivalents at non-U.S. subsidiaries where we had made such a determination and in turn no provision for U.S. income taxes had been made. As of March 31, 2012, we believe we have sufficient foreign tax credits available to offset tax obligations associated with the repatriation of these funds.

On March 14, 2012, Holdings and SS&C Sarl entered into a cooperation agreement with GlobeOp. Pursuant to the cooperation agreement, SS&C Sarl announced pursuant to Rule 2.7 of the City Code on Takeovers and Mergers the terms of the Offer under which Holdings, acting through SS&C Sarl, would acquire the entire issued and to be issued share capital of GlobeOp for 485 pence per share. The full terms of, and conditions to, the Offer are set forth in the offer document issued by SS&C Sarl on March 26, 2012, or the Offer Document. On May 9, 2012, we announced that SS&C Sarl had received valid acceptances of the Offer in respect of 66,785,197 GlobeOp shares, representing approximately 62.0 percent of the existing issued share capital of GlobeOp. The Offer, which remains subject to the terms and conditions set out in the Offer Document, has been extended and will remain open for acceptances until 1:00 p.m. (London time) on May 14, 2012. There can be no certainty that we will acquire GlobeOp.

On March 14, 2012, we entered into a Credit Agreement among SS&C, SS&C Technologies Holdings Europe S.A.R.L., a Luxembourg société à responsabilité limitée and an indirect wholly-owned subsidiary of SS&C ("SS&C Sarl"), as the borrowers, Holdings and certain subsidiaries of SS&C as guarantors, Deutsche Bank AG New York Branch, as administrative agent, swing line lender and letter of credit issuer (the "Agent'), the other lenders party thereto and Deutsche Bank Securities, Inc., Barclays Capital, the investment banking division of Barclays Bank PLC, Credit Suisse Securities (USA) LLC and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners. The Credit Agreement has four tranches of term loans: (i) a $0 term A-1 facility, to be borrowed by SS&C, (ii) a $300 million term A-2 facility, to be borrowed by SS&C Sarl, (iii) a $725 million term B-1 facility to be borrowed by SS&C and (iv) a $100 million term B-2 facility to be borrowed by SS&C Sarl. In addition, the Credit Agreement has a $142 million bridge loan facility available to be borrowed by SS&C Sarl and a revolving credit facility available to be borrowed by SS&C with $100 million in commitments. The revolving facility contains a $25 million letter of credit sub-facility and a $20 million swingline loan sub-facility.

As security for the obligations under the Credit Agreement, we have agreed to pledge substantially all of our tangible and intangible assets. The Credit Agreement contains customary restrictive covenants and a financial covenant requiring that we maintain a consolidated net senior secured leverage ratio.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Senior Credit Facilities

On December 15, 2011, we entered into a credit agreement with SS&C as the borrower, which provides for a $125 million Senior Credit Facility, to be available on a revolving basis until December 15, 2016, of which $100 million was immediately drawn, and contains an expansion feature permitting additional revolving or term loan commitments of up to $75 million under certain circumstances. Borrowings outstanding will bear interest at a rate per annum equal to, at the election of SS&C, either a floating base rate or a Eurocurrency rate plus, in each case, an applicable margin. In addition, we pay a commitment fee in respect of unused revolving commitments at a rate that will be adjusted based on our leverage ratio. The initial commitment fee rate is 0.25% per annum, payable quarterly in arrears. We may choose to prepay loans or reduce the Senior Credit Facility commitments at any time, without penalty.

The obligations under the Senior Credit Facility are guaranteed by SS&C Holdings and the material U.S. subsidiaries of SS&C. Obligations under the Senior Credit Facility are secured, subject to certain agreed upon exceptions, by substantially all of the tangible and intangible assets of SS&C and each guarantor (including, without limitation, intellectual property and capital stock of domestic subsidiaries).

The Senior Credit Facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, SS&C Holdings, SS&C's and most of SS&C's subsidiaries' ability to incur or guarantee additional indebtedness, pay dividends and distributions on capital stock, create liens on assets, repay subordinated indebtedness, make capital expenditures, engage in certain transactions with affiliates, dispose of assets and engage in mergers or acquisitions. In addition, under the Senior Credit Facility, we are required to satisfy and maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio. As of March 31, 2012, we were in compliance with the financial and non-financial covenants.

Associated with the May 2012 acquisition of the PORTIA Business, Bank of America, N.A. provided us with a $175 million senior secured term loan under the Senior Credit Facility, the aggregate proceeds of which will be sufficient to pay the aggregate purchase consideration and all related fees and expenses in connection with this acquisition.

In connection with the entry into the Senior Credit Facility, SS&C terminated its then-existing credit agreement, or the Prior Facility, and used the proceeds from advances made under the Senior Credit Facility to repay all amounts outstanding under the Prior Facility, including an aggregate principal amount of outstanding borrowings of approximately $99.7 million. At the time of the termination of the Prior Facility, all liens and other security interests that SS&C had granted to the lenders under the Prior Facility were released.

11 3/4% Senior Subordinated Notes due 2013

The 11 3/4% senior subordinated notes due 2013 were unsecured senior subordinated obligations of SS&C that were subordinated in right of payment to all existing and future senior debt, including the Prior Facility.

The senior subordinated notes were redeemable in whole or in part, at SS&C's option, at any time at varying redemption prices. In May 2010, SS&C redeemed $71.75 million in principal amount of its outstanding 11 3/4% senior subordinated notes due 2013 at a redemption price of 105.875% of the principal amount, plus accrued and unpaid interest on such amount to, but excluding, May 24, 2010, the date of redemption. In March 2011, SS&C redeemed $66.6 million in aggregate principal amount of its outstanding 11 3/4% senior subordinated notes due 2013 at a redemption price of 102.9375% of the principal amount, plus accrued and unpaid interest on such amount to, but excluding, March 17, 2011, the date of redemption. In December 2011, SS&C redeemed the remaining $66.6 million in aggregate principal amount outstanding of its 11 3/4% senior subordinated notes due 2013 at a redemption price of 100% of the principal amount, plus accrued and unpaid interest on such amount to, but excluding, December 19, 2011, the date of redemption.

Under the Senior Credit Facility, we are required to satisfy and maintain specified financial ratios and other financial condition tests. As of March 31, 2012, we were in compliance with the financial and non-financial covenants. Our continued ability to meet these financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet these ratios and tests. A breach of any of these covenants could result in a default . . .