Exhibit 13

Unisys Corporation

2011 Annual Report

Unisys Corporation

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Overview

In 2011, the company continued to implement its ongoing program to tighten its strategic focus, strengthen its solutions portfolio, increase the cost efficiency of services operations, and reduce debt and interest expense.

The company’s financial results in 2011 were impacted by charges related to debt reduction actions taken during the year as well as an increase in retirement-related expense. Also impacting the company’s 2011 results was a $191 million, or 23%, revenue decline in the company’s U.S. Federal government business, reflecting ongoing challenges in that market and the ending of the company’s contract with the U.S. Transportation Security Administration (TSA) in November 2010.

The company reported 2011 net income from continuing operations attributable to common shareholders of $120.5 million, or $2.71 per diluted share. The results included pretax debt-reduction charges of $85.2 million, $34.3 million in pretax pension expense, $12.5 million in U.S. 401(k) expense and $17.2 million of pretax foreign exchange gains. In 2010, the company reported net income from continuing operations of $158.9 million, or $3.67 per diluted share, which included $2.1 million of pretax debt-reduction charges, $2.9 million of pretax pension income and pretax foreign exchange losses of $43.4 million.

Revenue for 2011 declined 4% to $3.85 billion compared with $4.02 billion in 2010. The decline in the U.S. Federal government business contributed approximately 5 percentage points to the rate of decline in revenue in 2011. The company’s contract with TSA had provided approximately $117 million and $150 million of revenue in 2010 and 2009, respectively.

During 2011, the company took actions that reduced its debt by an aggregate of $464 million, or 56%. On February 28, 2011, the company sold approximately 2.6 million shares of 6.25% mandatory convertible preferred stock for net proceeds of approximately $250 million. On March 30, 2011, the company used the net proceeds from the sale of the mandatory convertible preferred stock to redeem an aggregate principal amount of $211.0 million of its senior secured notes due 2014 and 2015. On April 11, 2011, the company completed a cash tender offer and purchased an aggregate principal amount of $178.9 million of its senior secured notes due 2014 and 2015. On November 21, 2011, the company purchased in the open market $20.0 million of its 12  ³/4% senior secured notes due 2014. On November 25, 2011, the company redeemed all of the remaining $65.9 million of its 8% senior notes due 2012.

Year-end 2011 debt was $360 million and cash was $715 million. The annualized interest expense attributable to the debt retired during 2011 is approximately $61 million. The annualized dividend on the mandatory convertible preferred stock is approximately $16.2 million until mandatory conversion in March 2014.

On February 1, 2012, the company called for redemption all of the remaining $25.5 million of its 14 1/4% senior secured notes due 2015 and $40.0 million of its 12.5% senior notes due 2016. The notes will be redeemed on March 2, 2012 and the company expects to recognize a charge of approximately $7 million in “Other income (expense), net” in the first quarter of 2012 in connection with the redemptions.

Results of operations

Company results

Revenue for 2011 was $3.85 billion compared with 2010 revenue of $4.02 billion, a decrease of 4%. Foreign currency had a 3-percentage-point positive impact on revenue in 2011 compared with 2010. The decline in revenue from the company’s U.S. Federal business contributed approximately 5 percentage points to the rate of decline in revenue in 2011.

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Services revenue in 2011 decreased by 3%. The decline in revenue from the company’s U.S. Federal business contributed approximately 6 percentage points to the rate of decline in services revenue in 2011. Technology revenue in 2011 decreased by 11% compared with 2010.

Revenue for 2010 was $4.02 billion compared with 2009 revenue of $4.39 billion, a decrease of 8%. Approximately 2 percentage points of the revenue decline was due to the divestiture of the company’s U.S. specialized technology check sorter equipment and related U.S. maintenance business. Foreign currency had a 1-percentage-point positive impact on revenue in 2010 compared with 2009.

Revenue from international operations in 2011, 2010 and 2009 was $2.27 billion, $2.29 billion and $2.38 billion, respectively. Foreign currency had a 6-percentage-point positive impact on international revenue in 2011 compared with 2010, and a 2-percentage-point positive impact in 2010 compared with 2009. Revenue from U.S. operations was $1.58 billion in 2011, $1.73 billion in 2010 and $2.01 billion in 2009. In 2011, the company’s U.S. revenue declined 9%. The $191 million, or 23%, decline in revenue from the company’s U.S. Federal business contributed approximately 13 percentage points to the rate of decline in U.S. revenue in 2011.

Gross profit percent was 25.6% in 2011, 26.7% in 2010 and 25.4% in 2009. The decrease in gross profit percent in 2011 compared with 2010 principally reflects lower revenue and margin in the company’s U.S. Federal business. The increase in gross profit percent in 2010 compared with 2009 principally reflects a stronger mix of high-end enterprise server sales as well as the benefits derived from improved cost efficiencies in services delivery.

Selling, general and administrative expenses were $586.3 million in 2011 (15.2% of revenue), $617.1 million in 2010 (15.4% of revenue) and $681.1 million in 2009 (15.5% of revenue). The decline in selling, general and administrative expenses reflects the company’s continued focus on cost reduction.

Research and development (R&D) expenses in 2011 were $76.1 million compared with $78.9 million in 2010 and $101.9 million in 2009. The decrease in R&D expense in 2010 compared with 2009 principally reflects changes in the company’s development model as the company has focused its investments on operating system software development while leveraging commodity components and offshore resources.

In 2011, the company reported an operating profit of $324.6 million compared with $375.7 million in 2010 and $330.0 million in 2009.

Pension expense for 2011 was $34.3 million compared with pension income of $2.9 million in 2010 and pension income of $23.6 million in 2009. For 2012, the company expects to recognize pension expense of approximately $102 million. The change in 2012 from 2011 is principally due to a lower discount rate and a lower expected return on plan assets in the company’s U.S. qualified defined benefit pension plan. The company records pension income or expense, as well as other employee-related costs such as payroll taxes and medical insurance costs, in operating income in the following income statement categories: cost of revenue; selling, general and administrative expenses; and research and development expenses. The amount allocated to each category is based on where the salaries of active employees are charged.

Effective January 1, 2011, the company reinstated a company match to its U.S. 401(k) Savings Plan, which had been suspended effective January 1, 2009. The company matches 50 percent of the first 6 percent of eligible pay contributed by participants to the plan on a before-tax basis (subject to IRS limits). The company is currently funding and expects to continue to fund the match with the company’s common stock. The charge to income related to the company match for the year ended December 31, 2011 was $12.5 million compared with zero in 2010 and 2009.

During 2011, the company recorded a charge of $13.5 million ($6.4 million in cost of revenue and $7.1 million in other income/expense) related to the loss of an old non-income tax case concerning the company’s former Brazilian manufacturing operations. During 2011, the company also recorded $14.3 million income in other income/expense related to a favorable resolution of a Brazilian non-income tax case concerning tax on other income. During 2009, the company recorded a benefit of $11.2 million (a $5.4 million benefit in other income, a $6.1 million benefit in cost of revenue and an expense of $.3 million in selling, general and administrative expense related to legal fees) related to a 2009 change in Brazilian law involving a gross receipts tax.

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Interest expense was $63.1 million in 2011, $101.8 million in 2010 and $95.2 million in 2009. The decline in 2011 from 2010 reflects the debt reductions discussed herein.

Other income (expense), net was expense of $55.5 million in 2011, compared with expense of $51.0 million in 2010 and expense of $16.6 million in 2009. Included in 2011 were charges of $85.2 million related to the debt redemptions discussed herein offset in part by income of $7.2 million related to the Brazilian matters discussed above, foreign exchange gains of $17.2 million and interest income of $15.4 million. Included in 2010 were foreign exchange losses of $43.4 million (including $19.9 million related to the Venezuelan devaluation, discussed below) and interest income of $8.3 million. Included in 2009 was income of $5.4 million related to the Brazilian law change discussed above and foreign exchange losses of $12.5 million.

Income from continuing operations before income taxes in 2011 was $206.0 million compared with income of $222.9 million in 2010 and income of $218.2 million in 2009.

The provision for income taxes in 2011, 2010 and 2009 was $64.8 million, $58.8 million and $42.3 million, respectively. The 2011, 2010 and 2009 income tax provisions include benefits due to changes in judgment about the company’s ability to realize deferred tax assets in future years resulting in a net decrease in valuation allowances of $15.2 million, $13.2 million and $28.7 million, respectively. The 2011 income tax provision includes a benefit of $28.3 million related to the settlement of two European tax matters, as well as a provision of $8.4 million due to a reduction in the UK income tax rate (see Note 7 of the Notes to Consolidated Financial Statements). The 2011 and 2009 income tax provision includes benefits of $4.2 million and $11.1 million, respectively, related to provisions in the Housing and Economic Recovery Act of 2008 permitting certain research and alternative minimum tax (AMT) credit carryforwards to be refundable and 2009 includes a tax benefit of $7.7 million related to prior year tax adjustments.

The company evaluates quarterly the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The company will record a tax provision or benefit for those international subsidiaries that do not have a full valuation allowance against their deferred tax assets. Any profit or loss recorded for the company’s U.S. continuing operations will have no provision or benefit associated with it due to its full valuation allowance, except with respect to benefits related to income from discontinued operations. As a result, the company’s provision or benefit for taxes will vary significantly period to period depending on the geographic distribution of income. Due to its full valuation allowance in the U.S., the health care legislation enacted during 2010 had no impact on the company’s U.S. deferred tax assets.

The realization of the company’s net deferred tax assets as of December 31, 2011 is primarily dependent on forecasted future taxable income within certain foreign jurisdictions. Any reduction in estimated forecasted future taxable income may require the company to record an additional valuation allowance against the remaining deferred tax assets. Any increase or decrease in the valuation allowance would result in additional or lower income tax expense in such period and could have a significant impact on that period’s earnings.

Net income from continuing operations attributable to Unisys Corporation for 2011 was income of $120.5 million, or $2.71 per diluted common share, compared with income of $158.9 million, or $3.67 per diluted common share, in 2010 and income of $172.2 million, or income of $4.32 per diluted common share, in 2009.

In 2010, the company sold its health information management (HIM) and its Unisys Insurance Services Limited (UISL) businesses and retroactively reclassified its financial statements to report these businesses as discontinued operations. Income from discontinued operations for 2011 was zero compared with income of $77.2 million, or $1.78 per diluted common share, in 2010 and income of $17.1 million, or $.43 per diluted common share, in 2009. See Note 3 of the Notes to Consolidated Financial Statements.

Due to cumulative inflation of approximately 100 percent or more over the last 3-year period, the company’s Venezuelan subsidiary has applied highly inflationary accounting beginning January 1, 2010. For those international subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency, and as such, nonmonetary assets and

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liabilities are translated at historical exchange rates, and monetary assets and liabilities are translated at current exchange rates. Exchange gains and losses arising from translation are included in other income (expense), net. Effective January 11, 2010, the Venezuelan government devalued the Bolivar Fuerte by 50 percent by resetting the official exchange rate from 2.15 to the U.S. dollar to 4.30 to the U.S. dollar. As a result, the company recorded a foreign exchange loss in the first quarter of 2010 of approximately $20 million. The company has used and continues to use the official exchange rate for translation purposes. At December 31, 2011, the company’s operations in Venezuela had net monetary assets denominated in local currency of approximately $19 million.

Segment results

The company has two business segments: Services and Technology. The products and services of each segment are marketed throughout the world to commercial businesses and governments. Revenue classifications by segment are as follows: Services – systems integration and consulting, outsourcing, infrastructure services and core maintenance; Technology – enterprise-class software and servers and other technology.

The accounting policies of each business segment are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are priced as if the sales or transfers were to third parties. Accordingly, the Technology segment recognizes intersegment revenue and manufacturing profit on hardware and software shipments to customers under Services contracts. The Services segment, in turn, recognizes customer revenue and marketing profit on such shipments of company hardware and software to customers. The Services segment also includes hardware and software products sourced from third parties that are sold to customers through the company’s Services channels. In the company’s consolidated statements of income, the manufacturing costs of products sourced from the Technology segment and sold to Services customers are reported in cost of revenue for Services.

Also included in the Technology segment’s sales and operating profit are sales of hardware and software sold to the Services segment for internal use in Services engagements. The amount of such profit included in operating income of the Technology segment for the years ended December 31, 2011, 2010 and 2009, was $8.2 million, $7.2 million and $14.8 million, respectively. The profit on these transactions is eliminated in Corporate.

The company evaluates business segment performance on operating income exclusive of restructuring charges and unusual and nonrecurring items, which are included in Corporate. Effective January 1, 2011, the company changed the measurement of segment performance that it evaluates to exclude pension income or expense. Prior periods have been reclassified to conform to the 2011 presentation. All corporate and centrally incurred costs are allocated to the business segments, based principally on revenue, employees, square footage or usage. See Note 15 of the Notes to Consolidated Financial Statements.

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Information by business segment for 2011, 2010 and 2009 is presented below:

Gross profit percent and operating income percent are as a percent of total revenue.

Customer revenue by classes of similar products or services, by segment, for 2011, 2010 and 2009 is presented below:

In the Services segment, customer revenue was $3.35 billion in 2011, $3.46 billion in 2010 and $3.82 billion in 2009. Foreign currency had about a 3-percentage-point positive impact on Services revenue in 2011 compared with 2010, and a 1-percentage-point positive impact in 2010 compared with 2009. The decline in revenue from the company’s U.S. Federal business contributed approximately 6 percentage points to the rate of decline in services revenue in 2011. Approximately 2 percentage points of the decline in 2010 compared with 2009 were due to divestitures of businesses.

Revenue from systems integration and consulting decreased 4.8% in 2011 compared with 2010, and 2010 revenue declined 10.1% compared with 2009. The decline in revenue from the company’s U.S. Federal business contributed approximately 5 percentage points to the rate of decline in systems integration and consulting revenue in 2011. The 2010 decline reflected lower demand for project-based services and the continued reshaping of the company’s services portfolio.

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Outsourcing revenue decreased 2.9% in 2011 as the loss of $117 million in TSA revenue in the company’s U.S. Federal business, which was all included in information technology outsourcing (ITO) revenue, more than offset growth in other ITO outsourcing revenue. The decline in revenue from the company’s U.S. Federal business contributed approximately 9 percentage points to the rate of decline in outsourcing revenue in 2011. Outsourcing revenue decreased 3.8% in 2010 from 2009, primarily reflecting declines in business processing outsourcing (BPO) revenue.

Infrastructure services revenue increased 3.1% in 2011 compared with 2010 and decreased 16.2% in 2010 compared with 2009. The decline in 2010 reflects the company’s de-emphasis of lower-margin business, as well as the shift away from project work to managed outsourcing contracts. Approximately 4 percentage points of the decline in 2010 compared with 2009 were due to divestitures of businesses.

Core maintenance revenue declined 6.5% in 2011 compared with 2010. Core maintenance revenue declined 25.3% in 2010 compared with 2009. Approximately 12 percentage points of the 2010 decline were due to divestitures of businesses.

Services gross profit percent was 20.0% in 2011, 20.1% in 2010 and 18.6% in 2009. Services operating income percent was 6.9% in 2011 compared with 6.7% in 2010 and 5.6% in 2009.

In the Technology segment, customer revenue was $499.2 million in 2011, $562.2 million in 2010 and $560.8 million in 2009. Foreign currency translation had about a 2-percentage-point positive impact on Technology revenue in 2011 compared with 2010, and a negligible impact in 2010 compared with 2009. Adjusting for divested businesses, the growth rate in Technology revenue in 2010 would have been 4 percentage points higher.

Revenue from the company’s enterprise-class software and servers decreased 4.0% in 2011 compared with 2010 and was flat in 2010 compared with 2009. The company’s ClearPath revenue remained essentially flat throughout both years.

Revenue from other technology decreased 44.5% in 2011 compared with 2010 and increased 3.6% in 2010 compared with 2009. The decline in 2011 from 2010 was due to lower sales of third-party equipment. Adjusting for divested businesses, the growth rate in other technology revenue in 2010 would have been 19 percentage points higher.

Technology gross profit percent was 56.9% in 2011, 55.0% in 2010 and 49.5% in 2009. The increases were due to a higher relative mix of ClearPath sales. Technology operating income percent was 21.5% in 2011 compared with 21.1% in 2010 and 12.1% in 2009.

New accounting pronouncements

See Note 5 of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the expected dates of adoption and estimated effects on the company’s consolidated financial statements.

Financial condition

The company’s principal sources of liquidity are cash on hand, cash from operations and its new five-year revolving credit facility, discussed below, which has replaced the company’s U.S. trade accounts receivable facility (the A/R Facility). The company and certain international subsidiaries have access to uncommitted lines of credit from various banks. The company believes that it will have adequate sources of liquidity to meet its expected 2012 cash requirements.

Cash and cash equivalents at December 31, 2011 were $714.9 million compared with $828.3 million at December 31, 2010. The decline was principally due to cash used for the debt reductions described below. At December 31, 2010, the company had sold no receivables under the A/R Facility compared with $100 million as of December 31, 2009 and $141 million at December 31, 2008.

As of December 31, 2011, approximately $457 million of cash and cash equivalents were held by the company’s foreign subsidiaries. In the future, if these funds are needed for the company’s operations in the U.S., the company may be required to accrue and pay U.S. taxes to repatriate these funds. See Note 7 of the Notes to Consolidated Financial Statements regarding the company’s intention to indefinitely reinvest earnings of foreign subsidiaries.

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During 2011, cash provided by operations was $317.2 million compared with $336.8 million in 2010.

Cash used for investing activities in 2011 was $96.3 million compared with cash used of $61.6 million in 2010. Net proceeds from investments in 2011 were $3.0 million compared with net proceeds of $.9 million in 2010. Proceeds from investments and purchases of investments represent derivative financial instruments used to manage the company’s currency exposure to market risks from changes in foreign currency exchange rates. During the year ended December 31, 2011, the net change in restricted deposits resulted in cash provided of $50.7 million compared with cash provided of $23.4 million in 2010. In addition, the investment in marketable software was $51.7 million in 2011 compared with $55.8 million in 2010, capital additions of properties were $42.2 million in 2011 compared with $64.1 million in 2010 and capital additions of outsourcing assets were $40.5 million in 2011 compared with $83.2 million in 2010. The current year includes $15.6 million of net payments related to sales of businesses and assets compared with 2010 which includes net proceeds of $117.2 million related to the sale of the company’s HIM business, U.S. specialized technology check sorter and related U.S. maintenance business and UISL business (see Note 3 of the Notes to Consolidated Financial Statements).

Cash used for financing activities during 2011 was $319.4 million compared with cash used of $91.5 million in 2010. The current year includes cash proceeds of $249.7 million related to the issuance of preferred stock, net of issuance costs; cash payments to retire long-term debt of $555.7 million (see discussion below); and $12.2 million of dividends paid on preferred stock. The prior-year period includes $92.8 million used to reduce long-term debt.

At December 31, 2011, total debt was $359.7 million, a decrease of $464.3 million from December 31, 2010.

On February 28, 2011, the company sold 2,587,500 shares of 6.25% mandatory convertible preferred stock for net proceeds of $249.7 million. Each share of mandatory convertible preferred stock will automatically convert on March 1, 2014 into between 2.1899 and 2.6717 shares of the company’s common stock, subject to adjustment, depending on the volume weighted average price per share of the company’s common stock over the 20 consecutive trading days ending on the third trading day immediately preceding the mandatory conversion date. At any time prior to March 1, 2014, holders may elect to convert all or a portion of their shares of the mandatory convertible preferred stock at the minimum conversion rate of 2.1899 shares of the company’s common stock, subject to adjustment.

The company pays dividends on each share of the mandatory convertible preferred stock on a cumulative basis at an annual rate of 6.25% on the initial liquidation preference of $100 per share (equivalent to $6.25 per share per year). Dividends accrue and accumulate from the date of issuance and, to the extent the company has lawfully available funds to pay dividends and the company’s Board of Directors or an authorized committee of the Board of Directors declares a dividend payable, the company will pay dividends on March 1, June 1, September 1 and December 1 of each year prior to March 1, 2014 in cash and on March 1, 2014 or any earlier conversion date in cash, shares of the company’s common stock, or a combination thereof, at the company’s election. The annualized dividend on the mandatory convertible preferred stock is approximately $16.2 million until conversion.

On March 30, 2011, the net proceeds from the sale of mandatory convertible preferred stock were used to redeem an aggregate principal amount of $124.7 million of the company’s senior secured notes due 2014 and an aggregate principal amount of $86.3 million of the company’s senior secured notes due 2015 under the provisions of the indentures relating to the notes that allow the company to redeem, at its option, up to 35% of the original principal amount of each series of notes from the net cash proceeds of one or more equity offerings. As a result of these redemptions, the company recognized a charge of $31.8 million in “Other income (expense), net” in the three months ended March 31, 2011, which was comprised of $28.2 million of premium paid and $3.6 million for the write off of unamortized discounts, issuance costs and gains related to the portion of the notes redeemed.

On April 11, 2011, the company purchased $44.1 million of its senior secured notes due 2014 and $134.8 million of its senior secured notes due 2015 that had been tendered into a cash tender offer conducted by the company. As a result of this purchase of notes, the company recognized a charge of $45.7 million in “Other income (expense), net” in the three months ended June 30, 2011, which is comprised of $42.2 million of premium and expenses paid and $3.5 million for the write off of unamortized discounts, issuance costs and gains related to the portion of the notes purchased.

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On November 21, 2011, the company purchased in the open market $20.0 million of its senior secured notes due 2014. As a result, the company recognized a charge of $3.2 million in “Other income (expense), net” in the three months ended December 31, 2011, which is comprised of $3.0 million of premium paid and $.2 million for the write off of unamortized discounts, issuance costs and gains related to the portion of the notes purchased.

On November 25, 2011, the company redeemed all of the remaining $65.9 million of its 8% senior notes due 2012. As a result of the redemption, the company recognized a charge of $4.4 million in “Other income (expense), net” in the three months ended December 31, 2011, which is comprised of $4.3 million of premium and expenses paid and $.1 million for the write off of unamortized issuance costs.

The annualized interest expense attributable to the debt retired during 2011 is approximately $61 million.

On February 1, 2012, the company called for redemption all of the remaining $25.5 million of its 14 1/4% senior secured notes due 2015 and $40.0 million of its 12.5% senior notes due 2016. The notes will be redeemed on March 2, 2012 and the company expects to recognize a charge of approximately $7 million in “Other income (expense), net” in the first quarter of 2012 in connection with the redemptions.

On June 23, 2011, the company entered into a new, five-year, secured revolving credit facility to replace the company’s $150 million U.S. trade accounts receivable securitization facility that terminated on that date. The new credit agreement provides for loans and letters of credit up to an aggregate amount of $150 million (with a limit on letters of credit of $100 million). The prior accounts receivable securitization facility had not provided for letters of credit. Borrowing limits under the new credit agreement are based upon the amount of eligible U.S. accounts receivable. At December 31, 2011, the company had no borrowings and $29.8 million of letters of credit outstanding under the facility. At December 31, 2011, availability under the facility was $85.8 million net of letters of credit issued. Borrowings under the facility will bear interest based on short-term rates. The credit agreement contains customary representations and warranties, including that there has been no material adverse change in the company’s business, properties, operations or financial condition. It also contains financial covenants requiring the company to maintain a minimum fixed charge coverage ratio and, if the company’s consolidated cash plus availability under the credit facility falls below $130 million, a maximum secured leverage ratio. The credit agreement allows the company to pay dividends on its preferred stock unless the company is in default and to, among other things, repurchase its equity, prepay other debt, incur other debt or liens, dispose of assets and make acquisitions, loans and investments, provided the company complies with certain requirements and limitations set forth in the agreement. Events of default include non-payment, failure to perform covenants, materially incorrect representations and warranties, change of control and default under other debt aggregating at least $50 million. The credit facility is guaranteed by Unisys Holding Corporation, Unisys NPL, Inc. and any future material domestic subsidiaries. The facility is secured on a first priority basis by certain assets of Unisys Corporation and the subsidiary guarantors consisting primarily of the U.S. trade accounts receivable of Unisys Corporation. It is secured on a junior basis (to the senior secured notes due 2014 and 2015) by the other assets of Unisys Corporation and the subsidiary guarantors, other than certain excluded assets. The company may elect to prepay or terminate the credit facility without penalty.

At December 31, 2011, the company has met all covenants and conditions under its various lending agreements. The company expects to continue to meet these covenants and conditions.

At December 31, 2011, the company had outstanding standby letters of credit and surety bonds of approximately $324 million related to performance and payment guarantees. On the basis of experience with these arrangements, the company believes that any obligations that may arise will not be material.

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As described more fully in Notes 9 and 11 of the Notes to Consolidated Financial Statements, at December 31, 2011, the company had certain cash obligations, which are due as follows:

As described in Note 16 of the Notes to Consolidated Financial Statements, in 2012, the company expects to make cash contributions of approximately $241 million to its worldwide defined benefit pension plans, which is comprised of $98 million primarily for non-U.S. defined benefit pension plans and $143 million for the company’s U.S. qualified defined benefit pension plan.

The company may, from time to time, redeem, tender for, or repurchase its securities in the open market or in privately negotiated transactions depending upon availability, market conditions and other factors. The company has on file with the Securities and Exchange Commission an effective registration statement, expiring in June of 2012, covering approximately $.8 billion of debt or equity securities, which enables the company to be prepared for future market opportunities.

Market risk

The company has exposure to interest rate risk from its short-term and long-term debt. In general, the company’s long-term debt is fixed rate and, to the extent it has any, its short-term debt is variable rate. See Note 9 of the Notes to Consolidated Financial Statements for components of the company’s long-term debt. The company believes that the market risk assuming a hypothetical 10% increase in interest rates would not be material to the fair value of these financial instruments, or the related cash flows, or future results of operations.

The company is also exposed to foreign currency exchange rate risks. The company is a net receiver of currencies other than the U.S. dollar and, as such, can benefit from a weaker dollar, and can be adversely affected by a stronger dollar relative to currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may adversely affect consolidated revenue and operating margins as expressed in U.S. dollars. Currency exposure gains and losses are mitigated by purchasing components and incurring expenses in local currencies.

In addition, the company uses derivative financial instruments, primarily foreign exchange forward contracts, to reduce its exposure to market risks from changes in foreign currency exchange rates on intercompany balances. See Note 12 of the Notes to Consolidated Financial Statements for additional information on the company’s derivative financial instruments.

The company has performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign currency exchange rates applied to these derivative financial instruments described above. As of December 31, 2011 and 2010, the analysis indicated that such market movements would have reduced the estimated fair value of these derivative financial instruments by approximately $13 million and $3 million, respectively. Based on changes in the timing and amount of interest rate and foreign currency exchange rate movements and the company’s actual exposures and hedges, actual gains and losses in the future may differ from the above analysis.

Critical accounting policies

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Certain accounting policies, methods and estimates are particularly important because of their significance to the financial statements and because of the possibility that future events affecting them may differ from management’s current judgments. The company bases its estimates and judgments on historical experience and on other

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assumptions that it believes are reasonable under the circumstances; however, to the extent there are material differences between these estimates, judgments and assumptions and actual results, the financial statements will be affected. Although there are a number of accounting policies, methods and estimates affecting the company’s financial statements as described in Note 1 of the Notes to Consolidated Financial Statements, the following critical accounting policies reflect the significant estimates, judgments and assumptions. The development and selection of these critical accounting policies have been determined by management of the company and the related disclosures have been reviewed with the Audit Committee of the Board of Directors.

Outsourcing

Typically, the initial terms of the company’s outsourcing contracts are between 3 and 5 years. In certain of these arrangements, the company hires certain of the customers’ employees and often becomes responsible for the related employee obligations, such as pension and severance commitments. In addition, system development activity on outsourcing contracts often requires significant upfront investments by the company. The company funds these investments, and any employee-related obligations, from customer prepayments and operating cash flow. Also, in the early phases of these contracts, gross margins may be lower than in later years when the work force and facilities have been rationalized for efficient operations, and an integrated systems solution has been implemented.

Revenue under these contracts is recognized when the company performs the services or processes transactions in accordance with contractual performance standards. Customer prepayments (even if nonrefundable) are deferred (classified as a liability) and recognized systematically as revenue over the initial contract term.

Costs on outsourcing contracts are charged to expense as incurred. However, direct costs incurred related to the inception of an outsourcing contract are deferred and charged to expense over the initial contract term. These costs consist principally of initial customer setup and employment obligations related to employees hired under terms of the outsourcing contracts. In addition, the costs of equipment and software, some of which are internally developed, are capitalized and depreciated over the shorter of their life or the initial contract term.

Recoverability of outsourcing assets is subject to various business risks, including the timely completion and ultimate cost of the outsourcing solution, and realization of expected profitability of existing outsourcing contracts. The company quarterly compares the carrying value of the outsourcing assets with the undiscounted future cash flows expected to be generated by the outsourcing assets to determine if there is an impairment. If impaired, the outsourcing assets are reduced to an estimated fair value on a discounted cash flow approach. The company prepares its cash flow estimates based on assumptions that it believes to be reasonable but are also inherently uncertain. Actual future cash flows could differ from these estimates. At December 31, 2011 and 2010, the net capitalized amount related to outsourcing contracts was $137.9 million and $162.3 million, respectively.

Revenue recognition

The majority of the company’s sales agreements contain standard business terms and conditions; however, some agreements contain multiple elements or non-standard terms and conditions. As discussed in Note 1 of the Notes to Consolidated Financial Statements, the company enters into multiple-element arrangements, which may include any combination of hardware, software or services. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple-element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when to recognize revenue for each element. The company recognizes revenue on delivered elements only if: (a) any undelivered products or services are not essential to the functionality of the delivered products or services, (b) the company has an enforceable claim to receive the amount due in the event it does not deliver the undelivered products or services, (c) there is evidence of the selling price for each undelivered product or service, and (d) the revenue recognition criteria otherwise have been met for the delivered elements. Otherwise, revenue on delivered elements is recognized as the undelivered elements are delivered. For arrangements with multiple elements involving the

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licensing or sale of software and software-related elements, the allocation of revenue is based on vendor-specific objective evidence (VSOE), which is based upon normal pricing and discounting practices for those products and services when sold separately. The company’s continued ability to determine VSOE of fair value will depend on continued sufficient volumes and sufficient consistent pricing of stand-alone sales of such undelivered elements. In addition, the company’s revenue recognition policy states that revenue is not recognized until collectibility is deemed probable. Changes in judgments on these assumptions and estimates could materially impact the timing of revenue recognition.

For long-term fixed price systems integration contracts, the company recognizes revenue and profit as the contracts progress using the percentage-of-completion method of accounting, which relies on estimates of total expected contract revenues and costs. The company follows this method because reasonably dependable estimates of the revenue and costs applicable to various elements of a contract can be made. The financial reporting of these contracts depends on estimates, which are assessed continually during the term of the contracts and therefore, recognized revenues and profit are subject to revisions as the contract progresses to completion. Revisions in profit estimates are reflected in the period in which the facts that give rise to the revision become known. Accordingly, favorable changes in estimates result in additional revenue and profit recognition, and unfavorable changes in estimates result in a reduction of recognized revenue and profit. When estimates indicate that a loss will be incurred on a contract upon completion, a provision for the expected loss is recorded in the period in which the loss becomes evident. As work progresses under a loss contract, revenue continues to be recognized, and a portion of the contract costs incurred in each period is charged to the contract loss reserve. For other systems integration projects, the company recognizes revenue when the services have been performed.

Income Taxes

Accounting rules governing income taxes require that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. These rules also require that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or the entire deferred tax asset will not be realized. In 2005, the company recorded a noncash charge of $1.6 billion to increase the valuation allowance against deferred taxes.

At December 31, 2011 and 2010, the company had deferred tax assets in excess of deferred tax liabilities of $2,822.8 million and $2,611.8 million, respectively. For the reasons cited below, at December 31, 2011 and 2010, management determined that it is more likely than not that $174.3 million and $185.4 million, respectively, of such assets will be realized, resulting in a valuation allowance of $2,648.5 million and $2,426.4 million, respectively.

The company evaluates the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the company’s historical profitability, forecast of future taxable income and available tax-planning strategies that could be implemented to realize the net deferred tax assets. The company uses tax-planning strategies to realize or renew net deferred tax assets to avoid the potential loss of future tax benefits.

Failure to achieve forecasted taxable income might affect the ultimate realization of the net deferred tax assets. Factors that may affect the company’s ability to achieve sufficient forecasted taxable income include, but are not limited to, the following: increased competition, a decline in sales or margins, loss of market share, delays in product availability or technological obsolescence. See “Factors that may affect future results.”

Internal Revenue Code Sections 382 and 383 provide annual limitations with respect to the ability of a corporation to utilize its net operating loss and tax credit carryforwards, respectively, against future U.S. taxable income, if the corporation experiences an “ownership change.” Based on currently available information, the company believes that an ownership change may have occurred during 2011. See Note 7 of the Notes to Consolidated Financial Statements.

The company’s provision for income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of management judgment and are based on the best information available at the time. The company operates within federal, state and international taxing jurisdictions and is subject to audit in these jurisdictions. These audits

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can involve complex issues, which may require an extended period of time to resolve. As a result, the actual income tax liabilities in the jurisdictions with respect to any fiscal year are ultimately determined long after the financial statements have been published.

Accounting rules governing income taxes also prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The company maintains reserves for estimated tax exposures including penalties and interest. Income tax exposures include potential challenges of research and development credits and intercompany pricing. Exposures are settled primarily through the settlement of audits within these tax jurisdictions, but can also be affected by changes in applicable tax law or other factors, which could cause management of the company to believe a revision of past estimates is appropriate. Management believes that an appropriate liability has been established for estimated exposures; however, actual results may differ materially from these estimates. The liabilities are reviewed quarterly for their adequacy and appropriateness. See Note 7 of the Notes to Consolidated Financial Statements.

Pensions

Accounting rules governing defined benefit pension plans require that amounts recognized in financial statements be determined on an actuarial basis. The measurement of the company’s pension obligations, costs and liabilities is dependent on a variety of assumptions selected by the company and used by the company’s actuaries. These assumptions include estimates of the present value of projected future pension payments to plan participants, taking into consideration the likelihood of potential future events such as salary increases and demographic experience. The assumptions used in developing the required estimates include the following key factors: discount rates, salary growth, retirement rates, inflation, expected return on plan assets and mortality rates.

As permitted for purposes of computing pension expense, the company uses a calculated value of plan assets (which is further described below). This allows that the effects of the performance of the pension plan’s assets on the company’s computation of pension income or expense be amortized over future periods. A substantial portion of the company’s pension plan assets relates to its qualified defined benefit plan in the United States.

A significant element in determining the company’s pension income or expense is the expected long-term rate of return on plan assets. The company sets the expected long-term rate of return based on the expected long-term return of the various asset categories in which it invests. The company considers the current expectations for future returns and the actual historical returns of each asset class. Also, because the company’s investment policy is to actively manage certain asset classes where the potential exists to outperform the broader market, the expected returns for those asset classes are adjusted to reflect the expected additional returns. For 2012 and 2011, the company has assumed that the expected long-term rate of return on U.S. plan assets will be 8.00% and 8.75%, respectively, and on the company’s non-U.S. plan assets will be 6.59% and 6.57%, respectively. A change of 25 basis points in the expected long-term rate of return for the company’s U.S. and principal non-U.S. pension plans causes a change of approximately $9 million and $4 million, respectively, in pension expense. The assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over four years. This produces the expected return on plan assets that is included in pension income or expense. The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset gains or losses affects the calculated value of plan assets and, ultimately, future pension income or expense. At December 31, 2011, for the company’s U.S. qualified defined benefit pension plan, the calculated value of plan assets was $3.67 billion and the fair value was $3.56 billion.

At the end of each year, the company determines the discount rate to be used to calculate the present value of plan liabilities. The discount rate is an estimate of the current interest rate at which the pension liabilities could be effectively settled at the end of the year. In estimating this rate, the company looks to rates of return on high-quality, fixed-income investments that (a) receive one of the two highest ratings given by a recognized ratings agency and (b) are currently available and expected to be available during the period to maturity of the pension benefits. At December 31, 2011, the company determined this rate to be 4.96% for its U.S. defined benefit pension plans, a decrease of 72 basis points from

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the rate used at December 31, 2010. A change of 25 basis points in the U.S. and principal non-U.S. discount rates causes a change in pension expense of approximately zero and $5 million, respectively, and a change of approximately $127 million and $95 million, respectively, in the benefit obligation. The net effect of changes in the discount rate, as well as the net effect of other changes in actuarial assumptions and experience, has been deferred, as permitted.

Gains and losses are defined as changes in the amount of either the projected benefit obligation or plan assets resulting from experience different from that assumed and from changes in assumptions. Because gains and losses may reflect refinements in estimates as well as real changes in economic values and because some gains in one period may be offset by losses in another and vice versa, the accounting rules do not require recognition of gains and losses as components of net pension cost of the period in which they arise.

As a minimum, amortization of an unrecognized net gain or loss must be included as a component of net pension cost for a year if, as of the beginning of the year, that unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the calculated value of plan assets. If amortization is required, the minimum amortization is that excess above the 10 percent divided by the average remaining life expectancy of the plan participants. For the company’s U.S. qualified defined benefit pension plan and the company’s principal non-U.S. pension plans, that period is approximately 21 years. At December 31, 2011, based on the calculated value of plan assets, the estimated unrecognized loss for the company’s U.S. qualified defined benefit pension plan and the company’s principal non-U.S. pension plans was $2.80 billion and $.5 billion, respectively.

For the year ended December 31, 2011, the company recognized consolidated pretax pension expense of $34.3 million, compared with pretax pension income of $2.9 million for the year ended December 31, 2010. For 2012, the company expects to recognize pension expense of approximately $102 million. See Note 16 of the Notes to Consolidated Financial Statements.

Factors that may affect future results

From time to time, the company provides information containing “forward-looking” statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events and include any statement that does not directly relate to any historical or current fact. Words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “projects” and similar expressions may identify such forward-looking statements. All forward-looking statements rely on assumptions and are subject to risks, uncertainties and other factors that could cause the company’s actual results to differ materially from expectations. Factors that could affect future results include, but are not limited to, those discussed below. Any forward-looking statement speaks only as of the date on which that statement is made. The company assumes no obligation to update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made.

Factors that could affect future results include the following:

Future results will depend in part on the company’s ability to drive profitable growth in consulting and systems integration. The company’s ability to grow profitably in this business will depend on the level of demand for systems integration projects and the portfolio of solutions the company offers for specific industries. It will also depend on an efficient utilization of services delivery personnel. In addition, profit margins in this business are largely a function of the rates the company is able to charge for services and the chargeability of its professionals. If the company is unable to attain sufficient rates and chargeability for its professionals, profit margins will be adversely affected. The rates the company is able to charge for services are affected by a number of factors, including clients’ perception of the company’s ability to add value through its services; introduction of new services or products by the company or its competitors; pricing policies of competitors; and general economic conditions. Chargeability is also affected by a number of factors, including the company’s ability to transition employees from completed projects to new engagements, and its ability to forecast demand for services and thereby maintain an appropriate headcount.

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The company’s future results will depend in part on its ability to take on, successfully implement and grow outsourcing operations. The company’s outsourcing contracts are multiyear engagements under which the company takes over management of a client’s technology operations, business processes or networks. In a number of these arrangements, the company hires certain of its clients’ employees and may become responsible for the related employee obligations, such as pension and severance commitments. In addition, system development activity on outsourcing contracts may require the company to make significant upfront investments. The company will need to have available sufficient financial resources in order to take on these obligations and make these investments.

Recoverability of outsourcing assets is dependent on various factors, including the timely completion and ultimate cost of the outsourcing solution, and realization of expected profitability of existing outsourcing contracts. These risks could result in an impairment of a portion of the associated assets, which are tested for recoverability quarterly.

As long-term relationships, outsourcing contracts provide a base of recurring revenue. However, outsourcing contracts are highly complex and can involve the design, development, implementation and operation of new solutions and the transitioning of clients from their existing business processes to the new environment. In the early phases of these contracts, gross margins may be lower than in later years when an integrated solution has been implemented, the duplicate costs of transitioning from the old to the new system have been eliminated and the work force and facilities have been rationalized for efficient operations. Future results will depend on the company’s ability to effectively and timely complete these implementations, transitions and rationalizations.

Future results will also depend, in part, on market demand for the company’s high-end enterprise servers and maintenance on these servers. The company continues to apply its resources to develop value-added software capabilities and optimized solutions for these server platforms which provide competitive differentiation. Future results will depend on the company’s ability to maintain its installed base for ClearPath and to develop next-generation ClearPath products to expand the market.

The company faces aggressive competition in the information services and technology marketplace, which could lead to reduced demand for the company’s products and services and could have an adverse effect on the company’s business. The information services and technology markets in which the company operates include a large number of companies vying for customers and market share both domestically and internationally. The company’s competitors include consulting and other professional services firms, systems integrators, outsourcing providers, infrastructure services providers, computer hardware manufacturers and software providers. Some of the company’s competitors may develop competing products and services that offer better price-performance or that reach the market in advance of the company’s offerings. Some competitors also have or may develop greater financial and other resources than the company, with enhanced ability to compete for market share, in some instances through significant economic incentives to secure contracts. Some also may be better able to compete for skilled professionals. Any of these factors could lead to reduced demand for the company’s products and services and could have an adverse effect on the company’s business. Future results will depend on the company’s ability to mitigate the effects of aggressive competition on revenues, pricing and margins and on the company’s ability to attract and retain talented people.

The company’s future results will depend on its ability to retain significant clients. The company has a number of significant long-term contracts with clients, including governmental entities, and its future success will depend, in part, on retaining its relationships with these clients. The company could lose clients for such reasons as contract expiration, conversion to a competing service provider, disputes with clients or a decision to in-source services, including for contracts with governmental entities as part of the rebid process. The company could also lose clients as a result of their merger, acquisition or business failure. The company may not be able to replace the revenue and earnings from any such lost client.

The company’s future results will depend upon its ability to effectively anticipate and respond to volatility and rapid technological change in its industry. The company operates in a highly volatile industry characterized by rapid technological change, evolving technology standards, short product life cycles and continually changing customer demand patterns. Future success will depend in part on the company’s ability to anticipate and respond to these market trends and to design, develop, introduce, deliver or obtain new and innovative products and services on a timely and cost-effective basis. The

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company may not be successful in anticipating or responding to changes in technology, industry standards or customer preferences, and the market may not demand or accept its services and product offerings. In addition, products and services developed by competitors may make the company’s offerings less competitive.

The company’s business can be adversely affected by global economic conditions, acts of war, terrorism or natural disasters. The company’s financial results have been impacted by the global economic slowdown in recent years. If economic conditions worsen, the company could see reductions in demand and increased pressure on revenue and profit margins. The company could also see a further consolidation of clients, which could also result in a decrease in demand. The company’s business could also be affected by acts of war, terrorism or natural disasters. Current world tensions could escalate, and this could have unpredictable consequences on the world economy and on the company’s business.

The company has significant pension obligations and may be required to make significant cash contributions to its defined benefit pension plans. The company has unfunded obligations under its U.S. and non-U.S. defined benefit pension plans. Based on current legislation, recent interest rates and expected returns, in 2012, the company expects to make cash contributions of approximately $241 million to its worldwide defined benefit pension plans, which is comprised of $98 million primarily for non-U.S. defined benefit pension plans and $143 million for the company’s U.S. qualified defined benefit pension plan.

Deterioration in the value of the company’s worldwide defined benefit pension plan assets, as well as discount rate changes, could require the company to make larger cash contributions to its defined benefit pension plans in the future. In addition, the funding of plan deficits over a shorter period of time than currently anticipated could result in making cash contributions to these plans on a more accelerated basis. Either of these events would reduce the cash available for working capital and other corporate uses and may have an adverse impact on the company’s operations, financial condition and liquidity.

The company’s future results will depend on the success of its program to reduce costs, focus its global resources and simplify its business structure. Over the past several years, the company has implemented significant cost-reduction measures and continues to focus on measures intended to further improve cost efficiency. In prior years, the company has incurred significant cost reduction charges in connection with these efforts. Future results will depend on the success of these efforts as well as on the success of the company’s program to focus its global resources and simplify its business structure. This program is based on various assumptions, including assumptions regarding market segment growth, client demand, and the proper skill set of and training for sales and marketing management and personnel, all of which are subject to change. Furthermore, the company’s institutional stockholders may attempt to influence these strategies.

The company’s contracts may not be as profitable as expected or provide the expected level of revenues. In a number of the company’s long-term contracts for infrastructure services, outsourcing, help desk and similar services, the company’s revenue is based on the volume of products and services provided. As a result, revenue levels anticipated at the contract’s inception are not guaranteed. In addition, some of these contracts may permit termination at the customer’s discretion before the end of the contract’s term or may permit termination or impose other penalties if the company does not meet the performance levels specified in the contracts.

The company’s contracts with governmental entities are subject to the availability of appropriated funds. These contracts also contain provisions allowing the governmental entity to terminate the contract at the governmental entity’s discretion before the end of the contract’s term. In addition, if the company’s performance is unacceptable to the customer under a government contract, the government retains the right to pursue remedies under the affected contract, which remedies could include termination.

Certain of the company’s outsourcing agreements require that the company’s prices be benchmarked if the customer requests it and provide that those prices may be adjusted downward if the pricing for similar services in the market has changed. As a result, revenues anticipated at the beginning of the terms of these contracts may decline in the future.

Some of the company’s systems integration contracts are fixed-price contracts under which the company assumes the risk for delivery of the contracted services and products at an agreed-upon fixed price. Should the company experience problems

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in performing fixed-price contracts on a profitable basis, adjustments to the estimated cost to complete may be required. Future results will depend on the company’s ability to perform these services contracts profitably.

The company’s contracts with U.S. governmental agencies may subject the company to audits, criminal penalties, sanctions and other expenses and fines. The company frequently enters into contracts with governmental entities. U.S. government agencies, including the Defense Contract Audit Agency and the Department of Labor, routinely audit government contractors. These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards. The U.S. government also may review the adequacy of, and a contractor’s compliance with contract terms and conditions, its systems and policies, including the contractor’s purchasing, property, estimating, billing, accounting, compensation and management information systems. Any costs found to be overcharged or improperly allocated to a specific contract or any amounts improperly billed or charged for products or services will be subject to reimbursement to the government. In addition, government contractors, such as the company, are required to disclose credible evidence of certain violations of law and contract overpayments to the federal government. If the company is found to have participated in improper or illegal activities, the company may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. Any negative publicity related to such contracts, regardless of the accuracy of such publicity, may adversely affect the company’s business or reputation.

The company may face damage to its reputation or legal liability if its clients are not satisfied with its services or products. The success of the company’s business is dependent on strong, long-term client relationships and on its reputation for responsiveness and quality. As a result, if a client is not satisfied with the company’s services or products, its reputation could be damaged and its business adversely affected. Allegations by private litigants or regulators of improper conduct, as well as negative publicity and press speculation about the company, whatever the outcome and whether or not valid, may harm its reputation. In addition to harm to reputation, if the company fails to meet its contractual obligations, it could be subject to legal liability, which could adversely affect its business, operating results and financial condition.

Breaches of data security could expose the company to legal liability and could harm the company’s business and reputation. The company’s business includes managing, processing, storing and transmitting proprietary and confidential data, including personal information, within the company’s own IT systems and those the company designs, develops, hosts or manages for clients. Breaches of data security involving these systems by hackers, other third parties or the company’s employees, despite established security controls with respect to this data, could result in the loss of data or the unauthorized disclosure or misuse of confidential information of the company, its clients, or others. This could result in litigation and legal liability for the company, lead to the loss of existing or potential clients, adversely affect the market’s perception of the security and reliability of the company’s products and services and lead to shutdowns or disruptions of the company’s IT systems. In addition, such breaches could subject the company to fines and penalties for violations of data privacy laws. This may negatively impact the company’s reputation and financial results.

Future results will depend in part on the performance and capabilities of third parties with whom the company has commercial relationships. The company has commercial relationships with suppliers, channel partners and other parties that have complementary products, services or skills. Future results will depend, in part, on the performance and capabilities of these third parties, on the ability of external suppliers to deliver components at reasonable prices and in a timely manner, and on the financial condition of, and the company’s relationship with, distributors and other indirect channel partners.

More than half of the company’s revenue is derived from operations outside of the United States, and the company is subject to the risks of doing business internationally. More than half of the company’s total revenue is derived from international operations. The risks of doing business internationally include foreign currency exchange rate fluctuations, currency restrictions and devaluations, changes in political or economic conditions, trade protection measures, import or export licensing requirements, multiple and possibly overlapping and conflicting tax laws, new tax legislation, weaker intellectual property protections in some jurisdictions and additional legal and regulatory compliance requirements applicable to businesses that operate internationally, including the Foreign Corrupt Practices Act and non-U.S. laws and regulations.

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Financial market conditions may inhibit the company’s ability to access capital and credit markets to address its liquidity needs. Financial market conditions may impact the company’s ability to borrow, to refinance its outstanding debt, or to utilize surety bonds, letters of credit, foreign exchange derivatives and other financial instruments the company uses to conduct its business. Although the company primarily uses cash on hand to address its liquidity needs, its ability to do so assumes that its operations will continue to generate sufficient cash.

The company’s services or products may infringe upon the intellectual property rights of others. The company cannot be sure that its services and products do not infringe on the intellectual property rights of third parties, and it may have infringement claims asserted against it or against its clients. These claims could cost the company money, prevent it from offering some services or products, or damage its reputation.

Pending litigation could affect the company’s results of operations or cash flow. There are various lawsuits, claims, investigations and proceedings that have been brought or asserted against the company, which arise in the ordinary course of business, including actions with respect to commercial and government contracts, labor and employment, employee benefits, environmental matters, intellectual property and non-income tax and employment compensation in Brazil. See Note 14 of the Notes to Consolidated Financial Statements for more information on litigation. The company believes that it has valid defenses with respect to legal matters pending against it. Litigation is inherently unpredictable, however, and it is possible that the company’s results of operations or cash flow could be materially affected in any particular period by the resolution of one or more of the legal matters pending against it.

The company could face business and financial risk in implementing future dispositions or acquisitions. As part of the company’s business strategy, it may from time to time consider disposing of existing technologies, products and businesses that may no longer be in alignment with its strategic direction, including transactions of a material size, or acquiring complementary technologies, products and businesses. Potential risks with respect to dispositions include difficulty finding buyers or alternative exit strategies on acceptable terms in a timely manner; potential loss of employees or clients; dispositions at unfavorable prices or on unfavorable terms, including relating to retained liabilities; and post closing indemnity claims. Any acquisitions may result in the incurrence of substantial additional indebtedness or contingent liabilities. Acquisitions could also result in potentially dilutive issuances of equity securities and an increase in amortization expenses related to intangible assets. Additional potential risks associated with acquisitions include integration difficulties; difficulties in maintaining or enhancing the profitability of any acquired business; risks of entering markets in which the company has no or limited prior experience; potential loss of employees or failure to maintain or renew any contracts of any acquired business; and expenses of any undiscovered or potential liabilities of the acquired product or business, including relating to employee benefits contribution obligations or environmental requirements. Further, with respect to both dispositions and acquisitions, management’s attention could be diverted from other business concerns. Adverse credit conditions could also affect the company’s ability to consummate dispositions or acquisitions. The risks associated with dispositions and acquisitions could have a material adverse effect upon the company’s business, financial condition and results of operations. There can be no assurance that the company will be successful in consummating future dispositions or acquisitions on favorable terms or at all.

The company believes that its ability to use its U.S. federal net operating loss carryforwards and other tax attributes may be limited. Internal Revenue Code Sections 382 and 383 provide annual limitations with respect to the ability of a corporation to utilize its net operating loss (as well as certain built-in losses) and tax credit carryforwards, respectively (Tax Attributes), against future U.S. taxable income, if the corporation experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. The company regularly monitors ownership changes (as calculated for purposes of Section 382). Based on currently available information, the company believes that an ownership change may have occurred during 2011, for purposes of the rules described above. However, the final determination of whether an ownership change has occurred is currently subject to a number of discretionary tax rules and final reporting by shareholders. Moreover, any future transaction or transactions and the timing of such transaction or transactions could trigger additional ownership changes under Section 382.

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In the event of an ownership change, utilization of the company’s Tax Attributes will be subject to an estimated overall annual limitation determined in part by multiplying the total adjusted aggregate market value of the company’s common stock immediately preceding the ownership change by the applicable long-term tax-exempt rate, possibly subject to increase based on the built-in gain, if any, in the company’s assets at the time of the ownership change. Any unused annual limitation may be carried over to later years. Future U.S. taxable income may not be fully offset by existing Tax Attributes, if such income exceeds the company’s annual limitation. However, based on presently available information and the existence of tax planning strategies, currently the company does not expect to incur a cash tax liability in the near term. The company maintains a full valuation allowance against the realization of all U.S. as well as certain foreign deferred tax assets in excess of deferred tax liabilities.

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Unisys Corporation

Consolidated Financial Statements

Consolidated Statements of Income

See notes to consolidated financial statements.

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Unisys Corporation

Consolidated Balance Sheets

See notes to consolidated financial statements.

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Unisys Corporation

Consolidated Statements of Cash Flows

See notes to consolidated financial statements.

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Unisys Corporation

Consolidated Statements of Equity (Deficit)