<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d89157e10-k.txt
<DESCRIPTION>FORM 10-K FOR FISCAL YEAR END APRIL 30, 2001
<TEXT>
<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC. 20549

                          ----------------------------
                                    FORM 10-K
                          ----------------------------

Mark One      Annual Report Pursuant to Section 13 or 15(d) of the
[X]                      Securities Exchange Act of 1934
                    FOR THE FISCAL YEAR ENDED APRIL 30, 2001
                                       OR
[ ]         Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934
                 For the transition period from _____ to _____.

                         Commission file number 0-19349

                             SOFTWARE SPECTRUM, INC.
             (Exact name of registrant as specified in its charter)

            Texas                                      75-1878002
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

                               2140 MERRITT DRIVE,
                                 GARLAND, TEXAS
                                      75041
                    (Address of principal executive offices)
                                   (Zip Code)

                                  972-840-6600
              (Registrant's telephone number, including area code)

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     Common Stock, par value $.01 per share
                                (Title of Class)

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

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

         The aggregate market value on July 16, 2001 of the Registrant's voting
securities held by non-affiliates was $24,764,045.

         At July 16, 2001, the Registrant had outstanding 3,210,088 shares of
Common Stock, par value $.01 per share.

                       DOCUMENTS INCORPORATED BY REFERENCE

         There is incorporated by reference in Part III of this Annual Report on
Form 10-K certain of the information contained in the registrant's proxy
statement for its annual meeting of shareholders to be held September 20, 2001,
which will be filed by the registrant within 120 days after April 30, 2001.

================================================================================

<PAGE>   2






                                     PART I

ITEM 1. BUSINESS

         Software Spectrum ("the Company") is a global business-to-business
software services provider with sales locations, operations and contact centers
located in North America, Europe and Asia/Pacific. The Company sells personal
computer ("PC") software through volume licensing and maintenance ("VLM")
agreements, or right-to-copy arrangements, and full-packaged software products.
In addition, the Company provides contact center solutions to software
publishers, Internet service providers, original equipment manufacturers and
other organizations. The Company has established supply arrangements with major
personal computer software publishers, including Microsoft, IBM/Lotus, Adobe
Systems, Symantec, Novell and McAfee. The Company markets software titles for
IBM, IBM-compatible and Macintosh personal computers, including software for all
major operating systems such as Windows 98, Windows NT, Windows 2000, Linux and
Novell Netware.

         The Company was incorporated under the laws of the State of Texas in
April 1983. The Company's principal facilities and its executive offices are
located at 2140 Merritt Drive, Garland, Texas 75041, and its telephone number at
that location is (972) 840-6600. Except where the context otherwise requires,
the term "Company" as used herein includes Software Spectrum, Inc. and its
subsidiaries.

COMPANY OVERVIEW

         The Company is a global business-to-business software services provider
with sales locations, operations and contact centers located in North America,
Europe and Asia/Pacific. The Company sells PC software through volume licensing
and maintenance agreements, or right-to-copy arrangements, and full-packaged
software products. In addition, the Company provides contact center solutions to
software publishers, Internet service providers, original equipment
manufacturers and other organizations. The Company's strategy is to leverage its
global infrastructure to provide a high level of customer service, to maintain a
cost-efficient operating structure and to grow its product and contact services
businesses. The Company controls its costs by centralizing its administrative,
customer service and contact services operations while utilizing a
geographically dispersed field sales force strategically located in major
business markets worldwide. The majority of the Company's revenues are derived
from sales to large organizations, including Fortune 500 and Global 500
companies, as well as thousands of mid-sized customers from every industry.

         The Company derives revenues from two primary business lines, which
consist of product services and contact services. For financial information
concerning the Company's two business segments and the Company's foreign and
domestic operations, see Notes to Consolidated Financial Statements, Note J -
Business Segments and Foreign Operations.

         The largest component of the Company's business is providing
third-party personal computer software, licenses and related services to large
organizations, including companies in the Fortune 500 and Global 500. The
Company concentrates on building and expanding these relationships through
personal sales contacts made throughout major global computing markets. The
Company maintains a sales force which focuses on the software licensing and
distribution needs of its larger customers and serves mid-sized customers
through a combined field sales and outbound telephone-based sales effort.
Through its strategically located, centralized operations centers in North
America, Europe and Asia/Pacific, the Company supports the global marketing
efforts of its sales force.

         The Company's Internet Web site, www.softwarespectrum.com, includes an
e-commerce business center, "My Account Center" ("Account Center"), which helps
customers meet their total procurement, asset management, reporting, standards
management and order tracking needs. The Account Center also provides customers
the option of obtaining their software electronically. In addition, the Company
partners with its customers on e-procurement platform implementations with
providers such as Ariba and Commerce One. In conjunction with its electronic
business-to-business Web tool, the Company maintains headquarters-based sales
representatives to






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facilitate purchases and self-help services by the Company's customers over the
Internet. See "Sales and Marketing."

         Software Spectrum provides contact services through its contact centers
located in the United States and Ireland. These services are utilized by
software publishers, Internet service providers, original equipment
manufacturers and other businesses that desire to outsource their various forms
of contact services. The Company employed over 1,100 technical support analysts
and other contact services personnel as of April 30, 2001, including a dedicated
sales force.

         The Company adapts its product-related services to specific customer
requests, consults with customers on developing strategies to efficiently
acquire and manage the customer's investment in distributed computing software
and manages the accurate and timely delivery of products. The Company provides
its customers with information, advice and assistance through its marketing,
sales and technical staff on the wide range of software procurement choices
available. For customers electing to standardize desktop software applications
or otherwise take advantage of right-to-copy arrangements, the Company provides
volume licensing and maintenance agreement services and support. Under VLM
agreements, the Company acts as a designated service provider to sell software
licensing rights that permit customers to make copies of a publisher's software
program from a master disk and distribute this software within a customer's
organization for a fee per copy made. Maintenance agreements entitle customers
to all updates and upgrades of covered products during the term of the
Agreement, typically two or three years following the software purchase. By
utilizing VLM agreements, customers are able to consolidate their worldwide
purchases and acquire software under a single master agreement for a given
publisher from a global supplier such as the Company. An increasingly popular
VLM program involves enterprise-wide licensing agreements which give the
customer the right to use a particular suite of products offered by a publisher
on all desktops across its enterprise. The Company's licensing consultants can
assist customers in selecting the most advantageous form of licensing available
based on specific needs or constraints. Among its other services, the Company
offers on-site consultants for large corporations, software selection
assistance, software asset management and determination of price and
availability of hard-to-find software products.

         The Company serves an important role in the software industry by
providing a service-oriented and cost-effective means for software publishers to
market, sell, distribute and provide support for their products. The services
provided by the Company assist publishers by building product awareness,
marketing products directly on behalf of publishers to businesses and other
organizations, and providing additional technical support related to those
software products. The Company is also instrumental in the selection, design and
implementation of VLM programs for its customers. The Company believes that
maintaining its relationships with major publishers is important to the
Company's future growth and profitability. The Company will often coordinate
product introductions and marketing programs with publishers, which may involve
joint regional product seminars and cross-selling of selected complementary
products. Due to its volume of purchases, the Company believes it is able to
obtain favorable pricing, avail itself of marketing funds provided by major
publishers and work closely with publisher personnel on various marketing and
selling matters such as the introduction of new products, programs and related
service opportunities.

         The Company continues to sell a significant amount of software to its
customers through VLM agreements. For the year ended April 30, 2001 ("fiscal
2001"), sales through VLM agreements represented approximately 87% of software
sales of the Company, compared to 87% and 83% of software sales for the years
ended April 30, 2000 ("fiscal 2000") and April 30, 1999 ("fiscal 1999"),
respectively. Since individual software packages and documentation may not be
provided to each user, and due to volume pricing incentives and lower
distribution costs, customers utilizing VLM agreements can purchase licenses for
software at a lower cost than by purchasing individual shrink-wrapped software
packages. In general, the Company receives lower gross margins, as a percent of
sales, on sales made through VLM agreements. Lower gross margins are partially
offset by lower operating costs associated with such agreements.

         In May 2000, the Company announced a plan to exit its professional
services business. In accordance with this plan, ten of the Company's sixteen
professional services sites were closed effective May 31, 2000. The Company sold
its three





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Asia/Pacific sites effective July 31, 2000 and its three remaining North
American sites effective August 31, 2000. In addition, the Company sold its
Customer Relationship Management business effective December 5, 2000.

GLOBAL OPERATIONS

         Under VLM agreements, multinational customers can consolidate their
worldwide volume software purchases under a single master agreement for a given
publisher. The Company's ability to sell software globally through these
programs is a key factor in its global expansion, which began in fiscal 1993.

         The Company's North American operations are based in Dallas, Texas. The
Company has major product and contact centers located in Dallas, Texas and
Spokane, Washington and a contact center in Tampa, Florida. The Company's
European sales headquarters is located in The Hague, The Netherlands and its
operations center is located in Dublin, Ireland. The Company also has sales
representatives in Finland, Italy, Sweden, the United Kingdom, France and
Germany. The Company's Asia/Pacific headquarters is located in Sydney,
Australia. The Company also has sales offices in Australia, New Zealand,
Singapore and Hong Kong.

         The Company participates in a joint venture in Japan, named
Uchida-Spectrum, Inc., with Uchida-Yoko Co., Ltd. and Microsoft, Inc. Through
this joint venture, in which the Company owns a 43% equity interest, the Company
sells software products and provides technology services to customers in Japan.

         With centralized operations centers in North America, Europe and
Asia/Pacific, the Company is able to serve the major computing technology
markets around the world. Today, Software Spectrum provides software or
fulfillment services to customers located in over 100 countries, provides
contact services in eight languages, invoices customers in many local currencies
and provides consolidated worldwide reporting for its customers.

PRODUCT SERVICES

Licensing, Procurement and Deployment Services

         The Company's customers can purchase software applications in a number
of different ways. VLM agreements, or right-to-copy agreements, allow a customer
either to purchase a license for each user in a transaction-based process or
track and periodically report its software copies, paying a license fee for each
copy made. The Company sells, supports and services the various VLM arrangements
currently utilized by software publishers. For customers, the overall cost of
using one of these methods of acquiring personal computer software may be
substantially less than purchasing shrink-wrapped full-packaged software
products.

         Since each software publisher has chosen a different set of procedures
for implementing VLM agreements, businesses are faced with a significant
challenge to sort through all the alternatives and procedures to ensure that
they are utilizing the appropriate agreements, complying with the publishers'
licensing terms and properly reporting and paying for their software licenses.
Certain publishers offer licensing programs that reduce the reporting burden of
customers and the Company by requiring annual payments over a two to three year
term, provided the customer agrees to standardize certain applications within
its organization. In order to address the wide range of procurement choices
available to its customers, the Company provides information, analysis, advice
and assistance to its customers relating to their procurement decisions and
negotiations through its team of licensing consultants as well as by means of
the Company's marketing and sales staff and through its publications. See
"Publications" and "Sales and Marketing."

         Increasingly, large corporate customers are electing to standardize
desktop applications and coordinate their enterprise-wide personal computer
management responsibilities. In response to this trend, publishers have
developed enterprise-wide VLM agreements, which simplify the terms, conditions
and administration of VLM arrangements and provide the customer with more
predictable annual costs. The Company works closely with its customers to
educate them regarding the options available under VLM agreements and has
developed the systems needed to provide the global integration and reporting
required under these programs.




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         Recently, Microsoft announced a change to its licensing programs, to be
effective October 1, 2001, whereby new enterprise-wide licensing arrangements
will be priced, billed and collected directly by Microsoft. The Company will
continue to provide sales and support services related to these transactions and
will earn a service fee directly from Microsoft for these activities.
Enterprise-wide licensing agreements in effect prior to October 1, 2001, which
generally have terms of three years from the date such agreements are signed,
and Microsoft's other licensing programs will not be impacted.

         The Company's licensing consultants are software managers certified by
the Software and Information Industry Association, that are trained to provide
customers with advice in the evaluation of the various VLM programs offered by
publishers. In addition to the Company's extensive experience in dealing with
VLM agreements, it has continued to invest in technology-based systems to
support the special requirements necessary to service VLM agreements for its
customers. The Company has developed a custom, client/server-based system which
provides individualized customer contract management data, assists customers in
complying with VLM agreements and provides customers with necessary reporting
mechanisms.

         To help customers develop or improve their software management
programs, the Company developed a software management process and corresponding
implementation services that allow customers to effectively utilize the benefits
associated with VLM programs. The Company provides its customers with a
methodology for evaluating the individual customer's personal computer software
management process and analyzing issues in implementing the VLM programs offered
by various publishers. The service options available from the Company are
designed to assist the customer in implementing its software management plan,
including internal distribution services, communicating with end-users,
reporting and compliance under VLM agreements.

         Most of the Company's products are ordered by the customer's
procurement or information systems department and may be billed to the
department of the end-user, which may be located at a different site than the
procurement or information systems department. The Company provides customers,
upon request, open-order status and purchase activity reports formatted to each
customer's specifications. The Company has also enabled its customers to obtain
this information directly from the Company's Web site via its online Account
Center. The majority of the Company's customers now status their orders via this
Internet tool. Also, customers can submit orders or other data to the Company
from their computer systems via the Company's electronic data interchange
("EDI") capabilities. EDI and online Web order placement improve order accuracy
and reduce administrative costs for corporate customers and the Company.

         A number of customers who have elected to purchase software licenses
through VLM agreements have also purchased software maintenance, which allows
customers to receive new versions, upgrades or updates of software products
released during the maintenance period in exchange for a specified annual fee,
which may be paid in monthly, quarterly or annual installments. Upgrades and
updates are revisions to previously published software that improve or enhance
certain features of the software and/or correct errors found in previous
versions. Customers that have elected not to purchase maintenance agreements are
still able to upgrade multiple units of specific products through the Company
for a separate fee.

Electronic Software Distribution

         Electronic software distribution ("ESD") supports the fast, convenient
delivery of software products between businesses via electronic links such as
the Internet. The Company currently delivers a limited amount of software in
this manner and intends to continue to participate in this method of
distribution as demand for this service by large organizations emerges and as
communication technology improvements enable this form of ESD to become more
widely used.

E-procurement

         The Company participates in the electronic procurement arena in two
primary ways: through its online Account Center and through its Electronic
Business-to-Business Partner Program ("e-B2B Partner Program") in which the
Company partners with e-procurement providers, such as Ariba and Commerce One.




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         The Company's online Account Center contains an Internet-based suite of
tools which enables customers to manage their software procurement. For most of
its larger customers, the Company creates customized electronic product catalogs
containing product information and pricing. These catalogs are accessed through
search engine functionality, which enables customers to quickly locate products
they need. Customers are also able to status open orders and obtain certain
real-time standard reports online. The Account Center also provides tools which
allow customers to restrict purchasing only to pre-approved products or allow an
administrator at a customer location to give users within that organization
access to the Account Center, but restrict the level of their activity and the
features and options available to them. These e-procurement tools help customers
control costs and potentially eliminate the need for enterprise-wide
e-procurement systems.

         Under the e-B2B Partner Program, the Company supports customers'
implementations of the various e-procurement platforms in an effort to
streamline procurement processes and improve operational efficiencies. The
Company was the first among its competitors to achieve the "Ariba Ready"
distinction, an award which certifies an organization's e-commerce expertise,
and has served as an advisor to the leading e-procurement organizations over the
past year.

Publications

         The Company's online customer magazine, In Touch, provides new product
information and case studies from existing customers who are implementing the
latest products and technologies from the leading software publishers worldwide
and offers the latest news and commentary on industry trends and Company
sponsored seminars and other technology-related events.

         The Company prepares and distributes an annual publication which
includes in-depth analysis of various product offerings called the Licensing and
Software Management Guide. This publication provides comprehensive information
on the many facets of software licensing. The Licensing and Software Management
Guide provides the purchasing requirements and qualification restrictions of the
numerous VLM publisher programs. Issues such as concurrent licensing and copying
software on home or laptop computers are identified. Because of the potential
savings a corporation can realize by utilizing alternative procurement methods,
customers have expressed a significant amount of interest in this publication
and it has been made available online.

         The Company's online Account Center contains company news and
information designed to educate customers about the Company's areas of
expertise, its products (including third-party reviews) and services, the
publishers represented by the Company and the latest trends in the industry. The
Company also provides information through various Company publications. A
portion of the marketing funds provided to the Company by publishers is used to
offset the Company's cost of producing these publications. The Company publishes
newsletters, service and product brochures and product catalogs and also
provides other timely information coincident with major product releases.

CONTACT SERVICES

         The Company provides telephone and Internet contact services on behalf
of software publishers, Internet service providers, original equipment
manufacturers and other organizations. Services are provided through the
Company's facilities in Dallas, Texas; Spokane, Washington; Tampa, Florida, and
Dublin, Ireland. The Company's commitment to management strength, technology and
service is critical in meeting the needs of its clients.

         The Company's technical support services cover a number of
technologies, including desktop applications and operating systems and network
operating systems. The staff in the Company's contact centers are experienced in
over fifty major personal computer software applications and can provide support
for software products running on most major personal computer operating systems
and environments, including Windows 2000, Windows 98, Macintosh, Microsoft
Windows NT, Novell NetWare and other network operating systems.




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         The Company provides services using several different media including
telephone, e-mail and the Internet. The Company's contact centers employ
advanced technology that includes digital switching and skill-based call
routing. This technology enables the Company to optimize its call handling and
personnel scheduling, thereby increasing its efficiency and enhancing the
quality of the services it provides to its clients and their customers. The
Company maintains a series of online knowledge bases that support the contact
services representatives. In addition, contact services representatives are
typically able to access knowledge bases owned and maintained by the Company's
clients. The contact centers include large capacity file servers, multiple CD
ROM databases and other resources that enable the Company's contact services
personnel to recreate a customer's individual problem, develop a solution and
guide the customer through the solution on a step-by-step basis.

         The Company focuses on creating customized solutions that meet each
client's specialized needs while minimizing their total support costs. Each
account has a dedicated account management team, including an operations manager
and an account manager. The operations manager takes full responsibility for
tactical operations and is responsible for effective, ongoing communication with
the client. The account manager is responsible for facilitating all financial
discussions, completing monthly and quarterly business reviews and assisting
clients with account growth and development. The account management team works
together to explore ways to increase customer satisfaction and provide
additional value to the client.

         The Company's contact services representatives are monitored by a team
of professional quality specialists located at each domestic contact center.
Using criteria mutually developed by the Company and the client, the quality
assurance professionals monitor, evaluate and provide feedback to the
representatives on a regular basis. The quality assurance team analyzes quality
trends, reports potential areas of concern, identifies improvement opportunities
and assists management in capitalizing on these opportunities. In addition, the
Company's major clients also survey a statistically significant percentage of
customers to gain feedback on their customer service experiences. The results of
these surveys are reviewed regularly and used to enhance training and
development initiatives.

         The Company's ability to provide high quality technical support and
customer service solutions depends upon its success in recruiting, hiring and
training large numbers of skilled employees. Each contact services
representative is trained and certified internally for customer service skills
and knowledge of the client's specific product and/or service offerings prior to
interacting with the client's customers. The Company also provides ongoing
on-site and computer-based training to allow representatives to further enhance
their skills.

SALES AND MARKETING

         The Company sells and markets its product services to existing and
potential large customers through its account executives, customer service
representatives and its marketing and support staff, as well as its Internet
site. The Company organizes account management teams to serve and support each
of its customers' needs. Generally, each team consists of one account executive,
supported by technical, marketing, customer service and sales support personnel
at the Company's operations centers, as well as Web-based self-service
capabilities. The Company's contact services offerings are marketed and sold by
a dedicated team of account executives that focus exclusively on custom contact
services solutions for potential customers.

         In its product business, the Company assigns to account executives
specific accounts and/or a specific territory, which generally includes major
metropolitan areas in one or more countries, states or provinces. Account
executives market the overall services and advantages of using the Company as
the customer's preferred software and services supplier, and they concentrate on
generating new customer relationships, maintaining and improving existing
customer relationships and increasing the volume of software and services
provided to corporate customers. For national and global accounts, several
account executives may work with the customer in different parts of North
America, Europe and Asia/Pacific, coordinated by a designated national or global
account manager. The number of accounts handled by each account executive
depends on the relative size of the accounts and the level of service required
by each customer within the assigned territory.




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         Account executives work directly with senior and mid-level procurement
managers, IT managers and computer support managers of existing and potential
customers to identify the specific needs of each customer and to facilitate the
purchase of software products and services by the customer's organization.
Account executives maintain close contact with customers in order to provide
them with timely communications and assistance with any special or strategic
requests. Account executives are responsible for providing customers with useful
and relevant product information to assist the customer in its selection of
software available for the desired application, providing customers with
information and guidance on software procurement options including VLM
agreements, implementation and deployment of software under VLM agreements and
planning product presentations and seminars by representatives of the Company
and publishers.

         The Company's licensing consultants work with its customers to provide
advice and consultation on VLM programs and to produce detailed customer account
analysis and reporting. The Company also assigns a team of customer service
representatives to each product account. Customer service representatives, who
are based primarily at the Company's operations centers, handle all aspects of
the day-to-day customer account servicing, including common presale questions,
customer order placement, order status inquiries, requests for demonstration
products for evaluation and searches for hard-to-find products. They also help
customers perform many of these functions directly by guiding them through the
variety of options available on the Company's Web site. This structure enables
customer service representatives to develop close relationships with individuals
within the customer's organization and to better serve them by being familiar
with their account. By assigning a specific team of customer service
representatives to specific customers, the Company adds additional direct
contacts that reinforce customer relationships.

         To solicit software business from mid-sized organizations, the Company
utilizes a coordinated effort from field sales and outbound telephone-based
sales representatives. While product price and delivery terms are key factors in
mid-sized organizations, the Company also provides a broad range of VLM
agreement support and services to this category of customers. Initial contact
and sales are made typically through field sales or telephone inquiries. The
Company interfaces with smaller customers via outbound telephone inquiries as
well as Web-based self-service offerings.

         The Company has established relationships with many of the leading
electronic procurement companies including Ariba and Commerce One. These
e-procurement companies serve a broad base of businesses in many markets and
allow the Company to expand its customer base by opening new customer
relationships with little added expense.

         The Company sells its telephone and Internet-based contact services
through a dedicated sales force which focuses on the types of organizations who
most often require such services. Software publishers typically outsource some
or all of their telephone support on some portion of their product offerings,
which allows the Company to leverage its existing relationships with software
publishers. The Company's market for contact services also extends to a number
of other organizations, including Internet service providers and original
equipment manufacturers.

SUPPORT SYSTEMS

         The Company has developed certain proprietary support systems that
facilitate the delivery of products and services to its customers and has
invested in technology-based systems to support the special requirements
necessary to service VLM agreements for its customers. SOLO, a custom,
client/server-based system, provides individualized contract management data,
assists customers in complying with the terms of their VLM agreements and
provides customers with necessary reporting mechanisms. Using individualized
data in SOLO, in conjunction with the Company's contract management database,
the Company's representatives can guide a customer through the various
purchasing options and assist in administering VLM agreements. SOLO also
provides the Company's customer service representatives with a customer profile,
account status, order status and product pricing and availability details.




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PRODUCTS AND DISTRIBUTION

         The software products offered by the Company include major business
programs such as spreadsheet, word processing, electronic mail, groupware,
database, and graphics, as well as operating systems, utilities and languages.
For the fiscal year ended April 30, 2001, the top 20 software titles sold by the
Company represented approximately 75% of the Company's net software sales.

         In North America, the Company has outsourced substantially all of the
fulfillment of shrink-wrapped software for its customers to Ingram Micro, Inc.,
a leading technology distributor. Under this arrangement, Ingram Micro provides
distribution services for product purchased directly from Ingram Micro as well
as for odd and hard to find product purchased elsewhere by the Company. The
agreement with Ingram Micro extends through 2001 and is automatically extended
for two additional years unless terminated.

         Outside of North America, the Company uses the services of distributors
or publishers to ship shrink-wrapped products directly to its customers, usually
the same day the Company receives the order. As of April 30, 2001, the Company
did not have a significant order backlog.

CUSTOMERS

         In fiscal 2001, the Company handled more than 9,000 active customer
accounts. The Company's customer base includes corporations, government
agencies, educational institutions, non-profit organizations and other business
entities. Sales contracts with large customers for the procurement of products
generally cover a one to three year period subject to the customers' rights to
terminate the contract upon notice. These contracts usually include provisions
regarding price, availability, payment terms and return policies. Standard
payment terms with the Company's customers are net 30 days from the date of
invoice or net 10 days in the case of summary periodic billings to customers. In
fiscal 2001, no single customer represented more than 5% of the Company's
revenues, and the Company's customer base included approximately 220 of the
calendar year 2000 Fortune 500 companies and approximately 190 of the Fortune
Global 500 companies. The Company does not believe that the loss of any single
customer would have a material adverse effect on its revenues.

         The Company's contact services business is currently concentrated among
two key customers. Loss of either of these customers could have a material
adverse effect on the Company's profitability.

VENDORS

         The Company's software sales are derived from products purchased from
publishers and distributors. The decision whether to buy products directly from
publishers or through distributors is determined on a vendor-by-vendor basis
based on publisher requirements, cost, availability, return privileges and
demand for a particular product. For fiscal 2001, approximately 89% of the
Company's product sales represented products purchased from its ten largest
publishers. For the fiscal years ended April 30, 2001 and 2000, products from
Microsoft accounted for approximately 68% and 66% of net software sales,
respectively, and products from IBM/Lotus accounted for approximately 10% and
12% of net software sales, respectively.

         The Company has contractual relationships with all its major vendors
covering price, payment terms and return privileges. These contracts are
non-exclusive and are generally terminable by either party without cause upon 30
to 60 days notice. The Company's contracts with its major vendors are generally
for one or two year terms, and the majority contain no provision for automatic
renewal.

         Publisher contracts generally permit the Company to submit adjustment
reports for licensing and maintenance transactions within a certain time period
after the transaction is reported. Such contracts do not typically require the
Company to ensure end-user compliance with its publishers' licensing and
copyright or patent right protection provisions. Certain of the Company's
contracts with vendors provide for early payment discounts. Under the terms of
its vendor contracts, the Company is not generally required to meet any minimum
purchase or sales requirements, except to the extent that the Company's level of
purchases or sales may affect the amount or availability of financial
incentives, advertising allowances and marketing funds. The reduction in amount,




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discontinuance of or the Company's inability to meet requirements established by
vendors for achieving financial incentives, advertising allowances and marketing
funds could have an adverse effect on the Company's business and financial
results.

COMPETITION

         The personal computer software market is intensely competitive. With
respect to its product services business, the Company faces competition from a
wide variety of sources, including "software-only" resellers, hardware resellers
and manufacturers and large systems integrators. Current competitors from the
software-only reseller category would include Corporate Software, ASAP Software
and Softwarehouse International. The Company believes that its global presence
and capabilities, VLM expertise, services and systems that support the Company's
business, including Internet services, and knowledgeable, industry-experienced
personnel serve to distinguish it from its competitors.

         Competitors also include hardware resellers and manufacturers. These
companies compete in the large and mid-size organization markets with marketing
efforts to provide customers with software and hardware services. Such
competitors include Dell Computer Corporation and Compaq Computer Corporation,
hardware manufacturers that also sell software, and systems integrators such as
Compucom Systems, Inc. Many of these companies do have a global presence. The
Company believes its VLM expertise and services, software-focused solutions,
custom computing systems specifically designed to support the Company's business
and knowledgeable industry-experienced personnel are differentiating factors in
this group of competitors.

         In the global contact services market, the Company competes with a
variety of companies including Convergys Corporation, TeleTech Holdings, Inc.,
RMH Teleservices, Inc., SITEL Corporation, Stream International, Inc. and Sykes
Enterprises Incorporated. The Company competes in this market based primarily on
the quality of services provided and cost. Many of the Company's competitors
have significantly greater financial resources than the Company. However, the
Company believes that its emphasis on training and quality programs, and its
focus on high customer satisfaction at a reasonable cost, allow the Company to
compete effectively in this highly competitive market. In order to compete
effectively in the contact services business, it will be necessary to continue
to invest in new technologies that increase customer satisfaction and allow
integrated telephone, self-help, chat and e-mail solutions. In addition,
businesses wishing to outsource their customer contact and support operations
are increasingly examining ways to reduce labor costs by outsourcing such
services outside of the United States.

         The manner in which personal computer software products are distributed
and sold is continually changing and new methods of distribution may emerge or
expand. Software publishers may intensify their efforts to sell their products
directly to end-users, including current and potential customers of the Company,
without utilizing services such as those provided by the Company. In the past,
direct sales from software publishers to end-users have not been significant,
although end-users have traditionally been able to purchase upgrades directly
from publishers. From time to time, some publishers have instituted programs for
the direct sale of large order quantities of software to major corporate
accounts, and the Company anticipates that these types of transactions will
continue to be used by various publishers in the future. The Company could be
adversely affected if major software publishers successfully implement or expand
programs for the direct sale of software through volume purchase agreements or
other arrangements intended to exclude the resale channel. The licensing program
changes recently announced by Microsoft are not expected to reduce the role of
the reseller channel in the sale of Microsoft products. The Company believes
that the total range of services it provides to its customers cannot be easily
substituted by publishers, particularly because publishers do not offer the
scope of services or product offerings required by most of the Company's
customers. However, there can be no assurance that publishers will not increase
their efforts to sell substantial quantities of software directly to end-users
without engaging the Company to provide value-added services. In addition, the
use of VLM agreements by organizations as a method to purchase software has
become widely accepted. Should publishers permit others to sell VLM agreements,
or should additional competitors develop the capabilities required to service
and support large licensing programs, the Company's competitive advantage could
be negatively impacted. If the resale channel's participation in VLM agreements
is reduced or eliminated, or if other methods of distribution of software become
common, the Company's business and financial results could be materially
adversely affected. The Company currently delivers a





                                       9
<PAGE>   11

limited amount of software through electronic software distribution and intends
to continue to participate in this method of software distribution as demand for
this service by large organizations emerges and as communications technology
improvements permit electronic software distribution to be made securely and
efficiently. The Company's continuing investment in e-procurement reflects the
Company's commitment to meeting the changing needs of its customers.

EMPLOYEES

         As of April 30, 2001, the Company had approximately 2,000 employees in
North America, Europe and Asia/Pacific. The Company has entered into
non-competition agreements and/or non-solicitation agreements with substantially
all of its sales personnel. None of the Company's employees are represented by a
union.

FORWARD-LOOKING INFORMATION

         The Company, or its representatives, from time to time may make or may
have made certain forward-looking statements, whether orally or in writing,
including without limitation statements made or to be made in this Annual Report
on Form 10-K, the Company's Quarterly Reports on Form 10-Q, information
contained in other filings with the Securities and Exchange Commission, press
releases and other public documents or statements. In addition, representatives
of the Company, from time to time, participate in speeches and calls with market
analysts, conferences with investors or potential investors in the Company's
securities and other meetings and conferences. Some of the information presented
at such speeches, calls, meetings and conferences may include forward-looking
statements. The Company uses words like "expects," "anticipates" or "believes"
to identify forward-looking statements.

         The Company wishes to ensure that all forward-looking statements are
accompanied by meaningful cautionary statements, so as to ensure to the fullest
extent possible the protections of the safe harbor established in the Private
Securities Litigation Reform Act of 1995. Accordingly, all forward-looking
statements are qualified in their entirety by reference to, and are accompanied
by, the following discussion of certain important factors that could cause
actual results to differ materially from those projected in such forward-looking
statements. The Company cautions the reader that this list of important factors
may not be exhaustive. The Company operates in rapidly changing businesses, and
new risk factors emerge from time to time. Management cannot predict every risk
factor, nor can it assess the impact, if any, of all such risk factors on the
Company's business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those projected in any
forward-looking statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results. Further, the Company
undertakes no obligation to update forward-looking statements after the date
they are made to conform the statements to actual results or changes in the
Company's expectations.

Reliance on Financial Incentives, Volume Discounts and Marketing Funds

         As part of its supply agreements with certain publishers and
distributors, the Company receives substantial incentives in the form of
rebates, volume purchase discounts, cooperative advertising funds and market
development funds. Under the new licensing model announced by Microsoft, to
become effective October 1, 2001, the Company will no longer receive these forms
of financial incentives on new enterprise-wide licensing agreements, but instead
will be paid fees for services performed under such agreements. Other publishers
have based their financial incentives on specific market segments and products.
If the Company's business model does not align with the objectives established
for these incentives or if software publishers further change, reduce or
discontinue these incentives, discounts or advertising allowances, the Company's
business and financial results could be materially adversely affected.

Dependence on Vendors

         A large percentage of the Company's sales are represented by popular
personal computer business software products from a small number of vendors. For
the year ended April 30, 2001, approximately 78% of the






                                       10
<PAGE>   12

Company's net software sales were derived from products published by Microsoft
and IBM/Lotus. Most of the Company's contracts with vendors are terminable by
either party, without cause, upon 30 to 60 days notice. The loss or significant
change in the Company's relationship with these vendors could have a material
adverse effect on the Company's business and financial results. Although the
Company believes the software products would be available from other parties,
the Company may have to obtain such products on terms that would likely
adversely affect its financial results.

Volume Licensing and Maintenance Agreements

         The Company serves as a designated services provider for VLM agreements
between many of its customers and major publishers of personal computer
software. VLM agreements are typically used by customers seeking to standardize
desktop software applications and, consequently, typically involve significant
quantities of unit sales for each customer. Although unit volume sales are
increased by the use of VLM agreements, generally lower gross margins are
realized on such sales as compared to sales of full-packaged software products.
Approximately 87% of the Company's product sales are made pursuant to VLM
agreements. The Company continues to experience an increase in the percentage of
sales made under enterprise-wide licensing agreements, which typically have
lower gross margins and administrative costs than other VLM programs. The
Company may continue to experience margin pressures due to these factors.

Economic Conditions and Geographic Expansion

         The Company's business is sensitive to the spending patterns of its
customers, which in turn are subject to prevailing economic and business
conditions. Due to current economic conditions, there has been a decrease in
spending for information technology by both existing and potential customers
over the past year. If customers and potential customers continue to decrease
their spending in this area, the Company's financial results could be adversely
affected. Further, sales to large corporations have been important to the
Company's results, and its future results are dependent on its continued success
with such customers. Sales outside of the United States accounted for
approximately 17% of the Company's revenues in fiscal 2001. The Company's future
growth and success depend on continued growth and success in international
markets. The success and profitability of the Company's international operations
are subject to numerous risks and uncertainties, including local economic and
labor conditions, unexpected changes in the regulatory environment, trade
protection measures and tax laws, currency exchange risks, political instability
and other risks of conducting business abroad.





                                       11
<PAGE>   13


Highly Competitive Environment; Pricing Competition

         The desktop technology marketplace is intensely competitive. The
Company faces competition from a wide variety of sources, including other
software resellers, hardware manufacturers and resellers, large system
integrators, software publishers, contact services providers, software
suppliers, personal computer retail stores (including superstores), mail order,
Internet and other discount business suppliers. Many of the Company's
competitors, particularly software publishers, have substantially greater
financial resources than the Company. Because of the intense competition within
the personal computer software channel, companies that compete in this market,
including the Company, are characterized by low gross and operating margins.
Consequently, the Company's profitability is highly dependent upon effective
cost and management controls.

New Developments and Rapid Technological Change; Retention of Qualified
Personnel

         The market for the Company's products and services is characterized by
rapidly changing technology, evolving industry standards and frequent
introductions of new products and services. The Company's future success will
depend in part on its ability to enhance existing services, to continue to
invest in rapidly changing technology and to offer new services on a timely
basis. Additionally, the Company's business results can be adversely affected by
disruptions in customer ordering patterns, the impact of new product releases
and changes in licensing programs.

         The growth and success of the Company's contact services business
depends largely upon its ability to attract, develop, motivate and retain
highly-skilled sales, customer service and technical employees in an industry
characterized by high employee turnover. If the Company is unable to attract and
retain sufficient numbers of highly-skilled sales, customer service and
technical employees, the Company's contact services business could be adversely
affected.

Changing Methods of Software Distribution

         Recently, Microsoft announced a change to its licensing programs, to be
effective October 1, 2001, whereby new enterprise-wide licensing arrangements
will be priced, billed and collected directly by Microsoft. The Company will
continue to provide sales and support services related to these transactions and
will earn a service fee directly from Microsoft for these activities.
Enterprise-wide licensing agreements in effect prior to October 1, 2001, which
generally have terms of three years from the date such agreements are signed,
and Microsoft's other licensing programs will not be impacted. The licensing
program changes will result in significantly lower revenues for the Company on
the affected transactions. For the year ended April 30, 2001, approximately
one-third of the Company's product sales were under Microsoft enterprise-wide
licensing agreements. The Company's ability to adjust to and compete under this
new model will be an important factor in its future success. In addition, all
aspects of the new model have not been finalized. Accordingly, the impact of the
new model on the Company's operating results cannot yet be fully assessed.

         The manner in which personal computer software products are distributed
and sold is continually changing, and new methods of distribution may continue
to emerge or expand. Software publishers may intensify their efforts to sell
their products directly to end-users, including current and potential customers
of the Company. Other products and methodologies for distributing software to
users may be introduced by publishers, present competitors or other third
parties. If personal computer software suppliers' participation in these
programs is reduced or eliminated, or if other methods of distribution of
software, which exclude the personal computer software resale channel, become
common, the Company's business and financial results could be materially
adversely affected.

Contact Services Agreements

         Most of the Company's key contact services contracts generate revenues
based upon the number of customer contacts received by the Company or the time
spent on such contacts. Consequently, the amount of revenues generated is
dependent upon the support and customer service needs of end-users. With respect
to agreements that






                                       12
<PAGE>   14

provide for pricing on a per-contact basis, the Company's profitability may be
adversely affected if the Company receives fewer support and customer service
requests than expected or the time spent in resolving inquiries is greater than
anticipated.

         In general, the Company's contact services contracts provide that the
contract may be terminated in whole or in part on short notice, in some cases
for convenience, or if the Company fails to meet specified performance criteria.
The Company's contact services business is currently concentrated among two key
customers. Accordingly, cancellation of, or a significant decrease in, the
services provided under the contracts with either of these customers could have
an adverse effect on the Company's profitability. In addition, the Company may
be required to expand its contact services operations to meet the demands of its
customers or obtain new business. Rapid changes to the size of the Company's
contact services operations and employee base involve significant costs,
including costs associated with employee hiring and training, the purchase of
additional workstations, equipment and technology and the establishment of
additional contact center facilities. Likewise, due to the lead time involved in
procuring and preparing additional capacity, it may be necessary for the Company
to commit to expansion facilities and incur related costs prior to obtaining the
corresponding new business.

Disputes and Legal Proceedings

         From time to time, the Company is subject to claims and disputes in the
course of its operations. Given the Company's low gross operating margins, an
adverse determination in a claim or dispute that is material to the Company
could have a material adverse effect on the Company's business or results of
operations. See "Item 3. Legal Proceedings."

ITEM 2. PROPERTIES

         The Company currently leases approximately 184,000 square feet of space
in Garland, Texas (a suburb in the Dallas/Forth Worth metroplex) which houses
its corporate headquarters, along with call centers for contact and product
services. The Garland leases have aggregate current monthly payments of
approximately $105,000 and remaining terms of four to six years. The Company
leases approximately 108,000 square feet of office space in Spokane, Washington
with current aggregate monthly payments of approximately $97,000. As of April
30, 2001, the Spokane leases had remaining terms of four years. The Company also
has a contact services center in Tampa, Florida. This facility consists of
approximately 98,500 square feet of space which is leased for approximately
$134,000 per month. The remaining term of the lease is approximately three
years. The Company leases approximately 73,000 square feet of space for an
additional contact services center in North Richland Hills, Texas (a suburb in
the Dallas/Fort Worth metroplex), which is currently unoccupied. The lease
provides for monthly rental payments of approximately $69,000 and has a
remaining term of approximately six years.

         With respect to its European-based operations, the Company currently
leases space for its operations center in Dublin, Ireland and its sales
headquarters in The Hague, The Netherlands. In Asia/Pacific, the Company leases
space for its Asia/Pacific headquarters in Sydney, Australia and maintains sales
offices in six other markets.

ITEM 3. LEGAL PROCEEDINGS

         In March 2000, the Company received notice from the Internal Revenue
Service ("IRS") alleging a tax deficiency for the year ended March 31, 1996. The
income adjustments asserted in the notice, approximately $1.3 million, relate to
certain payments made by the Company to its foreign subsidiaries. Similar
payments, approximating $7.7 million, were deducted in subsequent tax returns.
The Company believes that the tax returns for each of these years are
substantially correct as filed, and has contested the deficiency assertion
through the IRS appeals process. While the Company is prepared to litigate the
issues, it also recognizes the costs, risks and distractions inherent in
litigation. Accordingly, the Company has conducted settlement discussions with
the IRS regarding the alleged 1996 deficiency, but to-date, has not been
successful in resolving the claims.

         Although an out-of-court settlement cannot be assured, the Company and
the IRS continue to engage in ongoing discussions to resolve the 1996 alleged
deficiency. In the event that an agreement is reached for the 1996




                                       13
<PAGE>   15

tax year, there can be no assurance of a similar result for the subsequent
years, which are currently under audit. However, based on negotiations and
discussions to-date, the Company has accrued an estimate of $1.5 million,
including interest expense, to resolve the aforementioned issues for all
applicable tax years. While the Company does not expect that any additional
liabilities related to these matters would materially affect the Company's
consolidated financial position or results of operations, there can be no
assurance that the final resolution of this matter will not exceed this accrual
or that such excess amount, if any, would not have a material adverse effect on
the Company's financial position or results of operations.

         The Company is involved in various claims and legal actions arising in
the ordinary course of business. The ultimate disposition of these matters is
not expected to have a material adverse effect on the Company's financial
condition, results of operations or cash flows.

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

         No matter was submitted to a vote of the Company's shareholders during
the fourth quarter of the fiscal year ended April 30, 2001.

                                     PART II

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

         The Company's common stock is traded over the counter and is listed on
The NASDAQ Stock Market under the symbol SSPE. The following table sets forth
the range of high and low last reported sales prices for the Company's common
stock for the last eight fiscal quarters.

<Table>
<Caption>
     Fiscal Year 2001 Quarter Ended:                                 High              Low
                                                                  ---------         ---------
<S>                                                               <C>               <C>
     July 31                                                      $  18.19          $  12.13
     October 31                                                      15.50              7.63
     January 31                                                      10.75              6.06
     April 30                                                        12.75              9.50

     Fiscal Year 2000 Quarter Ended:
     July 31                                                      $  19.00          $  11.94
     October 31                                                      18.50             10.06
     January 31                                                      19.44              8.81
     April 30                                                        34.00             15.63
</Table>


         On July 16, 2001, the last reported sales price of the Company's common
stock as reported on The NASDAQ Stock Market was $11.95 per share. On July 16,
2001 there were 736 holders of record (representing approximately 2,000
beneficial owners) of the Company's common stock. The Company has never paid
cash dividends on its common stock. The Board of Directors presently intends to
retain all earnings for use in the Company's business and does not anticipate
paying cash dividends in the near term.

         On September 2, 1999 the Company issued 16,904 shares of the Company's
common stock in connection with the acquisition of Comptroller Technology, Inc.,
d/b/a Quinn, Reeder and Associates. The shares of common stock were issued to
the stockholders of Quinn, Reeder and Associates in a transaction that was
exempt from registration under section 4(2) of the Securities Act of 1933, as
amended, and the regulations promulgated thereunder.




                                       14
<PAGE>   16



ITEM 6. SELECTED FINANCIAL DATA

         The following selected consolidated financial data of the Company is
qualified by reference to, and should be read in conjunction with, the Company's
Consolidated Financial Statements and Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this document.

STATEMENT OF OPERATIONS DATA
(In thousands, except per share amounts)

<Table>
<Caption>
                                                                             Year Ended
                                                                              April 30,
                                                   ----------------------------------------------------------------
                                                      2001          2000         1999 (1)     1998(1)      1997 (1)
                                                   -----------  -----------  ------------ -----------   -----------
<S>                                                 <C>         <C>          <C>          <C>           <C>
Net sales                                           $1,213,283  $ 1,005,578  $   887,307  $   846,991   $   771,693
Gross margin                                            99,542       98,217       94,403       84,217        83,124
Operating income                                         8,964       13,988       18,782       12,461         6,688
Income from continuing operations                        2,837        6,686       10,754        5,205         1,820
Income per share from continuing operations
     Basic                                                 .81         1.70         2.53         1.21           .42
     Diluted                                               .81         1.69         2.52         1.20           .41
Weighted average shares outstanding
     Basic                                               3,487        3,934        4,244        4,318         4,314
     Diluted                                             3,492        3,963        4,273        4,351         4,415
</Table>

BALANCE SHEET DATA
(In thousands)

<Table>
<Caption>
                                                                              April 30,
                                                   ----------------------------------------------------------------
                                                      2001          2000         1999 (1)     1998(1)      1997 (1)
                                                   -----------  -----------  ------------ -----------   -----------
<S>                                                <C>          <C>          <C>          <C>           <C>
Working capital                                    $     4,221  $     9,468  $    22,249  $    18,526   $    39,068
Total assets                                           227,789      232,854      232,414      255,725       267,008
Total debt                                               3,800        7,863        8,626        8,206        37,370
Shareholders' equity                                    59,723       64,979       78,925       76,270        73,939
</Table>

(1)      Amounts have been reclassified to reflect the discontinuance of the
         Company's professional services operations.


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

OVERVIEW

         Software Spectrum ("the Company") is a global business-to-business
software services provider with sales locations, operations and contact centers
located in North America, Europe and Asia/Pacific. The Company sells personal
computer ("PC") software through volume licensing and maintenance ("VLM")
agreements, or right-to-copy arrangements, and full-packaged software products.
In addition, the Company provides contact center solutions to software
publishers, Internet service providers, original equipment manufacturers and
other organizations. Total sales have increased each year since the Company's
inception in 1983. Increases in sales of software have resulted from the
Company's market share growth, geographic expansion and strategic acquisitions.
Sales increases also reflect overall growth in the software industry. Contact
services revenue has fluctuated based upon contract requirements and needs of
the Company's primary customers in this business segment.



                                       15
<PAGE>   17

DISCONTINUED OPERATIONS

         In May 2000, the Company announced a plan to exit its professional
services business. In accordance with this plan, ten of the Company's sixteen
professional services sites were closed effective May 31, 2000. The Company sold
its three Asia/Pacific sites effective July 31, 2000 and its three remaining
North American sites effective August 31, 2000. The Company recorded an
estimated loss of $8.0 million on the disposition of the professional services
business, including related tax benefits of $3.2 million, during fiscal 2000 and
recorded an additional loss of $465,000, including related tax benefits of
$221,000 during fiscal 2001.

         The financial data related to the professional services business is
classified as discontinued operations for all periods presented.

RESULTS OF CONTINUING OPERATIONS

         The following table sets forth certain items from the Company's
Consolidated Statements of Operations expressed as a percentage of net sales
from continuing operations:

<Table>
<Caption>
                                                              Percentage of Net Sales
                                                              For Year Ended April 30,
                                                  --------------------------------------------
                                                     2001             2000             1999
                                                  ----------       ----------       ----------

<S>                                               <C>              <C>              <C>
Net sales                                              100.0%           100.0%           100.0%
Cost of sales                                           91.8             90.2             89.4
                                                  ----------       ----------       ----------
Gross margin                                             8.2              9.8             10.6
Selling, general and administrative expenses             6.6              7.1              7.5
Write-off of Asia/Pacific goodwill                        --               .3               --
Depreciation and amortization                             .9              1.0              1.0
                                                  ----------       ----------       ----------
Operating income                                          .7              1.4              2.1
Non-operating expense, net                                .2               .1               .2
                                                  ----------       ----------       ----------
Income before income taxes                                .5              1.3              1.9
Income tax expense                                        .3               .6               .7
                                                  ----------       ----------       ----------
Income from continuing operations                         .2%              .7%             1.2%
                                                  ==========       ==========       ==========
</Table>

         Fluctuations in foreign currencies against the U.S. dollar did not have
a significant effect on the Company's operating results for the periods
presented.

Fiscal 2001 Compared to Fiscal 2000

     Net sales from continuing operations increased approximately 21% in fiscal
2001 compared to fiscal 2000. Software sales for the year ended April 30, 2001
increased 24% over those for the year ended April 30, 2000, primarily due to the
Company's strong competitive position with global enterprises, the expansion of
the sales force throughout the year and the continued trend on the part of large
customers toward enterprise-wide licensing agreements. The Company serves as a
designated service provider for VLM agreements which are frequently used by
organizations seeking to standardize desktop software applications and,
consequently, may involve significant quantities of unit sales for each customer
at lower per-unit prices than full-packaged software products. Sales of software
through VLM agreements represented approximately 87% of software sales for both
the years ended April 30, 2001 and 2000. There is a continued trend on the part
of large customers toward enterprise-wide licensing arrangements which simplify
the administration of VLM agreements for customers who elect to standardize
desktop applications across their organizations.

     In May 2001, Microsoft announced a change to its licensing programs to be
effective October 1, 2001, whereby new enterprise-wide licensing arrangements
will be priced, billed and collected directly by Microsoft. The Company will
continue to provide sales and support services related to these transactions and
will earn a service






                                       16
<PAGE>   18


fee directly from Microsoft for these activities. The Company will continue to
realize software revenue from existing enterprise-wide agreements, which
generally have terms of three years, as well as from sales of software under
Microsoft's other licensing programs. The licensing program changes will result
in significantly lower revenues for the Company on the affected transactions,
but are not expected to significantly impact gross margin dollars. For the year
ended April 30, 2001, approximately one-third of the Company's product sales
were under Microsoft enterprise-wide licensing agreements.

     Due to current economic conditions, there has been a decrease in spending
for information technology by both existing and potential customers over the
past year. If customers and potential customers continue to decrease their
spending in this area, the Company's revenues could be adversely affected.

     Revenues derived from contact services (formerly referred to as support
services) decreased by 21% during fiscal 2001 compared to fiscal 2000. The
decrease was primarily attributable to the decision by one of the Company's
largest customers to reduce and realign call volumes outsourced to third
parties, which resulted in lower call volumes in the Company's Dallas and
Spokane call centers. The decline was partially offset by increased business in
the Company's Tampa call center, which opened in June 1999. Contact services
represented approximately 5% of the Company's overall sales for the year ended
April 30, 2001, and 7% of overall sales for the year ended April 30, 2000, and
such revenue generated approximately 14% and 16%, respectively, of the Company's
gross margin dollars. The Company expects that revenues and the percentage of
gross margin dollars provided by contact services will increase as the Company
continues to develop and expand this segment of its business.

     For the year ended April 30, 2001, sales outside the United States
increased 19% to $205 million, compared to sales of $173 million for the year
ended April 30, 2000. Sales in Europe increased 19% to $83 million while sales
in Asia/Pacific increased 9% to $52 million for the year ended April 30, 2001.
These increases over fiscal 2000 were primarily due to increased sales of
software under VLM agreements, including enterprise-wide licensing arrangements.

     Overall gross margin as a percentage of net sales was 8.2% and 9.8% for the
years ended April 30, 2001 and 2000, respectively. For the year ended April 30,
2001, gross margin on the sale of PC software declined to 7.4% as compared to
8.8% for the year ended April 30, 2000, primarily due to price competition and
the increasing percentage of sales of software through enterprise-wide licensing
agreements, which typically have lower gross margins and administrative costs
than traditional VLM arrangements. Gross margin percentages on sales of contact
services were 25% and 22% for the years ended April 30, 2001 and 2000,
respectively.

     The Company believes that gross margin percentages on sales of software may
continue to experience downward pressure if the volume of software product sales
by the Company through VLM agreements continues, if publishers respond to
continued market pressures by reducing financial incentives to resellers or if
the level of price competition continues. However, this potential decrease in
product gross margin percentages may be offset by anticipated increases in gross
margin dollars generated by contact services and service fees under the new
Microsoft model.

     Selling, general and administrative ("SG&A") expenses include the costs of
the Company's sales and marketing organization as well as purchasing,
distribution and administration costs. For the year ended April 30, 2001, SG&A
expenses, as a percentage of net sales, decreased to 6.6% as compared to 7.1%
for the year ended April 30, 2000. The decrease is primarily due to increased
sales in the product services area, as well as more frequent use of the
Company's electronic offerings. The Company remains focused on controlling
operating costs in both of its business lines.

     Depreciation and amortization for the year ended April 30, 2001 was $10.1
million compared to $10.3 million for the year ended April 30, 2000.

     Operating income for the year ended April 30, 2001 was $9.0 million,
compared to $14.0 million in fiscal 2000. The decrease of $5 million is
primarily due to lower contact services revenues, reduced gross margin
percentages on product services and approximately $1.3 million of nonrecurring
charges related to employee severance and excess capacity in the contact
services business, primarily related to the reduced call volumes in Spokane and
Dallas discussed above.




                                       17
<PAGE>   19

     In March 2000, the Company received notice from the Internal Revenue
Service ("IRS") alleging a tax deficiency for the year ended March 31, 1996. The
income adjustments asserted in the notice, approximately $1.3 million, relate to
certain payments made by the Company to its foreign subsidiaries. Similar
payments, approximating $7.7 million, were deducted in subsequent tax returns.
The Company believes that the tax returns for each of these years are
substantially correct as filed, and has contested the deficiency assertion
through the IRS appeals process. While the Company is prepared to litigate the
issues, it also recognizes the costs, risks and distractions inherent in
litigation. Accordingly, the Company has conducted settlement discussions with
the IRS regarding the alleged 1996 deficiency, but to-date, has not been
successful in resolving the claims.

     Although an out-of-court settlement cannot be assured, the Company and the
IRS continue to engage in ongoing discussions to resolve the 1996 alleged
deficiency. In the event that an agreement is reached for the 1996 tax year,
there can be no assurance of a similar result for the subsequent years, which
are currently under audit. However, based on negotiations and discussions
to-date, the Company has accrued an estimate of $1.5 million, including interest
expense, to resolve the aforementioned issues for all applicable tax years. This
accrual is included in other current liabilities in the Company's April 30, 2001
balance sheet and reduced earnings per share for fiscal 2001 by $.43. Based on
the information available, the Company does not expect that any additional
liability related to these matters would materially affect the Company's
consolidated financial position or results of operations.

     The Company's effective tax rate for the year ended April 30, 2001 was
approximately 59% as compared to approximately 50% for the year ended April 30,
2000. The increase in the Company's effective tax rate is due to the litigation
accrual, offset by the impact of international operations, including the
nondeductible write-off of goodwill in Asia/Pacific during fiscal 2000.

Fiscal 2000 Compared to Fiscal 1999

     Net sales from continuing operations increased approximately 13% in fiscal
2000 compared to fiscal 1999. Software sales for the year ended April 30, 2000
increased 12% over those for the year ended April 30, 1999, primarily due to
increased VLM sales in North America. Sales of software through VLM agreements
represented approximately 87% of software sales for the year ended April 30,
2000 compared to 83% for the year ended April 30, 1999.

     Revenues derived from contact services increased by 30% during fiscal 2000
compared to fiscal 1999. The increase was primarily attributable to increased
business in the Company's Tampa call center, which opened in June 1999, as well
as services provided in the Dallas and Spokane contact centers under a large
contract that began in the July 1998 quarter. Contact services represented
approximately 7% of the Company's overall sales for the year ended April 30,
2000, and 6% of overall sales for the year ended April 30, 1999 and such revenue
generated approximately 16% and 17%, respectively, of the Company's gross margin
dollars.

     For the year ended April 30, 2000, sales outside the United States
increased 15% to $173 million, compared to sales of $151 million for the year
ended April 30, 1999. Sales in Europe increased 7% to $70 million while sales in
Asia/Pacific increased 8% to $48 million for the year ended April 30, 2000.
These increases over 1999 were primarily due to increased sales of software
under VLM agreements, including enterprise-wide licensing arrangements.

     Overall gross margin as a percentage of net sales was 9.8% and 10.6% for
the years ended April 30, 2000 and 1999, respectively. Gross margins decreased
in both of the Company's business segments.

     For the year ended April 30, 2000, gross margin on the sale of PC software
declined to 8.8% as compared to 9.3% for the year ended April 30, 1999,
primarily due to price competition and the increasing percentage of sales of
software through VLM agreements. The Company generally realizes lower gross
margins as a percentage of net sales on sales of software through VLM
agreements, as compared to sales of full-packaged software products. Gross
margin percentages on sales of contact services were 22% and 31% for the years
ended April 30, 2000 and 1999, respectively. In July 1998, the Company began
providing support services under a large contract with a





                                       18
<PAGE>   20

software publisher involving the introduction of a new product. Initial high
call volumes and publisher incentives caused gross margins on this contract to
be uncharacteristically high during fiscal 1999.

         SG&A expenses, as a percentage of net sales, decreased to 7.1% for the
year ended April 30, 2000, as compared to 7.5% for the year ended April 30,
1999. The decrease is due to operating efficiencies realized in the product
services area due to increased sales and more frequent use of the Company's
electronic offerings.

         The Company periodically evaluates the carrying value of its long-lived
assets when events and circumstances warrant such review. The Company's
Asia/Pacific operations did not performed as expected, primarily in New Zealand,
and the Company determined the anticipated future undiscounted cash flows from
these operations did not support the carrying value of the related assets.
Accordingly, a nondeductible charge of approximately $2.6 million was recorded
against income from continuing operations in fiscal 2000 to write off goodwill
associated with continuing operations in the region.

         Depreciation and amortization for the year ended April 30, 2000
increased to $10.3 million compared to $9.0 million for the year ended April 30,
1999. The increase was due to additional depreciation on the higher level of
fixed assets utilized in the Company's contact services business in fiscal 2000.

         Operating income for the year ended April 30, 2000 was $14.0 million,
compared to $18.8 million in fiscal 1999. Excluding the aforementioned $2.6
million write-off of goodwill, the remaining decrease of $2.2 million was wholly
attributable to the uncharacteristically high margin achieved in contact
services during fiscal 1999. Operating income for contact services for fiscal
1999 was $6.6 million, exceeding fiscal 2000 by $3.2 million.

         The Company's effective tax rate for the year ended April 30, 2000 was
approximately 50% as compared to approximately 38% for the year ended April 30,
1999. The increase in the Company's effective tax rate reflected the impact of
international operations, including the nondeductible write-off of goodwill in
Asia/Pacific.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has a revolving credit facility (the "Facility") which
permits the Company to borrow up to $100 million, subject to availability under
its borrowing base. At April 30, 2001, the Company had $51 million of unused
borrowing availability under the Facility. The Facility, which expires in March
2002, bears interest at a variable rate (6.3% at April 30, 2001) and provides
for an annual commitment fee equal to a variable percentage of the unused line
of credit. The Facility, which is secured by accounts receivable and a pledge of
the stock of certain of the Company's subsidiaries, requires the Company to
maintain certain financial covenants and ratios and places limitations on
dividend payments, capital expenditures and certain other borrowings. The
Company intends to renew or replace the Facility prior to expiration.

         The Company's New Zealand subsidiary has a revolving credit facility
with a local bank totaling $3.8 million. Borrowings bear interest at a floating
rate (6.6% at April 30, 2001) and are secured by a $4 million letter of credit
issued by the Company. The facility expires in January 2002.

         In 1997, the Company implemented a stock repurchase program which
allows for the purchase of the Company's common stock from time to time in the
open market or through privately negotiated transactions. The Company funds such
purchases with excess cash or borrowings under the Company's credit facility. As
of July 16, 2001 the Company had repurchased 1,357,800 shares of common stock,
for a total of $19.5 million, under the stock repurchase program and has been
authorized by its Board of Directors to repurchase up to an additional $2.2
million of its common stock.

         On December 5, 2000, the Company sold all of the outstanding stock of
its customer relationship management ("CRM") subsidiary for proceeds of
approximately $6.1 million, consisting of $750,000 in cash and 137,600 shares of
common stock of the acquirer, a publicly traded corporation. Concurrent with the
sale, Software Spectrum also extinguished certain contingent purchase
obligations to the former owners of the CRM business for approximately $2.2
million. The gain realized on the sale was insignificant.




                                       19
<PAGE>   21

         As of April 30, 2001, the Company held 137,600 shares of the acquirer's
stock, offset by a 40,000 share temporary short position. The market price of
the stock was $25.10 per share. Subsequent to year end, the short position was
closed via an open market purchase, with minimal financial impact. The quoted
market price of the stock as of July 16, 2001 was $11.78 per share.

         The increase in trade accounts receivable and trade accounts payable
from April 30, 2000 to April 30, 2001 is due to increased sales and the timing
of collections of accounts receivable and payments to the Company's vendors. At
April 30, 2001 and 2000, accounts receivable represented approximately 56 and 48
days of historical sales, respectively. The increase in days sales outstanding
had minimal impact on the Company's cash flow, as it was primarily attributable
to a few large transactions involving special financing arrangements between the
Company, the customer and the vendor. The decrease in other current liabilities
from April 30, 2000 to April 30, 2001 is primarily due to obligations associated
with the discontinued professional services business.

         Net cash provided by continuing operating activities was $14.0 million
in fiscal 2001, as compared to $8.2 million of cash provided by continuing
operating activities in fiscal 2000. The increase in cash provided by continuing
operating activities is primarily due to the timing of collections of accounts
receivable and payments to the Company's vendors. During fiscal 1999, $28.1
million of cash was provided by continuing operating activities.

         The increase in furniture, equipment and leasehold improvements in
fiscal 2001 reflects approximately $5.8 million of capital expenditures relating
to the ongoing upgrade of the Company's computer systems. The increase in
furniture, equipment and leasehold improvements in fiscal 2000 reflects
approximately $10.7 million of capital expenditures relating to the ongoing
upgrade of the Company's computer systems and expansion of its contact center in
Tampa, Florida. The Company's capital expenditures for fiscal 2002 are expected
to be approximately $11 million, primarily expenditures to expand its contact
services business and to further upgrade and expand the Company's computer
systems.

         The Company expects that its cash requirements for fiscal 2002 will be
satisfied from cash flow from operations and borrowings under its credit
facility, which the Company intends to renew or replace prior to expiration.

MARKET RISK

         The Company is exposed to market risk from changes in foreign currency
exchange rates, security prices and interest rates which could affect its future
results of operations and financial condition. The Company manages its exposure
to these risks through its regular operating and financial activities. The
Company does not use derivative financial instruments for speculative or trading
purposes.

         The Company conducts business in many foreign currencies and is subject
to foreign currency exchange rate risk on cash flows related to sales, expenses
and financing transactions. The impacts of fluctuations in foreign currency
exchange rates on the Company's geographically diverse operations are often
varied and at times offsetting. The Company occasionally uses forward-exchange
contracts to hedge these exposures. In addition, the Company issues intercompany
advances to its foreign subsidiaries denominated in U.S. dollars, which expose
the foreign subsidiaries to the effect of changes in spot exchange rates of
their local currencies relative to the U.S. dollar. Based on the Company's
foreign currency exchange rate exposure for intercompany borrowings of
approximately $12 million at April 30, 2001, the maximum impact of a 10% adverse
change in currency rates would be a $1.2 million reduction to net income.

         The Company is exposed to securities price risk relating to its
marketable equity securities, and occasionally uses hedging activities to
decrease this risk. Based on the shares owned at April 30, 2001, a 10% decline
in the price of these securities would decrease net income by approximately
$152,000.

         The Company's credit arrangements expose it to fluctuations in interest
rates. At April 30, 2001, the Company's New Zealand subsidiary had $3.8 million
outstanding under its revolving credit facility, which




                                       20
<PAGE>   22

provides for interest to be paid based on variable rates. Based upon the
interest rates and borrowings at April 30, 2001, a 10% increase in interest
rates would not materially affect the Company's financial position, results of
operations or cash flows.

EURO CURRENCY ISSUES

     On January 1, 1999, 11 of the 15 member countries of the European Union
introduced a common legal currency called the Euro, which is intended to replace
the currently existing currencies of the participating countries by January
2002. The initial introduction of the Euro did not have a significant effect on
the Company's operations or financial results. The Company believes that its
internal systems are Euro capable and does not expect increased use of the Euro
to materially impact its financial condition, operating results or use of
derivative instruments.

FACTORS THAT MAY AFFECT FUTURE RESULTS

     Other than statements of historical fact, this Management's Discussion and
Analysis of Financial Condition and Results of Operations includes certain
statements of the Company that may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. The
Company uses words like "expects," "anticipates" or "believes" to identify
forward-looking statements. These statements include future market trends,
expectations concerning the Company's growth and profitability, expectations
regarding the economy and the software industry in general, key performance
indicators that impact the Company, statements regarding market risk and
statements included in the Euro Currency discussion above. In developing any
forward-looking statements, the Company makes a number of assumptions, including
expectations for continued market growth, supplier relationships, anticipated
revenue and gross margin levels, legal and regulatory proceedings and cost
savings and efficiencies. Although the Company believes these assumptions are
reasonable, no assurance can be given that they will prove correct. The
Company's ability to continue to grow its product and contact services
businesses and improve operational efficiencies will be key to its success in
the future. If the industry's or the Company's performance differs materially
from these assumptions or estimates, Software Spectrum's actual results could
vary significantly from the estimated performance reflected in any
forward-looking statements. Accordingly, forward-looking statements should not
be relied upon as a prediction of actual results. Further, the Company
undertakes no obligation to update forward-looking statements after the date
they are made to conform the statements to actual results or changes in the
Company's expectations. This report on Form 10-K for the Company's fiscal year
ended April 30, 2001 contains certain cautionary statements under
"Forward-Looking Information" that identify factors that could cause the
Company's actual results to differ materially from those in the forward-looking
statements in this discussion. All forward-looking statements in this discussion
are expressly qualified in their entirety by the cautionary statements in this
paragraph and under "Forward-Looking Information."

INFLATION

         The Company believes that inflation has not had a material impact on
its operations or liquidity to date.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Item 14(a).

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

         None





                                       21
<PAGE>   23




                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information relating to the current directors of the Company, and the
persons nominated for election as directors of the Company at its Annual Meeting
of Shareholders to be held on September 20, 2001, will appear in the Company's
definitive Proxy Statement relating to the Annual Meeting of Shareholders under
the caption "Election of Directors" to be filed pursuant to Regulation 14A. Such
information is incorporated herein by reference.

EXECUTIVE OFFICERS

         Officers are elected annually by the Board of Directors and serve until
their successors are elected and qualified. The current executive officers of
the Company are as follows:

<Table>
<Caption>
                                                                                 Officer
     Name                               Position                                  Since             Age
     ----                               --------                                  -----             ---

<S>                          <C>                                                <C>               <C>
     Judy C. Odom            Chairman and Chief Executive Officer                 1983              48
     Keith R. Coogan         President and Chief Operating Officer                1990              49
     Roger J. King           Executive Vice President
                             and President of Product Services                    1990              48
     John R. Sprague         President, Spectrum Contact Services                 2000              55
     Carrie C. Adams         Vice President of Human Resources                    2001              35
     James W. Brown          Vice President and Chief Financial Officer           1998              44
     Lorraine Castorina      Vice President of North American Sales               1998              54
     Robert D. Graham        Vice President of Strategic Relationships            1997              46
                             and General Counsel, Secretary
     Gary W. Hanson          Vice President of Marketing                          2000              43
     Robert B. Mercer        Vice President and Chief Information Officer         1994              49
     Lisa M. Stewart         Vice President of e-Services and
                             Customer Operations                                  1996              39
     Melissa D. Womack       Vice President of Business Development               2000              42
</Table>


         Judy C. Odom has served as Chief Executive Officer of the Company since
April 1988 and Chairman of the Board since July 1992. Ms. Odom is a co-founder
of the Company and has been a director of the Company since its inception in
1983. Ms. Odom served as Treasurer of the Company from 1983 to October 1990, as
Vice President from April 1987 to April 1988 and as President from April 1996 to
May 1998. Ms. Odom was employed by the national accounting firm of Grant
Thornton LLP from 1977 to 1985, where she last served as an audit partner. Ms.
Odom is a Certified Public Accountant.

         Keith R. Coogan was named President in May 1998 and has been Chief
Operating Officer since April 1996. Mr. Coogan has served as a director of the
Company since August 1998. Mr. Coogan served as Executive Vice President of the
Company from April 1996 to May 1998 and had been a Vice President of the Company
since October 1990. Mr. Coogan served as Secretary of the Company from May 1991
through July 1992 and as Treasurer from October 1990 to March 1992. From May
1989 until joining the Company, Mr. Coogan served as Vice President of Finance
for Leather Center Holdings, Inc., a privately held manufacturer and retailer of
leather furniture. From January 1986 to May 1989, he was Vice President and
Chief Financial Officer of Trinity Texas Corporation and Ward Hunt Investments,
both of which were privately held real estate sales and development
organizations. Mr. Coogan is a Certified Public Accountant.



                                       22
<PAGE>   24



         Roger J. King was named President of Product Services in July 2000 and
has been Executive Vice President of Sales and Marketing since May 1998. Mr.
King served as Vice President of Sales and Marketing from April 1996 through
April 1998 and as Vice President of Sales from September 1990 to March 1996. Mr.
King was employed by Lotus Development Corporation from September 1987 to
September 1990, where he last served as Regional Manager for the software
business group and was responsible for product sales in a 14-state region. From
July 1985 to September 1987, Mr. King was a Vice President of the banking
software group of Sterling Software, Inc., a software development company. Prior
thereto, he spent nine years with IBM in various sales and sales management
positions.

         John R. Sprague joined the Company in October 2000 as President of
Spectrum Contact Services. From November 1990 to September 2000, Mr. Sprague
served as Vice President of Consumer Services for Experian, Inc., a global
credit reporting and information solutions company.

         Carrie C. Adams was promoted to Vice President of Human Resources in
February 2001. Ms. Adams joined the Company in February 1999 as Director of
Human Resources. From September 1996 through January 1999, Ms. Adams served as
Director of Human Resources for Mary Kay Inc., a privately held global cosmetics
company. From May 1988 through September 1996, Ms. Adams held various positions
at Litton Industries, a publicly held provider of defense and commercial
electronics technology, where she last served as Director of Human Resources.

         James W. Brown joined the Company in February 1998 as Vice President
and Chief Financial Officer. From November 1991 until joining the Company, Mr.
Brown served as Vice President of Corporate Accounting for Affiliated Computer
Services, Inc., a publicly held information technology outsourcing provider. Mr.
Brown is a Certified Public Accountant.

         Lorraine Castorina was promoted to Vice President of North American
Sales in May 1998. Ms. Castorina joined the Company in February 1987 and has
served in various sales and sales management positions.

         Robert D. Graham has served as Vice President of Strategic
Relationships and General Counsel since January 1997 and Secretary since
February 1997. Mr. Graham served on the Board of Directors of the Company from
1991 until February 1997. From 1980 through January 1997, Mr. Graham was in the
private practice of law with the law firm of Locke Liddell & Sapp LLP and its
predecessor, in Dallas, Texas.

         Gary W. Hanson joined the Company as Vice President of Marketing in
October 2000. From January 2000 through October 2000, Mr. Hanson served as Vice
President of Marketing and Communications for E.W. Blanch Holdings, Inc. a
publicly held provider of integrated risk management services. From November
1990 through December 1999, Mr. Hanson served as Director of Communications for
Electronic Data Systems Corporation, a publicly held technology services
company.

         Robert B. Mercer has been Vice President and Chief Information Officer
of the Company since January 1994. From March 1992 until joining the Company,
Mr. Mercer was the Vice President and Chief Information Officer of Lechters,
Inc., a publicly held specialty retailer. From 1988 to March 1992, he served as
Senior Vice President and Chief Information Officer of KG Men's Store, a
privately held clothing store chain.

         Lisa M. Stewart has been Vice President of e-Services and Customer
Operations since April 1996. From January 1994 through March 1996, Ms. Stewart
served as Director of Customer Operations for the Company after having served in
various sales, sales management and operations positions. Prior to joining the
Company in 1988, Ms. Stewart was employed by Fox T.V. and Hilton Services
Corporation.

         Melissa D. Womack rejoined the Company in December 2000 as Vice
President of Business Development. From July 2000 through November 2000, Ms.
Womack served as Vice President, Marketing for a technology start-up company.
Ms. Womack served as Vice President of Marketing for the Company from May 1998
through June 2000 and as Director of Marketing from May 1997 through April 1998.
Ms. Womack was previously Director of Sales and Marketing for SABRE Interactive
and served in other marketing and sales positions for the SABRE Group since
1987.




                                       23
<PAGE>   25



ITEM 11. EXECUTIVE COMPENSATION

         The information required by this item will appear in the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on September
20, 2001, under the caption "Executive Compensation," which information is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this item will appear in the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on September
20, 2001, under the captions "Stock Ownership of Principal Shareholders" and
"Stock Ownership of Management," which information is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

                                     PART IV

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

(a)      FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

         (1) and (2) - Index to Financial Statements and Schedules - The
                  information required by this portion of Item 14 is set forth
                  in a separate section following Part IV of this Report.

         (3)      The following documents are filed or incorporated by reference
                  as exhibits to this Report:

         3.1(a)   Second Restated Articles of Incorporation of the Company.

         3.1(b)   Statement of Designation of Series A Junior Participating
                  Preferred Stock (incorporated by reference to the Company's
                  Current Report on Form 8-K dated December 13, 1996.)

         3.2      Second Amended and Restated Bylaws of the Company.

         3.3      Rights Agreement between the Company and KeyCorp Shareholder
                  Services, Inc., (the "Rights Agreement") dated December 13,
                  1996 (incorporated by reference to the Company's Current
                  Report on Form 8-K dated December 13, 1996.)

         3.4      Letter of Substitution of Rights Agent under Rights Agreement,
                  dated June 7, 1997 (appointing ChaseMellon Shareholders
                  Services, L.L.C. as successor rights agent) (incorporated by
                  reference to the Company's Annual Report on Form 10-K for the
                  fiscal year ended April 30, 1998.)

         10.1     IBM Business Partner Agreement between the Company, IBM
                  Corporation and Lotus Development Corporation, dated June 30,
                  1997 (incorporated by reference to the Company's Annual Report
                  on Form 10-K for the fiscal year ended April 30, 1997.)

         10.2     Microsoft Large Account Reseller Agreement, dated January 1,
                  2000 between MSLI, GP and the Company, including Amendment No.
                  1 thereto, dated July 1, 2000 (incorporated by reference to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended April 30, 2000.)

         10.3     Intentionally omitted.

         10.4(a)  Commercial Lease Agreement, dated May 1, 1990 between CIIF
                  Associates II Limited Partnership and the Company
                  (incorporated by reference to the Company's Registration
                  Statement No. 33-40794 on Form S-1.)



                                       24
<PAGE>   26

         10.4(b)  Amendment to Lease Agreement, dated March 31, 1995 between
                  CIIF Associates II Limited Partnership and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 1995.)

         10.4(c)  Third Amendment to Lease Agreement, dated effective as of
                  April 20, 1998 between CIIF Associates II Limited Partnership
                  and the Company (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  1998.)

         10.4(d)  Fourth Amendment to Lease Agreement, dated effective as of
                  October 1, 1998 between CIIF Associates II Limited Partnership
                  and the Company (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  1999.)

         10.5(a)  Commercial Lease Agreement, dated as of April 19, 1993 between
                  Kancro, L.P. and the Company (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 31, 1993.)

         10.5(b)  Amendment #2 - Expansion Agreement to Lease Agreement, dated
                  as of June 20, 1994 between Kancro, L.P. and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 1994.)

         10.5(c)  Third Amendment to Commercial Lease Agreement, dated effective
                  April 1, 1995 between Kancro, L.P. and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 1995.)

         10.5(d)  Fourth Amendment to Commercial Lease Agreement, dated
                  effective as of November 25, 1996 between Kancro, L.P. and the
                  Company (incorporated by reference to the Company's Annual
                  Report on Form 10-K for the fiscal year ended April 30, 1997.)

         10.5(e)  Fifth Amendment to Commercial Lease Agreement, dated effective
                  as of March 9, 1998 between Kancro, L.P. and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended April 30, 1998.)

         10.6(a)  Lease Agreement between Spokane Teachers Credit Union and
                  Spectrum Integrated Services, Inc. d/b/a Software Spectrum,
                  dated March 10, 2000 (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  April 30, 2000.)

         10.6(b)  Amendment to Lease between Spokane Teachers Credit Union and
                  Spectrum Integrated Services, Inc. d/b/a Software Spectrum,
                  dated October 31, 2000.

         10.7(a)  Lease Agreement, dated April 28, 2000 between Pretty M.T.,
                  L.P. and Spectrum Integrated Services, Inc. d/b/a Software
                  Spectrum (incorporated by reference to the Company's Annual
                  Report on Form 10-K for the fiscal year ended April 30, 2000.)

         10.7(b)  Amendment to Net Lease, dated November 8, 2000 between Pretty
                  M.T., L.P. and Spectrum Integrated Services, Inc. d/b/a
                  Software Spectrum.

         10.8     Lease Agreement, dated April 26, 1996 by and between
                  Beneficiaries of American National Bank Trust Number 104601-03
                  and the Company (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended March 31,
                  1996.)

         10.9     Intentionally omitted.

         10.10    Software Spectrum, Inc. Second Amended and Restated Employee
                  Stock Purchase Plan.

         10.11    The Software Spectrum, Inc. Amended and Restated 1993 Long
                  Term Incentive Plan (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  April 30, 2000.)

         10.12    Intentionally omitted.



                                       25
<PAGE>   27

         10.13    Management Continuity Agreement ("Continuity Agreement")
                  between the Company and James W. Brown, dated March 1, 1998
                  together with schedule identifying additional executive
                  officers that are parties to Continuity Agreements.

         10.14    Non-Employee Directors' Retainer Stock Plan (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the quarter ended December 31, 1995.)

         10.15(a) Third Amended and Restated Limited Waiver Agreement, dated
                  December 15, 1999 between the Company and Private Capital
                  Management, Inc. (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  2000.)

         10.15(b) Fourth Amended and Restated Limited Waiver Agreement, dated
                  September 1, 2000 between the Company and Private Capital
                  Management, Inc. (incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the fiscal quarter ended
                  January 31, 2001.)

         10.16    Amended and Restated Credit Agreement, dated March 11, 1998
                  among the Company, the Chase Manhattan Bank, as Administrative
                  Agent, Chase Bank of Texas, National Association, as
                  Collateral Agent and other participating financial
                  institutions (incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the quarterly period ended
                  January 31, 1998.)

         10.17(a) The Software Spectrum, Inc. 1998 Long Term Incentive Plan
                  (incorporated by reference to the Company's Quarterly Report
                  on Form 10-Q for the fiscal quarter ended October 31, 1998.)

         10.17(b) Amendment No. 1 to the Software Spectrum, Inc. 1998 Long Term
                  Incentive Plan (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  2000.)

         10.18(a) First Amendment to Amended and Restated Credit Agreement,
                  dated as of August 15, 1998 among the Company, the Chase
                  Manhattan Bank, as Administrative Agent, Chase Bank of Texas,
                  National Association, as Collateral Agent, and other
                  participating financial institutions (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the fiscal quarter ended October 31, 1998.)

         10.18(b) Second Amendment to Amended and Restated Credit Agreement,
                  dated as of June 23, 1999 among the Company, the Chase
                  Manhattan Bank, as Administrative Agent, Chase Bank of Texas,
                  National Association, as Collateral Agent, and other
                  participating financial institutions (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the quarterly period ended January 31, 2000.)

         10.18(c) Consent, Waiver and Third Amendment to Amended and Restated
                  Credit Agreement, dated as of July 31, 2000 among the Company,
                  the Chase Manhattan Bank, as Administrative Agent, Chase Bank
                  of Texas, National Association, as Collateral Agent, and other
                  participating financial institutions (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the fiscal quarter ended July 31, 2000.)

         10.18(d) Waiver and Fourth Amendment to Amended and Restated Credit
                  Agreement, dated as of December 12, 2000 among the Company,
                  the Chase Manhattan Bank, as a Bank, as Administrative Agent
                  and as Collateral Agent, and other participating financial
                  institutions (incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the fiscal quarter ended
                  October 31, 2000.)

         10.19    Lease Agreement, dated October 19, 1998 between
                  Highwoods/Florida Holdings, L.P. and the Company, together
                  with First Amendment thereto, dated April 16, 1999
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended April 30, 1999.)

         10.20    Lease, dated February 28, 2000 between SDS Properties Liberty
                  Lake L.L.C. and Spectrum Integrated Services, Inc. d/b/a
                  Software Spectrum (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  2000.)




                                       26
<PAGE>   28

         21       Subsidiaries of the Company.

         23       Consent of Grant Thornton LLP, Independent Accountants.

         24       Power of Attorney (included on the signature page of this Form
                  10-K.)

(b)      REPORTS ON FORM 8-K

         No reports on Form 8-K have been filed during the quarter ended April
30, 2001.




                                       27
<PAGE>   29





                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES



<Table>
<S>                                                                                                       <C>
Report of Independent Certified Public Accountants                                                         F - 1

Financial Statements (Item 14(a) (1))

     Consolidated Balance Sheets as of April 30, 2001 and 2000                                             F - 2

     Consolidated Statements of Operations for the three years ended April 30, 2001                        F - 3

     Consolidated Statements of Shareholders' Equity for the three years ended April 30, 2001              F - 4

     Consolidated Statements of Cash Flows for the three years ended April 30, 2001                        F - 5

     Consolidated Statements of Comprehensive Income (Loss) for the three years ended April 30, 2001       F - 6

     Notes to Consolidated Financial Statements                                                            F - 7

Financial Statement Schedule (Item 14 (a) (2))

     Report of Independent Certified Public Accountants on Schedules                                       S - 1

     Schedule II - Valuation and Qualifying Accounts for the three years ended April 30, 2001              S - 2
</Table>

         All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required or are inapplicable and therefore have been omitted. Individual
financial statements of Software Spectrum, Inc. have been omitted since
consolidated financial statements are being filed and no significant amount of
the assets of the subsidiaries included in the consolidated financial statements
being filed are restricted as to transfer to Software Spectrum, Inc.






                                       28
<PAGE>   30




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Shareholders and Board of Directors

Software Spectrum, Inc.


We have audited the accompanying consolidated balance sheets of Software
Spectrum, Inc. and subsidiaries as of April 30, 2001 and 2000, and the related
consolidated statements of operations, shareholders' equity, cash flows and
comprehensive income (loss) for each of the three years in the period ended
April 30, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Software Spectrum,
Inc. and subsidiaries as of April 30, 2001 and 2000, and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended April 30, 2001 in conformity with accounting
principles generally accepted in the United States of America.





/s/     Grant Thornton LLP
-----------------------------------------------
        Grant Thornton LLP

Dallas, Texas
June 13, 2001







                                      F-1
<PAGE>   31



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)



<Table>
<Caption>
                                     ASSETS
                                                                                                April 30,
                                                                                      -----------------------------
                                                                                          2001             2000
                                                                                      -----------       -----------
<S>                                                                                   <C>               <C>
Current assets
    Cash and cash equivalents                                                         $    13,937       $     5,652
    Marketable equity securities                                                            2,450                --
    Trade accounts receivable, net of allowance for doubtful
     accounts of $3,649 in 2001 and $2,767 in 2000                                        151,734           145,954
    Prepaid expenses                                                                        1,010             1,031
    Net assets of discontinued operations                                                      --            12,037
    Other current assets                                                                    3,156             4,869
                                                                                      -----------       -----------
       Total current assets                                                               172,287           169,543

Furniture, equipment and leasehold improvements, at cost                                   43,495            48,108
    Less accumulated depreciation and amortization                                         25,369            27,301
                                                                                      -----------       -----------
                                                                                           18,126            20,807
Other assets, consisting primarily of goodwill, net of accumulated
    amortization of $12,095 in 2001 and $9,819 in 2000                                     37,376            42,504
                                                                                      -----------       -----------

                                                                                      $   227,789       $   232,854
                                                                                      ===========       ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
    Current maturities of long-term debt                                              $     3,800       $        63
    Trade accounts payable                                                                152,735           135,410
    Other current liabilities                                                              11,531            24,602
                                                                                      -----------       -----------
       Total current liabilities                                                          168,066           160,075

Long-term debt, less current maturities                                                        --             7,800

Shareholders' equity
    Preferred stock, par value $.01; authorized, 1,000,000 shares;
     issued and outstanding, none                                                              --                --
    Common stock, par value $.01; authorized, 20,000,000 shares;
     issued, 4,615,025 shares in 2001 and 4,585,140 shares in 2000                             46                46
    Additional paid-in capital                                                             42,601            42,292
    Retained earnings                                                                      42,269            39,897
    Currency translation adjustments                                                       (4,835)           (4,267)
                                                                                      -----------       -----------
                                                                                           80,081            77,968
    Less treasury stock at cost - 1,409,801 shares in 2001
     and 841,201 shares in 2000                                                            20,358            12,989
                                                                                      -----------       -----------
       Total shareholders' equity                                                          59,723            64,979
                                                                                      -----------       -----------

                                                                                      $   227,789       $   232,854
                                                                                      ===========       ===========
</Table>


                See notes to consolidated financial statements.


                                      F-2
<PAGE>   32



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)




<Table>
<Caption>
                                                                               Year Ended April 30,
                                                                --------------------------------------------------
                                                                    2001               2000               1999
                                                                ------------       ------------       ------------
<S>                                                             <C>                <C>                <C>
Net sales
    Software services                                           $  1,158,031       $    935,873       $    833,667
    Contact services                                                  55,252             69,705             53,640
                                                                ------------       ------------       ------------
                                                                   1,213,283          1,005,578            887,307
Cost of sales
    Software services                                              1,072,504            853,110            755,758
    Contact services                                                  41,237             54,251             37,146
                                                                ------------       ------------       ------------
                                                                   1,113,741            907,361            792,904
                                                                ------------       ------------       ------------
    Gross margin                                                      99,542             98,217             94,403

Selling, general and administrative expenses                          80,488             71,386             66,604
Write-off of Asia/Pacific goodwill                                        --              2,557                 --
Depreciation and amortization                                         10,090             10,286              9,017
                                                                ------------       ------------       ------------
    Operating income                                                   8,964             13,988             18,782
Non-operating expense (income)
    Interest expense                                                   2,323              1,438              1,956
    Interest income                                                     (932)              (716)              (519)
    Other                                                                636                 --                 --
                                                                ------------       ------------       ------------
                                                                       2,027                722              1,437
                                                                ------------       ------------       ------------
    Income before income taxes                                         6,937             13,266             17,345
Income tax expense                                                     4,100              6,580              6,591
                                                                ------------       ------------       ------------
    Income from continuing operations                                  2,837              6,686             10,754

Discontinued operations
    Loss from operations of discontinued professional
       services business (net of applicable tax benefit)                  --              5,729              4,623
    Loss on disposition of professional services business,
       including provision for operating losses during
       phase-out period (net of applicable tax benefit)                  465              7,956                 --
                                                                ------------       ------------       ------------
    Loss from discontinued operations                                    465             13,685              4,623
                                                                ------------       ------------       ------------
    Net income (loss)                                           $      2,372       $     (6,999)      $      6,131
                                                                ============       ============       ============

Earnings (loss) per share - basic
    Income from continuing operations                           $        .81       $       1.70       $       2.53
                                                                ============       ============       ============
    Net income (loss)                                           $        .68       $      (1.78)      $       1.44
                                                                ============       ============       ============
Earnings (loss) per share - diluted
    Income from continuing operations                           $        .81       $       1.69       $       2.52
                                                                ============       ============       ============
    Net income (loss)                                           $        .68       $      (1.77)      $       1.43
                                                                ============       ============       ============
Weighted average shares outstanding
    Basic                                                              3,487              3,934              4,244
                                                                ============       ============       ============
    Diluted                                                            3,492              3,963              4,273
                                                                ============       ============       ============
</Table>



                See notes to consolidated financial statements.



                                      F-3
<PAGE>   33

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                     (In thousands, except number of shares)


<Table>
<Caption>
                                           Common Stock        Additional                  Currency
                                     -----------------------    Paid-in      Retained     Translation
                                       Shares       Amount      Capital      Earnings     Adjustments
                                     ----------   ----------   ----------   ----------    -----------

<S>                                  <C>          <C>          <C>          <C>           <C>
Balances at May 1, 1998               4,397,678   $       44   $   39,496   $   40,765    $   (2,627)

Stock issued pursuant to employee
  benefit plans, including related
  tax benefit of $105                    93,864            1        1,337           --            --

Purchase of treasury stock                   --           --           --           --            --

Net income                                   --           --           --        6,131            --

Currency translation adjustments             --           --           --           --          (465)
                                     ----------   ----------   ----------   ----------    ----------
Balances at April 30, 1999            4,491,542           45       40,833       46,896        (3,092)

Stock issued pursuant to employee
  benefit plans, including related
  tax benefit of $95                     76,694            1        1,159           --            --

Stock issued in connection with
  acquisition of Comptroller
  Technology, Inc.                       16,904           --          300           --            --

Purchase of treasury stock                   --           --           --           --            --

Net loss                                     --           --           --       (6,999)           --

Currency translation adjustments             --           --           --           --        (1,175)
                                     ----------   ----------   ----------   ----------    ----------
Balances at April 30, 2000            4,585,140           46       42,292       39,897        (4,267)

Stock issued pursuant to employee
  benefit plans                          29,885           --          309           --            --

Purchase of treasury stock                   --           --           --           --            --

Net income                                   --           --           --        2,372            --

Currency translation adjustments             --           --           --           --          (568)
                                     ----------   ----------   ----------   ----------    ----------
Balances at April 30, 2001            4,615,025   $       46   $   42,601   $   42,269    $   (4,835)
                                     ==========   ==========   ==========   ==========    ==========



<Caption>
                                           Treasury Stock
                                      ------------------------
                                        Shares        Amount        Total
                                      ----------    ----------    ----------

<S>                                   <C>           <C>           <C>
Balances at May 1, 1998                  (92,111)   $   (1,408)   $   76,270

Stock issued pursuant to employee
  benefit plans, including related
  tax benefit of $105                         --            --         1,338

Purchase of treasury stock              (292,790)       (4,349)       (4,349)

Net income                                    --            --         6,131

Currency translation adjustments              --            --          (465)
                                      ----------    ----------    ----------
Balances at April 30, 1999              (384,901)       (5,757)       78,925

Stock issued pursuant to employee
  benefit plans, including related
  tax benefit of $95                          --            --         1,160

Stock issued in connection with
  acquisition of Comptroller
  Technology, Inc.                            --            --           300

Purchase of treasury stock              (456,300)       (7,232)       (7,232)

Net loss                                      --            --        (6,999)

Currency translation adjustments              --            --        (1,175)
                                      ----------    ----------    ----------
Balances at April 30, 2000              (841,201)      (12,989)       64,979

Stock issued pursuant to employee
  benefit plans                               --            --           309

Purchase of treasury stock              (568,600)       (7,369)       (7,369)

Net income                                    --            --         2,372

Currency translation adjustments              --            --          (568)
                                      ----------    ----------    ----------
Balances at April 30, 2001            (1,409,801)   $  (20,358)   $   59,723
                                      ==========    ==========    ==========
</Table>

                See notes to consolidated financial statements.


                                      F-4
<PAGE>   34



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


<Table>
<Caption>
                                                                                    Year Ended April 30,
                                                                         ------------------------------------------
                                                                             2001           2000            1999
                                                                         ----------      ----------      ----------
<S>                                                                      <C>             <C>             <C>
Operating activities
  Income from continuing operations                                      $    2,837      $    6,686      $   10,754
  Adjustments to reconcile income from continuing operations to
    net cash provided by operating activities
       Provision for bad debts                                                2,035           1,604           1,324
       Depreciation and amortization                                         10,090          10,286           9,017
       Write-off of Asia/Pacific goodwill                                        --           2,557              --
       Net losses on sales, revaluation or write-offs of assets               1,154              --              --
       Deferred income taxes                                                   (210)            (29)          1,244
       Changes in operating assets and liabilities, net of impact of
            purchases and sales of subsidiaries
          Trade accounts receivable                                         (10,827)        (19,891)         27,717
          Marketable equity securities                                        2,148              --              --
          Inventories                                                           620            (367)          4,183
          Prepaid expenses and other assets                                   1,128             959           1,074
          Trade accounts payable and other
             current liabilities                                              4,999           6,405         (27,249)
                                                                         ----------      ----------      ----------
  Net cash provided by operating activities                                  13,974           8,210          28,064
                                                                         ----------      ----------      ----------

 Investing activities
  Purchase of furniture, equipment and
    leasehold improvements                                                   (5,834)        (10,701)         (8,250)
  Purchase of subsidiary, net of cash acquired                               (2,159)         (1,916)             --
  Sale of subsidiary, net                                                       503              --              --
                                                                         ----------      ----------      ----------
  Net cash used in investing activities                                      (7,490)        (12,617)         (8,250)
                                                                         ----------      ----------      ----------

 Financing activities
  Borrowings on long-term debt                                              296,710         169,315         205,366
  Repayments of long-term debt                                             (300,773)       (170,192)       (204,898)
  Proceeds from stock issuance                                                  309           1,160           1,338
  Purchase of treasury stock                                                 (7,369)         (7,232)         (4,349)
                                                                         ----------      ----------      ----------
  Net cash used in financing activities                                     (11,123)         (6,949)         (2,543)
                                                                         ----------      ----------      ----------

 Effect of exchange rate changes on cash                                       (867)           (722)           (499)
                                                                         ----------      ----------      ----------

 Net cash provided by (used in) continuing operations                        (5,506)        (12,078)         16,772
 Net cash provided by (used in) discontinued operations                      13,791          (2,354)         (3,817)
                                                                         ----------      ----------      ----------

 Increase (decrease) in cash and cash equivalents                             8,285         (14,432)         12,955
 Cash and cash equivalents at beginning of year                               5,652          20,084           7,129
                                                                         ----------      ----------      ----------
 Cash and cash equivalents at end of year                                $   13,937      $    5,652      $   20,084
                                                                         ==========      ==========      ==========

 Supplemental disclosure of cash paid during the year
  Income taxes                                                           $    3,418      $    1,853      $    5,070
  Interest                                                                    1,164           1,132           1,673
</Table>



                See notes to consolidated financial statements.



                                      F-5
<PAGE>   35



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)


<Table>
<Caption>
                                                 Year Ended April 30,
                                     ------------------------------------------
                                        2001            2000            1999
                                     ----------      ----------      ----------

<S>                                  <C>             <C>             <C>
Net income (loss)                    $    2,372      $   (6,999)     $    6,131
Currency translation adjustments           (568)         (1,175)           (465)
                                     ----------      ----------      ----------
Comprehensive income (loss)          $    1,804      $   (8,174)     $    5,666
                                     ==========      ==========      ==========
</Table>


                See notes to consolidated financial statements.




                                      F-6
<PAGE>   36



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

     The Company is a global business-to-business software services provider
with sales locations, operations and contact centers located in North America,
Europe and Asia/Pacific. The Company sells personal computer software through
volume licensing and maintenance ("VLM") agreements, or right-to-copy
arrangements, and full-packaged software products. In addition, the Company
provides contact center solutions to software publishers, Internet service
providers, original equipment manufacturers and other organizations.

Principles of Consolidation

     The accompanying financial statements include the accounts of the Company
and its subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation. Certain prior period amounts have been reclassified
to conform to the current period presentation.

Estimates

     In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could differ
from these estimates.

Cash and Cash Equivalents

     The Company considers all investments with maturities of three months or
less when purchased to be cash equivalents.

Marketable Equity Securities

     The Company's marketable equity securities are classified as trading
securities and are recorded at fair value as determined by quoted market prices.
Gains and losses on these securities are included in other non-operating
expense.

Credit Risk

     Trade accounts receivable are generally due from a diverse group of
companies and, accordingly, do not include any specific concentrations of credit
risk.

Financial Instruments

     The fair values of the Company's financial instruments, consisting of cash
and cash equivalents, accounts receivable, accounts payable and long-term debt,
approximate their carrying values.

Furniture, Equipment and Leasehold Improvements

     Furniture, equipment and leasehold improvements are stated at cost.
Depreciation of furniture and equipment is provided primarily on the
straight-line method over the estimated useful lives ranging from two to ten
years. Amortization of leasehold improvements is provided on the straight-line
method over the shorter of the useful lives of the assets or the terms of the
corresponding leases.




                                      F-7
<PAGE>   37



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

Goodwill

     Goodwill represents the excess of acquisition costs over the fair value of
the net assets of businesses purchased and is amortized on the straight-line
method over periods of up to 20 years.

Valuation of Long-Lived Assets

     The Company periodically evaluates the carrying value of long-lived assets,
including goodwill, whenever events or changes in circumstances indicate that
the carrying amount may not be fully recoverable. If the total of the expected
future undiscounted cash flows is less than the carrying amount of the asset, a
loss is recognized based on the amount by which the carrying value exceeds the
asset's fair market value.

Internal-Use Software

     Effective May 1, 1999, the Company adopted the provisions of Statement of
Position 98-1 (SOP 98-1), Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, which revised the accounting for
software development costs. Based on this accounting standard, certain
internal-use software costs that were previously expensed are now capitalized
when specific criteria are met. These costs are amortized on the straight-line
method over the estimated useful lives of the software developed, up to five
years. Adoption of this statement did not have a material impact on the
Company's financial statements.

Foreign Currency Translation

     The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Assets and liabilities of the foreign subsidiaries
are translated to U.S. dollars at year-end exchange rates. Income and expense
items are translated at the rates of exchange prevailing during the year. The
adjustments resulting from translating the financial statements of foreign
subsidiaries are reflected in shareholders' equity. Gains and losses on foreign
currency transactions are included in the consolidated statements of operations.

Revenue Recognition

     The Company recognizes revenue from software sales at the time of product
shipment, or in accordance with terms of licensing contracts. Revenue from
maintenance contracts is recognized when invoiced, as the Company has no
material costs associated with future performance under these contracts.

     Service revenue is recognized as the services are provided. Advance
billings are recorded as deferred revenue.

Stock-Based Compensation

     The Company accounts for stock-based compensation to employees using the
intrinsic value method. Accordingly, compensation cost for employee stock
options is measured as the excess, if any, of the quoted market price of the
Company's common stock at the date of grant over the exercise price.

Earnings Per Share

     The Company computes basic earnings per share based on the weighted average
number of common shares outstanding. Diluted earnings per share is computed
based on the weighted average number of shares outstanding, plus the number of
additional common shares that would have been outstanding if dilutive potential
common shares had been issued.




                                      F-8
<PAGE>   38

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

Derivatives and Hedging

         Effective May 1, 2000, the Company adopted Statement of Financial
Accounting Standards No. 133 (SFAS 133), Accounting for Derivative Instruments
and Hedging Activities. This standard requires that all derivatives be
recognized as either assets or liabilities at estimated fair value. The adoption
of SFAS 133 did not have a material effect on the Company's financial position
or results of operations.

Recent Accounting Pronouncements

         In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 141 (SFAS 141),
Business Combinations. This standard eliminates the pooling method of accounting
for business combinations initiated after June 30, 2001. In addition, SFAS 141
addresses the accounting for intangible assets and goodwill acquired in a
business combination. This portion of SFAS 141 is effective for business
combinations completed after June 30, 2001. The Company does not expect SFAS 141
to have a material effect on the Company's financial position or results of
operations.

         In June 2001, the Financial Accounting Standards Board approved for
issuance Statement of Financial Accounting Standards No. 142 (SFAS 142),
Goodwill and Intangible Assets, which revises the accounting for purchased
goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets
with indefinite lives will no longer be amortized, but will be tested for
impairment annually and also in the event of an impairment indicator. SFAS 142
is effective for fiscal years beginning after December 15, 2001, with early
adoption permitted for companies with fiscal years beginning after March 15,
2001 if their first quarter financial statements have not previously been
issued. The Company expects that adoption of SFAS 142 will increase annual
operating income by approximately $2.5 million. The Company has not yet
determined when it will adopt SFAS 142.

NOTE B - DISCONTINUED OPERATIONS

     In May 2000, the Company announced a plan to exit its professional services
business. In accordance with this plan, ten of the Company's sixteen
professional services sites were closed effective May 31, 2000. The Company sold
its three Asia/Pacific sites, excluding accounts receivable, effective July 31,
2000 for approximately $725,000 and its three remaining North American sites
effective August 31, 2000 for approximately $1.4 million. The Company recorded
an estimated loss of $8.0 million on the disposition of the professional
services business, net of related tax benefits of $3.2 million during fiscal
2000. An additional loss of $465,000, including tax benefits of $221,000, was
recorded during fiscal 2001, primarily related to customer collection issues and
real estate leases. The pretax loss accrual and the related accrued tax benefit
are classified as other current liabilities and other current assets,
respectively, in the Company's consolidated balance sheets.

     The financial data related to the professional services business is
classified as discontinued operations for all periods presented.



                                      F-9
<PAGE>   39

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE B - DISCONTINUED OPERATIONS (CONTINUED)

     Operating results from discontinued operations were as follows:

<Table>
<Caption>
                                                                                         Year Ended April 30,
                                                                                     --------------------------
                                                                                        2000            1999
                                                                                     ----------      ----------
<S>                                                                                  <C>             <C>
Revenues                                                                             $   45,707      $   42,656
Loss before income taxes                                                                 (8,616)         (6,775)
Income tax benefit                                                                        2,887           2,152
Loss from discontinued operations                                                        (5,729)         (4,623)
</Table>


     The net assets of discontinued operations were as follows at April 30,
2000:

<Table>
<S>                                                                                  <C>
Accounts receivable, net                                                             $   11,051
Prepaid expenses and other current assets                                                   317
Furniture, equipment and leasehold improvements, net                                      3,244
Other assets                                                                                201
Trade accounts payable                                                                     (187)
Other current liabilities                                                                (2,589)
                                                                                     ----------
                                                                                     $   12,037
                                                                                     ==========
</Table>

NOTE C - MARKETABLE EQUITY SECURITIES

     The Company's marketable equity securities consist of 137,600 shares of
common stock acquired through the sale of its customer relationship management
("CRM") subsidiary (see Note K), offset by a 40,000 share temporary short
position. Other non-operating expense for the year ended April 30, 2001 included
realized gains of $1.3 million, offset by net unrealized losses of approximately
$2 million, related to these securities. Subsequent to year end, the short
position was closed via an open market purchase, with minimal financial impact.
As of July 16, 2001, the quoted market price of the stock was $11.78 per share.

NOTE D - GOODWILL

     The Company periodically evaluates the carrying value of its long-lived
assets when events and circumstances warrant such review. The Company's
Asia/Pacific operations did not perform as expected, primarily in New Zealand,
and the Company determined the anticipated future undiscounted cash flows from
these operations did not support the carrying value of the related assets.
Accordingly, a nondeductible charge of approximately $2.6 million was recorded
against income from continuing operations in fiscal 2000 to write off goodwill
associated with continuing operations in the region.

NOTE E - LONG-TERM DEBT

     Long-term debt consisted of (in thousands):

<Table>
<Caption>
                                                                                                April 30,
                                                                                      -----------------------------
                                                                                          2001              2000
                                                                                      -----------       -----------

<S>                                                                                   <C>               <C>
Notes payable to foreign banks                                                        $     3,800       $     7,800
Other                                                                                          --                63
                                                                                      -----------       -----------
                                                                                            3,800             7,863
Less current maturities                                                                     3,800                63
                                                                                      -----------       -----------

                                                                                      $        --       $     7,800
                                                                                      ===========       ===========
</Table>




                                      F-10
<PAGE>   40


                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)



NOTE E - LONG-TERM DEBT (CONTINUED)

     The Company has a revolving credit facility (the "Facility") which permits
the Company to borrow up to $100 million, subject to availability under its
borrowing base. At April 30, 2001, the Company had $51 million of unused
borrowing availability under the Facility. The Facility, which expires in March
2002, bears interest at a variable rate (6.3% at April 30, 2001) and provides
for an annual commitment fee equal to a variable percentage of the unused line
of credit. The Facility, which is secured by accounts receivable and a pledge of
the stock of certain of the Company's subsidiaries, requires the Company to
maintain certain financial covenants and ratios and places limitations on
dividend payments, capital expenditures and certain other borrowings.

     The Company's New Zealand subsidiary has a revolving credit facility with a
local bank totaling $3.8 million. Borrowings bear interest at a floating rate
(6.6% at April 30, 2001) and are secured by a $4 million letter of credit issued
by the Company. The facility expires in January 2002.

NOTE F - INCOME TAXES

     Income before income taxes is comprised of the following (in thousands):

<Table>
<Caption>
                                                                                    Year Ended April 30,
                                                                         ------------------------------------------
                                                                            2001            2000           1999
                                                                         -----------    -----------     -----------

<S>                                                                      <C>            <C>             <C>
  United States                                                          $     8,628    $    17,992     $    16,681

  Foreign                                                                     (1,691)        (4,726)            664
                                                                         -----------    -----------     -----------

  Income before income taxes                                             $     6,937    $    13,266     $    17,345
                                                                         ===========    ===========     ===========
</Table>


     The Company's provision (benefit) for income taxes is comprised of the
following (in thousands):

<Table>
<Caption>
                                                            Federal        Foreign          State          Total
                                                          -----------    -----------    -----------     -----------

<S>                                                       <C>            <C>            <C>             <C>
Year ended April 30, 2001
     Current                                              $     3,669    $       286    $       355     $     4,310
     Deferred                                                     209           (419)            --            (210)
                                                          -----------    -----------    -----------     -----------
                                                          $     3,878    $      (133)   $       355     $     4,100
                                                          ===========    ===========    ===========     ===========

Year ended April 30, 2000
     Current                                              $     6,089    $        90    $       430     $     6,609
     Deferred                                                    (103)            74             --             (29)
                                                          -----------    -----------    -----------     -----------
                                                          $     5,986    $       164    $       430     $     6,580
                                                          ===========    ===========    ===========     ===========

Year ended April 30, 1999
     Current                                              $     4,884    $       170    $       293     $     5,347
     Deferred                                                     605            639             --           1,244
                                                          -----------    -----------    -----------     -----------
                                                          $     5,489    $       809    $       293     $     6,591
                                                          ===========    ===========    ===========     ===========
</Table>




                                      F-11
<PAGE>   41

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)



NOTE F - INCOME TAXES (CONTINUED)

     A reconciliation of income tax expense from continuing operations using the
statutory federal income tax rate of 34% to the actual income tax expense from
continuing operations follows (in thousands):

<Table>
<Caption>
                                                                                    Year Ended April 30,
                                                                         ------------------------------------------
                                                                            2001            2000           1999
                                                                         -----------    -----------     -----------
<S>                                                                      <C>            <C>             <C>
  Income tax at statutory rate                                           $     2,359    $     4,510     $     5,897
  State and local income taxes, net of federal benefit                           234            284             193
  Impact of foreign operations, including differences
    between foreign and U.S. tax rates, losses
    without tax benefits and related charges                                   1,771            540             159
  Nondeductible goodwill amortization and write-off                                2            987             134

  Other                                                                         (266)           259             208
                                                                         -----------    -----------     -----------
  Income tax expense                                                     $     4,100    $     6,580     $     6,591
                                                                         ===========    ===========     ===========
</Table>

     Deferred tax assets and liabilities as of April 30, 2001 and 2000, which
are included in other assets and other current assets, consist of the following
(in thousands):

<Table>
<Caption>
                                                                                                April 30,
                                                                                      -----------------------------
                                                                                          2001              2000
                                                                                      -----------       -----------

<S>                                                                                   <C>               <C>
Accounts receivable                                                                   $       435       $       317
Accrued expenses                                                                              463             2,910
Foreign net operating loss carryforwards                                                    1,332               896
Unrealized currency losses                                                                    230                --
Other                                                                                          27                42
                                                                                      -----------       -----------
    Deferred tax assets                                                                     2,487             4,165
                                                                                      -----------       -----------
Depreciation and amortization                                                                (450)             (459)
Other                                                                                          --               (57)
                                                                                      -----------       -----------
    Deferred tax liabilities                                                                 (450)             (516)
                                                                                      -----------       -----------
Valuation allowance                                                                        (1,501)             (896)
                                                                                      -----------       -----------
                                                                                      $       536       $     2,753
                                                                                      ===========       ===========
</Table>

     At April 30, 2001, the Company's foreign subsidiaries had net operating
loss carryforwards of approximately $7.2 million. Utilization of these
carryforwards is limited to income of the respective subsidiaries; accordingly,
a valuation allowance has been provided for approximately $4.6 million of these
carryforwards.

NOTE G - EMPLOYEE BENEFIT PLANS

     In August 1993, the Company's shareholders approved the adoption of the
1993 Long Term Incentive Plan. In September 1998, the shareholders approved the
adoption of the 1998 Long Term Incentive Plan. Under the terms of the 1993 and
1998 Long Term Incentive Plans, awards may be granted in the form of incentive
or non-qualified stock options, restricted shares of common stock, or units
valued on the basis of Company performance. Stock options are granted at the
quoted market price of the Company's stock at the date of grant, become
exercisable over periods of up to five years and expire on various dates from
2001 through 2011. At April 30, 2001, 86,000 and 167,680 shares of common stock
were reserved for future grant under the 1998 and 1993 Long Term Incentive
Plans, respectively.





                                      F-12

<PAGE>   42

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE G - EMPLOYEE BENEFIT PLANS (CONTINUED)

     The Company has adopted only the disclosure provisions of Statement of
Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based
Compensation, for employee stock options and continues to apply Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, for
recording stock options granted. If the Company had elected to recognize
compensation expense based upon the fair value at the grant date for options
granted subsequent to March 31, 1995, consistent with the methodology prescribed
by SFAS 123, net income (loss) and earnings (loss) per share would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
amounts):

<Table>
<Caption>
                                                                                    Year Ended April 30,
                                                                         ------------------------------------------
                                                                             2001           2000            1999
                                                                         -----------    -----------     -----------

<S>                                                                      <C>            <C>             <C>
  Net income (loss) - as reported                                          $   2,372    $   (6,999)     $     6,131

  Net income (loss) - pro forma                                                2,164        (7,654)           5,646

  Earnings (loss) per share - as reported
      Basic                                                                      .68         (1.78)            1.44
      Diluted                                                                    .68         (1.77)            1.43
  Earnings (loss) per share - pro forma
      Basic                                                                      .62         (1.95)            1.33
      Diluted                                                                    .62         (1.93)            1.32
</Table>

     These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related to
grants made before fiscal 1996. The fair value of these options was estimated at
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions used for grants in fiscal 2001, 2000 and
1999, respectively: dividend yield of 0% for all periods; volatility of 73%, 68%
and 49%; risk-free interest rates of 5.75%, 5.73% and 5.75% and expected lives
of five, four and four years. The weighted average fair values of options
granted were $9.24, $8.79 and $8.34 per share during fiscal 2001, 2000 and 1999,
respectively.

     Option activity for the three years ended April 30, 2001 is summarized as
follows:

<Table>
<Caption>
                                                                 Number of Shares            Weighted Average
                                                                Underlying Options            Exercise Price
                                                              --------------------        ----------------------

<S>                                                           <C>                         <C>
Outstanding at May 1, 1998                                            482,940                       $16.65
Granted                                                               174,850                        18.69
Exercised                                                             (53,800)                       13.06
Canceled/forfeited                                                    (80,900)                       18.99
                                                                  -----------
Outstanding at April 30, 1999                                         523,090                        17.28
Granted                                                               195,950                        15.70
Exercised                                                             (36,460)                       14.76
Canceled/forfeited                                                   (110,630)                       21.68
                                                                  -----------
Outstanding at April 30, 2000                                         571,950                        16.05
Granted                                                               228,400                        14.44
Exercised                                                                (300)                       12.88
Canceled/forfeited                                                   (165,760)                       15.72
                                                                  -----------
Outstanding at April 30, 2001                                         634,290                        15.55
                                                                  ===========

Exercisable at April 30, 1999                                         208,430                        18.37
                                                                  ===========

Exercisable at April 30, 2000                                         197,590                        15.57
                                                                  ===========

Exercisable at April 30, 2001                                         232,750                        15.71
                                                                  ===========
</Table>





                                      F-13

<PAGE>   43

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)



NOTE G - EMPLOYEE BENEFIT PLANS (CONTINUED)

     Further information regarding options outstanding and options exercisable
at April 30, 2001 is summarized below:

<Table>
<Caption>
                                                    Options Outstanding                     Options Exercisable
                                      ----------------------------------------------    ---------------------------
                                                         Weighted         Weighted                       Weighted
                                        Number            Average          Average         Number         Average
                  Range of                of             Remaining        Exercise           of          Exercise
               Exercise Prices          Shares             Life             Price          Shares          Price
           ----------------------     -----------    ----------------    -----------    -----------     -----------

<S>                                   <C>            <C>                 <C>            <C>             <C>
           $     5.01  to   10.00          25,250          9.48          $      9.65          6,000     $    9.50
                10.01  to   15.00         120,930          3.09                12.73         82,360         12.96
                15.01  to   20.00         416,150          5.46                15.82        113,300         16.52
                20.01  to   25.00          67,960          3.15                20.53         27,090         20.55
                25.01  to   30.00           4,000           .29                26.00          4,000         26.00
           ----------------------     -----------    ----------------    -----------    -----------     ---------
           $     5.01  to   30.00         634,290          4.89          $     15.55        232,750     $   15.71
           ======================     ===========    ================    ===========    ===========     =========
</Table>

     In July 1992, the Company approved an Employee Stock Purchase Plan which
allows eligible employees to purchase shares of common stock through payroll
deductions. The shares can be purchased at an amount equal to 85% of the fair
market value of the common stock on the exercise date. The plan provides for a
series of monthly offerings, with an exercise date of the 15th of each month.
Each employee may purchase up to $15,000 of fair market value of common stock
per calendar year, limited to 10% of a participant's compensation. At April 30,
2001, approximately 138,000 shares of common stock were reserved for issuance
under the plan. For the years ended April 30, 2001, 2000 and 1999, 29,297,
39,088, and 40,196 shares, respectively, were issued under the plan.

         The Company's employee savings plan covers all employees who are 19
years of age or older and have six months of service with the Company. The plan
allows participants to make voluntary pre-tax contributions, which are partially
matched by the Company, in accordance with the provisions of Section 401(k) of
the Internal Revenue Code. Employer contributions to the plan are at the
discretion of the Board of Directors and are reduced by forfeited contributions.
The Company's contributions to the plan for the years ended April 30, 2001, 2000
and 1999, net of reductions for forfeitures, were $164,000, $306,000 and
$320,000, respectively.

NOTE H - EARNINGS PER SHARE

     The following table (in thousands, except per share amounts) sets forth the
computation of basic and diluted earnings per share. Outstanding options that
were not included in the computation of diluted earnings per share because their
effect would be antidilutive totaled approximately 496,000, 293,000 and 293,000
shares for the years ended April 30, 2001, 2000 and 1999, respectively.

<Table>
<Caption>
                                                                                      Year Ended April 30,
                                                                           ----------------------------------------
                                                                               2001           2000         1999
                                                                           -----------    -----------   -----------
<S>                                                                        <C>            <C>           <C>
Income from continuing operations                                          $     2,837    $     6,686   $    10,754
                                                                           -----------    -----------   -----------
Loss from discontinued operations                                          $      (465)   $   (13,685)  $    (4,623)
                                                                           -----------    -----------   -----------
Weighted average shares outstanding (basic)                                      3,487          3,934         4,244
Effect of dilutive employee and director stock options                               5             29            29
                                                                           -----------    -----------   -----------
Weighted average shares outstanding (diluted)                                    3,492          3,963         4,273
                                                                           -----------    -----------   -----------
Earnings per share from continuing operations (basic)                      $       .81    $      1.70   $      2.53
                                                                           ===========    ===========   ===========
Earnings per share from continuing operations (diluted)                    $       .81    $      1.69   $      2.52
                                                                           ===========    ===========   ===========
Loss per share from discontinued operations (basic)                        $      (.13)   $     (3.48)  $     (1.09)
                                                                           ===========    ============  ===========
Loss per share from discontinued operations (diluted)                      $      (.13)   $     (3.46)  $     (1.08)
                                                                           ===========    ============  ===========
</Table>



                                      F-14
<PAGE>   44


                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE I - LEASES

     The Company leases various office facilities as well as certain office and
computer equipment under leases classified as operating leases. Future minimum
rental payments under all long-term, noncancelable operating leases at April 30,
2001 are as follows (in thousands):

<Table>
<Caption>
Year Ending April 30:
---------------------

<S>                                                                                                      <C>
       2002                                                                                              $    4,846
       2003                                                                                                   4,987
       2004                                                                                                   4,958
       2005                                                                                                   3,386
       2006                                                                                                   1,170
       Thereafter                                                                                             1,658
                                                                                                         ----------
                                                                                                             21,005
       Less sublease receivable                                                                                 103
                                                                                                         ----------
                                                                                                         $   20,902
                                                                                                         ==========
</Table>

     Rent expense for operating leases totaled $4.8 million, $3.7 million and
$2.6 million for fiscal 2001, 2000 and 1999, respectively.

NOTE J - BUSINESS SEGMENTS AND FOREIGN OPERATIONS

     The Company's reportable segments are strategic business units that offer
diverse products and services. The Company has two reportable segments: software
services and contact services. The software services segment sells software
applications through volume licensing and maintenance agreements and
full-packaged software products. The contact services segment provides telephone
and Internet contact services to software publishers, Internet service
providers, original equipment manufacturers and other organizations.

     The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based upon income or loss from operations prior to allocation of
corporate overhead. Unallocated corporate overhead includes the costs of the
Company's corporate functions, such as finance, human resources and information
systems, as well as the compensation of the Company's officers. Information for
the Company's reportable segments for the years ended April 30, 2001, 2000 and
1999 is presented below (in thousands). Note that the Company does not allocate
expenditures for assets on a segment basis for internal management reporting
and, therefore, such information is not presented.

<Table>
<Caption>
                                                                                      Year Ended April 30,
                                                                             --------------------------------------
                                                                                 2001         2000         1999
                                                                             -----------  -----------   -----------
<S>                                                                          <C>          <C>           <C>
Net sales
    Software services                                                        $ 1,158,031  $   935,873   $   833,667
    Contact services                                                              55,252       69,705        53,640
                                                                             -----------  -----------   -----------
                                                                             $ 1,213,283  $ 1,005,578   $   887,307
                                                                             ===========  ===========   ===========
Operating income
    Software services                                                        $    49,389  $    50,042   $    44,855
    Contact services                                                              (1,096)       3,374         6,613
    Unallocated corporate overhead                                               (39,329)     (39,428)      (32,686)
                                                                             -----------  -----------   -----------
                                                                             $     8,964  $    13,988   $    18,782
                                                                             ===========  ===========   ===========
Depreciation and amortization
    Software services                                                        $       651  $       969   $     1,078
    Contact services                                                               3,504        3,428         2,351
    Unallocated corporate overhead                                                 5,935        5,889         5,588
                                                                             -----------  -----------   -----------
                                                                             $    10,090  $    10,286   $     9,017
                                                                             ===========  ===========   ===========
Assets
    Software services                                                        $   144,891  $   140,705
    Contact services                                                              17,599       19,766
    Unallocated corporate assets                                                  65,299       60,346
    Assets of discontinued operations                                                 --       12,037
                                                                             -----------  -----------
                                                                             $   227,789  $   232,854
                                                                             ===========  ===========
</Table>




                                      F-15
<PAGE>   45

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE J - BUSINESS SEGMENTS AND FOREIGN OPERATIONS (CONTINUED)

     Information regarding foreign operations for the years ended April 30,
2001, 2000 and 1999 follows (in thousands). Sales are attributed to countries
based upon the location of the customer.

<Table>
<Caption>
                                                                                      Year Ended April 30,
                                                                             --------------------------------------
                                                                                 2001         2000         1999
                                                                             -----------  -----------   -----------
<S>                                                                          <C>          <C>           <C>
Net sales
   United States                                                             $ 1,008,592  $   832,957   $   736,583
   Foreign                                                                       204,691      172,621       150,724
                                                                             -----------  -----------   -----------
                                                                             $ 1,213,283  $ 1,005,578   $   887,307
                                                                             ===========  ===========   ===========
Long-lived assets
   United States                                                             $    51,387  $    58,486
   Foreign                                                                         3,243        3,843
                                                                             -----------  -----------
                                                                             $    54,630  $    62,329
                                                                             ===========  ===========
</Table>

NOTE K - CUSTOMER RELATIONSHIP MANAGEMENT BUSINESS

     On September 2, 1999, the Company acquired all of the outstanding shares of
common stock of Comptroller Technology, Inc., d/b/a Quinn, Reeder and
Associates, a privately held technology company which specializes in providing
customer relationship management solutions. The purchase price was $2.3 million,
including cash of $2.0 million and the issuance of 16,904 shares of the
Company's common stock. In addition, the purchase agreement provided for the
payment of additional cash consideration during the three years following the
closing date if certain earnings targets were met. The acquisition was accounted
for using the purchase method of accounting. The operating results of the
acquired business have been included in the consolidated statements of
operations from the date of acquisition. Pro forma operating results, giving
effect to the acquisition as though it had occurred at the beginning of fiscal
1999, are not presented because they are not materially different than the
Company's actual results.

     On December 5, 2000, the Company sold all of the outstanding stock of this
subsidiary for proceeds of approximately $6.1 million, consisting of $750,000 in
cash and 137,600 shares of common stock of the acquirer, a publicly traded
corporation. Concurrent with the sale, the Company also extinguished its
contingent purchase obligations to the former owners of the business for
approximately $2.2 million. The gain realized on the sale was insignificant.

NOTE L - CONTINGENCY

     In March 2000, the Company received notice from the Internal Revenue
Service ("IRS") alleging a tax deficiency for the year ended March 31, 1996. The
income adjustments asserted in the notice, approximately $1.3 million, relate to
certain payments made by the Company to its foreign subsidiaries. Similar
payments, approximating $7.7 million, were deducted in subsequent tax returns.
The Company believes that the tax returns for each of these years are
substantially correct as filed, and has contested the deficiency assertion
through the IRS appeals process. While the Company is prepared to litigate the
issues, it also recognizes the costs, risks and distractions inherent in
litigation. Accordingly, the Company has conducted settlement discussions with
the IRS regarding the alleged 1996 deficiency, but to-date, has not been
successful in resolving the claims.

     Although an out-of-court settlement cannot be assured, the Company and the
IRS continue to engage in ongoing discussions to resolve the 1996 alleged
deficiency. In the event that an agreement is reached for the 1996 tax year,
there can be no assurance of a similar result for the subsequent years, which
are currently under audit. However, based on negotiations and discussions
to-date, the Company has accrued an estimate of $1.5 million, including interest
expense, to resolve the aforementioned issues for all applicable tax years. This
accrual is included in other current liabilities in the Company's April 30, 2001
balance sheet and reduced earnings per share for fiscal 2001 by $.43. Based on
the information available, the Company does not expect that any additional
liability related to these matters would materially affect the Company's
consolidated financial position or results of operations.


                                      F-16
<PAGE>   46

                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (CONTINUED)


NOTE M - QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table summarizes the unaudited quarterly financial data for
the years ended April 30, 2001 and 2000 (in thousands, except per share
amounts):

<Table>
<Caption>
                                                             Quarter Ended
                                      -----------------------------------------------------------
                                                              Fiscal 2001
                                      -----------------------------------------------------------
                                        April 30,       Jan. 31,       Oct. 31,        July 31,
                                          2001            2001           2000            2000
                                      ------------    ------------   ------------    ------------

<S>                                   <C>             <C>            <C>             <C>
Net sales (1)                         $    274,257    $    429,112   $    246,015    $    263,899
Gross margin (1)                            25,172          30,100         21,470          22,800
Income (loss) from continuing
  operations (2) (4)                          (394)          3,736           (881)            376
Loss from discontinued
  operations                                    --              --           (465)             --
Net income (loss)                             (394)          3,736         (1,346)            376
Earnings (loss) per share - basic
     Income (loss) from
       continuing operations                  (.12)           1.10           (.25)            .10
     Loss from discontinued
       operations                               --              --           (.13)             --
     Net income (loss)                        (.12)           1.10           (.38)            .10
Earnings (loss) per share - diluted
     Income (loss) from
       continuing operations                  (.12)           1.10           (.25)            .10
     Loss from discontinued
       operations                               --              --           (.13)             --
     Net income (loss)                        (.12)           1.10           (.38)            .10




<Caption>
                                                              Quarter Ended
                                      ------------------------------------------------------------
                                                               Fiscal 2000
                                      ------------------------------------------------------------
                                        April 30,       Jan. 31,       Oct. 31,         July 31,
                                         2000 (3)         2000            1999            1999
                                      ------------    ------------    ------------    ------------

<S>                                   <C>             <C>             <C>             <C>
Net sales (1)                         $    247,223    $    302,828    $    227,124    $    228,403
Gross margin (1)                            22,822          28,878          22,856          23,661
Income (loss) from continuing
  operations (2) (4)                        (1,109)          4,087           1,775           1,933
Loss from discontinued
  operations                               (10,196)         (1,912)         (1,091)           (486)
Net income (loss)                          (11,305)          2,175             684           1,447
Earnings (loss) per share - basic
     Income (loss) from
       continuing operations                  (.30)           1.06             .44             .47
     Loss from discontinued
       operations                            (2.72)           (.50)           (.27)           (.12)
     Net income (loss)                       (3.02)            .56             .17             .35
Earnings (loss) per share - diluted
     Income (loss) from
       continuing operations                  (.30)           1.02             .44             .47
     Loss from discontinued
       operations                            (2.72)           (.48)           (.27)           (.12)
     Net income (loss)                       (3.02)            .54             .17             .35
</Table>








(1)      The net sales and gross margin numbers have been reclassified to
         reflect the decision to discontinue the Company's professional services
         operations. The reclassification had no impact on net income or
         earnings per share.

(2)      Income (loss) from continuing operations for the quarter ended April
         30, 2000 includes a charge of $2.6 million, or $.68 per share, to write
         off goodwill related to the Company's Asia/Pacific operations,
         primarily New Zealand.

(3)      Loss from discontinued operations for the quarter ended April 30, 2000
         includes the estimated loss on disposition of the Company's
         professional services operations of $8.0 million, or $2.12 per share.

(4)      Loss from continuing operations for the quarter ended April 30, 2001
         includes a $1.5 million non-recurring charge for potential tax payments
         and net losses of $787,000 relating to the decline in value of the
         marketable equity securities received through the sale of the Company's
         CRM subsidiary. These items reduced earnings per share for the quarter
         by $.46 and $.14, respectively.





                                      F-17
<PAGE>   47





                                POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS that each of Software Spectrum, Inc., a
Texas corporation, and the undersigned directors and officers of Software
Spectrum, Inc., hereby constitutes and appoints Judy C. Odom its or his true and
lawful attorney-in-fact and agent, for it or him and in its or his name, place
and stead, in any and all capacities, with full power to act alone, to sign any
and all amendments to this Report, and to file each such amendment to this
Report, with all exhibits thereto, and any and all other documents in connection
therewith, with the Securities and Exchange Commission, hereby granting unto
said attorney-in-fact and agent full power and authority to do and perform any
and all acts and things requisite and necessary to be done in and about the
premises as fully to all intents and purposes as it or he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
may lawfully do or cause to be done by virtue hereof.


                                   SIGNATURES

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

                                      SOFTWARE SPECTRUM, INC.



                                 By: /s/ Judy C. Odom
                                    -----------------------------------------
                                         Judy C. Odom, Chairman and
                                         Chief Executive Officer


Date:   July 30, 2001



                                      F-18
<PAGE>   48



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



<Table>
<Caption>
              Signature                                   Title                                    Date
              ---------                                   -----                                    ----


<S>                                         <C>                                               <C>
/s/ Judy C. Odom                            Chief Executive Officer and                       July 30, 2001
------------------------------------        Chairman of the Board
    Judy C. Odom                            (Principal Executive Officer)

/s/ Keith R. Coogan                         President, Chief Operating Officer                July 30, 2001
------------------------------------        and Director
    Keith R. Coogan


/s/ James W. Brown                          Vice President and Chief Financial Officer        July 30, 2001
------------------------------------        (Principal Financial Officer and
    James W. Brown                          Principal Accounting Officer)

/s/ Mellon C. Baird                         Director                                          July 30, 2001
------------------------------------
    Mellon C. Baird


/s/ Brian N. Dickie                         Director                                          July 30, 2001
------------------------------------
    Brian N. Dickie


/s/ Frank Tindle                            Director                                          July 30, 2001
------------------------------------
    Frank Tindle
</Table>





                                      F-19
<PAGE>   49




         REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULES





Shareholders and Board of Directors
Software Spectrum, Inc.

In connection with our audit of the consolidated financial statements of
Software Spectrum, Inc. and subsidiaries referred to in our report dated June
13, 2001, we have also audited Schedule II for each of the three years in the
period ended April 30, 2001. In our opinion, this schedule presents fairly, in
all material respects, the information required to be set forth therein.



/s/ Grant Thornton LLP
---------------------------------------
    Grant Thornton LLP



Dallas, Texas
June 13, 2001



                                      S-1
<PAGE>   50



                    SOFTWARE SPECTRUM, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS




<Table>
<Caption>
                                                                                DEDUCTIONS/
                                        BALANCE AT         CHARGED TO           WRITE-OFFS            BALANCE
                                        BEGINNING           COSTS AND             NET OF               AT END
                                         OF YEAR            EXPENSES            RECOVERIES            OF YEAR
                                     ---------------     ---------------     ---------------      ---------------


<S>                                  <C>                 <C>                 <C>                  <C>
Allowance for Doubtful Accounts:

   Year ended April 30, 2001:        $     2,767,000     $     2,964,000     $    (2,082,000)     $     3,649,000

   Year ended April 30, 2000:              2,408,000           1,604,000          (1,245,000)           2,767,000

   Year ended April 30, 1999:              3,009,000           1,324,000          (1,925,000)           2,408,000






Inventory Valuation Account:

   Year ended April 30, 2001:        $       226,000     $       236,000     $      (389,000)     $        73,000

   Year ended April 30, 2000:                 36,000             612,000            (422,000)             226,000

   Year ended April 30, 1999:              2,189,000             801,000          (2,954,000)              36,000
</Table>









                                      S-2
<PAGE>   51





                                  EXHIBIT INDEX


<Table>
<Caption>
        EXHIBIT
        NUMBER                           DESCRIPTION
        ------                           -----------


<S>               <C>
         3.1(a)   Second Restated Articles of Incorporation of the Company.

         3.1(b)   Statement of Designation of Series A Junior Participating
                  Preferred Stock (incorporated by reference to the Company's
                  Current Report on Form 8-K dated December 13, 1996.)

         3.2      Second Amended and Restated Bylaws of the Company.

         3.3      Rights Agreement between the Company and KeyCorp Shareholder
                  Services, Inc., (the "Rights Agreement") dated December 13,
                  1996 (incorporated by reference to the Company's Current
                  Report on Form 8-K dated December 13, 1996.)

         3.4      Letter of Substitution of Rights Agent under Rights Agreement,
                  dated June 7, 1997 (appointing ChaseMellon Shareholders
                  Services, L.L.C. as successor rights agent) (incorporated by
                  reference to the Company's Annual Report on Form 10-K for the
                  fiscal year ended April 30, 1998.)

         10.1     IBM Business Partner Agreement between the Company, IBM
                  Corporation and Lotus Development Corporation, dated June 30,
                  1997 (incorporated by reference to the Company's Annual Report
                  on Form 10-K for the fiscal year ended April 30, 1997.)

         10.2     Microsoft Large Account Reseller Agreement, dated January 1,
                  2000 between MSLI, GP and the Company, including Amendment No.
                  1 thereto, dated July 1, 2000 (incorporated by reference to
                  the Company's Annual Report on Form 10-K for the fiscal year
                  ended April 30, 2000.)

         10.3     Intentionally omitted.

         10.4(a)  Commercial Lease Agreement, dated May 1, 1990 between CIIF
                  Associates II Limited Partnership and the Company
                  (incorporated by reference to the Company's Registration
                  Statement No. 33-40794 on Form S-1.)

         10.4(b)  Amendment to Lease Agreement, dated March 31, 1995 between
                  CIIF Associates II Limited Partnership and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 1995.)

         10.4(c)  Third Amendment to Lease Agreement, dated effective as of
                  April 20, 1998 between CIIF Associates II Limited Partnership
                  and the Company (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  1998.)

         10.4(d)  Fourth Amendment to Lease Agreement, dated effective as of
                  October 1, 1998 between CIIF Associates II Limited Partnership
                  and the Company (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  1999.)

         10.5(a)  Commercial Lease Agreement, dated as of April 19, 1993 between
                  Kancro, L.P. and the Company (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  March 31, 1993.)

         10.5(b)  Amendment #2 - Expansion Agreement to Lease Agreement, dated
                  as of June 20, 1994 between Kancro, L.P. and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 1994.)
</Table>




<PAGE>   52

<Table>
<S>               <C>
         10.5(c)  Third Amendment to Commercial Lease Agreement, dated effective
                  April 1, 1995 between Kancro, L.P. and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended March 31, 1995.)

         10.5(d)  Fourth Amendment to Commercial Lease Agreement, dated
                  effective as of November 25, 1996 between Kancro, L.P. and the
                  Company (incorporated by reference to the Company's Annual
                  Report on Form 10-K for the fiscal year ended April 30, 1997.)

         10.5(e)  Fifth Amendment to Commercial Lease Agreement, dated effective
                  as of March 9, 1998 between Kancro, L.P. and the Company
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended April 30, 1998.)

         10.6(a)  Lease Agreement between Spokane Teachers Credit Union and
                  Spectrum Integrated Services, Inc. d/b/a Software Spectrum,
                  dated March 10, 2000 (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  April 30, 2000.)

         10.6(b)  Amendment to Lease between Spokane Teachers Credit Union and
                  Spectrum Integrated Services, Inc. d/b/a Software Spectrum,
                  dated October 31, 2000.

         10.7(a)  Lease Agreement, dated April 28, 2000 between Pretty M.T.,
                  L.P. and Spectrum Integrated Services, Inc. d/b/a Software
                  Spectrum (incorporated by reference to the Company's Annual
                  Report on Form 10-K for the fiscal year ended April 30, 2000.)

         10.7(b)  Amendment to Net Lease, dated November 8, 2000 between Pretty
                  M.T., L.P. and Spectrum Integrated Services, Inc. d/b/a
                  Software Spectrum.

         10.8     Lease Agreement, dated April 26, 1996 by and between
                  Beneficiaries of American National Bank Trust Number 104601-03
                  and the Company (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended March 31,
                  1996.)

         10.9     Intentionally omitted.

         10.10    Software Spectrum, Inc. Second Amended and Restated Employee
                  Stock Purchase Plan.

         10.11    The Software Spectrum, Inc. Amended and Restated 1993 Long
                  Term Incentive Plan (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the fiscal year ended
                  April 30, 2000.)

         10.12    Intentionally omitted.

         10.13    Management Continuity Agreement ("Continuity Agreement")
                  between the Company and James W. Brown, dated March 1, 1998
                  together with schedule identifying additional executive
                  officers that are parties to Continuity Agreements.

         10.14    Non-Employee Directors' Retainer Stock Plan (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the quarter ended December 31, 1995.)

         10.15(a) Third Amended and Restated Limited Waiver Agreement, dated
                  December 15, 1999 between the Company and Private Capital
                  Management, Inc. (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  2000.)

         10.15(b) Fourth Amended and Restated Limited Waiver Agreement, dated
                  September 1, 2000 between the Company and Private Capital
                  Management, Inc. (incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the fiscal quarter ended
                  January 31, 2001.)

         10.16    Amended and Restated Credit Agreement, dated March 11, 1998
                  among the Company, the Chase Manhattan Bank, as Administrative
                  Agent, Chase Bank of Texas, National Association, as
                  Collateral Agent and other participating financial
                  institutions (incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the quarterly period ended
                  January 31, 1998.)
</Table>




<PAGE>   53

<Table>
<S>               <C>
         10.17(a) The Software Spectrum, Inc. 1998 Long Term Incentive Plan
                  (incorporated by reference to the Company's Quarterly Report
                  on Form 10-Q for the fiscal quarter ended October 31, 1998.)

         10.17(b) Amendment No. 1 to the Software Spectrum, Inc. 1998 Long Term
                  Incentive Plan (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  2000.)

         10.18(a) First Amendment to Amended and Restated Credit Agreement,
                  dated as of August 15, 1998 among the Company, the Chase
                  Manhattan Bank, as Administrative Agent, Chase Bank of Texas,
                  National Association, as Collateral Agent, and other
                  participating financial institutions (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the fiscal quarter ended October 31, 1998.)

         10.18(b) Second Amendment to Amended and Restated Credit Agreement,
                  dated as of June 23, 1999 among the Company, the Chase
                  Manhattan Bank, as Administrative Agent, Chase Bank of Texas,
                  National Association, as Collateral Agent, and other
                  participating financial institutions (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the quarterly period ended January 31, 2000.)

         10.18(c) Consent, Waiver and Third Amendment to Amended and Restated
                  Credit Agreement, dated as of July 31, 2000 among the Company,
                  the Chase Manhattan Bank, as Administrative Agent, Chase Bank
                  of Texas, National Association, as Collateral Agent, and other
                  participating financial institutions (incorporated by
                  reference to the Company's Quarterly Report on Form 10-Q for
                  the fiscal quarter ended July 31, 2000.)

         10.18(d) Waiver and Fourth Amendment to Amended and Restated Credit
                  Agreement, dated as of December 12, 2000 among the Company,
                  the Chase Manhattan Bank, as a Bank, as Administrative Agent
                  and as Collateral Agent, and other participating financial
                  institutions (incorporated by reference to the Company's
                  Quarterly Report on Form 10-Q for the fiscal quarter ended
                  October 31, 2000.)

         10.19    Lease Agreement, dated October 19, 1998 between
                  Highwoods/Florida Holdings, L.P. and the Company, together
                  with First Amendment thereto, dated April 16, 1999
                  (incorporated by reference to the Company's Annual Report on
                  Form 10-K for the fiscal year ended April 30, 1999.)

         10.20    Lease, dated February 28, 2000 between SDS Properties Liberty
                  Lake L.L.C. and Spectrum Integrated Services, Inc. d/b/a
                  Software Spectrum (incorporated by reference to the Company's
                  Annual Report on Form 10-K for the fiscal year ended April 30,
                  2000.)

         21       Subsidiaries of the Company.

         23       Consent of Grant Thornton LLP, Independent Accountants.

         24       Power of Attorney (included on the signature page of this Form
                  10-K.)
</Table>




</TEXT>
</DOCUMENT>
