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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                        COMMISSION FILE NUMBER: 000-22194

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

                                    SPSS INC.
             (Exact name of registrant as specified in its charter)


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<S>                                         <C>

                 DELAWARE                                   36-2815480
      (State or other jurisdiction of                      (IRS Employer
      incorporation or organization)                    Identification No.)
</Table>


                  233 S. WACKER DRIVE, CHICAGO, ILLINOIS 60606
              (Address of principal executive offices and zip code)

               REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE:
                                 (312) 651-3000

           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 if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act   Yes [ ]   No [X]

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act   Yes [ ]   No [X]

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.   Yes [X]   No [ ]

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

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check
one):

     Large accelerated filer   [ ]   Accelerated filer   [X]   Non-accelerated
                                   filer   [ ]

     Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2). Yes  [ ]   No [X]

     The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant on June 30, 2005 (based upon the per share closing
sale price of $19.21 on such date, and, for the purpose of this calculation
only, the assumption that all of the registrant's directors and executive
officers as of such date are deemed to be the affiliates) was approximately
$308.1 million.

     The number of shares outstanding of the registrant's Common Stock, par
value $0.01, as of February 15, 2006, was 18,770,560.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Part III of this Annual Report on Form 10-K incorporates by reference
portions of the registrant's Proxy Statement for its 2006 Annual Meeting of
Stockholders to be held on April 27, 2006.

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                                    SPSS INC.

                                TABLE OF CONTENTS


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<Caption>

                                                                                           PAGE
<S>                    <C>                                                                 <C>

                                             PART I
Item 1.                Business.........................................................     2
Item 1A.               Risk Factors.....................................................    10
Item 1B.               Unresolved Staff Comments........................................    15
Item 2.                Properties.......................................................    15
Item 3.                Legal Proceedings................................................    15
Item 4.                Submission of Matters to a Vote of Security Holders..............    16
                                            PART II
Item 5.                Market for Registrant's Common Equity, Related Stockholder
                       Matters and Issuer Purchases of Equity Securities................    17
Item 6.                Selected Financial Data..........................................    19
Item 7.                Management's Discussion and Analysis of Financial Condition and
                       Results of Operations............................................    20
Item 7A.               Quantitative and Qualitative Disclosures About Market Risk.......    34
Item 8.                Financial Statements and Supplementary Data......................    35
Item 9.                Changes in and Disagreements with Accountants on Accounting and
                       Financial Disclosure.............................................    69
Item 9A.               Controls and Procedures..........................................    69
Item 9B.               Other Information................................................    70
                                            PART III
Item 10.               Directors and Executive Officers of the Registrant...............    71
Item 11.               Executive Compensation...........................................    71
Item 12.               Security Ownership of Certain Beneficial Owners and Management
                       and Related Stockholder Matters..................................    71
Item 13.               Certain Relationships and Related Transactions...................    72
Item 14.               Principal Accountant Fees and Services...........................    72
                                            PART IV
Item 15.               Exhibits and Financial Statement Schedules.......................    72

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                                    SPSS INC.

                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                                     PART I

FORWARD-LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS
REGARDING THE COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES
THAT ARE SIGNIFIED BY THE WORDS "EXPECTS," "ANTICIPATES," "INTENDS," "BELIEVES,"
"ESTIMATES" OR SIMILAR LANGUAGE. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO SPSS ON THE DATE HEREOF. SPSS
CAUTIONS INVESTORS THAT ITS BUSINESS AND FINANCIAL PERFORMANCE AND THE MATTERS
DESCRIBED IN THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO SUBSTANTIAL RISKS
AND UNCERTAINTIES, INCLUDING THE RISKS DESCRIBED UNDER ITEM 1A, "RISK FACTORS."
BECAUSE OF THESE RISKS AND UNCERTAINTIES, SOME OF WHICH MAY NOT BE CURRENTLY
ASCERTAINABLE AND MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL, ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.
DEVIATIONS BETWEEN ACTUAL FUTURE EVENTS AND THE COMPANY'S ESTIMATES AND
ASSUMPTIONS COULD LEAD TO RESULTS THAT ARE MATERIALLY DIFFERENT FROM THOSE
EXPRESSED IN OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. SPSS DOES NOT INTEND
TO UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT ACTUAL FUTURE EVENTS.

ITEM 1.  BUSINESS

     SPSS Inc., a Delaware corporation ("SPSS" or the "Company"), was
incorporated in Illinois in 1975 under the name "SPSS, Inc." and was
reincorporated in Delaware in 1993 under the name "SPSS Inc." SPSS is a global
provider of predictive analytics technology and services.

     The Company's offerings connect data to effective action by enabling
decision makers to draw reliable conclusions about current conditions and future
events. Predictive analytics leverages an organization's business knowledge by
applying sophisticated analytic techniques to enterprise data. The insights
gained through the use of these techniques can lead to improved business
processes that increase revenues, reduce costs and prevent fraudulent
activities.

     Many organizations focus on developing and retaining relationships with
people, particularly in their roles as customers, employees, patients, students,
or citizens. To accomplish these goals, organizations collect and analyze data
related to people's actions, attributes and attitudes. Since its inception, SPSS
has specialized in the analysis of such information about people, developing
technology and services that incorporate decades of related "best practice"
predictive analytic processes and techniques.

     SPSS provides two classes of software and service offerings to two distinct
audiences. For researchers proficient in the use of analytic methods, the
Company offers statistical, data mining and business intelligence software tools
to examine and predict from a broad range of enterprise data. For general
business users acquainted with but not proficient in data analysis techniques,
SPSS delivers packaged software applications that embed the power of predictive
analytics directly into particular business processes, thereby enabling
widespread use of the power of prediction.

     SPSS sells its short sales cycle offerings through telesales and its longer
sales cycle offerings through field sales organizations configured
geographically and by vertical industries. The Company's primary targeted
vertical industries include the insurance industry, the market research
industry, the i-Series market and the public sector.



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     Approximately two-thirds of the Company's revenues come from commercial
firms, many of which use SPSS technology to improve the profitability and
effectiveness of their organizations by attracting new customers more
efficiently, increasing the value of existing customers through improved cross-
selling and retention, and detecting and preventing fraud. Among its government
customers, SPSS offerings are primarily used to improve interactions between
public sector agencies and their constituents or detect forms of non-compliance.
At colleges and universities, SPSS statistical and data mining tools are often
standards for teaching data analysis techniques and academic research.

     In August 1993, SPSS completed an initial public offering of common stock,
$0.01 par value. The common stock is listed on the NASDAQ National Market under
the symbol "SPSS."

     In addition to the information contained in this report, further
information regarding SPSS can be found on the Company's website at
www.spss.com. The information on the Company's website is not incorporated into
this annual report. The Company's annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and all amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 are made available, free of charge, on the Company's website,
www.spss.com, as soon as reasonably practical after the reports have been filed
with or furnished to the Securities and Exchange Commission.

OUR INDUSTRY

     Predictive analytics is a set of procedures and related technologies that
applies sophisticated analytic techniques to enterprise data. When combined with
an organization's business knowledge, predictive analytics can lead to actions
that demonstrably improve critical business processes, including those that
directly affect how people act as customers, employees, patients, students, and
citizens.

     The use of predictive analytics begins by exploring how an organization's
business problems can be addressed through an examination of data pertaining to
the organization's various internal processes or describing characteristics,
attitudes, and behavior of the people with whom the organization interacts.
These numeric and text data sets, which originate from both internal systems and
third-party providers, are cleaned, transformed, and evaluated using
statistical, mathematical, and other algorithmic techniques. These techniques,
often in conjunction with advanced visualization capabilities, then generate
models for classification, segmentation, forecasting, and propensity scoring, as
well as the detection of patterns and anomalies. The results of these models can
be used to determine which actions drive optimal outcomes. The results can be
delivered as recommendations to people and customer-facing systems that can take
effective action. Such actions include identifying new revenue opportunities,
finding measurable cost savings, identifying repeatable process improvements,
and detecting fraud.

     The predictive analytics market emerged as a growing number of commercial,
government and academic organizations discovered and experienced the benefits of
using applied analytics. This market developed with the convergence of two
aspects of the software industry -- statistical tools and data mining -- which,
in turn, combined with new technologies to create a third market known as
predictive analytic applications.

     Statistical Tools.  SPSS is a leading provider of statistical software
tools. Statistical software tools have been and remain an integral part of the
Company's overall business, and based on the Company's experience in 2005, a
growth opportunity.

     Data Mining Tools.  Data mining tools extend predictive analytics by
introducing an array of algorithms that could, under certain conditions, predict
outcomes more effectively than traditional statistical techniques. SPSS has
emerged as a leading provider of data mining tools. The Company believes that
data mining tools present a long-term growth opportunity for the Company.

     Predictive Analytic Applications.  Predictive analytic applications are a
synergistic combination of statistical tools, data mining tools and new
technologies (such as scoring engines, rules and optimization techniques) that
can be harnessed to implement real time decision making. Predictive analytic
applications have emerged as an important driver of future growth of the
Company's business. Business process applications such as Customer Relationship
Management (CRM) systems and Enterprise Resource Planning (ERP) create an
environment where the predictive analytic applications are able to provide
significant return on investment by improving the performance of these
underlying systems.



                                        3

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STRATEGY

     The Company's strategy is based on the following objectives:

     - Drive greater awareness of the value of predictive analytics, especially
       among information technology (IT) professionals.

     - Deliver the right analytical functionality to the right professionals
       throughout an organization.

     - Leverage the Company's expertise in analyzing information about people.

     - Focus on primary vertical industries.

     - Accelerate growth through partnership and acquisition.

MARKETS

     SPSS targets the following markets defined by International Data
Corporation (IDC) in its research reports entitled Worldwide Business
Intelligence Forecast and Analysis, 2005-2009 and Worldwide Customer
Relationship Management Analytic Applications Software Forecast and Analysis,
2005-2009:

     - The global market for statistical and technical analysis software, which
       was approximately $503 million in size in 2004 and in which SPSS held a
       market share of approximately 21%. IDC estimates that this market will
       increase by approximately 3% a year and reach approximately $586 million
       in size by 2009.

     - The global market for data mining tools, which was approximately $523
       million in size in 2004 and in which SPSS held a market share of
       approximately 5%. IDC estimates that this market will increase by
       approximately 8% a year and reach approximately $766 million in size by
       2009.

     - The global market for analytical customer relationship management (aCRM)
       applications, which was approximately $1.0 billion in size in 2004 and in
       which SPSS held a market share of approximately 3%. IDC estimates that
       this market will increase by approximately 9% a year and reach
       approximately $1.5 billion in size by 2009.

     These target markets, combined, total approximately $2.0 billion in
revenues in 2004 with SPSS holding a share of approximately 8%. IDC estimates
that these SPSS target markets will combine to total approximately $2.9 billion
in revenues by 2009. To more effectively increase its overall market share, SPSS
plans to leverage its strong position in the statistical and technical analysis
software market to increase its presence in the related larger and higher-growth
market sectors.

OFFERINGS

     SPSS provides its predictive analytic technology as tools for research
analysts and applications for business users. SPSS has historically operated
with very little backlog because its tools and applications are generally
shipped as orders are received.

  TOOLS

     SPSS software tools enable customers to access and prepare data for
analysis, develop and deploy predictive models, and generate reports and graphs
to present the results. In general, the Company's software tools are:

     - Comprehensive in function, spanning the entire process of data analysis;

     - Modular, allowing customers to purchase only the functionality they need;

     - Integrated, enabling the use of various parts of the SPSS technology in
       combination to tackle particularly complex problems;

     - Tailored to desktop operating environments for greater ease-of-use,
       including browser-based environments for the delivery of results;



                                        4

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     - Available on most popular computing platforms; and

     - For some products, translated and localized for use in France, Germany,
       Italy, Poland, Japan, Taiwan, Korea, China, and Spanish-speaking
       countries.

     Statistics Family.  The Company's primary statistical tools are part of its
flagship SPSS product line. These tools are modular in nature and designed for
use by research analysts working in a wide variety of commercial, governmental,
and academic organizations. While varying by version and computing platform, a
typical purchase from the SPSS product line includes an SPSS Base product and
related optional add-on modules. The SPSS Base includes the user interface, data
connectivity, data editing, reporting, graphing, and general statistical
capabilities. Add-on modules require the SPSS Base to operate and become
seamlessly integrated with SPSS Base upon installation. These optional offerings
usually provide additional statistical functionality specific to particular
types of analysis. The Statistics Family represented approximately 42%, 47% and
54% of total revenue in 2003, 2004 and 2005, respectively.

     Data Mining Family.  The Data Mining Family primarily consists of the
Clementine data mining workbench with optional add-on modules for text mining
and predictive web analytics. These products feature process-oriented visual
user interfaces and artificial intelligence-based algorithms. The Company's Data
Mining and Statistics products can be used together to gain additional data
transformation and analytical functionality. The Data Mining Family represented
approximately 11%, 11% and 10% of total revenue in 2003, 2004 and 2005,
respectively.

     Business Intelligence Family.  The Business Intelligence Family consists of
the ShowCase product line. ShowCase products support information access, data
warehousing, on-line analytical processing (OLAP), and other analytical
applications for the IBM eServer iSeries (AS/400) computer market. The Business
Intelligence Family represented approximately 13%, 13% and 11% of total revenue
in 2003, 2004 and 2005, respectively.

  APPLICATIONS

     Analytical applications provide pre-defined access to the data required for
particular business problems and interfaces that guide users through the related
business processes including the relevant analytics. SPSS analytical
applications include:

     PredictiveMarketing, PredictiveCallCenter, and PredictiveClaims seamlessly
integrate with operational software from other vendors to provide predictive
capability to business users in their management of marketing campaigns,
programs to improve call center effectiveness, or efforts to identify fraudulent
activity in the insurance claims processes. These offerings have pre-packaged
but modifiable data mining models designed for specific tasks, such as customer
acquisition or retention, and enable calculated predictive scores to be inserted
into data warehouses or onto the screens of call center operators. The Company's
Data Distilleries application software is at the core of these Predictive-Series
offerings, providing their real-time scoring and prediction capabilities.

     Dimensions is a robust technology platform that supports the complete end-
to-end survey process for firms in the market research industry and increasingly
to large corporations to address Enterprise Feedback Management needs.
Dimensions provides seamless and efficient work processes around surveys, easier
analysis of data, and more dynamic means of delivering results to clients.
Dimensions represented approximately 13%, 12% and 12% of total revenue in 2003,
2004 and 2005, respectively.

SERVICES

     To support its analytical applications, SPSS offers consulting and
customization services to assist in new implementations or configure existing
applications to vertical industry and customer requirements. SPSS consultants
also help organizations develop plans that align analytical efforts with
organizational goals, assist with the collection and structuring of data for
analysis, and facilitate the building of predictive analytic models. Services
represented approximately 16%, 14% and 11% of total revenue in 2003, 2004 and
2005, respectively.

     To support the implementation of its software tools, SPSS offers a
comprehensive training program with courses covering product operations, general
data analytical concepts and processes, as well as how statistical and data
mining techniques can be applied to address particular business problems. These
courses are regularly


                                        5

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scheduled in cities around the world or organizations can contract with the
Company for on-site training tailored to their specific requirements. Courseware
will also be made available to SPSS partners and integrators, which will
increase potential capacity for delivering customer solutions.

     SPSS has a worldwide customer service and technical support infrastructure
that engages with customers on-site or by telephone, fax, mail, e-mail and the
Web. Technical support is provided to all licensees and includes assistance in
software installation and operations as well as limited guidance in the
selection of analytical methods and the interpretation of results. Additional
technical support services are available on a time-and-materials basis.

SALES AND MARKETING

     The Company has a long-established worldwide telesales organization that
largely sells SPSS tools to research analysts. Sales made by the telesales
organization are typically driven by direct mail campaigns and customer
references, completed within thirty days, and average about $2,500 per
transaction. The database of existing SPSS customers provides an efficient
source for selling add-on products, upgrades and training. SPSS continues to
expand the scope of offerings sold through its telesales organization to
encompass most short sales cycle transactions. The Company also has an e-
commerce infrastructure through which it sells its lower-priced products and
maintains a network of over forty distributors around the world to increase its
penetration into smaller international markets.

     The SPSS field sales force sells its long sales cycle tools and
applications to enterprise customers. This field sales force is organized by the
Company's primary targeted vertical industries, including the insurance
industry, the market research industry, the i-Series market, and the public
sector. SPSS field sales personnel engage with line-of-business executives and
information technology professionals to identify organizational problems that
SPSS offerings can address. In many situations, SPSS professional services
personnel are also involved to complete procurements and plan implementations.
The field sales force has partner relationships with other leading companies to
participate in mutually beneficial joint sales opportunities or provide
additional application implementation capabilities. Transactions completed by
SPSS field sales personnel typically take from nine to twelve months and range
in value from $50 to $500 thousand, per transaction.

     SPSS maintains a worldwide infrastructure to support these sales
organizations. In addition to its headquarters in Chicago, the Company has
offices in the United States in the following metropolitan areas: New York City,
Boston, Washington D.C., Cincinnati, and Rochester (MN). SPSS international
operations consist of fourteen offices in Europe and the Pacific Rim.
Transactions are customarily made in local currencies.

     The SPSS field marketing organization is charged with generating qualified
leads for the Company's tools and applications through direct mail, e-mail,
prospect seminars, advertising in trade and market-specific publications,
exhibiting at trade shows, and conducting user group meetings. This organization
also continually analyzes the SPSS customer database to identify likely
prospects for the Company's new offerings.

     The SPSS products organization consists of two groups, one devoted to
product management, and the other to product marketing. The product management
group is charged with building the products. Their tasks include translating
customer needs into clear directives for specific product development projects,
and working with the research and development organization to develop "roadmaps"
that chart the future direction of each product family. The product marketing
group is responsible for delivering the products to the customers. The product
marketing group focuses on actively engaging with the sales force in customer
situations, understanding the current and future needs of customers, and
understanding the markets and competitors for each product family.

     SPSS also has a corporate marketing group responsible for the broad
visibility of the Company. This group works with the trade and financial press,
industry analysts and financial analysts to establish the identity and presence
of the Company as an industry leader. SPSS corporate marketing also supports
other important areas of company visibility, including corporate Web properties,
the development of expert reviews of SPSS tools and applications which appear in
trade and market-specific publications, and participation in professional
association meetings.



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RESEARCH AND DEVELOPMENT

     SPSS plans to develop new software technologies and products, enhance
existing software technologies and products, acquire complementary technologies,
and form partnerships with third parties providing particular software
functionality or with domain expertise essential to serving selected vertical
industries. SPSS research and development initiatives are Company sponsored
initiatives that will primarily focus on:

     - Extending the capabilities of its primary software tools;

     - Enhancing existing and developing new predictive analytic applications;

     - Improving the interoperability of various SPSS tools and applications;

     - Continuing to build reusable components for use in developing new
       analytical tools;

     - Establishing directions concerning future platforms and deployment,
       including J2EE and .NET, data visualization, in-database modeling and
       scoring, and the adoption of emergent standards; and

     - Demonstrating industry leadership through active participation in
       standards organizations for predictive analytics, such as PMML and CRISP
       DM.

     The SPSS research and development staff currently includes professionals
organized into groups for software design, algorithm development, software
engineering, documentation, quality assurance, and product localization. SPSS
also uses independent contractors in its research and development efforts. SPSS
has outsourced maintenance, conversion, and new programming for some products to
enable its internal development staff to focus on products that are of greater
strategic significance. Expenditures by SPSS for research and development of new
products, services and techniques, including capitalized software, were
approximately $53.8 million in 2003, $57.0 million in 2004, and $54.4 million in
2005.

     Most of the statistical algorithms used by SPSS in its software are
published for the convenience of its customers. SPSS employs full-time
statisticians who regularly research and evaluate new algorithms and statistical
techniques for inclusion in its software. SPSS also employs professionals
trained in the use of predictive analytics in its documentation, quality
assurance, software design and software engineering groups.

COMPETITION

     In selling its predictive analytic tools or applications, SPSS competes
primarily on the basis of the usability, functionality, performance,
reliability, and connectivity of its software. The significance of each of these
factors varies depending upon the anticipated use of the software and the
analytical training and expertise of the customer. To a lesser extent, SPSS
competes on the basis of price and thus maintains pricing policies to meet
market demand. The Company also offers flexible licensing arrangements to
satisfy customer requirements.

     Historically, the Company's success has been driven by highly usable
interfaces, comprehensive analytical capabilities, efficient performance
characteristics, local language versions, consistent quality, connectivity
capabilities, worldwide distribution, and widely recognized brand names. SPSS
considers its primary worldwide competitor in each of its targeted markets to be
the larger and better-financed SAS Institute, although SPSS believes that the
SAS Institute's revenues are derived primarily from offerings in areas other
than predictive analytics.

     In the market for statistical tools, the Company also competes with
StatSoft Inc., Minitab, Inc., Insightful and Stata, although their annual
revenues from statistical products are believed to be considerably less than the
revenues of SPSS. SPSS also faces competition from providers of software for
specific statistical applications.

     In the market for data mining tools, the Company also competes with
offerings from SAS, Oracle, NCR, Fair Isaac and Angoss.

     In the market for predictive analytic applications, SPSS also faces
competition from well-financed companies such as Oracle, Fair Isaac and Unica.

     With the exception of SAS, none of the Company's competitors are believed
to currently offer the range of predictive analytic capability provided by SPSS.



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     SPSS holds a strong position in the market for analytic applications to the
market research industry. SPSS believes no competitors in this market are larger
and better financed. The annual revenues of competitors such as Pulse Train
Technology, The Firm, Sawtooth Software, and Computers for Marketing Corporation
are thought to be considerably less than the market research revenues of SPSS.

     In the future, SPSS may face competition from other new entrants into its
markets. SPSS could also experience competition from companies in the business
intelligence software sector, such as providers of OLAP and analytical
application software, companies in the data provider sector, such as companies
in the credit scoring or personal demographic information business, as well as
from companies in other sectors of the broader market for enterprise
applications, which could add enhanced analytical functionality to their
existing products. Some of these potential competitors have significant capital
resources, marketing experience, and research and development capabilities. New
competitive offerings by these companies or other companies could have a
material adverse effect on SPSS.

INTELLECTUAL PROPERTY

     SPSS attempts to protect its proprietary software with trade secret laws
and internal nondisclosure safeguards, as well as copyrights and contractual
restrictions on copying, disclosure and transferability that are incorporated
into its software license agreements. SPSS licenses its software only in the
form of executable code, with contractual restrictions on copying, disclosures
and transferability. For multi-user licenses of its software, SPSS requires its
customers to sign a license agreement. For single-user licenses of its software,
SPSS licenses its software via a "shrink-wrap" license, as is customary in the
industry. The source code for all SPSS products is protected as a trade secret.
In addition, SPSS has common law copyright protection for its source code and
has filed for copyright protection under federal law with respect to certain
source code. SPSS has also entered into confidentiality and nondisclosure
agreements with its key employees. Despite these restrictions, the possibility
exists for competitors or users to copy aspects of SPSS products or to obtain
information which SPSS regards as a trade secret. Although SPSS holds five
patents and has three patents in registration, judicial enforcement of patent
laws, copyright laws and trade secrets may be uncertain, particularly outside of
North America. Preventing unauthorized use of computer software is difficult,
and software piracy is expected to be a persistent problem for the packaged
software industry. These problems may be particularly acute in international
markets.

     SPSS uses a variety of trademarks with its products. Management believes
the following are material to its business:

     - SPSS is a trademark used in connection with virtually all of the
       technology, solutions, and products of the Company;

     - Clementine is a registered trademark and is used in connection with the
       product line that SPSS acquired from Integral Solutions Limited;

     - PredictiveMarketing, PredictiveCallCenter, and PredictiveClaims are
       trademarks, pending registration, used in connection with the SPSS
       analytical applications for customer relationship management;

     - Dimensions is an unregistered trademark used in connection with the
       Company's market research products on all platforms;

     - Quantime is an unregistered trademark used in connection with the
       Company's market research products on all platforms; and

     - ShowCase is an unregistered trademark used with products licensed by SPSS
       in its Business Intelligence family of products.

     Some of these trademarks comprise portions of other SPSS trademarks. SPSS
has registered some of its trademarks in the United States and some of its
trademarks in a number of other countries, including the Netherlands, France,
Germany, the United Kingdom, Japan, Singapore and Spain.

     Due to the rapid pace of technological change in the software industry,
SPSS believes that patent, trade secret, and copyright protection are less
significant to its competitive position than factors such as the knowledge,
ability,


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and experience of the Company's personnel, new research and development,
frequent technology and product enhancements, name recognition and ongoing
reliable technology maintenance and support.

     SPSS believes that its software tools, predictive analytic applications,
trademarks and other proprietary rights do not infringe the proprietary rights
of third parties. There can be no assurance, however, that third parties will
not assert infringement claims in the future or that the claim will not have a
material adverse affect on SPSS if it is decided adversely to SPSS.

RELIANCE ON THIRD PARTIES

     SPSS licenses various software programs from third-party developers and
incorporates them into SPSS products. Many of these are exclusive worldwide
licenses that terminate on various dates. SPSS believes that it will be able to
renew non-perpetual licenses or obtain substitute products if needed.

  DATA DIRECT

     To provide data connectivity between SPSS products and various databases,
SPSS has an agreement expiring in May 2006 with Data Direct. This agreement
enables SPSS to embed and distribute, as an integral part of its offerings, an
unlimited number of copies of the Data Direct products for a fixed annual
license and maintenance fee.

  BANTA GLOBAL TURNKEY SOFTWARE DISTRIBUTION AGREEMENT

     Banta Global Turnkey manufactures, packages and distributes the Company's
software products in the United States and multiple international locations.
This arrangement ensures speed and efficiency in the manufacturing, order
fulfillment and delivery of SPSS products. Specifically, Banta performs diskette
and CD-ROM duplication, documentation printing, packaging, warehousing,
fulfillment and shipping of SPSS products. SPSS believes that, because of the
capacity of Banta's third-party distribution centers and their around-the-clock
operation, SPSS can easily adapt to peak period demand, quickly manufacture new
products for distribution, and effectively respond to anticipated sales volumes.
Banta has provided these services to SPSS since 1997, and SPSS and Banta amended
and renewed their distribution agreement in January 2006. The agreement with
Banta has a three-year term and automatically renews thereafter for successive
one-year periods. Either party may terminate the agreement for cause if the
other party materially breaches its obligations.

  HYPERION SOLUTIONS

     In 2004, SPSS renewed its strategic relationship with Hyperion Solutions.
Under the terms of this agreement, SPSS has the non-exclusive right to convert,
maintain, support, and distribute the Essbase/400 software from Hyperion
Solutions. Essbase/400 enables SPSS to reach a broader customer base, including
users of multi-dimensional analyses, and offers the Company new partnering
opportunities. Following the initial three-year term, the agreement with
Hyperion Solutions will renew automatically for one-year periods.

EMPLOYEES

     As of December 31, 2005, SPSS had 1,129 full-time employees, 640
domestically and 489 internationally. Of the 1,129 employees, there were 544 in
sales, marketing and professional services, 393 in research and development, and
192 in general and administrative. SPSS believes it has generally good
relationships with its employees. None of the Company's employees are members of
labor unions. The Company also had 78 part-time employees as of December 31,
2005.



                                        9

<PAGE>

FINANCIAL INFORMATION ABOUT THE COMPANY'S FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES

     The following table sets forth financial information about foreign and
domestic operations. This information may not necessarily be indicative of
trends for future periods.

<Table>
<Caption>

                                                   YEAR ENDED DECEMBER 31,
                                                ----------------------------
                                                  2003      2004      2005
                                                --------  --------  --------
                                                       (IN THOUSANDS)

<S>                                             <C>       <C>       <C>


Sales to unaffiliated customers:
  United States................................ $102,484  $101,665  $102,775
  Europe.......................................   80,392    90,941    98,643
  Pacific Rim..................................   25,491    31,468    34,645
                                                --------  --------  --------
     Total..................................... $208,367  $224,074  $236,063
                                                ========  ========  ========
Sales or transfers between geographic areas:
  United States................................ $ 27,781  $ 27,019  $ 28,598
  Europe.......................................  (15,912)  (13,820)  (15,017)
  Pacific Rim..................................  (11,869)  (13,199)  (13,581)
                                                --------  --------  --------
     Total..................................... $    --   $    --   $    --
                                                ========  ========  ========
Operating income (loss):
  United States................................ $   (951) $ (9,953) $  2,945
  Europe.......................................     (257)   12,632    19,587
  Pacific Rim..................................    1,336     3,897     5,492
                                                --------  --------  --------
     Total..................................... $    128  $  6,576  $ 28,024
                                                ========  ========  ========
Identifiable assets:
  United States................................ $156,949  $153,128  $167,744
  Europe.......................................   57,132    59,364    62,764
  Pacific Rim..................................   14,926    22,833    41,389
                                                --------  --------  --------
     Total..................................... $229,007  $235,325  $271,897
                                                ========  ========  ========

</Table>


     SPSS revenues from operations outside of United States accounted for
approximately 51% in 2003, 55% in 2004 and 56% in 2005. Net revenues per
geographic region are attributed to countries based upon point of sale. SPSS
expects that revenues from international operations will continue to represent a
large percentage of its net revenues and that this percentage may increase,
particularly as the Company further localizes its offerings by translating them
into additional languages. Various risks impact international operations. See
Item 1, "Business -- Sales and Marketing," Item 1A, "Risk Factors," Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and Note 2, "Domestic and Foreign Operations," of the Notes to
Consolidated Financial Statements.

ITEM 1A.  RISK FACTORS

     In addition to factors discussed elsewhere in this Annual Report on Form
10-K, the following are important risks which could adversely affect the
Company's future results. If any of the following risks actually occurred, the
Company's business and financial condition or the results of its operations
could be materially adversely affected, the trading price of the Company's
common stock could decline, and investors could lose all or part of their
investment in SPSS. In addition to the risks and uncertainties described below,
additional risks and uncertainties not presently known to SPSS, or those SPSS
currently believes are immaterial, could also impair the Company's business
operations.


                                       10

<PAGE>

THE COMPANY'S FINANCIAL RESULTS AND STOCK PRICE MAY BE ADVERSELY AFFECTED BY
QUARTERLY FLUCTUATIONS WHICH ARE BEYOND ITS CONTROL.

     The Company's quarterly revenue and operating results have varied in the
past and may continue to do so in the future due to several factors, including:

     - The number and timing of product updates and new product introductions;

     - Delays in product development and introduction of new technologies;

     - Purchasing schedules of its customers;

     - Changes in foreign currency exchange rates;

     - Changes in prescribed accounting rules and practices;

     - Research and development as well as market development expenditures;

     - The timing of product shipments and solution implementations;

     - Changes in product mix and solutions revenues;

     - Timing, cost and effects of acquisitions; and

     - General economic conditions.

     Because expense levels are to a large extent based on forecasts of future
revenues, the Company's operating results may be adversely affected if its
future revenues fall below expectations. Accordingly, SPSS believes that
quarter-to-quarter comparisons of its results of operations may not be
meaningful and should not be relied upon as an indication of future performance.

     In addition, the timing and amount of the Company's revenues may be
affected by a number of factors that make estimation of operating results before
the end of a quarter uncertain. A significant portion of the Company's operating
expenses are relatively fixed, and planned expenditures are based primarily on
revenue forecasts. The variable profit margins on modest increases in sales
volume at the end of fiscal quarters are significant and, should SPSS fail to
achieve these revenue increases, net income could be materially affected.
Generally, if revenues do not meet the Company's expectations in any given
quarter, its operating results will be adversely affected. There can be no
assurance that profitability on a quarterly or annual basis can be achieved or
sustained in the future.

THE ANTICIPATED BENEFITS OF THE COMPANY'S ACQUISITIONS MAY NOT MATERIALIZE,
THEREBY EXPOSING THE COMPANY TO MORE EXPENSIVE AND LESS EFFICIENT OPERATIONS.

     In recent years, SPSS has made a number of acquisitions, including the
acquisition of businesses based outside of the United States. Part of the
Company's growth strategy includes pursuing additional acquisitions. Any of
these transactions could be material to its financial condition and results of
operations. In addition, the process of integrating an acquired company,
business or technology involves risk and may create unforeseen operating
difficulties and expenditures. These areas of risk include:

     - the need to implement or remediate controls, procedures and policies at
       companies that, prior to the acquisition, lacked these controls,
       procedures and policies;

     - interruption of, or a distraction of management's attention from, the
       Company's business;

     - cultural challenges associated with integrating employees from the
       acquired company into the Company's organization; and

     - the need to integrate each company's accounting, management information,
       human resource and other administrative systems to permit effective
       management.

     Foreign acquisitions involve unique risks in addition to those mentioned
above, including those related to the integration of operations across different
cultures and languages, currency risks and the particular economic, political
and regulatory risks associated with specific countries.



                                       11

<PAGE>

     SPSS may not be able to consummate these potential future acquisitions on
terms acceptable to it, or at all. Further, the anticipated benefit of many of
the Company's acquisitions may not materialize. Future acquisitions or
dispositions could result in potentially dilutive issuances of the Company's
equity securities, the incurrence of debt, contingent liabilities or
amortization expenses, or write-offs of goodwill, any of which could harm the
Company's financial condition. Any of these events could have a material adverse
effect on SPSS.

IF SPSS DOES NOT RESPOND ADEQUATELY TO RAPID TECHNOLOGICAL CHANGES, ITS EARNINGS
MAY BE ADVERSELY AFFECTED.

     The computer software industry is characterized by rapid technological
advances, changes in customer requirements, as well as frequent enhancements to
and introductions of technologies. The Company's future success will depend upon
its ability to enhance its existing software and introduce new software products
that keep pace with technological developments, respond to evolving customer
requirements and achieve market acceptance. In particular, SPSS believes it must
continue to respond quickly to users' needs for greater functionality, improved
usability and support for new hardware and operating systems. Any failure by
SPSS to respond adequately to technological developments and customer
requirements, or any significant delays in software development or introduction,
could result in loss of revenues.

     In the past, SPSS has, on occasion, experienced delays in the introduction
of new software and enhancements to existing technology, primarily due to
difficulties with particular operating environments and problems with software
provided by third parties. The extent of these delays has varied depending upon
the size and scope of the project and the nature of the problems encountered.
These delays have most often resulted from "bugs" encountered in working with
new versions of operating systems and other third party software, and "bugs" or
unexpected difficulties in existing third party software which complicate
integration with the Company's software. From time to time, SPSS has discovered
"bugs" in its software that are resolved through maintenance releases or through
periodic updates depending upon the seriousness of the defect. There can be no
assurance that SPSS will be successful in developing and marketing new software
or enhancements to existing technology on a timely basis or that SPSS will not
experience significant delays or defects in its software in the future, which
could have a material adverse effect on the Company. In addition, there can be
no assurance that new software or enhancements to existing technology developed
by SPSS will achieve market acceptance or that developments by others will not
render its technologies obsolete or noncompetitive.

REVENUES FROM INTERNATIONAL OPERATIONS REPRESENT A LARGE PERCENTAGE OF THE
COMPANY'S NET REVENUES. CERTAIN RISKS ASSOCIATED WITH OPERATING THE COMPANY'S
BUSINESS OUTSIDE OF NORTH AMERICA MAY HAVE A MATERIAL ADVERSE AFFECT ON ITS
BUSINESS.

     Revenues from operations outside of North America accounted for
approximately 51% of the Company's total revenues in 2003, 55% in 2004 and 56%
in 2005. SPSS expects that revenues from international operations will continue
to represent a large percentage of its net revenues and that this percentage may
increase, particularly as SPSS further "localizes" products by translating them
into additional languages and expands its operations through acquisitions of
companies outside the United States. A number of risk factors may affect the
Company's international revenues, including:

     - greater difficulties in accounts receivable collection;

     - longer payment cycles;

     - exposure to currency fluctuations;

     - political and economic instability; and

     - the burdens of complying with a wide variety of foreign laws and
       regulatory requirements.

     SPSS also believes that it is exposed to greater levels of software piracy
in certain international markets where weaker protection is afforded to
intellectual property. As SPSS expands its international operations, the risks
described above could increase and, in any event, could have a material adverse
effect on SPSS.



                                       12

<PAGE>

THE COMPANY'S STOCK PRICE MAY EXPERIENCE VOLATILITY, THEREBY CAUSING A POTENTIAL
LOSS OF VALUE TO ITS INVESTORS.

     There has been significant volatility in the market prices of securities of
technology companies, including SPSS, and, in some instances, this volatility
has been unrelated to the operating performance of those companies. Market
fluctuations may adversely affect the price of the Company's common stock. SPSS
also believes that, in addition to factors such as interest rates and economic
conditions which affect stock prices generally, some, but not all, of the
factors which could result in fluctuations in its stock price include:

     - announcements of new products by SPSS or its competitors;

     - quarterly variations in financial results;

     - recommendations and reports of analysts;

     - acquisitions; and

     - other factors beyond the Company's control.

SPSS RELIES ON THIRD PARTIES FOR CERTAIN SOFTWARE. THE LOSS OF THESE
RELATIONSHIPS COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S PRODUCTS.

     SPSS licenses software from third parties. Some of this licensed software
is embedded in its products, and some is offered as add-on products. If these
licenses are discontinued, or become invalid or unenforceable, there can be no
assurance that SPSS will be able to develop substitutes for this software
independently or to obtain alternative sources in a timely manner. Any delays in
obtaining or developing substitutes for licensed software could have a material
adverse effect on SPSS.

SPSS RELIES ON THIRD PARTIES FOR SOFTWARE DISTRIBUTION. THE LOSS OF THESE
RELATIONSHIPS COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S OPERATING
RESULTS.

     Since January 1997, SPSS has had an effective software distribution
agreement with Banta Global Turnkey. The original agreement was amended and
restated in January 2006. Pursuant to the software distribution agreement, Banta
manufactures, packages and distributes the Company's software products to its
domestic and international customers and various international subsidiaries.
Either party may terminate the Banta agreement for cause by written notice if
the other party materially breaches its obligations. If Banta fails to perform
adequately any of its obligations under the Banta agreement, the Company's
operating results could be materially adversely affected

CHANGES IN PUBLIC EXPENDITURES MAY ADVERSELY AFFECT THE COMPANY'S RESULTS OF
OPERATIONS.

     A significant portion of the Company's revenues comes from licenses of its
software directly to government entities both internationally and in the United
States. In addition, significant amounts of the Company's revenues come from
licenses to academic institutions, healthcare organizations and private
businesses that contract with or are funded by government entities. Government
appropriations processes are often slow and unpredictable and may be affected by
factors outside the Company's control. In addition, proposals are currently
being made in various countries to reduce government spending. Reductions in
government expenditures and termination or renegotiation of government-funded
programs or contracts could have a material adverse effect on SPSS. In addition,
declines in overall levels of economic activity could also have a material
adverse impact on SPSS.

SPSS MAY BE UNABLE TO CONTINUE TO COMPETE WITH COMPANIES IN ITS INDUSTRIES THAT
HAVE FINANCIAL OR OTHER ADVANTAGES. FAILURE TO COMPETE SUCCESSFULLY COULD HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.

     The Company's historical market for statistical software is both highly
competitive and fragmented. SPSS is among the largest companies in the
statistical software market. However, SPSS faces competition from providers of
statistical software, data mining tools, predictive analytic applications and
analytic applications to the market research industry. SPSS believes that it
competes effectively against its competitors, but there can be no assurance that
it will continue to do so in the future.



                                       13

<PAGE>

     In the future, SPSS may also face competition from new entrants into its
current or future markets. Some of these potential competitors may have
significant capital resources, marketing experience and research and development
capabilities. Competitive pressures from the introduction of new solutions and
products by these companies or other companies could have a material adverse
effect on SPSS.

SPSS DEPENDS ON KEY EXECUTIVES. A LOSS OF THESE EXECUTIVES AND OTHER PERSONNEL
COULD NEGATIVELY IMPACT THE COMPANY'S OPERATIONS.

     SPSS is dependent on the efforts of various executives and key employees.
The Company's continued success will depend in part on its ability to attract
and retain highly qualified technical, managerial, sales, marketing and other
personnel. Competition for highly qualified personnel is intense. The Company's
inability to continue to attract or retain highly qualified personnel could have
a material adverse effect on its financial position and results of operation. No
life insurance policies are maintained on the Company's key personnel.

SPSS MAY NOT RECEIVE THE FULL BENEFITS OF ITS INTELLECTUAL PROPERTY PROTECTIONS.

     The analytical algorithms incorporated in the Company's software are not
proprietary. SPSS believes that the portion of its technology that is
proprietary is the portion that determines the speed and quality of displaying
the results of computations, the ability of its software to work in conjunction
with third party software, and the ease of use of its software. The Company's
success will depend, in part, on its ability to protect these proprietary
aspects of its software. SPSS attempts to protect its proprietary software with
trade secret laws and internal nondisclosure safeguards, as well as copyright,
trademark and patent laws and contractual restrictions on copying, disclosure
and transferability that are incorporated into its software license agreements.
However, there is no guarantee that these protections will prove effective.

     Preventing unauthorized use of computer software is difficult, and software
piracy is expected to be a persistent problem for the packaged software
industry. These problems may be particularly acute in international markets. In
addition, the laws of various countries in which the Company's software is or
may be licensed do not protect its software and intellectual property rights to
the same extent as the laws of the United States. Despite the precautions that
SPSS takes, it may be possible for unauthorized third parties to reverse
engineer or copy the Company's products or obtain and use information that SPSS
regards as proprietary. There can be no assurance that the steps that SPSS takes
to protect its proprietary rights will be adequate to prevent misappropriation
of its technology.

     Although the Company's software has never been the subject of an
infringement claim, there can be no assurance that third parties will not assert
infringement claims against SPSS in the future or that any infringement
assertion will not result in costly litigation or require SPSS to obtain a
license to use the intellectual property of third parties. There can be no
assurance that these licenses will be available on reasonable terms, or at all.
There can also be no assurance that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technologies.

ANTI-TAKEOVER PROTECTIONS MAY MAKE IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE
SPSS.

     SPSS maintains a stockholder Rights Agreement which was adopted by the
Board in 1998 and amended in June 2004. The Rights Agreement and common stock
purchase rights issued in connection with the Right Agreement are intended to
ensure that its stockholders receive fair and equal treatment in the event of a
proposed takeover of SPSS. The Rights Agreement may discourage a potential
acquirer from acquiring control of SPSS.

     The Company's Certificate of Incorporation and By-Laws contain a number of
provisions, including provisions requiring an 80% super-majority stockholder
approval of specified actions and provisions for a classified Board of
Directors, which would make the acquisition of SPSS, by means of an unsolicited
tender offer, a proxy contest or otherwise, more difficult. The Company's bylaws
provide for a staggered board of directors so that only one-third of the total
number of directors are replaced or re-elected each year. Therefore, potential
acquirers of SPSS may face delays in replacing the existing directors.



                                       14

<PAGE>

     Certain of the Company's senior executives and other officers may be
entitled to substantial payments in the event of their termination without cause
or constructive termination following a change of control of SPSS. These
payments could have the effect of discouraging a potential acquirer from
acquiring control of SPSS.

SPSS MAY NOT MAINTAIN EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING WHICH
COULD HAVE A MATERIAL ADVERSE EFFECT ON SPSS.

     In the event SPSS does not maintain effective internal control over
financial reporting, the Company's financial statements could be inaccurate. If
SPSS has inaccurate financial statements, it could have a material adverse
effect on the value of the Company's common stock.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

     N/A

ITEM 2.  PROPERTIES

     The Company's principal administrative, marketing, training, product
development and support facilities are located at the Sears Tower, 233 South
Wacker Drive, Chicago, Illinois 60606. In April 1997, SPSS entered into a 15
year sublease agreement to sublease 99,444 square feet of office space in the
Sears Tower. This space became the Company's principal offices in 1998. In April
2000, SPSS entered into a six year sublease for an additional 41,577 square feet
of office space in the Sears Tower. Because the sublease is due to expire in
June 2006, in November 2005, SPSS entered into a lease agreement, commencing
July 2006, to lease the aforementioned 41,577 square feet of office space for an
additional 71 months. The aggregate annual gross rental payments on these leases
for office space in the Sears Tower were approximately $3.8 million for the year
2005. SPSS believes that these office spaces are adequate to fulfill the
Company's needs for the foreseeable future.

     In addition, SPSS leases office space in Massachusetts, New York, Virginia,
Pennsylvania, Ohio, Florida, Wisconsin, Minnesota, Texas and California. SPSS
leases office space internationally in Holland, the United Kingdom, Denmark,
Belgium, Spain, Germany, Sweden, France, Australia, Singapore, Malaysia, Japan,
and China. The aggregate annual gross rental payments on these leases were
approximately $8.8 million for the year 2005.

     SPSS believes its facilities are suitable and adequate for its present
needs, and plans to expand its facilities only on an as-needed basis. The
Company does not expect any such expansion to materially affect its real estate
lease costs.

ITEM 3.  LEGAL PROCEEDINGS

     SPSS Inc. has been named as a defendant in a lawsuit filed on December 6,
2002 in the United States District Court for the Southern District of New York,
under the caption Basu v. SPSS Inc., et al., Case No. 02CV9694. The complaint
alleges that, in connection with the issuance and initial public offering of
shares of common stock of NetGenesis Corp., the registration statement and
prospectus filed with the Securities and Exchange Commission in connection with
the IPO contained material misrepresentations and/or omissions. The alleged
violations of the federal securities laws took place prior to December 31, 2001,
the effective date of the merger in which the Company's acquisition subsidiary
merged with and into NetGenesis Corp. NetGenesis Corp. is now a wholly owned
subsidiary of SPSS. Other defendants to this action include the former officers
and directors of NetGenesis Corp. and the investment banking firms that acted as
underwriters in connection with the IPO. The plaintiff is seeking unspecified
compensatory damages, prejudgment and post-judgment interest, reasonable
attorney fees, experts' witness fees and other costs and any other relief deemed
proper by the Court. The Company is aggressively defending itself, and plans to
continue to aggressively defend itself against the claims set forth in the
complaint. The Company and the named officers and directors filed an answer to
the complaint on July 14, 2003. At this time, the Company believes the lawsuit
will be settled with no material adverse effect on its results of operations,
financial condition, or cash flows.

     SPSS, Jack Noonan, SPSS's President and Chief Executive Officer and Edward
Hamburg, SPSS's former Executive Vice President, Corporate Operations, Chief
Financial Officer and Secretary, were named as defendants


                                       15

<PAGE>

in a lawsuit filed in the United States District Court for the Northern District
of Illinois on or about May 14, 2004. The lawsuit was filed under the caption
Fred Davis, Individually and On Behalf of All Others Similarly Situated v. SPSS
Inc., Jack Noonan and Edward Hamburg, Case No. 04 CH 03427. The lawsuit was
amended on September 30, 2004 and KMPG LLP, SPSS's former auditor, was added as
a defendant. The complaint alleged that the defendants violated Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder. The complaint further alleged that the defendants failed to disclose
and misrepresented a series of material adverse facts regarding the Company's
revenues. The complaint sought to recover unspecified compensatory damages,
reasonable attorney fees, experts' witness fees and other costs and any other
relief deemed proper by the court on behalf of all purchasers of the Company's
securities between May 2, 2001 and March 30, 2004, although no court has
determined that such persons constitute a proper class. On May 10, 2005, the
United States District Court for the Northern District of Illinois dismissed the
plaintiffs' case for failure to state a claim upon which relief may be granted,
without prejudice, and granted the plaintiffs leave to file an amended
complaint. On June 24, 2005, the Lead Plaintiff filed a second amended complaint
which realleges that the defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, and
seeks the same relief as the original complaint. The second amended complaint
realleges many of the same factual bases for the claims as were set forth in the
first amended complaint that was dismissed by the court. In addition, an
additional plaintiff, AFCO, LP, has been added, and the second amended complaint
has dropped the claims against KPMG LLP. On August 26, 2005, SPSS, Mr. Noonan
and Dr. Hamburg filed a motion to dismiss the second amended complaint. On
November 2, 2005, the Lead Plaintiff filed a memorandum in opposition to the
motion to dismiss the second amended complaint filed by SPSS, Mr. Noonan and Dr.
Hamburg. On November 30, 2005, SPSS, Mr. Noonan and Dr. Hamburg filed a reply
memorandum in support of their motion to dismiss. SPSS, Mr. Noonan and Dr.
Hamburg believe that the suit is without merit and intend to defend vigorously
against the allegations contained in the second amended complaint.

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

     N/A



                                       16

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         ISSUER PURCHASES OF EQUITY SECURITIES

     The Company's common stock is traded on the over-the-counter market on the
Nasdaq National Market under the symbol "SPSS."

     The following table shows, for the periods indicated, the high and low sale
price of the Company's common stock:

<Table>
<Caption>

                                                            HIGH     LOW
                                                           ------  ------

<S>                                                        <C>     <C>


YEAR END DECEMBER 31, 2004
First Quarter............................................. $22.67  $17.51
Second Quarter............................................  20.00   14.04
Third Quarter.............................................  18.65   11.70
Fourth Quarter............................................  16.18   12.30
YEAR END DECEMBER 31, 2005
First Quarter.............................................  19.95   13.64
Second Quarter............................................  19.94   15.57
Third Quarter.............................................  24.35   17.68
Fourth Quarter............................................  31.84   21.54
</Table>


     As of February 15, 2006, there were 648 holders of record of the Company's
common stock.

     SPSS has never declared a cash dividend or paid any cash dividends on its
capital stock. SPSS does not anticipate paying any cash dividends on SPSS common
stock in the foreseeable future because SPSS expects to retain future earnings
for use in the operation and expansion of its business. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     The table below sets forth information with regard to securities authorized
for issuance under Company's equity compensation plans as of December 31, 2005.
As of December 31, 2005, SPSS had two active equity compensation plans: (1) the
Amended and Restated 2002 Equity Incentive Plan (the "2002 Plan") and (2) the
SPSS Inc. Employee Stock Purchase Plan (the "ESPP"). SPSS has three additional
equity compensation plans under which exercisable options remain outstanding.
These three plans were terminated and are now considered inactive because
securities no longer remain available for future issuance under these plans.
These three terminated equity compensation plans are: the 2000 Equity Incentive
Plan (the "2000 Plan"), the 1999 Employee Equity Incentive Plan (the "1999
Plan") and the Third Amended and Restated 1995 Equity Incentive Plan (the "1995
Plan"). Information regarding the 2000 Plan, the 1999 Plan and the 1995 Plan is
included in the table below because, as of December 31, 2005, exercisable
options remain outstanding under these three plans. Except for the 1999 Plan,
all of the Company's equity compensation plans have been approved by
stockholders.

<Table>
<Caption>

                                                                                 NUMBER OF SECURITIES
                                                                                REMAINING AVAILABLE FOR
                                 NUMBER OF SECURITIES    WEIGHTED AVERAGE    FUTURE ISSUANCE UNDER EQUITY
                                     TO BE ISSUED            PER SHARE            COMPENSATION PLANS
                                   UPON EXERCISE OF      EXERCISE PRICE OF       (EXCLUDING SECURITIES
                                 OUTSTANDING OPTIONS,  OUTSTANDING OPTIONS,        REFLECTED IN THE
PLAN CATEGORY                     WARRANTS AND RIGHTS   WARRANTS AND RIGHTS          FIRST COLUMN)
-------------                    --------------------  --------------------  ----------------------------

<S>                              <C>                   <C>                   <C>


Equity Compensation Plans
  Approved by Security Holders..       2,576,004(1)           $17.28(2)                 718,109(3)
Equity Compensation Plans Not
  Approved by Security Holders..         781,781(4)           $21.99                         --
                                       ---------              ------                    -------
Total...........................       3,357,785              $18.38                    718,109
                                       =========              ======                    =======

</Table>





                                       17

<PAGE>

--------

  (1) Includes (a) options to purchase 1,733,167 shares of common stock issued
      under the 2002 Plan with a weighted average exercise price of $16.34, (b)
      78,200 shares of common stock to be issued upon the vesting of restricted
      share units issued under the 2002 Plan for which no exercise price will be
      paid, (c) 23,387 shares of common stock issued pursuant to the ESPP in
      connection with the July 2005 to December 2005 purchase period (which
      shares were actually issued in January 2006), (d) options to purchase
      167,504 shares of common stock issued under the 2000 Plan with a weighted
      average exercise price of $19.34 and (e) options to purchase 573,746
      shares of common stock issued under the 1995 Plan with a weighted average
      exercise price of $22.59.

  (2) The calculation of weighted average exercise price includes only
      outstanding options.

  (3) Consists of 241,496 shares of common stock that remain available for
      issuance under the 2002 Plan in the form of options, stock appreciation
      rights, restricted shares or restricted share units, and 476,613 shares of
      common stock that remain available for issuance pursuant to the ESPP.

  (4) Reflects options to purchase 781,781 shares of common stock issued under
      the 1999 Plan with a weighted average exercise price of $21.99.

     Pursuant to the 1999 Plan, SPSS was able to award nonqualified stock
options and restricted shares to non-executive officers, non-director employees
and independent contractors of SPSS and any of its subsidiaries. The Board
administered the 1999 Plan and was authorized to delegate this authority to the
Compensation Committee. The purpose of the 1999 Plan was to further the success
of SPSS by attracting outstanding employees and other talent and providing to
such persons incentives and rewards tied to the Company's business success. The
maximum number of shares of common stock that was permitted to be issued or
transferred under the 1999 Plan in any given calendar year was 3% of the
greatest number of total common stock outstanding in the previous calendar year.
The options awarded under the 1999 Plan had a term of 10 years and an option
price equal to the closing price of SPSS common stock on the respective dates of
grant. At the time the 1999 Plan was terminated, the Board had issued 2,384,328
shares under the 1999 Plan. As stated above, securities no longer remain
available for future issuance under the 1999 Plan.



                                       18

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data presented below for each of the
years in the five-year period ended December 31, 2005 are derived from and
should be read in conjunction with the Consolidated Financial Statements of SPSS
and the footnotes thereto which have been audited. The Consolidated Financial
Statements as of December 31, 2004 and 2005, and for each of the years in the
three-year period ended December 31, 2005, are included elsewhere in this Form
10-K.

<Table>
<Caption>

                                                       YEAR ENDED DECEMBER 31,
                                          ------------------------------------------------
                                            2001      2002      2003      2004      2005
                                          --------  --------  --------  --------  --------
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                       <C>       <C>       <C>       <C>       <C>


Net revenues:
  License(1)............................. $ 90,007  $ 93,063  $ 91,473  $ 95,819  $107,568
  Maintenance(2).........................   59,352    81,481    83,557    97,735   102,241
  Services(3)............................   24,696    33,936    33,337    30,520    26,254
                                          --------  --------  --------  --------  --------
     Net revenues........................  174,055   208,480   208,367   224,074   236,063
Operating expenses:
  Cost of license and maintenance
     revenues............................   17,155    17,696    14,359    14,642    16,381
  Cost of license and maintenance
     revenues -- software write-offs.....    3,637     5,928     1,961       --        --
  Sales, marketing and services..........  114,402   130,303   123,454   129,987   117,872
  Research and development...............   32,305    41,624    44,167    47,765    45,418
  General and administrative(4)..........   14,056    18,032    18,194    25,104    28,368
  Special general and administrative
     charges(5)..........................   14,739     9,037     6,104       --        --
  Merger-related(6)......................    9,081     2,260       --        --        --
  Illumitek shut-down charges (7)........      --        518       --        --        --
  Acquired in-process technology(8)......    2,288       150       --        --        --
                                          --------  --------  --------  --------  --------
     Operating expenses..................  207,663   225,548   208,239   217,498   208,039
                                          --------  --------  --------  --------  --------
Operating income (loss)..................  (33,608)  (17,068)      128     6,576    28,024
                                          --------  --------  --------  --------  --------
Net interest and investment income
  (expense)..............................     (204)      (63)      (42)     (282)      161
Gain on divestiture of Sigma-series
  product line(9)........................      --        --      8,577        82     1,000
Other income (expense)...................   (1,121)      752     1,798     1,680    (2,013)
                                          --------  --------  --------  --------  --------
Income (loss) before income taxes and
  minority interest......................  (34,933)  (16,379)   10,461     8,056    27,172
Provision for income taxes...............   (8,177)      878     1,147     2,513    11,080
                                          --------  --------  --------  --------  --------
Income (loss) before minority interest...  (26,756)  (17,257)    9,314     5,543    16,092
Minority interest........................      360       497       --        --        --
                                          --------  --------  --------  --------  --------
Net income (loss)........................ $(26,396) $(16,760) $  9,314  $  5,543  $ 16,092
                                          ========  ========  ========  ========  ========
Basic net income (loss) per share........ $  (1.90) $  (0.99) $   0.54  $   0.31  $   0.88
Diluted net income (loss) per share...... $  (1.90) $  (0.99) $   0.53  $   0.31  $   0.85
Shares used in basic EPS calculation.....   13,927    16,887    17,351    17,671    18,228
Shares used in diluted EPS calculation...   13,927    16,887    17,562    17,884    18,880
Balance Sheet Data:
  Working capital........................ $ 22,307  $ (9,176) $ 16,629  $ 13,846  $ 37,415
  Total assets...........................  216,039   213,619   229,007   235,325   271,897
  Deferred revenue.......................   54,984    52,765    59,051    62,148    63,980
  Long term obligations, less current
     portion.............................    1,833     6,781     7,764     4,994     1,867
  Total stockholders' equity.............  115,062   101,993   119,639   128,459   163,746
</Table>


--------

  (1) License revenues include sales of the Company's tools, applications, and
      components on a perpetual, annual, or ASP (applications service provider)
      basis.



                                       19

<PAGE>

  (2) Maintenance revenues include recurring revenues recognized by the Company
      from renewals of maintenance agreements associated with perpetual licenses
      or renewals of annual licenses.

  (3) Services include revenues recognized from professional services
      engagements, training and other activities such as publication sales and
      providing respondents to online surveys.

  (4) Includes provision for doubtful accounts.

  (5) Includes costs associated with acquisitions, as well as costs associated
      with severance and the write-down of obsolete internal use software.

  (6) Includes costs directly related to acquisitions, such as investment
      banking and other professional fees, employee severance, merger-related
      bonuses and costs associated with closing excess office space and write-
      off of redundant assets.

  (7) In 2001, the Company purchased 50% of the then-issued and outstanding
      shares of stock of Illumitek Inc. In 2002, SPSS terminated its investment
      in Illumitek. These costs reflect costs associated with this termination
      and the related write-down of Illumitek technology.

  (8) Includes costs related to acquired in-process technology in conjunction
      with business combinations accounted for as purchases.

  (9) During 2003, the Company entered into an agreement to license the
      distribution of its Sigma-series line of products and sell certain related
      assets. During 2004, SPSS recorded a favorable adjustment to reduce
      certain professional fee accruals associated with this transaction. During
      2005, SPSS recorded additional gain related to receipt of final license
      payment of $1.0 million related to this transaction. This transaction was
      accounted for as a divestiture of a business. See additional discussion in
      Note 7 to the consolidated financial statements.

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

OVERVIEW AND BACKGROUND

     SPSS is a global provider of predictive analytics technology and services.
The Company's offerings connect data to effective action by enabling decision
makers to draw reliable conclusions about current conditions and future events.
Predictive analytics leverages an organization's business knowledge by applying
sophisticated analytic techniques to enterprise data. The insights gained
through the use of these techniques can lead to improved business processes that
increase revenues, reduce costs, and prevent fraudulent activities.

     The Company sells its products and services to a broad scope of industries.
Approximately 65% of the Company's 2005 revenues came from sales to customers in
corporate settings, with another 18% in academic institutions, 11% in government
agencies and 6% from nonprofit and healthcare organizations.

     The discussion set forth in this Item 7 is comprehensive in scope. The
following is background information intended to provide context and
clarification of certain key matters addressed in this discussion.

     Deferred Revenue.   Because of the nature of the Company's business,
management frequently discusses the timing of deferred revenue and the impact of
this timing on the Company's financial results. The Company generates a
significant portion of its revenue by selling software licenses. Software
licenses may be term licenses or perpetual licenses. If SPSS sells a term
license, the revenue associated with this license is deferred over the term of
the license. If SPSS sells a perpetual license, the license revenue is generally
recognized immediately but the revenue associated with maintenance of this
license is deferred over the contracted maintenance period which is typically a
12-month period. Both the mix of licenses (i.e. number of annual licenses and
the number of perpetual licenses) and the timing of when such licenses are
executed in a given quarter or fiscal year significantly affect the portion of
revenue that must be deferred for such period. References to deferred revenue
matters are made throughout this discussion.

     Transactions.   References are also made throughout this discussion to
transactions completed with the following companies over the past three fiscal
years: (a) America Online, Inc. ("AOL"), (b) Data Distilleries B.V.


                                       20

<PAGE>

("Data Distilleries") and (c) Systat Software, Inc., a subsidiary of Cranes
Software International Ltd. ("Systat"). Relevant facts surrounding each of these
transactions are as follows:

     - In 2001, SPSS entered into a strategic alliance with AOL through AOL's
       Digital Marketing Services (DMS) subsidiary. With this alliance, SPSS
       acquired certain operating assets and exclusive rights to distribute
       survey sample drawn from AOL members and users of AOL's other interactive
       properties. SPSS amended its strategic alliance with AOL in 2003. During
       2005, SPSS management modified the focus of its survey sample business,
       thereby causing AOL service revenue to decline.

     - In 2003, through one of its international subsidiaries, SPSS acquired
       Data Distilleries, a Netherlands-based developer of analytic
       applications. The products acquired through this acquisition are at the
       core of the Company's predictive applications offerings.

     - In 2003, the Company granted Systat an exclusive, worldwide license to
       distribute the Company's Sigma-Series product line for a three-year
       period. Systat also purchased all rights and obligations with respect to
       customers and personnel and all fixed assets related to the Sigma-Series
       product line. Systat assumed all responsibilities for the marketing and
       sales of the Sigma-Series product line as well as its ongoing development
       and technical support. Systat has paid all $13.0 million owed to SPSS in
       connection with this transaction. Systat has an option to purchase the
       licensed property for an additional $1.0 million.

REFERENCES TO "NOTES" WITHIN THIS ITEM 7 REFER TO THE FOOTNOTES TO THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS IN ITEM 8, "FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA." The following discussion should be read in conjunction with
the Company's consolidated financial statements and the notes thereto.

RESULTS OF OPERATIONS

     The following table shows select statements of operations data as a
percentage of net revenues for the years indicated.

<Table>
<Caption>

                                                        2003   2004   2005
                                                       -----  -----  -----

<S>                                                    <C>    <C>    <C>


Net revenues:
  License.............................................  43.9%  42.8%  45.6%
  Maintenance.........................................  40.1%  43.6%  43.3%
  Services............................................  16.0%  13.6%  11.1%
                                                       -----  -----  -----
     Net revenues..................................... 100.0% 100.0% 100.0%
                                                       -----  -----  -----
Operating expenses:
  Cost of license and maintenance revenues............   6.9%   6.6%   6.9%
  Cost of license and maintenance revenues -- software
     write-offs.......................................   0.9%   --     --
  Sales, marketing and services.......................  59.2%  58.0%  49.9%
  Research and development............................  21.2%  21.3%  19.2%
  General and administrative (including provision for
     doubtful accounts)...............................   8.7%  11.2%  12.0%
  Special general and administrative charges..........   3.0%   --     --
                                                       -----  -----  -----
     Operating expenses...............................  99.9%  97.1%  88.1%
                                                       -----  -----  -----
Operating income......................................   0.1%   2.9%  11.9%
Net interest and investment income (expense)..........   --    (0.1)%  0.1%
Gain on divestiture of Sigma-series product line......   4.1%   --     0.4%
Other income (expense)................................   0.8%   0.8%  (0.9)%
                                                       -----  -----  -----
Income before income taxes............................   5.0%   3.6%  11.5%
Provision for income taxes............................   0.5%   1.1%   4.7%
                                                       -----  -----  -----
Net income............................................   4.5%   2.5%   6.8%
                                                       =====  =====  =====

</Table>





                                       21

<PAGE>

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2003, 2004, AND 2005

  NET REVENUES.

     Revenues by product category, related amount changes, related percent
changes and percent of total revenues for 2003, 2004 and 2005 were as follows:

<Table>
<Caption>

                                     PERIOD
                          ----------------------------
                             YEAR ENDED DECEMBER 31,         AMOUNT CHANGE         PERCENTAGE CHANGE
                          ----------------------------  ----------------------  ----------------------
                            2003      2004      2005    '03 VS '04  '04 VS '05  '03 VS '04  '04 VS '05
                          --------  --------  --------  ----------  ----------  ----------  ----------
                                 (IN THOUSANDS)

<S>                       <C>       <C>       <C>       <C>         <C>         <C>         <C>


License.................. $ 91,473  $ 95,819  $107,568    $ 4,346     $11,749        5%          12%
Maintenance..............   83,557    97,735   102,241     14,178       4,506       17%           5%
Services.................   33,337    30,520    26,254     (2,817)     (4,266)      (8)%        (14)%
                          --------  --------  --------    -------     -------
  Net Revenues........... $208,367  $224,074  $236,063    $15,707     $11,989        8%           5%
                          ========  ========  ========    =======     =======
As a Percent of Revenue
License..................       44%       43%       46%
Maintenance..............       40%       44%       43%
Services.................       16%       13%       11%
                          --------  --------  --------
  Net Revenues...........      100%      100%      100%
                          ========  ========  ========

</Table>


  2004 Compared with 2005.

     The increase in license fee revenues from 2004 to 2005 was primarily driven
by higher sales of SPSS desktop statistical analysis tools including increases
in the United States, Europe, Southeast Asia and Japan. This increase was
partially offset by changes in currency exchange rates which resulted in a
decrease in license revenue of $0.2 million in 2005 compared with 2004.

     The increase in maintenance revenues from 2004 to 2005 was primarily due to
higher renewal rates for the Company's major offerings. This increase was
partially offset by changes in deferred revenue. The timing of deferred revenue
negatively impacted maintenance revenue by $4.0 million, or 4%, in 2005 compared
with 2004. The increase was also partially offset by changes in currency
exchange rates which resulted in a decrease in maintenance revenue of $0.1
million in 2005 compared with 2004.

     The decrease in services revenues from 2004 to 2005 was primarily due to a
decline in AOL service revenue of $3.7 million. This decline primarily resulted
from management's strategic business decision to modify the focus of its survey
sample business.

  2003 Compared with 2004.

     The increase in license fee revenue from 2003 to 2004 was primarily driven
by higher sales of SPSS data mining and desktop statistical analysis tools,
sales of predictive analytic applications from the Company's 2003 Data
Distilleries acquisition and $4.1 million due to changes in currency rates.
These increases were offset by the effects of the divestiture of the Company's
Sigma-series product line in December 2003 which represented $4.6 million of
license revenue for 2003.

     Maintenance revenues increased from 2003 to 2004 primarily due to higher
renewal rates for the Company's major offerings and $4.0 million due to changes
in currency exchange rates. Additionally, maintenance revenues from Data
Distilleries applications were $1.8 million in 2004.

     Service revenues decreased from 2003 to 2004 primarily due to fewer
ShowCase-related consulting projects. This decrease was partially offset by
consulting revenues related to implementations of Data Distilleries applications
and $1.5 million due to changes in currency exchange rates.



                                       22

<PAGE>

     Net revenues per geographic region, related amount changes, related percent
changes and percent of total revenues for 2003, 2004 and 2005 were as follows:

<Table>
<Caption>

                                     PERIOD
                          ----------------------------
                             YEAR ENDED DECEMBER 31,         AMOUNT CHANGE         PERCENTAGE CHANGE
                          ----------------------------  ----------------------  ----------------------
                            2003      2004      2005    '03 VS '04  '04 VS '05  '03 VS '04  '04 VS '05
                          --------  --------  --------  ----------  ----------  ----------  ----------
                                 (IN THOUSANDS)

<S>                       <C>       <C>       <C>       <C>         <C>         <C>         <C>


United States............ $102,484  $101,665  $102,775    $  (819)    $ 1,110       (1)%         1%
                          --------  --------  --------    -------     -------
United Kingdom...........   28,584    31,701    31,911      3,117         210       11%          1%
The Netherlands..........   18,982    21,943    27,411      2,961       5,468       16%         25%
Other....................   32,826    37,297    39,321      4,471       2,024       14%          5%
                          --------  --------  --------    -------     -------
  Total Europe...........   80,392    90,941    98,643     10,549       7,702       13%          8%
Japan....................   18,608    21,032    22,416      2,424       1,384       13%          7%
Other....................    6,883    10,436    12,229      3,553       1,793       52%         17%
                          --------  --------  --------    -------     -------
  Total Pacific Rim......   25,491    31,468    34,645      5,977       3,177       23%         10%
                          --------  --------  --------    -------     -------
  Total International....  105,883   122,409   133,288     16,526      10,879       16%          9%
                          --------  --------  --------    -------     -------
  Net Revenue............ $208,367  $224,074  $236,063    $15,707     $11,989        8%          5%
                          ========  ========  ========    =======     =======
Percent of Net Revenues
United States............       49%       45%       44%
International............       51%       55%       56%
                          --------  --------  --------
Net Revenue..............      100%      100%      100%
                          ========  ========  ========

</Table>


     Net revenue growth in 2005 and 2004 reflected the increased demand for
certain data mining and statistical products, a strong renewal base for the
Company's products and the increasing geographic coverage of the business.

  2004 Compared with 2005.

     Net revenues derived internationally increased 9% from 2004 to 2005. This
increase resulted from expansion in generally all significant international
markets including the Netherlands, United Kingdom, Japan, Germany, Spain,
Belgium and Southeast Asia, partially offset by a decrease in France. Net
revenues derived from the United States increased by 1% from 2004 to 2005
because the timing of deferred revenue negatively impacted United States revenue
by $6.3 million, or 6%, in 2005 compared with 2004.

  2003 Compared with 2004.

     Net revenues derived internationally increased 16% from 2003 to 2004. This
increase resulted from expansion in all significant international markets
including the Netherlands, United Kingdom, Japan, Germany and France principally
reflecting volume increases, foreign currency and contributions from the
DataDistilleries acquisition. Net revenues derived from the United States
decreased by 1% from 2003 to 3004 as a result of the effects of the divestiture
of the Company's Sigma-series product line in December 2003 and fewer ShowCase
related consulting projects. This decrease was partially offset by higher
license sales of SPSS data mining and desktop statistical analysis tools.

  COST OF LICENSE AND MAINTENANCE REVENUES.

<Table>
<Caption>

                                             PERIOD
                                  ---------------------------
                                    YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                                  ---------------------------   -----------------------   -----------------------
                                    2003      2004      2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                                  -------   -------   -------   ----------   ----------   ----------   ----------
                                         (IN THOUSANDS)

<S>                               <C>       <C>       <C>       <C>          <C>          <C>          <C>


Cost of License and Maintenance
  Revenues.....................   $14,359   $14,642   $16,381      $283        $1,739          2%          12%
  Percent of Total Revenues....         7%        7%        7%
</Table>





                                       23

<PAGE>

     Cost of license and maintenance revenues consists of costs of goods sold,
amortization of capitalized software development costs and license fees paid to
third parties. The increase from 2004 to 2005 was primarily due to higher costs
associated with the increase in license revenues and higher amortization of
capitalized acquired technology assets in connection with the release of new
products. The increase from 2003 to 2004 was primarily due to higher costs
associated with the increase in license revenues and higher amortization of
capitalized acquired technology assets in connection with the release of new
products and the acquisition of Data Distilleries

  COST OF LICENSE AND MAINTENANCE REVENUES -- SOFTWARE WRITE-OFFS.

<Table>
<Caption>

                                          PERIOD
                                 ------------------------
                                  YEAR ENDED DECEMBER 31,        AMOUNT CHANGE           PERCENTAGE CHANGE
                                 ------------------------   -----------------------   -----------------------
                                  2003     2004     2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                                 ------   ------   ------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)

<S>                              <C>      <C>      <C>      <C>          <C>          <C>          <C>


Cost of License and
  Maintenance Revenues-
  Software Write-offs.........   $1,961    $ --     $ --      $(1,961)      $ --         (100)%        -- %
  Percent of Total Revenues...        1%     -- %     -- %
</Table>


     During 2003, the Company incurred software write-offs totaling $2.0 million
for obsolete and redundant technology resulting from the Data Distilleries
acquisition.

  SALES, MARKETING AND SERVICES.

<Table>
<Caption>

                                            PERIOD
                                 ----------------------------
                                    YEAR ENDED DECEMBER 31,         AMOUNT CHANGE         PERCENTAGE CHANGE
                                 ----------------------------  ----------------------  ----------------------
                                   2003      2004      2005    '03 VS '04  '04 VS '05  '03 VS '04  '04 VS '05
                                 --------  --------  --------  ----------  ----------  ----------  ----------
                                        (IN THOUSANDS)

<S>                              <C>       <C>       <C>       <C>         <C>         <C>         <C>


Sales, Marketing and Services..  $123,454  $129,987  $117,872    $6,533     $(12,115)       5%         (9)%
  Percent of Total Revenues....        59%       58%       50%
</Table>


     The decrease in sales, marketing and services from 2004 to 2005 was
primarily due to lower staff and occupancy costs resulting from office
consolidation, lower service expenses due to decreased service sales volume,
lower AOL service costs of $3.1 million and a decrease of $0.2 million from the
effects of fluctuations in foreign currency exchange rates. In addition, the
Company incurred severance costs of $1.3 million in 2004 associated with
personnel changes in the Company's sales and professional services organization.

     The increase in sales, marketing and services from 2003 to 2004 was
primarily due to compensation increases, severance costs of $1.3 million, staff
additions and changes, the addition of employees from the Data Distilleries
acquisition, and changes in currency rates. Such increases were partially offset
by a $4.7 million decline in AOL service costs reflecting the lower AOL service
revenue.

  RESEARCH AND DEVELOPMENT.

<Table>
<Caption>

                                             PERIOD
                                  ---------------------------
                                    YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                                  ---------------------------   -----------------------   -----------------------
                                    2003      2004      2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                                  -------   -------   -------   ----------   ----------   ----------   ----------
                                         (IN THOUSANDS)

<S>                               <C>       <C>       <C>       <C>          <C>          <C>          <C>


Research and Development.......   $44,167   $47,765   $45,418     $3,598       $(2,347)        8%          (5)%
  Percent of Total Revenues....        21%       21%       19%
</Table>


     The decrease in research and development expenses from 2004 to 2005
primarily reflected a decline in the United States chiefly due to improved
productivity and rationalization of resources principally through office
consolidation. The increase in research and development expenses from 2003 to
2004 was primarily due annual compensation increases, addition of employees from
the Data Distilleries acquisition and $0.6 million from the effects of
fluctuations in currency exchange rates.



                                       24

<PAGE>

  GENERAL AND ADMINISTRATIVE.

<Table>
<Caption>

                                             PERIOD
                                  ---------------------------
                                    YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                                  ---------------------------   -----------------------   -----------------------
                                    2003      2004      2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                                  -------   -------   -------   ----------   ----------   ----------   ----------
                                         (IN THOUSANDS)

<S>                               <C>       <C>       <C>       <C>          <C>          <C>          <C>


General and Administrative.....   $17,773   $24,813   $28,217     $7,040       $3,404         40%          14%
  Percent of Total Revenues....         9%       11%       12%
</Table>


     The increase in general and administrative expenses from 2004 to 2005 was
primarily due to the costs associated with complying with the Sarbanes-Oxley Act
of 2002 and higher compensation cost due to improved performance. In addition,
the Company incurred nonrecurring charges of $1.5 million in 2005 related to
exit costs for certain leased facilities in Texas and Massachusetts. In 2004,
the Company wrote-off a $1.0 million long-term receivable due to customer
insolvency and recorded a gain of $0.6 million on sale of property held in the
United Kingdom.

     The increase in general and administrative expenses from 2003 to 2004 was
primarily due to the addition of accounting professionals, costs associated with
complying with the Sarbanes-Oxley Act of 2002, $2.7 million in accounting and
legal costs due to the restatement of the Company's financial statements which
occurred in 2004, increased insurance costs, and $0.4 million from the effects
of fluctuations in currency exchange rates.

  PROVISION FOR DOUBTFUL ACCOUNTS.

<Table>
<Caption>

                                               PERIOD
                                      -----------------------
                                      YEAR ENDED DECEMBER 31,        AMOUNT CHANGE           PERCENTAGE CHANGE
                                      -----------------------   -----------------------   -----------------------
                                       2003     2004     2005   '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                                      -----    -----    -----   ----------   ----------   ----------   ----------
                                           (IN THOUSANDS)

<S>                                   <C>      <C>      <C>     <C>          <C>          <C>          <C>


Provision for Doubtful Accounts....    $421     $291     $151      $(130)       $(140)        (31)%        (48)%
  Percent of Total Revenues........     -- %     -- %     -- %
</Table>


     The decreases in the provision for doubtful accounts from both 2004 to 2005
and 2003 to 2004 represented improvements in receivable collections.

  SPECIAL GENERAL AND ADMINISTRATIVE CHARGES.

<Table>
<Caption>

                                        PERIOD
                                ----------------------
                                  YEAR ENDED DECEMBER
                                          31,                AMOUNT CHANGE         PERCENTAGE CHANGE
                                ----------------------  ----------------------  ----------------------
                                 2003    2004    2005   '03 VS '04  '04 VS '05  '03 VS '04  '04 VS '05
                                ------  ------  ------  ----------  ----------  ----------  ----------
                                    (IN THOUSANDS)

<S>                             <C>     <C>     <C>     <C>         <C>         <C>         <C>


Special General and
  Administrative Charges....... $6,104   $ --    $ --     $(6,104)     $ --        (100)%       -- %
  Percent of Total Revenues....      3%    -- %    -- %
</Table>


     During 2003, SPSS incurred certain unusual expenses including asset write-
offs, restructuring charges, and costs that did not meet the Company's
definition of "merger-related" expenses as described below. Such costs have been
separately reported as "Special general and administrative charges." Special
general and administrative charges were $6.1 million in 2003, or 3% of net
revenues. Special general and administrative charges in 2003 included a write-
off of $4.4 million due to the termination of the Company's Siebel CRM software
implementation and $1.7 million of severance, bonus and travel costs primarily
related to the Data Distilleries acquisition.



                                       25

<PAGE>

  NET INTEREST AND INVESTMENT (EXPENSE) INCOME.

<Table>
<Caption>

                                               PERIOD
                                        -------------------
                                        YEAR ENDED DECEMBER
                                                31,                AMOUNT CHANGE         PERCENTAGE CHANGE
                                        -------------------   ----------------------  ----------------------
                                        2003    2004   2005   '03 VS '04  '04 VS '05  '03 VS '04  '04 VS '05
                                        ----   -----   ----   ----------  ----------  ----------  ----------
                                           (IN THOUSANDS)

<S>                                     <C>    <C>     <C>    <C>         <C>         <C>         <C>


Net Interest and Investment (Expense)
  Income............................... $(42)  $(282)  $161      $(240)      $443        (571)%       157%
  Percent of Total Revenues............  -- %    -- %   -- %
</Table>


     The change from net interest expense in 2004 to net interest income in 2005
was principally the result of lower debt due to scheduled debt repayments under
line of credit agreements and the increase in interest income earned as a result
of higher cash balances. The increase in net interest expense from 2003 to 2004
was due to a decrease in net investment income in 2004. The interest income
earned on line-of-credit deposits in 2003 did not recur in 2004.

  GAIN ON DIVESTITURE OF SIGMA-SERIES PRODUCT LINE.

<Table>
<Caption>

                                         PERIOD
                                -----------------------
                                YEAR ENDED DECEMBER 31,        AMOUNT CHANGE           PERCENTAGE CHANGE
                                -----------------------   -----------------------   -----------------------
                                 2003     2004    2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                                ------   -----   ------   ----------   ----------   ----------   ----------
                                     (IN THOUSANDS)

<S>                             <C>      <C>     <C>      <C>          <C>          <C>          <C>


Gain on Divestiture of Sigma-
  series Product Line........   $8,577    $ 82   $1,000     $(8,495)      $918          (99)%       1,120%
  Percent of Total Revenues..        4%    -- %       1%
</Table>


     In December 2003, SPSS entered into a distribution license and sale of
assets agreement related to its Sigma-series product line with Systat Software,
a subsidiary of Cranes Software International Ltd. This transaction was
completed in December 2003. See Note 7 for an explanation of the terms of this
transaction. The 2003 gain represented the excess of the purchase price over the
book value of the assets sold and expenses directly related to the sale.

     The 2004 gain represented the adjustment of certain professional fee
accruals related to the sale. The 2005 gain represented a $1.0 million gain on
the sale of the Sigma-series product line from cash received in December 2005.
SPSS deferred gain recognition of this $1.0 million until these funds were
received because this amount was scheduled for payment more than two years after
the initial agreement date.

  OTHER INCOME (EXPENSE).

<Table>
<Caption>

                                        PERIOD
                              -------------------------
                               YEAR ENDED DECEMBER 31,         AMOUNT CHANGE           PERCENTAGE CHANGE
                              -------------------------   -----------------------   -----------------------
                               2003     2004      2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                              ------   ------   -------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)

<S>                           <C>      <C>      <C>       <C>          <C>          <C>          <C>


Other Income (Expense).....   $1,798   $1,680   $(2,013)     $(118)      $(3,693)       (7)%        (220)%
  Percent of Total
     Revenues..............        1%       1%       (1)%
</Table>


     Other expense in 2005 was primarily due to the strengthening of the dollar
against other major currencies which led to losses from currency transactions.
These losses were due to the decline in value of U.S. dollar-denominated
receivables held in international locations principally related to the British
Pound and the Euro denominated currencies.

     Other income in 2004 was primarily due to gains on foreign currency
transactions due to the weakening of the dollar against other major currencies.
SPSS also recognized a $1.0 million European research and development incentive
credit received from the French Government in 2004 relating to expenditures
accumulated through 1999. Other income in 2003 was principally due to gains from
foreign currency transactions reflecting the weakening of the dollar against
other major currencies.



                                       26

<PAGE>

  PROVISION FOR INCOME TAXES.

<Table>
<Caption>

                                        PERIOD
                              -------------------------
                               YEAR ENDED DECEMBER 31,         AMOUNT CHANGE           PERCENTAGE CHANGE
                              -------------------------   -----------------------   -----------------------
                               2003     2004      2005    '03 VS '04   '04 VS '05   '03 VS '04   '04 VS '05
                              ------   ------   -------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)

<S>                           <C>      <C>      <C>       <C>          <C>          <C>          <C>


Provision for Income
  Taxes....................   $1,147   $2,513   $11,080     $1,366       $8,567         119%         341%
  Percent of Pre-Tax
     Income................       11%      31%       41%
</Table>


     The income tax provision increased from 2004 to 2005 primarily due to an
increase in earnings. Other factors accounting for the increase in 2005 included
increase in foreign income, increase in deferred tax asset valuation allowance
and certain book to tax adjustments resulting from the reconciliation of
historical deferred account balances deemed to be immaterial to prior years.

     During 2004, the provision for income taxes represented a tax rate of
approximately 31%. During 2003, the provision for income taxes represented a tax
rate of approximately 11%. The Company's tax rate in 2003 was lower than the
statutory rate primarily as a result of the use of foreign tax credits, which
were previously reduced by a valuation allowance because their use was
uncertain. Generally, the Company expects its effective tax rate to be
approximately 33-35%.

LIQUIDITY AND CAPITAL RESOURCES

     During 2005, SPSS generated cash in excess of its operating requirements.
As of December 31, 2005, SPSS had $84.4 million in cash and cash equivalents
compared with $37.1 million at December 31, 2004. Factors affecting cash and
cash equivalents during 2005 include:

  Operating Cash Flows:

     - Cash derived from operating activities was $51.5 million. This cash
       resulted primarily from net income from operations, receivable
       collections, timing of accounts payable disbursements and additional
       deferred revenue.

     - Collection of receivables contributed $4.0 million to operating cash
       flow. Average days sales outstanding were 63 days at December 31, 2005,
       compared to 76 days at December 31, 2004.

     - Timing of accounts payable disbursements added $3.8 million to cash from
       operating activities.

     - Income taxes contributed $3.9 million to cash from operating activities,
       primarily the result of cash received from income tax refunds.

     - Deferred revenue contributed $5.9 million to cash from operating
       activities, before the impact of foreign currency translation which
       decreased deferred revenue by $4.1 million.

  Investing Activities:

     - Purchases of capital expenditures were $7.5 million in 2005.

     - Capitalized software costs were $9.0 million in 2005.

     - SPSS acquired one of its distributors during 2005. This resulted in a
       charge of $0.8 million to intangible assets.

     - SPSS received an additional $1.0 million scheduled payment from the sale
       of the Sigma-series product line previously completed in December 2003.

  Financing Activities:

     - Financing activities provided cash proceeds of $17.5 million from the
       issuance of common stock, primarily through the exercise of stock
       options.

     - SPSS made net repayments of $2.5 million on its line of credit
       agreements.



                                       27

<PAGE>

     Cash flows from operating activities in 2005 were more than adequate to
fund capital expenditures and software development costs of $16.6 million.
Management believes that SPSS has ample capacity in its property and equipment
to meet expected needs for future growth.

     Certain unique cash-related events occurred in 2003, 2004 and 2005. In
2003, 2004 and 2005, SPSS received scheduled payments totaling $9.0 million,
$3.0 million and $1.0 million, respectively, on the sale of its Sigma-series
product line consummated in December 2003. During 2004, the Company repurchased
common stock related to its acquisition of Data Distilleries for $5.4 million,
and received $2.6 million of proceeds from the disposal of a property in the
United Kingdom.

     On March 31, 2003, SPSS entered into a four (4) year, $25.0 million credit
facility with Wells Fargo Foothill, Inc. (f/k/a Foothill Capital Corporation).
The Wells Fargo Foothill facility includes a four (4) year term loan in the
amount of $10.0 million, two revolving lines of credit and a letters of credit
facility not to exceed $3.0 million. The maximum amount SPSS may borrow under
Revolver A will depend upon the value of the Company's eligible accounts
receivable generated within the United States. Revolver B provides for a credit
facility of up to $3.5 million provided that no event of default exists. As of
December 31, 2005, the Company has availability of $5.9 million under the
revolving lines of credit.

     The terms and conditions of the Wells Fargo Foothill credit facility are
specified in a Loan and Security Agreement, dated as of March 31, 2003, by and
between Wells Fargo Foothill and SPSS. The term loan portion of the facility
bears interest at a rate of 2.5% above prime, with potential future reductions
of up to 0.5% in the interest rate based upon the Company's achievement of
specified EBITDA targets. One component of the revolving line of credit will
bear interest at a rate of prime plus 3.0%. On the remainder of the revolving
line of credit, SPSS may select interest rates of either prime plus 0.25% or
LIBOR plus 2.5% with respect to each advance made by Wells Fargo Foothill. The
credit fee rate for letters of credit is 2.0% per annum times the daily balance
of the undrawn amount of all outstanding letters of credit. In May 2003, the
Company began paying down the term loan of $10.0 million in equal annual
installments over the scheduled four (4) year repayment period. At December 31,
2005, SPSS had $3.4 million outstanding under its line of credit with Wells
Fargo Foothill, including $2.5 million classified as current notes payable and
the face amount of letters of credit issued and outstanding under the existing
credit facility totaled approximately $0.9 million.

     The Wells Fargo Foothill facility requires SPSS to meet certain financial
covenants including minimum EBITDA targets and includes additional requirements
concerning, among other things, the Company's ability to incur additional
indebtedness, create liens on assets, make investments, engage in mergers,
acquisitions or consolidations where SPSS is not the surviving entity, sell
assets, engage in certain transactions with affiliates, and amend its
organizational documents or make changes in capital structure. The Company was
in compliance with all covenants as of December 31, 2005.

     The Wells Fargo Foothill facility is secured by all of the Company's assets
located in the United States. ShowCase Corporation, a Minnesota corporation and
wholly owned subsidiary of SPSS, and NetGenesis Corp., a Delaware corporation
and wholly owned subsidiary of SPSS, have guaranteed the obligations of SPSS
under the Loan and Security Agreement. This guaranty is secured by all of the
assets of ShowCase and NetGenesis.

     SPSS intends to fund its future capital needs through operating cash flows
and borrowings on our credit facility. SPSS anticipates that amounts available
from cash and cash equivalents on hand, under its line of credit, and cash flows
generated from operations, will be sufficient to fund the Company's operations
and capital requirements at the current level of operations. However, no
assurance can be given that changing business circumstances will not require
additional capital for reasons that are not currently anticipated or that the
necessary additional capital will then be available to SPSS on favorable terms
or at all.



                                       28

<PAGE>

SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     The following table reflects a summary of the Company's contractual
obligations to make cash payments in future years measured as of December 31,
2005 (in thousands):

<Table>
<Caption>

                                                          PAYMENT DUE BY PERIOD
                                         -------------------------------------------------------
                                                   LESS THAN                           MORE THAN
                                          TOTAL      1 YEAR    1-3 YEARS   3-5 YEARS    5 YEARS
                                         -------   ---------   ---------   ---------   ---------

<S>                                      <C>       <C>         <C>         <C>         <C>


Notes payable (See Note 10)...........   $ 3,372    $ 2,500     $   872     $   --       $  --
Capital lease obligations.............       --         --          --          --          --
Operating lease obligations (See Note
  8)..................................    47,527     11,396      15,381      12,459       8,291
Purchase obligations and other
  commitments.........................       --         --          --          --          --
Other long-term liabilities...........       --         --          --          --          --
                                         -------    -------     -------     -------      ------
  Total...............................   $50,899    $13,896     $16,253     $12,459      $8,291
                                         =======    =======     =======     =======      ======

</Table>


INTERNATIONAL OPERATIONS

     Revenues from international operations increased from 51% to 55% of total
net revenues between 2003 and 2004, and were approximately 56% of total net
revenues in 2005. As international revenues increase, SPSS may experience
additional foreign currency exchange risk. To mitigate these effects, SPSS from
time-to-time hedges its transaction exposure (i.e., the effect on earnings and
cash flows of changes in foreign exchange rates on receivables and payables
denominated in foreign currencies) through the use of foreign currency options.
SPSS does not hedge its foreign currency exposure in a manner that would
entirely eliminate the effects of changes in foreign exchange rates on the
Company's consolidated net income. Accordingly, the Company's reported revenues
and net income have been, and in the future may be affected by, the changes in
foreign exchange rates. On December 31, 2005, SPSS did not have any option
contracts outstanding.

     During 2005, SPSS generated operating income of $28.0 million. The Company
generated operating income of $25.1 million outside of the United States. Of the
non-U.S. income, SPSS derived operating income of $4.8 million in EURO nations,
operating income of $14.8 million in the United Kingdom, which utilizes the
British Pound, and operating income of $3.3 million in Japan which utilizes the
Japanese Yen. The average exchange rate for the EURO, the British Pound and the
Japanese Yen fluctuates relative to the dollar. These exchange rate fluctuations
impact the Company's operating income which is calculated in U.S. dollars. The
Euro: Dollar exchange rates, the GBP: Dollar exchange rates and the Yen: Dollar
exchange rates impacted operating income differently in 2005 and 2004. The
exchange rate impact on operating income in 2005 relative to 2004 is as follows:


<Table>
<Caption>

                                           % CHANGE IN CURRENCY   EFFECT ON OPERATING INCOME
CURRENCY                                      IN 2005 VS 2004          IN 2005 VS. 2004
--------                                   --------------------   --------------------------
                                                                         ($ THOUSANDS)

<S>                                        <C>                    <C>


Euro....................................            0.1%                     $   5
GBP.....................................           (0.7)%                    $(103)
Yen.....................................           (1.6)%                    $ (52)
</Table>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires management 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 the reported amounts of revenues and expenses
during the reporting period.

     On an on-going basis, management evaluates its estimates and judgments,
including those related to revenue recognition, capitalized software development
costs, and the valuation of accounts receivable, long-lived assets and deferred
income taxes. Management bases its estimates and judgments on historical
experience and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results may differ
from these estimates under


                                       29

<PAGE>

different assumptions or conditions. Management believes the following critical
accounting policies, among others, affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.

REVENUE RECOGNITION

     SPSS makes significant judgments related to revenue recognition. For each
arrangement, the Company makes significant judgments regarding the fair value of
multiple elements contained in its arrangements, if its fees are fixed or
determinable, and whether or not the collection of payment is probable. SPSS
also makes significant judgments when accounting for concurrent transactions
with customers and in its accounting for potential product returns. These
judgments and their possible effects on revenue recognition are discussed below.

     SPSS primarily recognizes revenue from the following:

     - Product licenses.  SPSS offers (a) annual licenses with maintenance
       renewable annually, (b) perpetual licenses with both annual and multi-
       year maintenance, and (c) multi-year licenses with multi-year
       maintenance;

     - Postcontract customer support ("PCS" or "maintenance") agreements which
       consist primarily of fees for providing when-and-if-available unspecified
       software upgrades and technical support over a specified term;

     - Fixed-price service-related arrangements which are primarily comprised of
       consulting, implementation services and training;

     - Various combinations of the above elements.

     - Distribution partners.  The Company licenses third-parties to distribute
       SPSS products in certain territories internationally or as value-added
       resellers worldwide. SPSS records license fees from transactions made by
       such distribution partners when these transactions are reported, and the
       partners are responsible for providing related maintenance services,
       including end-user support and software updates. However, SPSS has post
       contract support (PCS) obligations to the customers of its distribution
       partners that are implied by its responsibility to provide these partners
       with updates of SPSS products when and if developed. Because the Company
       cannot establish vendor specific objective evidence (VSOE) of fair value
       of these implied maintenance arrangements, the Company recognizes the
       related license fees ratably over the terms of the arrangements beginning
       when transactions are reported to the Company by its distribution
       partners and when all revenue recognition criteria are met. Specific
       revenue recognition on distributor partner contracts will be defined by
       the terms of the contract as follows:

       - Where SPSS defines the price for renewal of maintenance and support in
         the contract, such amount represents vendor specific objective evidence
         (VSOE) of fair value of maintenance and such amount will be deferred
         and recognized ratably over the life of the support contract.

       - When SPSS provides direct maintenance and support to the end-user, SPSS
         will defer the estimated fair value of the maintenance and support
         consistent with direct sales to its customers.

       - When neither of the above conditions exist and SPSS must provide free
         updates or second tier support to the partner, the revenue from the
         contract will be deferred and recognized ratably over the life of the
         contract.

       - Where no maintenance or support of any kind are required by the
         contract, no revenue will be deferred.

       - When a reseller has a right to return product stock for updated product
         stock (stock swap), SPSS will account this as a right of return in
         accordance with SFAS No. 48, Revenue Recognition When Right of Return
         Exists, and establish a reserve for the estimated amount of the
         returns.

  MULTIPLE ELEMENT ARRANGEMENTS

     SPSS typically enters into arrangements with customers that include
perpetual software licenses, maintenance, and technical support. Some
arrangements may also include consulting and training services. Software
licenses are sold as site licenses or on a per copy basis. Site licenses give
customers the right to copy licensed software on either


                                       30

<PAGE>

a limited or unlimited basis during a specified term. Per copy licenses give
customers the right to use a single copy of licensed software. The Company makes
judgments regarding the fair value of each element in the arrangement and
generally accounts for each element separately.

  THE FEE IS FIXED OR DETERMINABLE

     SPSS makes judgments at the beginning of an arrangement regarding whether
or not the fees are fixed or determinable. The Company's customary payment terms
are generally within 30 days after invoice date. Arrangements with payment terms
extending beyond one year after invoice date are not considered fixed or
determinable, in which case revenue is recognized as the fees become due and
payable.

  COLLECTION IS PROBABLE

     The Company makes judgments at the beginning of an arrangement regarding
whether or not collection is probable. Probability of collection is assessed on
a case-by-case basis. SPSS typically sells to customer with whom it has a
history of successful collections. New customers may be subject to a credit
review process to assess their financial position and ability to pay. If it is
determined that collection is not probable, then revenue is recognized upon
receipt of payment.

  PRODUCT RETURNS

     SPSS estimates potential future product returns based on the analysis of
historical return rates and reduces current period revenue accordingly. Actual
returns may vary from estimates if a change from historical sales and returns
patterns occur or if there are unanticipated changes in competitive or economic
conditions that affect actual returns.

  DELIVERY OF SOFTWARE PRODUCTS

     Delivery of the Company's products is a prerequisite to the recognition of
software license revenue. SPSS considers such delivery complete when the
software products have been shipped, the customer has access to the license code
that activates the software, or shipment is confirmed by a third-party shipping
agent. If arrangements include an acceptance provision, then revenue is
recognized upon the earlier of the receipt of written customer acceptance or, if
applicable, the expiration of the acceptance period.

     The Company applies AICPA Statement of Position ("SOP") 97-2 (SOP 97-2),
Software Revenue Recognition, and related interpretations and amendments which
specifies the criteria that must be met prior to SPSS recognizing revenues from
software sales.

     SPSS reviews revenue recognition based upon the contract type or
combination of contract types and assesses individual events and changes in
circumstances that could modify recognition of revenue in accordance with SOP
97-2 and related interpretations and amendments. The Company's customary terms
are FOB shipping point. SPSS estimates and records provisions for revenue
returns and allowances in the period the related products are sold based upon
historical experience. To the extent actual results differ from the estimated
amounts, results could be adversely affected. See Note 1 for additional
information regarding Revenue Recognition.

CAPITALIZATION OF CERTAIN SOFTWARE DEVELOPMENT COSTS

     Software development costs incurred by SPSS in connection with the
Company's long-term development projects are capitalized in accordance with SFAS
No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed. SPSS has not capitalized software development costs relating
to development projects where the net realizable value is immaterial and the
time between technological feasibility and release is of short duration. SPSS
reviews capitalized software development costs each period and, if necessary,
reduces the carrying value of each product to its net realizable value.

     SPSS applies SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This standard requires that certain
costs related to the development or purchase of internal-use software be
capitalized and amortized over the estimated useful life of the software. SOP
98-1 also requires that costs related to


                                       31

<PAGE>

the preliminary project stage and post-implementation/operations stage of an
internal-use computer software development project be expensed as incurred.
During 2003, 2004 and 2005, SPSS capitalized $1.1 million, $0.8 million and $0.4
million, respectively, and amortized $0.6 million, $1.4 million and $1.2
million, respectively, of internal-use computer software.

ACCOUNTS RECEIVABLE

     SPSS management must make estimates of accounts receivable that will not be
collected. SPSS performs ongoing credit evaluations of its customers and adjusts
credit limits based upon payment history and the customer's creditworthiness, as
determined by the Company's review of their current credit information. SPSS
continuously monitors collections and payments from its customers and maintains
a provision for estimated credit losses based upon historical experience and any
specific customer collection issues that it has identified. While such credit
losses have historically been within management's expectations and the
provisions established, SPSS cannot guarantee that it will continue to
experience the same credit loss rates as in the past. If the financial condition
of SPSS customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.

IMPAIRMENT OF LONG-LIVED ASSETS

     SPSS assesses the impairment of identifiable intangibles, long-lived assets
and goodwill whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. In addition, goodwill must be assessed on
at least an annual basis. Factors SPSS considers important which could trigger
an impairment review include significant underperformance relative to expected
historical or projected future operating results, significant changes in the
manner of use of the acquired assets or the strategy for the Company's overall
business and significant negative industry or economic trends.

     When SPSS determines that the carrying value of amortizable intangibles and
long-lived assets may not be recoverable based upon the existence of one or more
of the above indicators of impairment, SPSS would use an estimate of
undiscounted future cash flows that the asset is expected to generate to measure
whether the asset is recoverable over its estimated useful life. If estimated
undiscounted future cash flows are less than the carrying amount of the asset,
the asset is considered impaired and an expense is recorded in an amount
required to reduce the carrying amount of the asset to its then fair value. To
the extent actual business values or cash flows differ from those estimated
amounts, the recoverability of those long-lived assets could be affected.

INCOME TAXES

     SPSS recognizes deferred tax assets and liabilities based on the
differences between the financial statement carrying amounts and the tax bases
of assets and liabilities. The Company regularly reviews its deferred tax assets
for recoverability and establishes a valuation allowance based on historical
taxable income, projected future taxable income, and the expected timing of the
reversals of existing temporary differences to reduce its deferred tax assets to
the amount that it believes is more likely than not to be realized. SPSS has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance. The Company has
not provided a valuation allowance on the amount of deferred tax assets that it
estimates will be utilized as a result of the execution of these strategies. If
the future taxable income is less than the amount that has been assumed in
assessing the recoverability of the deferred tax assets, then an increase in the
valuation allowance will be required, with a corresponding increase to income
tax expense. Likewise, should SPSS ascertain in the future that it is more
likely than not that deferred tax assets will be realized in excess of the net
deferred tax assets, all or a portion of the $59.6 million valuation allowance
as of December 31, 2005 would be reversed as a benefit to the provision for
income taxes in the period such determination was made.

OFF-BALANCE SHEET ARRANGEMENTS

     The Company has no significant off-balance sheet arrangements at December
31, 2005.



                                       32

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

     On October 22, 2004, the President signed the American Jobs Creation Act of
2004. The Act provides a deduction from income from qualified domestic
production activities, which will be phased in from 2005 through 2010. In
return, the Act also provides for a two-year phase-out (except for certain pre-
existing binding contracts) of the existing Extraterritorial Income exclusion
tax benefit for foreign sales which the World Trade Organization ("WTO") ruled
was an illegal export subsidy. The European Union ("EU") believes that the Act
fails to adequately repeal the illegal export subsidies because of the
transitional provisions and has asked the WTO to review whether these
transitional provisions are in compliance with their prior ruling. This will
have no material impact on the Company. Additionally, the Act creates a
temporary incentive for U.S. corporations to repatriate accumulated income
earned abroad by providing an 85% dividend received deduction for certain
dividends from controlled foreign corporations. The impact of this act on the
Company's consolidated financial statements was not significant.

     On December 21, 2004, the Financial Accounting Standards Board ("FASB")
Staff Position ("FSP") FAS 109-1, "Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004" was issued. FSP
FAS 109-1 clarifies that this tax deduction should be accounted for as a special
deduction in accordance with Statement 109. As such, the special deduction has
no effect on deferred tax assets and liabilities existing at the date of
enactment. Rather, the impact of this deduction would be reported in the period
in which the deduction is claimed on the Company's tax return beginning in 2005.
The Company has determined that the impact will not be material.

     On December 21, 2004, FSP FAS 109-2, "Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004" was issued. FSP FAS 109-2 provides companies additional
time, beyond the financial reporting period during which the Act took effect, to
evaluate the Act's impact on a company's plan for reinvestment or repatriation
of certain foreign earnings for purposes of applying Statement 109. FSP FAS 109-
2 was effective upon issuance. The effect of the repatriation provision in 2005
was not significant to SPSS.

     On December 16, 2004, the FASB issued Statement No. 123 (revised 2004),
Share-Based Payment, which is a revision of Statement 123. Statement 123(R)
supersedes Opinion 25, and amends FASB Statement No. 95, Statement of Cash
Flows. Generally, the approach in Statement 123(R) is similar to the approach
described in Statement 123. However, Statement 123(R) generally requires share-
based payments to employees, including grants of employee stock options and
purchases under employee stock purchase plans, to be recognized in the statement
of operations based on their fair values. Pro forma disclosure of fair value
recognition will no longer be an alternative.

     Statement 123(R) permits public companies to adopt its requirements using
one of two methods:

     - Modified prospective method: Compensation cost is recognized beginning
       with the effective date of adoption (a) based on the requirements of
       Statement 123(R) for all share-based payments granted after the effective
       date of adoption and (b) based on the requirements of Statement 123 for
       all awards granted to employees prior to the effective date of adoption
       that remain unvested on the date of adoption.

     - Modified retrospective method: Includes the requirements of the modified
       prospective method described above, but also permits restatement using
       amounts previously disclosed under the pro forma provisions of Statement
       123 either for (a) all prior periods presented or (b) prior interim
       periods of the year of adoption.

     On April 14, 2005, the Securities and Exchange Commission announced that
the Statement 123(R) effective transition date will be extended to annual
periods beginning after June 15, 2005. The Company expects to adopt this new
standard in the first fiscal quarter of 2006, using the modified prospective
method.

     This application will require that the Company record compensation expense
for all awards granted after the required effective date and for the unvested
portion of awards granted before December 31, 2005 that remain outstanding at
the date of adoption, in addition to any stock-based compensation to be recorded
for options granted with exercise prices below fair value.



                                       33

<PAGE>

     The Company expects that the adoption of SFAS 123(R) will have the
following effect on compensation expense for stock options outstanding as of
December 31, 2005 (in thousands):

<Table>
<Caption>

YEAR ENDING DECEMBER 31,                                           AMOUNT
------------------------                                           ------

<S>                                                                <C>


2006............................................................   $2,768
2007............................................................    2,055
2008............................................................      899
2009............................................................       79
                                                                   ------
Total estimated stock-based compensation expense over the
  remaining vesting period......................................   $5,801
                                                                   ======

</Table>


     Statement 123(R) also requires the benefits of tax deductions in excess of
recognized compensation expense to be reported as a financing cash flow, rather
than as an operating cash flow as prescribed under current accounting rules.
This requirement will reduce net operating cash flows and increase net financing
cash flows in periods after adoption. Total cash flow will remain unchanged from
how it would have been reported under prior accounting rules.

     As permitted by Statement 123, the Company currently accounts for share-
based payments to employees using Opinion 25's intrinsic value method. As a
consequence, the Company generally does not recognize any compensation cost for
employee stock options and purchases under the Company's Employee Stock Purchase
Plan. Although the adoption of Statement 123(R)'s fair value method will have no
adverse impact on the Company's balance sheet or total cash flows, it will
affect net income and diluted earnings per share. The actual effects of adopting
Statement 123(R) will depend on numerous factors including the amounts of share-
based payments granted in the future, the valuation model used to value future
share-based payments to employees and estimated forfeiture rates.

     In May 2005, FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections," which will be effective in the first quarter of fiscal year 2006.
This statement addresses the retrospective application of such changes and
corrections and will be followed if and when necessary.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risk from fluctuations in interest rates
on borrowings under its borrowing arrangement that bears interest at either the
prime rate or the Eurodollar rate. As of December 31, 2005, the Company had $3.4
million outstanding under this borrowing arrangement. A 100 basis point increase
in interest rates would result in an additional $34 thousand of annual interest
expense, assuming the same level of borrowing.

     The Company is exposed to market risk from fluctuations in foreign currency
exchange rates. Since a substantial portion of the Company's operations and
revenue occur outside the United States, and in currencies other than the U.S.
dollar, the Company's results can be significantly affected by changes in
foreign currency exchange rates. To manage its exposure to fluctuations to
currency exchange rates, the Company may enter into various financial
instruments, such as options. These instruments generally mature within 12
months. Gains and losses on these instruments are recognized in other income or
expense. Were the foreign currency exchange rates to depreciate immediately and
uniformly against the dollar by 10 percent from levels at December 31, 2005, the
reported cash balance would decrease $5.3 million, or 6.3 percent. The effect on
revenues would also be expected to have a material adverse effect on the
Company's financial results. On December 31, 2005, the Company did not have any
option contracts outstanding.

     Historically, the Company's derivative instruments did not qualify for
hedge accounting treatment under FAS No. 133. Accordingly, gains and losses
related to changes in the fair value of these instruments were recognized in
income in each financial reporting period.



                                       34

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           SPSS INC. AND SUBSIDIARIES

                                      INDEX


<Table>
<Caption>

                                                     PAGE
                                                     ----

<S>                                                  <C>


Reports of Independent Registered Public
  Accounting Firms................................    36
Management's Report on Internal Control Over
  Financial Reporting.............................    39
Consolidated Balance Sheets as of December 31,
  2004 and 2005...................................    40
Consolidated Statements of Income for the years
  ended December 31, 2003, 2004 and 2005..........    41
Consolidated Statements of Comprehensive Income
  for the years ended December 31, 2003, 2004 and
  2005............................................    42
Consolidated Statements of Stockholders' Equity
  for the years ended December 31, 2003, 2004 and
  2005............................................    43
Consolidated Statements of Cash Flows for the
  years ended December 31, 2003, 2004 and 2005....    44
Notes to Consolidated Financial Statements........    45
Consolidated Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts.....    68
</Table>


     Schedules not filed:

     All schedules other than Schedule II have been omitted as the required
information is inapplicable or the information is presented in the consolidated
financial statements or related notes.



                                       35

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
SPSS Inc.

     We have audited the accompanying consolidated balance sheet of SPSS Inc.
and Subsidiaries (a Delaware corporation) (the "Company") as of December 31,
2005, and the related consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for the year then ended. 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 audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2005 and the results of its income and cash flows for the
year ended December 31, 2005, in conformity with accounting principles generally
accepted in the United States of America.

     We have also audited Schedule II of the Company for the year ended December
31, 2005. In our opinion this Schedule presents fairly, in all material
respects, the information required to be set forth therein.

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of SPSS
Inc.'s internal control over financial reporting as of December 31, 2005, based
on the criteria established in Internal Control -- Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
and our report dated March 3, 2006 expressed an unqualified opinion on
management's assessment and the effectiveness of the Company's internal control
over financial reporting.

                                               /s/ GRANT THORNTON LLP

Chicago, Illinois
March 3, 2006


                                       36

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of SPSS Inc.:

     We have audited the accompanying consolidated balance sheet of SPSS Inc.
and subsidiaries (SPSS or the Company) as of December 31, 2004, and the related
consolidated statements of income, comprehensive income, stockholders' equity,
and cash flows for each of the years in the two-year period ended December 31,
2004. In connection with our audits of the consolidated financial statements, we
also have audited the consolidated financial statement schedule of valuation and
qualifying accounts. These consolidated financial statements and the
consolidated financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the consolidated financial statement
schedule based on our audits.

     We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2004, and the results of their operations and their cash
flows for each of the years in the two-year period ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

     As discussed in Note 1 to the consolidated financial statements, effective
July 1, 2003, the Company adopted SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.

                                        /s/ KPMG LLP

Chicago, Illinois
March 16, 2005



                                       37

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders SPSS Inc.

     We have audited management's assessment, included in the accompanying
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING, that SPSS Inc.
(the "Company") maintained effective internal control over financial reporting
as of December 31, 2005, based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     In our opinion, management's assessment that the Company maintained
effective internal control over financial reporting as of December 31, 2005, is
fairly stated, in all material respects, based on criteria established in
Internal Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Also, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2005, based on Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

     We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of SPSS Inc. and subsidiaries as of December 31, 2005, and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows for the year ended December 31, 2005, and our report dated March
3, 2006 expressed an unqualified opinion on those financial statements.

                                        /s/ GRANT THORNTON LLP

Chicago, Illinois
March 3, 2006


                                       38

<PAGE>

        MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f) to provide reasonable assurance regarding the reliability of
our financial reporting and the preparation of the financial statements for
external purposes in accordance with U.S. generally accepted accounting
principles. Management assessed the effectiveness of the Company's internal
control over financial reporting as of December 31, 2005, using the criteria
published by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control -- Integrated Framework.

     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     Based on the evaluation under the framework in Internal
Control -- Integrated Framework, management concluded that, as of December 31,
2005, the Company's internal control over financial reporting is effective. Our
independent registered public accounting firm, Grant Thornton LLP, has issued an
audit report on management's assessment of the Company's internal control over
financial reporting. That report is included in Item 8 of this Annual Report.

                                By:              /s/ Jack Noonan
                                    --------------------------------------------
                                                     Jack Noonan
                                        President and Chief Executive Officer

                                By:           /s/ Raymond H. Panza
                                    --------------------------------------------
                                                  Raymond H. Panza
                                         Executive Vice President, Corporate
                                                     Operations,
                                        Chief Financial Officer and Secretary


                                       39

<PAGE>

                             SPSS INC. AND SUBSIDIARIES

                             CONSOLIDATED BALANCE SHEETS
                          (IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                           DECEMBER 31,  DECEMBER 31,
                                                               2004          2005
                                                           ------------  ------------

<S>                                                        <C>           <C>


                                        ASSETS
CURRENT ASSETS:
  Cash and cash equivalents...............................   $ 37,107      $ 84,408
  Accounts receivable, net of allowances $2,465 in 2004
     and $1,748 in 2005...................................     50,007        42,488
  Inventories, net........................................        789           879
  Deferred income taxes...................................     15,503         5,624
  Prepaid income taxes....................................      7,064         5,067
  Other current assets....................................      5,248         5,233
                                                             --------      --------
     Total current assets.................................    115,718       143,699
                                                             --------      --------
Net property, equipment and leasehold improvements........     21,480        20,441
Capitalized software development costs, net...............     28,178        28,522
Goodwill..................................................     42,197        41,207
Intangibles, net..........................................      3,278         3,627
Deferred income taxes.....................................     22,860        32,938
Other noncurrent assets...................................      1,614         1,463
                                                             --------      --------
       Total assets.......................................   $235,325      $271,897
                                                             ========      ========
                              LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Notes payable...........................................   $  2,500      $  2,500
  Accounts payable........................................      6,127         9,678
  Income taxes and value added taxes payable..............      7,340         9,024
  Deferred revenues.......................................     62,148        63,980
  Other accrued liabilities...............................     23,757        21,102
                                                             --------      --------
     Total current liabilities............................    101,872       106,284
                                                             --------      --------
Noncurrent deferred income taxes..........................        632           449
Noncurrent notes payable..................................      3,381           872
Other noncurrent liabilities..............................        981           546
STOCKHOLDERS' EQUITY:
  Common Stock, $0.01 par value; 50,000,000 shares
     authorized; 17,705,744 and 18,724,649 shares issued
     and outstanding in 2004 and 2005, respectively.......        177           187
  Additional paid-in capital..............................    152,477       174,188
  Deferred compensation...................................       (145)       (1,069)
  Accumulated other comprehensive loss....................     (7,818)       (9,420)
  Accumulated deficit.....................................    (16,232)         (140)
                                                             --------      --------
     Total stockholders' equity...........................    128,459       163,746
                                                             --------      --------
       Total liabilities and stockholders' equity.........   $235,325      $271,897
                                                             ========      ========

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                       40

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<Table>
<Caption>

                                                         YEAR ENDED DECEMBER 31,
                                                      ----------------------------
                                                        2003      2004      2005
                                                      --------  --------  --------

<S>                                                   <C>       <C>       <C>


Net revenues:
  License............................................ $ 91,473  $ 95,819  $107,568
  Maintenance........................................   83,557    97,735   102,241
  Services...........................................   33,337    30,520    26,254
                                                      --------  --------  --------
Net revenues.........................................  208,367   224,074   236,063
Operating expenses:
  Cost of license and maintenance revenues...........   14,359    14,642    16,381
  Cost of license and maintenance
     revenues -- software write-offs.................    1,961       --        --
  Sales, marketing and services......................  123,454   129,987   117,872
  Research and development...........................   44,167    47,765    45,418
  General and administrative.........................   17,773    24,813    28,217
  Provision for doubtful accounts....................      421       291       151
  Special general and administrative charges.........    6,104       --        --
                                                      --------  --------  --------
Operating expenses...................................  208,239   217,498   208,039
                                                      --------  --------  --------
Operating income.....................................      128     6,576    28,024
                                                      --------  --------  --------
Other income (expense):
  Net interest and investment income.................      (42)     (282)      161
  Gain on divestiture of Sigma-series product line...    8,577        82     1,000
  Other..............................................    1,798     1,680    (2,013)
                                                      --------  --------  --------
Other income (expense)...............................   10,333     1,480      (852)
                                                      --------  --------  --------
Income before income taxes...........................   10,461     8,056    27,172
Income tax expense...................................    1,147     2,513    11,080
                                                      --------  --------  --------
Net income........................................... $  9,314  $  5,543  $ 16,092
                                                      ========  ========  ========
Basic net income per share........................... $   0.54  $   0.31  $   0.88
                                                      ========  ========  ========
Diluted net income per share......................... $   0.53  $   0.31  $   0.85
                                                      ========  ========  ========
Shares used in computing basic net income per share..   17,351    17,671    18,228
                                                      ========  ========  ========
Shares used in computing diluted net income per
  share..............................................   17,562    17,884    18,880
                                                      ========  ========  ========

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                       41

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)

<Table>
<Caption>

                                                          YEAR ENDED DECEMBER 31,
                                                         ------------------------
                                                          2003     2004     2005
                                                         ------  -------  -------

<S>                                                      <C>     <C>      <C>


Net income.............................................. $9,314  $ 5,543  $16,092
Other comprehensive loss:
  Foreign currency translation adjustment...............   (720)  (1,242)  (1,602)
                                                         ------  -------  -------
Comprehensive income.................................... $8,594  $ 4,301  $14,490
                                                         ======  =======  =======

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                       42

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<Table>
<Caption>

                                                         YEAR ENDED DECEMBER 31,
                                                      ----------------------------
                                                        2003      2004      2005
                                                      --------  --------  --------

<S>                                                   <C>       <C>       <C>


Common stock, $.01 par value:
  Balance at beginning of period..................... $    172  $    173  $    177
  Sale of 31,054, 23,271 and 8,270 shares of common
     stock to the Employee Stock Purchase Plans in
     2003, 2004 and 2005, respectively...............      --        --        --
  Exercise of stock options..........................        1         4        10
                                                      --------  --------  --------
  Balance at end of period...........................      173       177       187
                                                      --------  --------  --------
Additional paid-in capital:
  Balance at beginning of period.....................  139,391   148,202   152,477
  Sale of 31,054, 23,271 and 8,270 shares of common
     stock to the Employee Stock Purchase Plans in
     2003, 2004 and 2005, respectively...............      396       392       112
  Reclassification of 158,228 shares of common stock
     issued to AOL from temporary equity.............    3,296       --        --
  Issuance of 291,828 shares of common stock to AOL
     for survey services.............................    3,000       --        --
  Exercise of 186,480, 267,623 and 1,010,635 stock
     options in 2003, 2004 and 2005, respectively....    1,810     3,749    17,422
  Net issuance of 78,200 restricted share units......      --        --      1,428
  Income tax benefit related to stock options........      309       134     2,749
                                                      --------  --------  --------
  Balance at end of period...........................  148,202   152,477   174,188
                                                      --------  --------  --------
Deferred compensation:
  Balance at beginning of period.....................     (625)     (385)     (145)
  Net issuance of 78,200 restricted share units......      --        --     (1,428)
  Amortization of deferred compensation..............      240       240       504
                                                      --------  --------  --------
  Balance at end of period...........................     (385)     (145)   (1,069)
                                                      --------  --------  --------
Accumulated other comprehensive loss:
  Balance at beginning of period.....................   (5,856)   (6,576)   (7,818)
  Foreign currency translation adjustment............     (720)   (1,242)   (1,602)
                                                      --------  --------  --------
  Balance at end of period...........................   (6,576)   (7,818)   (9,420)
                                                      --------  --------  --------
Accumulated deficit:
  Balance at beginning of period.....................  (31,089)  (21,775)  (16,232)
  Net income.........................................    9,314     5,543    16,092
                                                      --------  --------  --------
  Balance at end of period...........................  (21,775)  (16,232)     (140)
                                                      --------  --------  --------
Total stockholders' equity........................... $119,639  $128,459  $163,746
                                                      ========  ========  ========

</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                       43

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<Table>
<Caption>

                                                         YEAR ENDED DECEMBER 31,
                                                       ---------------------------
                                                         2003     2004      2005
                                                       -------  --------  --------

<S>                                                    <C>      <C>       <C>


Cash flows from operating activities:
  Net income.......................................... $ 9,314  $  5,543  $ 16,092
     Adjustments to reconcile net income to net cash
       provided by operating activities:
     Depreciation and amortization....................  15,791    16,405    16,948
     Deferred income taxes............................   1,891   (11,190)   (1,711)
     Tax benefit from stock option exercises..........     309       134     2,749
     Gain on sale of product line.....................  (8,577)      (82)   (1,000)
     Write-off of software to cost of revenues........   2,147       --        --
     Write-off of internal use software and acquired
       technology.....................................   4,447     1,505       --
     Non-cash survey services expense (recoveries)....   1,312    (1,125)      --
     Gain from property disposal......................     --       (771)      --
     Changes in assets and liabilities, net of effects
       of acquisitions:
       Accounts receivable............................   3,396       969     3,984
       Inventories....................................     726       691      (125)
       Prepaid and other assets.......................   3,423      (236)     (147)
       Accounts payable...............................  (5,292)   (1,253)    3,841
       Accrued expenses...............................  (7,484)     (423)   (1,488)
       Income taxes...................................  (6,755)      835     3,991
       Deferred revenue...............................   5,872     1,747     5,916
  Other, net..........................................   1,689      (415)    2,459
                                                       -------  --------  --------
Net cash provided by operating activities.............  22,209    12,334    51,509
                                                       -------  --------  --------
Cash flows from investing activities:
  Capital expenditures................................  (2,573)   (5,477)   (7,543)
  Capitalized software development costs..............  (9,610)   (9,208)   (9,021)
  Purchase of business and intangibles................  (1,000)      --       (780)
  Repurchase of common stock issued for acquisition...     --     (5,421)      --
  Proceeds from the divestiture of Sigma-series
     product line.....................................   9,000     3,000     1,000
  Proceeds from property disposal.....................     --      2,633       --
  Other investing activities..........................     --        187       --
                                                       -------  --------  --------
Net cash used in investing activities.................  (4,183)  (14,286)  (16,344)
                                                       -------  --------  --------
Cash flows from financing activities:
  Net repayments under line-of-credit agreements......     (49)   (2,570)   (2,509)
  Proceeds from issuance of common stock..............   2,207     4,145    17,544
                                                       -------  --------  --------
Net cash provided by financing activities.............   2,158     1,575    15,035
                                                       -------  --------  --------
Effect of exchange rates on cash......................   1,427     1,383    (2,899)
                                                       -------  --------  --------
Net change in cash and cash equivalents...............  21,611     1,006    47,301
Cash and cash equivalents at beginning of period......  14,490    36,101    37,107
                                                       -------  --------  --------
Cash and cash equivalents at end of period............ $36,101  $ 37,107  $ 84,408
                                                       =======  ========  ========
Supplemental disclosures of cash flow information:
  Interest paid....................................... $   801  $    723  $    691
  Income taxes paid...................................   7,478    14,974     8,546
  Cash received from income tax refunds...............   3,139     2,307     4,496
  Supplemental disclosures of noncash investing
     activities:
     Issuance of common stock for acquisitions........   5,311       --        --
     Receipt of note receivable in divestiture of
       Sigma-series product line......................  (3,000)      --        --
</Table>



The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                       44

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  BUSINESS

     SPSS Inc., a Delaware corporation ("SPSS" or the "Company"), was
incorporated in Illinois in 1975 under the name SPSS, Inc. and was
reincorporated in Delaware in May 1993 under the name "SPSS Inc." SPSS is a
global provider of predictive analytics technology and services.

     The Company's offerings use predictive analytics to connect data to
effective action by drawing reliable conclusions about current conditions and
future events. Predictive analytics leverages an organization's business
knowledge by applying sophisticated analytic techniques to enterprise data. The
insights gained through the use of these techniques can lead to improved
business processes that increase revenues, reduce costs, and prevent fraudulent
activities.

     SPSS reports revenues in three categories used by most enterprise software
companies:

     - License fees, representing new sales of the Company's tools,
       applications, and components on a perpetual, annual, or ASP (applications
       services provider) basis;

     - Maintenance, representing recurring revenues recognized by the Company
       from renewals of maintenance agreements associated with perpetual
       licenses or renewals of annual licenses; and

     - Services, representing revenues recognized from professional services
       engagements, training, and other activities such as publication sales and
       providing respondents to online surveys.

  PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of SPSS Inc. and
its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated.

     The translation of the applicable foreign currencies into U.S. dollars is
performed for balance sheet accounts using current exchange rates in effect at
the balance sheet date and for revenue and expense accounts using the weighted
average exchange rates during the period. The gains or losses resulting from
such translation are included in stockholders' equity. Gains or losses resulting
from foreign currency transactions are included in "other income and expense" in
the consolidated statements of income.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and judgments that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities, and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The principal areas of estimation in
the financial statements include revenue recognition, capitalization of software
development costs, impairment of long-lived assets, credit losses on accounts
receivable, income taxes, contingencies and litigation.

  REVENUE RECOGNITION

     The Company applies AICPA Statement of Position ("SOP") 97-2, Software
Revenue Recognition, and related Amendments which establishes the criteria that
must be met prior to SPSS recognizing revenues from software sales.

     The Company's policy is to record revenue only when these criteria are met:

          (1) Persuasive evidence of an arrangement exists -- SPSS and the
     customer have executed a written agreement, contract or other evidence of
     an arrangement.



                                       45

<PAGE>

          (2) Delivery has occurred -- Product has been shipped or delivered to
     customer, depending on the applicable terms. The Company's standard
     contract does not contain acceptance clauses. In the event that SPSS
     modifies the terms of its standard contract to provide that final delivery
     is contingent upon the customer accepting the applicable product, SPSS does
     not recognize revenue for that product until the customer has accepted the
     product.

          (3) The vendor's fee is fixed or determinable -- The arrangement
     indicates the price of the license and the number of users, and the related
     payment terms are within one year of delivery of the software.

          (4) Collectibility is probable -- SPSS sells to customers it deems
     creditworthy. Standard terms for payment are 30 days. SPSS periodically
     extends payment terms to three to six months, but does not extend payment
     terms past one year. Any terms beyond standard are generally still
     collectible and are generally offered in larger transactions with more
     creditworthy customers.

     SPSS primarily recognizes revenue from product licenses, net of an
allowance for estimated returns and cancellations, at the time the software is
shipped. Revenue from certain product license agreements is recognized upon
contract execution, product delivery, and customer acceptance.

     The Company's customary terms are FOB shipping point. SPSS estimates and
records provisions for revenue returns and allowances in the period the related
products are sold, based upon historical experience.

     Revenue from postcontract customer support ("PCS" or "maintenance")
agreements, including PCS bundled with product licenses, is recognized ratably
over the term of the related PCS agreements. Maintenance revenues consist
primarily of fees for providing when-and-if-available unspecified software
upgrades and technical support over a specified term. Maintenance revenues are
recognized on a straight-line basis over the term of the contract. Some product
licenses include commitments for insignificant obligations, such as technical
and other support, for which an accrual is provided.

     Distribution partners: The Company licenses third-parties to distribute
SPSS products in certain territories internationally or as value-added resellers
worldwide. SPSS records license fees from transactions made by such distribution
partners when these transactions are reported, and the partners are responsible
for providing related maintenance services, including end-user support and
software updates. However, SPSS has post contract support (PCS) obligations to
the customers of its distribution partners that are implied by its
responsibility to provide these partners with updates of SPSS products when and
if developed. Because the Company cannot establish vendor specific objective
evidence (VSOE) of fair value of these implied maintenance arrangements, the
Company recognizes the related license fees ratably over the terms of the
arrangements beginning when transactions are reported to the Company by its
distribution partners and when all revenue recognition criteria are met.
Specific revenue recognition on distributor partner contracts will be defined by
the terms of the contract as follows:

     - Where SPSS defines the price for renewal of maintenance and support in
       the contract, such amount represents vendor specific objective evidence
       (VSOE) of fair value of maintenance and such amount will be deferred and
       recognized ratably over the life of the support contract.

     - When SPSS provides direct maintenance and support to the end-user, SPSS
       will defer the estimated fair value of the maintenance and support
       consistent with direct sales to its customers.

     - When neither of the above conditions exist and SPSS must provide free
       updates or second tier support to the partner, the revenue from the
       contract will be deferred and recognized ratably over the life of the
       contract.

     - Where no maintenance or support of any kind are required by the contract,
       no revenue will be deferred.

     - When a reseller has a right to return product stock for updated product
       stock (stock swap), SPSS accounts for this as a right of return in
       accordance with Statement of Financial Accounting Standards ("SFAS") No.
       48, Revenue Recognition when Right of Return Exists, and establishes a
       reserve for the estimated amount of the returns.

     Revenues from fixed-price service contracts, where consulting services are
essential to the functionality of the software or services are provided
separately, are recognized using the percentage-of-completion method, under SOP
81-1, Accounting for Performance of Construction-Type and Certain Production-
Type Contracts, of contract


                                       46

<PAGE>

accounting as services are performed to develop, customize and install the
Company's software products. The percentage completed is measured by the
percentage of labor hours incurred to date in relation to estimated total labor
hours for each contract. Management considers labor hours to be the best
available measure of progress on these contracts.

     SPSS enters into arrangements which may consist of the sale of: (a)
licenses of the Company's software, (b) professional services and maintenance or
(c) various combinations of each element. Revenues are recognized based on the
residual method under SOP 98-9, a modification of SOP 97-2 "Software Revenue
Recognition", when an agreement has been signed by both parties, delivery of the
product has occurred, the fees are fixed or determinable, collection of the fees
is probable and no other significant obligations remain. Historically, the
Company has not experienced significant returns or offered exchanges of its
products.

     For multiple element arrangements, each element of the arrangement is
analyzed and SPSS allocates a portion of the total fee under the arrangement to
the undelivered elements, such as professional services, training and
maintenance based on vendor-specific objective evidence of fair value. Revenues
allocated to the undelivered elements are deferred using vendor-specific
objective evidence of fair value of the elements and the remaining portion of
the fee is allocated to the delivered elements (generally the software license),
under the residual method. Vendor-specific objective evidence of fair value is
based on the price the customer is required to pay when the element is sold
separately (i.e., hourly time and material rates charged for consulting services
when sold separately from a software license and the optional renewal rates
charged by the Company for maintenance arrangements).

     If an element of the license agreement has not been delivered, revenue for
the element is deferred based on its vendor-specific objective evidence of fair
value. (If vendor-specific objective evidence of fair value does not exist, all
revenue is deferred until sufficient objective evidence exists or all elements
have been delivered). If the fee due from the customer is not fixed or
determinable, revenue is recognized as payments become due. If collectibility is
not considered probable, revenue is recognized when the fee is collected.

     Amounts allocated to license revenues under the residual method are
recognized at the time of delivery of the software when vendor-specific
objective evidence of fair value exists for the undelivered elements, if any,
and all the other revenue recognition criteria discussed above have been met.

     Revenues from professional services are comprised of consulting,
implementation services and training. Consulting services are generally sold on
a time-and-materials basis and include services to assist in new implementations
or configure existing applications to vertical industry and customer
requirements. SPSS consultants also help organizations to develop plans that
align analytical efforts with organizational goals, assist with the collection
and structuring of data for analysis, and facilitate the building of predictive
analytical models. Services are generally separable from the other elements
under the arrangement since the performance of the services is not essential to
the functionality (i.e., the services do not involve significant production,
modification or customization of the software or building complex interfaces) of
any other element of the transaction. Revenues for professional services and
training are recognized when the services are performed.

     SPSS offers: (a) annual licenses with maintenance renewable annually, (b)
perpetual licenses with both annual and multi-year maintenance, and (c) multi-
year licenses with multi-year maintenance. Vendor-specific objective evidence
(VSOE) of fair value of maintenance does not exist for annual licenses with one
year of maintenance. Vendor-specific objective evidence of fair value of
maintenance for perpetual licenses with annual maintenance is based on the price
the customer is required to pay for maintenance when sold separately. In certain
countries where SPSS operates, vendor-specific objective evidence of fair value
of maintenance for perpetual licenses with annual maintenance is based on a
stated renewal rate for maintenance. Vendor-specific objective evidence of fair
value of maintenance is not determinable for perpetual and multi-year
arrangements with multi-year maintenance in certain countries where SPSS
operates. For these types of arrangements, where there are stated renewal rates
and they are substantive, VSOE exists. If VSOE does not exist, the entire fee is
deferred and recognized ratably over the term of the arrangement as license
revenue.

     SPSS licenses software, primarily to end users, on a perpetual basis and on
an annual and multi-year basis. Under a perpetual license, the customer is
granted an indefinite right to use the software. SPSS has a 60-day return policy
for these types of licenses and the Company calculates its return allowance
using a 12-month rolling average


                                       47

<PAGE>

based on actual returns during the prior 12 months. Under an annual license, the
customer is granted the right to use the software for one year and may not
return or cancel during the first year.

     For each type of license, postcontract customer support (maintenance) is
offered. Under perpetual licenses, it is the customer's option to renew
maintenance each year. Under an annual or multi-year license, the customer must
renew the license and maintenance to continue to use the software. In both
cases, SPSS contacts the customer two months before the scheduled renewal date
to determine the customer's renewal intentions. If the customer indicates that
it intends to renew the license, the Company will issue a new invoice. In some
cases, customers ultimately cancel a license even though they initially
indicated a willingness to renew. These cancellations are tracked in a 12-month
rolling average to determine the cancellation percentage that SPSS will accrue
as its cancellation allowance.

  ADVERTISING EXPENSE

     Advertising expenses are charged to operations during the year in which
they are incurred. The total amount of advertising expenses charged to
operations was $2.6 million, $2.2 million and $1.6 million for the years ended
December 31, 2003, 2004 and 2005, respectively.

  EARNINGS PER SHARE

     Earnings per common share (EPS) are computed by dividing net income by the
weighted average number of shares of common stock (basic) plus common stock
equivalents outstanding (diluted) during the period. Common stock equivalents
consist of contingently issuable shares and stock options, which have been
included in the calculation of weighted average shares outstanding using the
treasury stock method. Basic weighted average shares reconciles to diluted
weighted average shares as follows (in thousands):

<Table>
<Caption>

                                                      2003    2004    2005
                                                     ------  ------  ------

<S>                                                  <C>     <C>     <C>


Basic weighted average common shares outstanding.... 17,351  17,671  18,228
Dilutive effect of stock options and contingently
  issuable shares...................................    211     213     652
                                                     ------  ------  ------
Diluted weighted average common shares outstanding.. 17,562  17,884  18,880
                                                     ======  ======  ======

</Table>


     Anti-dilutive shares not included in the diluted EPS calculation for 2003,
2004 and 2005 were 1.4 million, 1.1 million and 0.3 million, respectively.

  DEPRECIATION AND AMORTIZATION

     Depreciation is recorded using the straight-line method. The estimated
useful lives used in the computation of depreciation of tangible assets are as
follows:


<Table>
<S>                                              <C>


Furniture, fixtures, and office equipment....... 3-8 years
Computer equipment and software................. 3-7 years
Leasehold improvements.......................... 3-15 years or lease term if shorter
</Table>


     Capitalized software costs are amortized on a straight-line method over
three to five years based upon the expected life of each product. The straight-
line method is utilized as it results in amortization expense of at least the
amount that would be provided by the ratio of annual product revenue to total
product revenue over the remaining useful life of the products. Identifiable
intangible assets are amortized over their estimated useful lives using the
straight-line method.

  SOFTWARE DEVELOPMENT COSTS

     Software development costs incurred by SPSS in connection with the
Company's long-term development projects are capitalized in accordance with SFAS
No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or
Otherwise Marketed." SPSS has not capitalized software development costs
relating to development projects where the net realizable value is immaterial
and the time between technological feasibility and release is of short duration.
Product enhancement costs are capitalized when technological feasibility has
been


                                       48

<PAGE>

established. SPSS reviews capitalized software development costs each period
and, if necessary, reduces the carrying value of each product to its net
realizable value. See additional discussion at Note 4.

     SPSS applies Statement of Position ("SOP") 98-1, "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use". This standard
requires that certain costs related to the development or purchase of internal-
use software be capitalized and amortized over the estimated useful life of the
software. SOP 98-1 also requires that costs related to the preliminary project
stage and post-implementation/operations stage of an internal-use computer
software development project be expensed as incurred. See additional discussion
at note 3.

  STOCK OPTION PLANS

     The Company maintains one active stock incentive plan that is flexible and
allows various forms of equity incentives to be issued under it. See Note 15 for
additional information regarding this plan. The Company accounts for this plan
under the recognition and measurement principles of Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. In prior years, the Company has recognized compensation cost
for restricted stock issued to employees. No compensation is recognized for
stock option grants to employees. All options granted under the Company plan had
an exercise price equal to the market value of the underlying common stock on
the date of grant. The following table illustrates the effects on net income and
income per share if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-
based compensation.

     The Company recognizes compensation cost for restricted stock and
restricted share units issued to employees. No compensation is recognized for
stock option grants to employees. During 2005, the Company issued 78 thousand
restricted share units to employees. As a result of this issuance, the market
value of the restricted share units was recorded as deferred compensation of
$1.4 million and is being charged to compensation expense over the respective
vesting period. The expense related to any restricted share units that are
cancelled is netted against the related expense. All options granted under the
stock incentive plan have an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effects on net income and income per share if the Company had applied the
fair value recognition provisions of Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," to stock-based compensation (in thousands).

<Table>
<Caption>

                                                      FOR THE YEARS ENDED
                                                          DECEMBER 31,
                                                   -------------------------
                                                     2003     2004     2005
                                                   -------  -------  -------

<S>                                                <C>      <C>      <C>


Net income, as reported........................... $ 9,314  $ 5,543  $16,092
Add:
  Stock-based employee compensation cost, net of
     related tax, included in net income, as
     reported.....................................      59       60      281
Deduct:
  Total stock-based employee compensation expense
     determined under the fair value based method
     for all awards, net of related taxes.........  (5,120)  (4,195)  (2,536)
                                                   -------  -------  -------
Pro forma net income.............................. $ 4,253  $ 1,408  $13,837
                                                   =======  =======  =======
Income per share:
  Basic -- as reported............................ $  0.54  $  0.31  $  0.88
  Basic -- pro forma.............................. $  0.25  $  0.08  $  0.76
  Diluted -- as reported.......................... $  0.53  $  0.31  $  0.85
  Diluted -- pro forma............................ $  0.24  $  0.08  $  0.73
</Table>


     Under the stock option plan, the exercise price of each option equals the
market value of the Company's stock on the date of grant. For purposes of
calculating the compensation costs consistent with SFAS No. 123 for option
grants, the fair value of each grant or purchase right is estimated on the date
of grant using the Black-Scholes option-


                                       49

<PAGE>

pricing model with the following weighted-average assumptions for grants in
fiscal 2003, 2004 and 2005: no expected dividend yield; expected volatility of
39% in 2003, 38% in 2004 and 37% in 2005; risk-free interest rates ranging from
3.53%-4.49% in 2003, 4.09%-4.71% in 2004 and 4.06%-4.21% in 2005, and expected
lives of 4-8 years for all years.

     For purposes of calculating the compensation costs consistent with SFAS No.
123 for employee stock purchase plan purchase rights, the fair value of each
purchase right is estimated on the date the purchase right is issued using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for purchase rights in fiscal 2003, 2004 and 2005: no expected
dividend yield; expected volatility ranging from 38%-39% in 2003, 37%-38% in
2004 and 37%-38% in 2005; risk-free interest rates ranging from 0.89%-1.14% in
2003, 0.95%-1.71% in 2004 and 3.30%-3.40% in 2005, and an expected life of 3
months for years prior to 2005 and 6 months for 2005.

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents are comprised of highly liquid investments with
original maturity dates of three months or less. As of December 31, 2005, the
Company had $13.0 million invested in an overnight investment in the form of
commercial paper.

  CONCENTRATION OF CREDIT RISK

     The Company places temporary cash investments with institutions of high
credit quality. The Company has a broad customer base doing business in all
regions of the United States as well as other areas of North America, Europe and
the Pacific Rim. At December 31, 2004 and 2005, the Company had approximately
$37.1 million and $84.4 million, respectively, on deposit with financial
institutions. Of those amounts, approximately $27.5 million and $53.4 million of
cash was held outside of North America at December 31, 2004 and 2005,
respectively. Of the cash held on deposit, essentially all of the cash balance
was in excess of amounts insured by the Federal Deposit Insurance Corporation or
other foreign provided bank insurance. The Company performs periodic evaluations
of these institutions for relative credit standing and has not experienced any
losses as a result of this concentration. Consequently, no significant
concentration of credit risk is considered to exist.

  ACCOUNTS RECEIVABLE

     The Company's accounts receivable are primarily due from entities in the
government, academic and commercial sectors. The Company performs ongoing credit
evaluations of its customers and adjusts credit limits based upon payment
history and the customer's credit worthiness, as determined by the Company's
review of their current credit information. The Company continuously monitors
collections and payments from its customers and maintains a provision for
estimated credit losses based upon historical experience and any specific
customer collection issues that it has identified.

  INVENTORIES

     Inventories, consisting of finished goods, are stated at the lower of cost
or market. Cost is determined using the first-in, first-out method.

  PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Property, equipment and leasehold improvements are stated at cost. See
additional discussion at note 3.

  GOODWILL AND OTHER INTANGIBLE ASSETS

     The Company reviews its goodwill and intangible assets with indefinite
useful lives for impairment at least annually in accordance with the provisions
of SFAS No. 142, Goodwill and Other Intangible Assets. Identifiable intangible
assets are amortized over a seven to ten year period using the straight-line
method. SFAS No. 142 requires the Company to perform the goodwill impairment
test annually or when a change in facts and circumstances indicate that the fair
value of an asset may be below its carrying amount. SPSS performed an impairment
test


                                       50

<PAGE>

in the fourth quarter of 2004 and 2005 and no impairment was required to be
recognized upon completion of these tests.

  LONG-LIVED ASSETS

     Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount should be
evaluated. Factors leading to impairment include a combination of significant
underperformance relative to expected historical or projected future operating
results, significant changes in the manner of use of the acquired assets or the
strategy for the Company's overall business and significant negative industry or
economic trends. The assessment of recoverability is based on management's
estimate. Impairment is measured by comparing the carrying value to the
estimated and undiscounted future cash flows expected to result from the use of
the assets and their eventual disposition.

  RECLASSIFICATIONS

     Where appropriate, some items relating to the prior years have been
reclassified to conform to the presentation in the current year.

  INCOME TAXES

     SPSS applies the asset and liability method of accounting for income taxes
in which deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

  OFF-BALANCE SHEET ARRANGEMENTS

     The Company has no significant off-balance sheet arrangements at December
31, 2005.

  RECENT ACCOUNTING PRONOUNCEMENTS

     On October 22, 2004, the President signed the American Jobs Creation Act of
2004. The Act provides a deduction from income from qualified domestic
production activities, which will be phased in from 2005 through 2010. In
return, the Act also provides for a two-year phase-out (except for certain pre-
existing binding contracts) of the existing Extraterritorial Income exclusion
tax benefit for foreign sales which the World Trade Organization ("WTO") ruled
was an illegal export subsidy. The European Union ("EU") believes that the Act
fails to adequately repeal the illegal export subsidies because of the
transitional provisions and has asked the WTO to review whether these
transitional provisions are in compliance with their prior ruling. This will
have no material impact on the Company. Additionally, the Act creates a
temporary incentive for U.S. corporations to repatriate accumulated income
earned abroad by providing an 85% dividend received deduction for certain
dividends from controlled foreign corporations. The Company is currently
evaluating the impact of this act on its consolidated financial statements.

     On December 21, 2004, the Financial Accounting Standards Board ("FASB")
Staff Position ("FSP") FAS 109-1, "Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004" was issued. FSP
FAS 109-1 clarifies that this tax deduction should be accounted for as a special
deduction in accordance with Statement 109. As such, the special deduction has
no effect on deferred tax assets and liabilities existing at the date of
enactment. Rather, the impact of this deduction would be reported in the period
in which the deduction is claimed on the Company's tax return beginning in 2005.
The Company believes that the impact will not be material.

     On December 21, 2004, FSP FAS 109-2, "Accounting and Disclosure Guidance
for the Foreign Earnings Repatriation Provision within the American Jobs
Creation Act of 2004" was issued. FSP FAS 109-2 provides


                                       51

<PAGE>

companies additional time, beyond the financial reporting period during which
the Act took effect, to evaluate the Act's impact on a company's plan for
reinvestment or repatriation of certain foreign earnings for purposes of
applying Statement 109. FSP FAS 109-2 was effective upon issuance. The effects
of the repatriation provision in 2005 was not significant to SPSS.

     On December 16, 2004, the FASB issued Statement No. 123 (revised 2004),
Share-Based Payment, which is a revision of Statement 123. Statement 123(R)
supersedes Opinion 25, and amends FASB Statement No. 95, Statement of Cash
Flows. Generally, the approach in Statement 123(R) is similar to the approach
described in Statement 123. However, Statement 123(R) generally requires share-
based payments to employees, including grants of employee stock options and
purchases under employee stock purchase plans, to be recognized in the statement
of operations based on their fair values. Pro forma disclosure of fair value
recognition will no longer be an alternative.

     Statement 123(R) permits public companies to adopt its requirements using
one of two methods:

     - Modified prospective method: Compensation cost is recognized beginning
       with the effective date of adoption (a) based on the requirements of
       Statement 123(R) for all share-based payments granted after the effective
       date of adoption and (b) based on the requirements of Statement 123 for
       all awards granted to employees prior to the effective date of adoption
       that remain unvested on the date of adoption.

     - Modified retrospective method: Includes the requirements of the modified
       prospective method described above, but also permits restatement using
       amounts previously disclosed under the pro forma provisions of Statement
       123 either for (a) all prior periods presented or (b) prior interim
       periods of the year of adoption.

     On April 14, 2005, the Securities and Exchange Commission announced that
the Statement 123(R) effective transition date will be extended to annual
periods beginning after June 15, 2005. The Company expects to adopt this new
standard on January 1, 2006, using the modified prospective method.

     The Company expects that the adoption of SFAS 123(R) will have the
following effect for stock options outstanding as of December 31, 2005 (in
thousands):

<Table>
<Caption>

YEAR ENDING DECEMBER 31,                                         AMOUNT
------------------------                                         ------

<S>                                                              <C>


2006............................................................ $2,768
2007............................................................  2,055
2008............................................................    899
2009............................................................     79
                                                                 ------
Total estimated stock-based compensation expense over the
  remaining vesting period...................................... $5,801
                                                                 ======

</Table>


     Statement 123(R) also requires the benefits of tax deductions in excess of
recognized compensation expense to be reported as a financing cash flow, rather
than as an operating cash flow as prescribed under current accounting rules.
This requirement will reduce net operating cash flows and increase net financing
cash flows in periods after adoption. Total cash flow will remain unchanged from
how it would have been reported under prior accounting rules.

     As permitted by Statement 123, the Company currently accounts for share-
based payments to employees using Opinion 25's intrinsic value method. As a
consequence, the Company generally does not recognize any compensation cost for
employee stock options and purchases under our Employee Stock Purchase Plan.
Although the adoption of Statement 123(R)'s fair value method will have no
adverse impact on the Company's balance sheet or total cash flows, it will
affect the Company's net income and diluted earnings per share. The actual
effects of adopting Statement 123(R) will depend on numerous factors including
the amounts of share-based payments granted in the future, the valuation model
used to value future share-based payments to employees and estimated forfeiture
rates. See Stock Option Plans, above, for the effect on reported net income and
earnings per share if we had accounted for our stock option and stock purchase
plans using the fair value recognition provisions of Statement 123.



                                       52

<PAGE>

     In May 2005, FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections," which will be effective in the first quarter of fiscal year 2006.
This statement addresses the retrospective application of such changes and
corrections and will be followed if and when necessary.

(2) DOMESTIC AND FOREIGN OPERATIONS

     The net assets, net revenues and net income of international subsidiaries
as of and for the years ended December 31, 2003, 2004 and 2005 included in the
consolidated financial statements are summarized as follows (in thousands):

<Table>
<Caption>

                                                        DECEMBER 31,
                                                ----------------------------
                                                  2003      2004      2005
                                                --------  --------  --------

<S>                                             <C>       <C>       <C>


Working capital................................ $  1,413  $  7,175  $ 31,256
                                                ========  ========  ========
Excess of noncurrent assets over noncurrent
  liabilities.................................. $ 17,071  $ 16,995  $ 16,007
                                                ========  ========  ========
Net revenues................................... $105,883  $122,409  $133,288
                                                ========  ========  ========
Net income..................................... $  4,191  $ 13,200  $ 23,077
                                                ========  ========  ========

</Table>


     Net revenues per geographic region, attributed to countries based upon
point of sale, are summarized as follows (in thousands):

<Table>
<Caption>

                                                   YEAR ENDED DECEMBER 31,
                                                ----------------------------
                                                  2003      2004      2005
                                                --------  --------  --------

<S>                                             <C>       <C>       <C>


United States.................................. $102,484  $101,665  $102,775
                                                --------  --------  --------
United Kingdom.................................   28,584    31,701    31,911
The Netherlands................................   18,982    21,943    27,411
Other..........................................   32,826    37,297    39,321
                                                --------  --------  --------
  Total Europe.................................   80,392    90,941    98,643
                                                --------  --------  --------
Japan..........................................   18,608    21,032    22,416
Other..........................................    6,883    10,436    12,229
                                                --------  --------  --------
  Total Pacific Rim............................   25,491    31,468    34,645
                                                --------  --------  --------
Total International............................  105,883   122,409   133,288
                                                --------  --------  --------
     Total..................................... $208,367  $224,074  $236,063
                                                ========  ========  ========

</Table>




                                       53

<PAGE>

     Long-lived assets, excluding long-term deferred tax assets, per geographic
region are summarized as follows (in thousands):

<Table>
<Caption>

                                                           DECEMBER 31,
                                                         ----------------
                                                           2004     2005
                                                         -------  -------

<S>                                                      <C>      <C>


United States........................................... $80,039  $78,783
                                                         -------  -------
United Kingdom..........................................   3,774    5,083
The Netherlands.........................................   9,291    8,570
Other...................................................   1,426      836
                                                         -------  -------
  Total Europe..........................................  14,491   14,489
                                                         -------  -------
Japan...................................................   2,027    1,806
Other...................................................     190      182
                                                         -------  -------
  Total Pacific Rim.....................................   2,217    1,988
                                                         -------  -------
Total International.....................................  16,708   16,477
                                                         -------  -------
       Total............................................ $96,747  $95,260
                                                         =======  =======

</Table>


(3) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

     Property, equipment and leasehold improvements consist of the following (in
thousands):

<Table>
<Caption>

                                                           DECEMBER 31,
                                                        ------------------
                                                          2004      2005
                                                        --------  --------

<S>                                                     <C>       <C>


Property, equipment and leasehold improvements, at
  cost:
Furniture, fixtures, and office equipment.............. $ 15,934  $ 15,332
Computer equipment and software........................   68,218    68,840
Leasehold improvements.................................   13,331    14,936
                                                        --------  --------
Balance, cost -- end of year...........................   97,483    99,108
Less accumulated depreciation and amortization.........  (76,003)  (78,667)
                                                        --------  --------
Balance, net -- end of year............................ $ 21,480  $ 20,441
                                                        ========  ========

</Table>


     Activity in property, equipment and leasehold improvements is summarized as
follows (in thousands):

<Table>
<Caption>

                                                           DECEMBER 31,
                                                         ----------------
                                                           2004     2005
                                                         -------  -------

<S>                                                      <C>      <C>


Balance, net -- beginning of year....................... $27,771  $21,480
Additions...............................................   5,477    7,543
Disposals...............................................  (1,862)     --
Depreciation expense....................................  (8,361)  (8,040)
Write-off of internal use software and acquired
  technology............................................  (1,505)     --
Translation.............................................     (40)    (542)
                                                         -------  -------
Balance, net -- end of year............................. $21,480  $20,441
                                                         =======  =======

</Table>


     During 2003, 2004 and 2005, SPSS recorded depreciation expense of $8.1
million, $8.4 million and $8.0 million, respectively, as a component of
operating expenses.

     During 2003, 2004 and 2005, SPSS capitalized $1.1 million, $0.8 million and
$0.4 million, respectively, and amortized $0.6 million, $1.4 million and $1.2
million, respectively, of internal-use computer software.

     During 2004, the Company determined that approximately $1.5 million of
computer equipment and software no longer had continuing value, and was written
off in the consolidated financial statements. Additionally, in 2004,

                                       54

<PAGE>

the Company sold property that previously held the SPSS Limited Quantime offices
in London, England. The property was sold for total proceeds of $2.6 million and
the Company recognized a gain on the sale of $0.8 million.

     During 2005, the Company identified approximately $0.3 million of
furniture, fixtures and office equipment, $2.1 million of computer equipment and
software, and $0.5 million of leasehold improvements that were no longer in use,
and had been fully depreciated. Accordingly, these amounts were removed from the
property, equipment and leasehold improvements cost balances during 2005 with an
offsetting charge to accumulated depreciation and amortization.

(4) SOFTWARE DEVELOPMENT COSTS AND PURCHASED SOFTWARE

     The components of net capitalized software are summarized as follows (in
thousands):

<Table>
<Caption>

                                                           DECEMBER 31,
                                                        ------------------
                                                          2004      2005
                                                        --------  --------

<S>                                                     <C>       <C>


Product translations................................... $  8,920  $  9,898
Acquired software technology...........................   14,649    11,967
Capitalized software development costs.................   39,347    37,214
                                                        --------  --------
Balance, cost -- end of year...........................   62,916    59,079
Accumulated amortization...............................  (34,738)  (30,557)
                                                        --------  --------
Balance, net -- end of year............................ $ 28,178  $ 28,522
                                                        ========  ========

</Table>


     Activity in capitalized software is summarized as follows (in thousands):

<Table>
<Caption>

                                                           DECEMBER 31,
                                                         ----------------
                                                           2004     2005
                                                         -------  -------

<S>                                                      <C>      <C>


Balance, net -- beginning of year....................... $26,826  $28,178
Additions...............................................   9,208    9,021
Other...................................................     (50)     --
Amortization expense charged to cost of license and
  maintenance revenues..................................  (7,806)  (8,677)
                                                         -------  -------
Balance, net -- end of year............................. $28,178  $28,522
                                                         =======  =======

</Table>


     During 2003, 2004 and 2005, SPSS recorded amortization expense of $7.6
million, $7.8 million and $8.7 million, respectively, charged to cost of license
and maintenance revenues.

     Total software development expenditures, including amounts expensed as
incurred, amounted to approximately $53.8 million, $57.0 million and $54.4
million for the years ended December 31, 2003, 2004 and 2005, respectively.

     The following table presents the estimated future amortization expense for
acquired software technology (in thousands):


<Table>
<S>                                                                <C>

For the year ended December 31, 2006...........................    $1,613
For the year ended December 31, 2007...........................     1,015
For the year ended December 31, 2008...........................       791
For the year ended December 31, 2009...........................       218
For the year ended December 31, 2010...........................        29
</Table>


     During 2005, the Company identified approximately $3.3 million of acquired
software technology and $10.0 million of capitalized software development costs
that were fully amortized on versions of the Company's software products no
longer in use. Accordingly, these amounts were removed from the capitalized
software balances during 2005 with an offsetting charge to accumulated
amortization.



                                       55

<PAGE>

(5) GOODWILL AND INTANGIBLE ASSETS

     Goodwill and intangible asset data are as follows (in thousands):

<Table>
<Caption>

                                                         DECEMBER 31,
                                        ----------------------------------------------
                                                 2004                    2005
                                        ----------------------  ----------------------
                                          GROSS                   GROSS
                                        CARRYING   ACCUMULATED  CARRYING   ACCUMULATED
                                         AMOUNT   AMORTIZATION   AMOUNT   AMORTIZATION
                                        --------  ------------  --------  ------------

<S>                                     <C>       <C>           <C>       <C>


Amortizable intangible assets:
  Other intangible assets -- Customer
     relationships.....................  $ 1,522      $(231)     $ 2,102      $(422)
  Other intangible
     assets -- Trademarks..............      400       (240)         400       (280)
Unamortizable intangible assets:
  Other intangible assets..............    1,827                   1,827
Goodwill...............................   42,197                  41,207
Aggregate amortization expense:
  For the year ended December 31,
     2005..............................                              231
Estimated amortization expense:
  For the year ended December 31,
     2006..............................                              309
  For the year ended December 31,
     2007..............................                              309
  For the year ended December 31,
     2008..............................                              309
  For the year ended December 31,
     2009..............................                              269
  For the year ended December 31,
     2010..............................                              269
</Table>


     The aggregate amortization expense for the years ended December 31, 2003,
2004 and 2005 was $0.1 million, $0.2 million and $0.2 million, respectively.

     The following tables present the changes in the carrying amount of goodwill
and other intangibles as of December 31, 2004 and December 31, 2005 (in
thousands):

<Table>
<Caption>

                                                           DECEMBER 31, 2004
                                                         ---------------------
                                                         GOODWILL  INTANGIBLES
                                                         --------  -----------

<S>                                                      <C>       <C>


Balance at beginning of year............................  $42,253     $3,380
Amortization expense....................................      --        (238)
Adjustments to previously recorded goodwill.............     (554)       --
Translation.............................................      498        136
                                                          -------     ------
Balance at end of year..................................  $42,197     $3,278
                                                          =======     ======

</Table>



<Table>
<Caption>

                                                           DECEMBER 31, 2005
                                                         ---------------------
                                                         GOODWILL  INTANGIBLES
                                                         --------  -----------

<S>                                                      <C>       <C>


Balance at beginning of year............................  $42,197     $3,278
Amortization expense....................................      --        (231)
Intangibles acquired....................................      --         780
Translation.............................................     (990)      (200)
                                                          -------     ------
Balance at end of year..................................  $41,207     $3,627
                                                          =======     ======

</Table>





                                       56

<PAGE>

(6) INTANGIBLE ASSETS

     Intangible assets consist of the following at December 31 (in thousands):

<Table>
<Caption>

                                                   2004    2005   USEFUL LIVES
                                                  ------  ------  ------------

<S>                                               <C>     <C>     <C>


Trademarks....................................... $  400  $  400     10 years
Customer relationships...........................  1,522   2,102   7-10 years
                                                  ------  ------
                                                   1,922   2,502
Less accumulated amortization....................   (471)   (702)
                                                  ------  ------
                                                   1,451   1,800
Unamortizable trademarks.........................  1,827   1,827   Indefinite
                                                  ------  ------
Total intangible assets, net..................... $3,278  $3,627
                                                  ======  ======

</Table>


(7) ACQUISITIONS AND DIVESTURES

  ACQUISITIONS

  Data Distilleries B.V.

     On November 4, 2003, SPSS, through SPSS International B.V., its wholly
owned subsidiary, acquired Data Distilleries B.V., a Netherlands-based developer
of analytic applications. The terms and conditions of the acquisition are
specified in a Stock Purchase Agreement, by and among SPSS, SPSS International
B.V. and the owners of all of the issued and outstanding shares of the capital
stock of Data Distilleries. The aggregate purchase price for all of the issued
and outstanding capital stock of Data Distilleries consists of guaranteed and
contingent payments. The guaranteed portion of the purchase price was paid at
closing and consisted of a payment of $1.0 million in cash and 282 thousand
shares of SPSS common stock valued at $5.3 million for purposes of this
transaction. The contingent portion of the purchase price was required to be
paid, if at all, at the end of the first and second years following the closing.
The Company's obligation to make the contingent payments depended on the
achievement of certain growth targets for license and maintenance revenues from
the Data Distilleries applications. SPSS was not required to make any contingent
payments to the former owners of Data Distilleries during 2004 or 2005 because
these growth targets were not met in 2004 or 2005.

     In connection with the Data Distilleries transaction, SPSS incurred an
estimated $1.8 million in transaction fees, including legal, valuation and
accounting fees. The purchase price of $6.3 million has been allocated to the
tangible and identifiable intangible assets acquired and liabilities assumed on
the basis of their estimated fair values on the acquisition date. The results of
operations of Data Distilleries are included in the Consolidated Statements of
Operations from the date of the acquisition.

     The shares issued in the acquisition of Data Distilleries have been valued
in accordance with EITF Issue No. 99-12, "Determination of the Measurement Date
for the Market Price of Acquirer Securities Issued in a Purchase Business
Combination." In accordance with EITF No. 99-12, the Company has established
that the first date on which the number of our shares and the amount of other
consideration became fixed was November 4, 2003. Accordingly, the Company valued
the shares issued in the transaction at $18.84 per share utilizing the average
closing price for a few days before and after November 4, 2003.

     Under the terms of the November 4, 2003 Stock Purchase Agreement with Data
Distilleries, the Company was obligated to file a Registration Statement on Form
S-3 to register the potential resale of the 282 thousand shares issued to Data
Distilleries shareholders in the transaction. This contingent obligation
required the Company to classify the common stock as temporary equity labeled
"Common Stock Subject to Repurchase" at December 31, 2003. Because the Company's
Annual Report on Form 10-K for fiscal year 2003 was not timely filed, SPSS
became ineligible to use Form S-3 and was not able to register the shares by the
required April 2004 filing date. The Company fulfilled its obligation under the
Stock Purchase Agreement by repurchasing from each former Data Distilleries
shareholder the number of shares of SPSS common stock received by such
shareholder in connection with this transaction. During April 2004, SPSS
notified the former shareholders of the Company's inability to


                                       57

<PAGE>

properly register these shares and through June 30, 2004, the Company
repurchased all 282 thousand shares at a cost of $5.4 million.

  SPSS Belgium BVBA/AMARA

     During 2005, the Company reached a final agreement to terminate the
agreement with its Belgium distributor in efforts to further improve the
operating performance in Belgium. The agreement was reached for the Company to
purchase the existing Belgium customer base. The Company integrated the business
operations for the SPSS software previously sold under the Distribution
Agreement into its existing Belgium office. The result of this transaction was a
$0.8 million addition to intangible assets, with a useful life of ten years.

  DIVESTITURES

     On December 29, 2003, the Company received its first payment in a
transaction with Systat Software, Inc., a subsidiary of Cranes Software
International Ltd. ("Systat"), pursuant to which Systat acquired from SPSS an
exclusive worldwide license to distribute the Sigma-series line of products for
a three-year period and purchased certain related assets. Pursuant to the
agreement, Systat assumed all responsibilities for the marketing and sales of
the products as well as their ongoing development and technical support. SPSS
also transferred to Systat all rights and obligations with respect to customers
and personnel and all fixed assets related to the Sigma-series products (the
"Related Assets"). In exchange for the exclusive worldwide license and Related
Assets, Systat was obligated to make cash payments to SPSS in the aggregate
amount of $13.0 million. The agreement between SPSS and Systat also grants to
Systat an option to purchase the licensed property. Systat may exercise this
purchase option for $1.0 million within 180 days prior to the end of the three-
year license period.

     The $9.0 million payment made by Systat to SPSS on December 29, 2003
included the initial $6.0 million license fee and $3.0 million in consideration
of the related assets. Systat was obligated to make, and remitted, additional
license payments in the aggregate amount of $3.0 million in 2004. A final
license payment of $1.0 million was made in 2005.

     The distribution license and sale of the related assets of the Sigma-series
product line was accounted for as a divestiture of a business. The sale resulted
in a gain of $8.6 million during 2003. In addition to the net book value of the
assets sold, goodwill was reduced by $1.0 million to reflect the estimated
goodwill allocated to this business. During 2004, SPSS recorded a $0.1 million
adjustment to reduce certain professional fee accruals associated with this
transaction. During 2005, SPSS recorded an additional gain of $1.0 million
related to the final license payment made, as noted above.

(8) COMMITMENTS AND CONTINGENCIES

  OPERATING LEASES

     SPSS leases its office facilities, storage space, and some data processing
equipment under lease agreements expiring through the year 2012. Minimum lease
payments indicated below do not include costs such as property taxes,
maintenance, and insurance.

     The following is a schedule of future noncancellable minimum lease payments
required under operating leases as of December 31, 2005 (in thousands):

<Table>
<Caption>

YEAR ENDING DECEMBER 31,                                         AMOUNT
------------------------                                        -------

<S>                                                             <C>


2006........................................................... $11,396
2007...........................................................   8,361
2008...........................................................   7,020
2009...........................................................   6,430
2010...........................................................   6,029
Thereafter.....................................................   8,291
                                                                -------
Total operating lease obligation............................... $47,527
                                                                =======

</Table>





                                       58

<PAGE>

     Rent expense related to operating leases was approximately $13.4 million,
$14.4 million and $12.6 million during the years ended December 31, 2003, 2004
and 2005, respectively.

  HYPERION SOLUTIONS

     Through its strategic relationship with Hyperion Solutions, SPSS has rights
to distribute the Essbase/400 software while Hyperion Solutions maintains
limited distribution rights. Essbase/400 enables SPSS to reach a broader
customer base, including users of multidimensional analyses, and offers the
Company new partnering opportunities. The Company entered into the agreement on
November 5, 2004.

  BANTA GLOBAL TURNKEY

     Banta Global Turnkey manufactures, packages and distributes the Company's
software products in the United States and multiple international locations.
This arrangement ensures speed and efficiency in the manufacturing, order
fulfillment and delivery of SPSS products. Specifically, Banta performs diskette
and CD-ROM duplication, documentation printing, packaging, warehousing,
fulfillment and shipping of SPSS products. SPSS believes that, because of the
capacity of Banta's third-party distribution centers and their around-the-clock
operation, SPSS can easily adapt to peak period demand, quickly manufacture new
products for distribution, and effectively respond to anticipated sales volumes.
Banta has provided these services to SPSS since 1997, and SPSS and Banta amended
and renewed their distribution agreement in January 2006. The agreement with
Banta has a three-year term and automatically renews thereafter for successive
one-year periods. Either party may terminate the agreement for cause if the
other party materially breaches its obligations.

  LITIGATION

     SPSS Inc. has been named as a defendant in a lawsuit filed on December 6,
2002 in the United States District Court for the Southern District of New York,
under the caption Basu v. SPSS Inc., et al., Case No. 02CV9694. The complaint
alleges that, in connection with the issuance and initial public offering of
shares of common stock of NetGenesis Corp., the registration statement and
prospectus filed with the Securities and Exchange Commission in connection with
the IPO contained material misrepresentations and/or omissions. The alleged
violations of the federal securities laws took place prior to the effective date
of the merger in which the Company's acquisition subsidiary merged with and into
NetGenesis Corp. NetGenesis Corp. is now a wholly owned subsidiary of SPSS.
Other defendants to this action include the former officers and directors of
NetGenesis Corp. and the investment banking firms that acted as underwriters in
connection with the IPO. The plaintiff is seeking unspecified compensatory
damages, prejudgment and post-judgment interest, reasonable attorney fees,
experts' witness fees and other costs and any other relief deemed proper by the
Court. The Company is aggressively defending itself, and plans to continue to
aggressively defend itself against the claims set forth in the complaint. The
Company and the named officers and directors filed an answer to the complaint on
July 14, 2003. At this time, the Company believes the lawsuit will be settled
with no material adverse effect on its results of operations, financial
condition, or cash flows.

     SPSS, Jack Noonan, SPSS's President and Chief Executive Officer and Edward
Hamburg, SPSS's former Executive Vice President, Corporate Operations, Chief
Financial Officer and Secretary, were named as defendants in a lawsuit filed in
the United States District Court for the Northern District of Illinois on or
about May 14, 2004. The lawsuit was filed under the caption Fred Davis,
Individually and On Behalf of All Others Similarly Situated v. SPSS Inc., Jack
Noonan and Edward Hamburg, Case No. 04 CH 03427. The lawsuit was amended on
September 30, 2004 and KMPG LLP, SPSS's former auditor, was added as a
defendant. The complaint alleged that the defendants violated Sections 10(b) and
20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder. The complaint further alleged that the defendants failed to disclose
and misrepresented a series of material adverse facts regarding the Company's
revenues. The complaint sought to recover unspecified compensatory damages,
reasonable attorney fees, experts' witness fees and other costs and any other
relief deemed proper by the court on behalf of all purchasers of the Company's
securities between May 2, 2001 and March 30, 2004, although no court has
determined that such persons constitute a proper class. On May 10, 2005, the
United States District Court for the Northern District of Illinois dismissed the
plaintiffs' case for failure to state a claim upon which relief may be granted,
without prejudice, and granted the plaintiffs leave to file an amended
complaint. On June 24, 2005, the


                                       59

<PAGE>

Lead Plaintiff filed a second amended complaint which realleges that the
defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of
1934, and Rule 10b-5 promulgated thereunder, and seeks the same relief as the
original complaint. The second amended complaint realleges many of the same
factual bases for the claims as were set forth in the first amended complaint
that was dismissed by the court. In addition, an additional plaintiff, AFCO, LP,
has been added, and the second amended complaint has dropped the claims against
KPMG LLP. On August 26, 2005, SPSS, Mr. Noonan and Dr. Hamburg filed a motion to
dismiss the second amended complaint. On November 2, 2005, the Lead Plaintiff
filed a memorandum in opposition to the motion to dismiss the second amended
complaint filed by SPSS, Mr. Noonan and Dr. Hamburg. On November 30, 2005, SPSS,
Mr. Noonan and Dr. Hamburg filed a reply memorandum in support of their motion
to dismiss. SPSS, Mr. Noonan and Dr. Hamburg believe that the suit is without
merit and intend to defend vigorously against the allegations contained in the
second amended complaint.

(9) OTHER ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES

     Other accrued liabilities and other noncurrent liabilities consist of the
following at December 31 (in thousands):

<Table>
<Caption>

                                                           2004     2005
                                                         -------  -------

<S>                                                      <C>      <C>


Other Accrued Liabilities
Payroll................................................. $ 7,882  $ 8,576
Rent....................................................   3,603    3,831
Customer advances.......................................   2,171    2,084
Royalties...............................................   1,487    1,711
Professional fees.......................................     904      320
Other accrued expenses..................................   7,710    4,580
                                                         -------  -------
Total other accrued liabilities......................... $23,757  $21,102
                                                         =======  =======
Other Noncurrent Liabilities
Deferred revenue........................................ $   550  $   546
Other noncurrent liabilities............................     431       --
                                                         -------  -------
Total other noncurrent liabilities...................... $   981  $   546
                                                         =======  =======

</Table>


(10) FINANCING ARRANGEMENTS

     On March 31, 2003, SPSS entered into a four (4) year, $25.0 million credit
facility with Wells Fargo Foothill, Inc. (f/k/a Foothill Capital Corporation).
The Wells Fargo Foothill facility includes a four (4) year term loan in the
amount of $10.0 million, two revolving lines of credit and a letters of credit
facility not to exceed $3.0 million. The maximum amount SPSS may borrow under
Revolver A will depend upon the value of the Company's eligible accounts
receivable generated within the United States. Revolver B provides for a credit
facility of up to $3.5 million provided that no event of default exists. As of
December 31, 2005, the Company had availability of $5.9 million under the
revolving lines of credit.

     The terms and conditions of the Wells Fargo Foothill credit facility are
specified in a Loan and Security Agreement, dated as of March 31, 2003, by and
between Foothill and SPSS. The term loan portion of the facility bears interest
at a rate of 2.5% above prime, with potential future interest rate reductions of
up to 0.5% in the interest rate based upon the Company's achievement of
specified EBITDA targets. One component of the revolving line of credit will
bear interest at a rate of prime plus 3.0%. On the remainder of the revolving
line of credit, SPSS may select interest rates of either prime plus 0.25% or
LIBOR plus 2.5% with respect to each advance made by Foothill. The credit fee
rate for letters of credit is 2.0% per annum times the daily balance of the
undrawn amount of all outstanding letters of credit. In May 2003, the Company
began paying down the term loan of $10.0 million in equal annual installments
over the scheduled four (4) year repayment period. At December 31, 2005, SPSS
had $3.4 million outstanding under its line of credit with Foothill, including
$2.5 million classified as current notes


                                       60

<PAGE>

payable and the face amount of letters of credit issued and outstanding under
the existing credit facility totaled approximately $0.9 million.

     The Wells Fargo Foothill facility requires SPSS to meet certain financial
covenants including minimum EBITDA targets and includes additional requirements
concerning, among other things, the Company's ability to incur additional
indebtedness, create liens on assets, make investments, engage in mergers,
acquisitions or consolidations where SPSS is not the surviving entity, sell
assets, engage in certain transactions with affiliates, and amend its
organizational documents or make changes in capital structure. The Company was
in compliance with all covenants as of December 31, 2005.

     The Wells Fargo Foothill facility is secured by all of the Company's assets
located in the United States. ShowCase Corporation, a Minnesota corporation and
wholly owned subsidiary of SPSS, and NetGenesis Corp., a Delaware corporation
and wholly owned subsidiary of SPSS, have guaranteed the obligations of SPSS
under the Loan and Security Agreement. This guaranty is secured by all of the
assets of ShowCase and NetGenesis.

(11) OTHER INCOME

     Other income consists of the following (in thousands):

<Table>
<Caption>

                                                    YEAR ENDED DECEMBER 31,
                                                   ------------------------
                                                     2003    2004     2005
                                                   -------  ------  -------

<S>                                                <C>      <C>     <C>


Interest and investment income.................... $   891  $  485  $   990
Interest expense..................................    (933)   (767)    (829)
                                                   -------  ------  -------
Net interest and investment income (expense)......     (42)   (282)     161
                                                   -------  ------  -------
Gain on divestiture of Sigma-series product line..   8,577      82    1,000
Exchange gain (loss) on foreign currency
  transactions....................................   1,770     896   (2,013)
International research and development credit.....     --      976      --
Write-down in e-Intelligence investment...........     --     (217)     --
Other.............................................      28      25      --
                                                   -------  ------  -------
Other, net........................................   1,798   1,680   (2,013)
                                                   -------  ------  -------
Total other income (expense)...................... $10,333  $1,480  $  (852)
                                                   =======  ======  =======

</Table>


     As noted above, the Company recognized a gain of $8.6 million on the
divestiture of the Sigma-series product line during the year ended December 31,
2003. During 2004, SPSS recorded an adjustment to reduce certain professional
fee accruals associated with this transaction. See additional discussion in Note
7. During 2005, SPSS recognized income of $1.0 million related to the final
payment from Cranes related to the divestiture of the Sigma-series product line.

(12) SPECIAL GENERAL AND ADMINISTRATIVE CHARGES, AND MERGER-RELATED COSTS

     Special general and administrative charges were $6.1 million in 2003, or 4%
of net revenues. Special general and administrative charges in 2003 included a
write-off of $4.4 million due to the termination of the Company's Siebel CRM
software implementation and $1.7 million of severance, bonus and travel costs
primarily related to the Data Distilleries acquisition.

     As of December 31, 2004, the Company had approximately $27 thousand in
liabilities remaining which were all paid during the year ended December 31,
2005.



                                       61

<PAGE>

(13) INCOME TAXES

     Income before income taxes and minority interest consists of the following
(in thousands):

<Table>
<Caption>

                                                    YEAR ENDED DECEMBER 31,
                                                  --------------------------
                                                    2003     2004      2005
                                                  -------  --------  -------

<S>                                               <C>      <C>       <C>


Domestic......................................... $ 3,126  $(11,764) $(2,120)
Foreign..........................................   7,335    19,820   29,292
                                                  -------  --------  -------
Pretax income.................................... $10,461  $  8,056  $27,172
                                                  =======  ========  =======

</Table>


     Income tax expense (benefit) consists of the following (in thousands):

<Table>
<Caption>

                                                   CURRENT  DEFERRED   TOTAL
                                                   -------  --------  -------

<S>                                                <C>      <C>       <C>


Year ended December 31, 2003 U.S. Federal......... $(8,018)  $ 5,371  $(2,647)
  State...........................................    (668)    1,318      650
  Foreign.........................................   7,942    (4,798)   3,144
                                                   -------   -------  -------
  Income tax expense (benefit).................... $  (744)  $ 1,891  $ 1,147
                                                   =======   =======  =======
Year ended December 31, 2004 U.S. Federal......... $    96   $(3,231) $(3,135)
  State...........................................     --       (972)    (972)
  Foreign.........................................   5,755       865    6,620
                                                   -------   -------  -------
  Income tax expense (benefit).................... $ 5,851   $(3,338) $ 2,513
                                                   =======   =======  =======
Year ended December 31, 2005 U.S. Federal......... $ 3,559   $ 1,980  $ 5,539
  State...........................................      77      (751)    (674)
  Foreign.........................................   8,194    (1,979)   6,215
                                                   -------   -------  -------
  Income tax expense (benefit).................... $11,830   $  (750) $11,080
                                                   =======   =======  =======

</Table>


     For the years ended December 31, 2003, 2004 and 2005, the reconciliation of
the statutory Federal income tax rate of 34%, 34%, and 35% to the Company's
effective tax rate is as follows (in thousands):

<Table>
<Caption>

                                                    YEAR ENDED DECEMBER 31,
                                                  --------------------------
                                                    2003     2004     2005
                                                  -------  -------  --------

<S>                                               <C>      <C>      <C>


Statutory Federal income tax rate................      34%      34%       35%
                                                  -------  -------  --------
Income taxes using the Federal statutory rate.... $ 3,556  $ 2,739  $  9,510
State income taxes, net of Federal tax benefit...     389     (641)     (438)
Foreign taxes at net rates different from U.S.
  Federal rates..................................     (75)    (855)   (3,074)
Foreign tax credit...............................  (1,018)    (204)  (17,007)
Net operating loss...............................     --       --     13,664
Deemed income from foreign operations............   1,636      265     6,989
Nondeductible costs for income tax purposes......     340      271      (143)
Foreign income exclusion.........................    (165)    (544)     (160)
Prior year tax refunds...........................      --       --      (963)
Change in valuation allowance....................  (2,474)   2,590     3,677
Other, net.......................................  (1,042)  (1,108)     (975)
                                                  -------  -------  --------
Income tax expense............................... $ 1,147  $ 2,513  $ 11,080
                                                  =======  =======  ========

</Table>





                                       62

<PAGE>

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets/(liabilities) at December 31, 2004 and 2005,
are presented below (in thousands):

<Table>
<Caption>

                                                          2004      2005
                                                        --------  --------

<S>                                                     <C>       <C>


Deferred revenues...................................... $ 12,571  $ 11,477
  Foreign tax credit carryforwards.....................    6,690    23,697
  Research and experimentation credit carryforwards....    3,265     3,969
  AMT credits..........................................      --        386
  Acquisition-related items............................    6,776     6,240
  Depreciation, amortization and capitalized interest..     (648)   (1,948)
  Capitalized software costs...........................   (8,114)   (8,952)
  Net operating loss carryforwards.....................   27,755    57,738
  Foreign currency loss................................   (1,875)    1,589
  Inventories..........................................       88        77
  Allowances, accruals and other.......................    2,500     3,477
                                                        --------  --------
Total gross deferred income taxes......................   49,008    97,750
  Less valuation allowance.............................  (11,277)  (59,637)
                                                        --------  --------
Net deferred income tax asset.......................... $ 37,731  $ 38,113
                                                        ========  ========
Balance sheet classification:
  Current deferred income taxes........................ $ 15,503  $  5,624
  Noncurrent deferred income tax asset.................   22,860    32,938
  Noncurrent deferred income tax liability.............     (632)     (449)
                                                        --------  --------
Net deferred income taxes.............................. $ 37,731  $ 38,113
                                                        ========  ========

</Table>


     In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversals of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Management
believes it is more likely than not that the Company will realize the benefits
of these deductible differences, net of the existing valuation allowance at
December 31, 2005. The Company has not provided a valuation allowance on the
amount of deferred tax assets that it estimates will be utilized as a result of
the execution of these strategies. If the future taxable income is less than the
amount that has been assumed in assessing the recoverability of the deferred tax
asset, then an increase in the valuation allowance will be required, with a
corresponding increase to income tax expense.

     As of December 31, 2005, SPSS has a U.S. net operating loss carryforwards
of approximately $101.3 million, the majority of which begins to expire in 2021.
The Company has provided a valuation on $92.3 million of the U.S. net operating
loss carryforwards. In addition, as of December 31, 2005, the Company has
foreign net operating loss carryforwards of approximately $68.7 million against
which the Company has provided a valuation allowance on $63.5 million. In 2005,
the Company has reflected $43.4 million of U.S. and foreign net operating loss
carryforwards and $43.4 million of related valuation allowances that are not
reflected in the prior years. The disclosure of these items provides additional
clarification of the Company's deferred tax position but has no impact on the
current year tax calculation as the Company believes these deferred tax assets
are not realizable in the current period and were not realizable in prior year's
financial statements.

     During 2005, the Company adjusted its U.S. taxable income reporting related
to the inclusion of foreign income. The results of the changes were that the
Company's U.S. net operating loss carryforwards that were previously benefited
were substantially utilized and were replaced with foreign tax credits. The
changes also resulted in a larger U.S. income inclusion from foreign operations
during 2005. At December 31, 2005, the

                                       63

<PAGE>

Company has foreign tax credit carryforwards of $22.4 million, which begin to
expire in 2010. The Company has a valuation allowance of $5.2 million against
these credits.

     As of December 31, 2005, SPSS had a Federal research and experimentation
credit carryforward of approximately $3.8 million, which begins to expire in
2010. The Company has provided a valuation allowance of $0.9 million for this
item at December 31, 2005.

     During 2005, the Company completed an analysis of its U.S. and foreign tax
accounts including a reconciliation of its historical deferred tax balances. The
adjustments identified during that process have been reflected in the current
year and the net impact of the analysis had an immaterial impact on the
Company's income tax provision.

     Federal income and foreign withholding taxes have not been provided on
$109.3 of undistributed earnings of international subsidiaries of which $65.0
has been taxed in the United States. The Company has not recognized a deferred
tax liability for the undistributed earnings of its foreign operations that
arose in 2005 and prior years because the Company currently does not expect to
remit those earnings in the foreseeable future. Determination of the amount of
unrecognized deferred tax liability related to undistributed earnings of foreign
subsidiaries is not practicable.

(14) EMPLOYEE BENEFIT PLANS

     Qualified employees may participate in the 401(k) savings plan by
contributing up to the lesser of 15% of eligible compensation or limits imposed
by the U.S. Internal Revenue Code in a calendar year. SPSS makes a matching
contribution for employees in the plan the entire year. SPSS made contributions
of $0.4 million, $0.3 million and $0.5 million for 2003, 2004, and 2005,
respectively. These matching contributions were recorded as compensation
expense.

     In 1993, SPSS implemented a qualified employee stock purchase plan. The
SPSS purchase plan provided that eligible employees could contribute up to 10%
of their base salary per quarter toward the quarterly purchase of SPSS common
stock. The employee's purchase price was 85% of the fair market value of the
stock at the close of the first business day after the quarterly offering
period. The total number of shares issuable under the purchase plan was 100
thousand. Effective October 2000, the plan was amended to calculate the share
price as 85% of the lower of: i) the closing market price of the stock on the
first trading day of the quarter, or ii) the closing market price for the stock
on the last trading day after the end of the quarter. Additionally, in October
2000, a non-qualified plan was adopted by the Company's shareholders, but not
utilized until 2004. During 2003, 31 thousand shares were issued under the
qualified purchase plan at market prices ranging from $11.05 to $15.48. During
2004, 6 thousand shares were issued under the qualified purchase plan at a
market price of $17.88. Because no additional shares were available for issuance
under the qualified purchase plan, SPSS terminated the qualified purchase plan
in the first quarter of 2005. During 2004, 17 thousand shares were issued under
the non-qualified purchase plan at market prices ranging from $13.33 -- $18.40.
During the first quarter of 2005, there were 8 thousand shares issued under the
non-qualified plan with a market price of $13.54. During the first quarter of
2005, SPSS terminated the non-qualified purchase plan.

     At the annual stockholders' meeting held on June 15, 2005, the SPSS
stockholders approved a new qualified employee stock purchase plan. There are
500 thousand shares of SPSS common stock authorized for issuance over the term
of the stock purchase plan. The shares are offered for purchase through a series
of six-month contribution periods extending from January 1 through June 30 and
July 1 through December 31 of each year. The SPSS purchase plan provides that
eligible employees may elect to have between 1% and 15% of their total
compensation withheld and applied to the purchase of shares of SPSS common stock
on the last day of each contribution period. The employee's purchase price of
SPSS common stock will equal the lesser of i) 85% of the fair market value of
the SPSS common stock on the first business day of the contribution period, or
ii) 85% of the fair market value of the SPSS common stock on the last business
day of the contribution period. There is a maximum of 4 thousand shares that
each eligible employee may purchase each contribution period. There were no
shares issued under this qualified plan during 2005.


                                       64

<PAGE>

(15) STOCK COMPENSATION PLANS

  STOCK OPTION PLAN

     In June 1995, the stockholders of SPSS adopted the 1995 Equity Incentive
Plan which authorized the Board of Directors, under some conditions, to grant
stock options and shares of restricted stock to directors, officers, other key
executives, employees and independent contractors.

     At the 1996 meeting of SPSS stockholders, the stockholders adopted the
Amended and Restated 1995 Equity Incentive Plan, which was amended, among other
things, to increase the shares allowed to be granted under the plan from 600
thousand to 1.1 million. At the 1998 meeting of SPSS stockholders, the
stockholders adopted the Second Amended and Restated 1995 Equity Incentive Plan,
which was amended, among other things, to increase the shares allowed to be
granted under the plan from 1.1 million to 1.8 million. In May 1999, SPSS
approved the Third Amended and Restated 1995 Equity Incentive Plan, which was
amended to clarify the rules governing the treatment of attestation of shares
given to SPSS for the exercise price of options.

     In May 1999, SPSS adopted the 1999 Employee Equity Incentive Plan, which
authorizes the Board, under some conditions, to grant stock options and shares
of restricted stock to non-executive officer employees and independent
contractors of SPSS.

     In February 2001, the stockholders of SPSS adopted the 2000 Equity
Incentive Plan which authorizes the Board of Directors, under some conditions,
to grant stock options and shares of restricted stock to directors, officers,
other key executives, employees and independent contractors. There were 500
thousand shares reserved for issuance under this plan.

     In 2002, SPSS terminated each of its existing equity incentive plans and
the stockholders of SPSS adopted the 2002 Equity Incentive Plan. This plan was
amended and restated in October 2004. The plan authorizes the Board of Directors
to award stock options and a variety of other equity incentives to directors,
executive officers, other key executives, employees and independent contractors
of SPSS and any of its subsidiaries. Under this plan, there are 80 thousand
shares reserved for issuance upon the exercise of option rights that qualify as
incentive stock options and 2.4 million shares reserved for issuance upon the
exercise of option rights that qualify as nonqualified stock options,
appreciation rights or as restricted shares.

     Additional information regarding options is as follows (in thousands,
except per share data):

<Table>
<Caption>

                                            2003                2004                2005
                                     ------------------  ------------------  ------------------
                                               WEIGHTED            WEIGHTED            WEIGHTED
                                               AVERAGE             AVERAGE             AVERAGE
                                               EXERCISE            EXERCISE            EXERCISE
                                                PRICE               PRICE               PRICE
                                     OPTIONS  PER SHARE  OPTIONS  PER SHARE  OPTIONS  PER SHARE
                                     -------  ---------  -------  ---------  -------  ---------

<S>                                  <C>      <C>        <C>      <C>        <C>      <C>


Outstanding at beginning of year....  4,167     $19.23    4,520     $19.01     4,695    $18.87
  Granted...........................    873      15.88      773      16.78       140     17.46
  Forfeited and expired.............   (305)     20.50     (341)     19.54      (562)    20.92
  Exercised.........................   (215)      8.33     (257)     14.17    (1,010)    17.28
                                      -----     ------    -----     ------    ------    ------
Outstanding at end of year..........  4,520     $19.01    4,695     $18.87     3,263    $18.95
                                      =====     ======    =====     ======    ======    ======
Options exercisable at year end.....  2,875     $20.17    3,047     $19.93     2,309    $19.75
                                      =====     ======    =====     ======    ======    ======

</Table>


     The weighted average fair value of options granted during 2003, 2004, and
2005 was $7.67, $8.52 and $8.77, respectively.



                                       65

<PAGE>

     The following table summarizes information about stock options outstanding
at December 31, 2005:

<Table>
<Caption>

                                  WEIGHTED AVERAGE
RANGE OF EXERCISE      OPTIONS        REMAINING     WEIGHTED AVERAGE    OPTIONS    WEIGHTED AVERAGE
PRICE                OUTSTANDING  CONTRACTUAL LIFE   EXERCISE PRICE   EXERCISABLE   EXERCISE PRICE
-----------------    -----------  ----------------  ----------------  -----------  ----------------
                                    (OPTION DATA IN THOUSANDS, EXCEPT PER SHARE DATE)

<S>                  <C>          <C>               <C>               <C>          <C>


$0.21- 3.24.........        8           1.17             $ 2.93              8          $ 2.93
4.26- 4.50..........        9           2.24               4.47              9            4.47
5.98- 10.93.........        2           4.92               6.23              2            6.23
11.00- 15.92........      749           7.46              14.50            461           14.64
16.00- 17.25........      742           8.07              16.68            291           16.63
17.50- 19.09........      664           5.89              18.58            638           18.60
19.25- 24.00........      752           4.82              21.29            562           21.14
25.12-34.15.........      317           2.16              26.90            318           26.90
40.91- 199.74.......       20           4.12              82.77             20           82.77
                        -----           ----             ------          -----          ------
                        3,263           6.10             $18.95          2,309          $19.75
                        =====           ====             ======          =====          ======

</Table>


  RESTRICTED SHARE UNITS

     During 2005, SPSS issued 84 thousand restricted share units to key
employees. Each restricted share unit awarded represents the right to receive
one share of SPSS common stock on the date that the award vests. Generally,
these grants vest ratably over a two year period. Compensation expense is a
product of the number of shares issued and the market value at the time of
issuance, and was structured as deferred compensation. The deferred compensation
is being amortized on a straight-line basis over the related vesting period.

     Additional information regarding Restricted Share Units is as follows (in
thousands, except fair value data):

<Table>
<Caption>

                                                             WEIGHTED AVERAGE
                                                       2005     FAIR VALUE
                                                       ----  ----------------

<S>                                                    <C>   <C>


Share units granted...................................   84       $18.10
Share units cancelled.................................   (6)      $16.64
                                                       ----
Outstanding at end of year............................   78       $18.20
                                                       ====
Pre-tax compensation expense charged to earnings, net
  of cancellations.................................... $392
</Table>


  COMPENSATION EXPENSE

     The Company recognized expense of approximately $0.2 million, $0.2 million
and $0.5 million for the fiscal years ended December 31, 2003, 2004 and 2005,
respectively, related to stock option grants to non-employees and restricted
stock and restricted stock unit grants to employees.

(16) CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Transactions with Norman Nie.  Norman Nie, the Chairman of the SPSS Board
of Directors, is also the president and owner of Norman H. Nie Consulting L.L.C.
("Nie Consulting"). During fiscal years 2005, 2004 and 2003, SPSS paid
approximately $0.2 million, $0.1 million and $0.1 million to Dr. Nie for
consulting work on a part-time basis through Nie Consulting.

     Transactions with Virtela Communications Inc.  Promod Haque, a member of
the Board whose term expires at the 2006 Annual Meeting of Stockholders, is also
the managing partner of Norwest Venture Partners and a member of the Board of
Directors of Virtela Communications Inc. Norwest Venture Partners owns
approximately 37% of the voting stock of Virtela (approximately 30% of the stock
on a fully diluted basis). By virtue of Dr. Haque's relationship with Norwest,
Dr. Haque has an indirect interest in Virtela. SPSS receives various networking
services from Virtela. During fiscal years 2005, 2004 and 2003, SPSS paid
approximately $0.6 million, $0.03 million and $0.02 million, respectively, to
Virtela as consideration for these services. None of these amounts exceeded more



                                       66

<PAGE>

than 5% of the consolidated gross revenues of Virtela in any of the past three
fiscal years. Dr. Haque did not receive and will not receive any direct
remuneration in connection with the Company's transactions with Virtela.

(17) UNAUDITED QUARTERLY FINANCIAL INFORMATION

     The following selected quarterly data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". This information has been derived from unaudited consolidated
financial statements of SPSS that, in our opinion, reflect all recurring
adjustments necessary to fairly present our financial information when read in
conjunction with our Consolidated Financial Statements and Notes. The results of
operations for any quarter are not necessarily indicative of the results to be
expected for any future period.

<Table>
<Caption>

                               MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                 2004       2004        2004       2004       2005       2005        2005       2005
                               --------   --------   ---------   --------   --------   --------   ---------   --------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                            <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>


Net revenues:
  License Fees..............    $24,826    $20,952    $22,335     $27,706    $25,997    $24,413    $27,359     $29,799
  Maintenance...............     23,841     24,246     24,518      25,130     25,312     26,448     25,028      25,453
  Services..................      8,443      7,806      6,645       7,626      6,147      7,220      5,905       6,982
                                -------    -------    -------     -------    -------    -------    -------     -------
     Net revenues...........     57,110     53,004     53,498      60,462     57,456     58,081     58,292      62,234
                                -------    -------    -------     -------    -------    -------    -------     -------
Operating expenses:
  Cost of license and
     maintenance revenues...      3,936      3,240      3,523       3,943      3,701      4,066      3,984       4,630
  Sales, marketing and
     services...............     32,387     34,658     29,965      32,977     30,278     29,247     28,322      30,025
  Research and development..     11,987     11,690     11,477      12,611     11,404     10,994     11,213      11,807
  General and
     administrative.........      4,874      5,688      7,311       7,231      8,091      6,486      6,606       7,185
                                -------    -------    -------     -------    -------    -------    -------     -------
     Operating expenses.....     53,184     55,276     52,276      56,762     53,474     50,793     50,125      53,647
                                -------    -------    -------     -------    -------    -------    -------     -------
Operating income (loss).....      3,926     (2,272)     1,222       3,700      3,982      7,288      8,167       8,587
Other income (expenses).....       (677)       760        (20)      1,417       (474)    (1,483)      (189)      1,294
                                -------    -------    -------     -------    -------    -------    -------     -------
Income (loss) before income
  taxes.....................      3,249     (1,512)     1,202       5,117      3,508      5,805      7,978       9,881
Income tax expense
  (benefit).................      1,145       (544)       369       1,543      1,088      2,075      3,926       3,991
                                -------    -------    -------     -------    -------    -------    -------     -------
Net income (loss)...........    $ 2,104    $  (968)   $   833     $ 3,574    $ 2,420    $ 3,730    $ 4,052     $ 5,890
                                =======    =======    =======     =======    =======    =======    =======     =======
Basic net income (loss) per
  share.....................    $  0.12    $ (0.05)   $  0.05     $  0.20    $  0.14    $  0.21    $  0.23     $  0.32
                                =======    =======    =======     =======    =======    =======    =======     =======
Diluted net income (loss)
  per share.................    $  0.11    $ (0.05)   $  0.05     $  0.20    $  0.13    $  0.21    $  0.22     $  0.30
                                =======    =======    =======     =======    =======    =======    =======     =======
Shares used in basic per
  share.....................     17,765     17,702     17,587      17,626     17,760     17,823     17,901      18,308
                                =======    =======    =======     =======    =======    =======    =======     =======
Shares used in diluted per
  share.....................     18,428     17,702     17,677      17,711     18,002     18,095     18,647      19,516
                                =======    =======    =======     =======    =======    =======    =======     =======

</Table>





                                       67

<PAGE>

                                                                     SCHEDULE II

                                    SPSS INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
                                 (IN THOUSANDS)

<Table>
<Caption>

                                                       ADDITIONS
                                         -------------------------------------
                             BALANCE AT  CHARGED TO                RESULTING                BALANCE AT
                              BEGINNING   COSTS AND  CHARGED TO  FROM BUSINESS                END OF
DESCRIPTION                   OF PERIOD   EXPENSES    REVENUES    COMBINATIONS  DEDUCTIONS    PERIOD
-----------                  ----------  ----------  ----------  -------------  ----------  ----------

<S>                          <C>         <C>         <C>         <C>            <C>         <C>


2003
Allowance for doubtful
  accounts, product returns,
  and cancellations.........   $5,129       $421       $1,824         $ 35        $3,774      $3,635
Inventory obsolescence
  reserve...................       64        680          --           --            532         212
2004
Allowance for doubtful
  accounts, product returns,
  and cancellations.........   $3,635       $291       $1,061         $--         $2,522      $2,465
Inventory obsolescence
  reserve...................      212        299          --           --            200         311
2005
Allowance for doubtful
  accounts, product returns,
  and cancellations.........   $2,465       $151       $1,610         $--         $2,478      $1,748
Inventory obsolescence
  reserve...................      311        411          --           --            398         324
</Table>



      See accompanying report of independent registered public accounting firm.



                                       68

<PAGE>

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

     The Company changed independent accountants in May 2005 from KPMG LLP to
Grant Thornton LLP. Information regarding the change in independent accountants
was reported in the Company's Current Report on Form 8-K dated May 6, 2005 and
filed with the Securities and Exchange Commission on May 12, 2005. The
disclosure required by Item 304(b) of Regulation S-K is not applicable.

ITEM 9A.  CONTROLS AND PROCEDURES

     a. Disclosure Controls and Procedures.  SPSS maintains disclosure controls
and procedures that have been designed to ensure that information related to the
Company is recorded, processed, summarized and reported on a timely basis. SPSS
reviews these disclosure controls and procedures on a periodic basis. In
connection with this review, SPSS has established a committee referred to as the
"Corporate Governance Committee" that is responsible for accumulating
potentially material information regarding the Company's activities and
considering the materiality of this information. This Corporate Governance
Committee (or a subcommittee) is also responsible for making recommendations
regarding disclosure and communicating this information to the Company's Chief
Executive Officer and Chief Financial Officer to allow timely decisions
regarding required disclosure. The Corporate Governance Committee is comprised
of the Company's associate general counsel, principal accounting officer, senior
manager in charge of investor relations, principal risk management officer,
chief information officer and certain other members of the SPSS senior
management.

     The Company's Chief Executive Officer and Chief Financial Officer, with the
participation of the compliance committee, evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures as of
the end of the period covered by this Annual Report, as required by Rule 13a-15
of the Securities Exchange Act of 1934. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that as of the end of
the period covered by this Annual Report, the Company's disclosure controls and
procedures were effective in ensuring that the information required to be
disclosed by the Company in the reports it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC.

     b. Internal Control Over Financial Reporting.  Management's Report on
Internal Control Over Financial Reporting and the Attestation Report of the
Registered Public Accounting Firm are included in Part II, Item 8 of this Annual
Report.

     c. Changes in Internal Control Over Financial Reporting.  There were no
changes in the Company's internal control over financial reporting that occurred
during the Company's last fiscal quarter of the period covered by this Annual
Report that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting, except as
described below.

     Management implemented additional controls throughout both the fourth
quarter of 2005 and the full 2005 fiscal year to strengthen its internal control
over financial reporting with respect to revenue recognition and income taxes.

  REVENUE RECOGNITION

     With regard to prior deficiencies identified by management, the Company
took the following actions during the fourth quarter of 2005:

     - Hired one professional accountant to assist with its monthly close
       process; and

     - Monitored its revenue controls to determine that the controls were in
       place for a sufficient time to be considered operating effectively at
       December 31, 2005.

     In addition to the actions taken during the fourth quarter of 2005, the
Company had taken the following actions throughout the full 2005 fiscal year:

     - Developed standardized revenue documentation procedures including
       additional monthly and quarterly review of significant contracts to
       ensure that all key aspects of revenue are considered and that all
       conclusions are fully and properly documented;



                                       69

<PAGE>

     - Reviewed key controls and initiated remediation and testing of certain
       control deficiencies;

     - Implemented formalized procedures for testing key information technology
       application controls;

     - Further updated its comprehensive revenue policies and distributed those
       policies to key personnel in the international subsidiaries; and

     - Hired additional personnel to augment its accounting staff.

  INCOME TAXES

     With regard to prior deficiencies identified by management, the Company
took the following actions during the fourth quarter of 2005:

     - Further enhanced its workpaper documentation procedures supporting its
       computations of income taxes; and

     - Added additional review of its income taxes including review by an
       independent external tax professional organization.

     In addition to the actions taken during the fourth quarter of 2005, the
Company had taken the following actions throughout the full 2005 fiscal year:

     - Hired an additional tax professional with appropriate tax expertise; and

     - Implemented additional, and strengthened, existing formalized procedures
       related to the review and validation of information used to compute
       income taxes and deferred tax assets in conjunction with the preparation
       of financial statements during 2005.

     The Company believes these actions significantly strengthened its internal
control over financial reporting and have adequately remediated prior
deficiencies.

ITEM 9B.  OTHER INFORMATION

     None.



                                       70

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item 10 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2005 and distributed in connection with the Company's 2006
Annual Meeting of Stockholders to be held on April 27, 2006, and such
information is incorporated herein by reference.

     Information related to this Item 10, "Directors and Executive Officers of
the Registrant" appears under the captions: "Election of Directors," "Officers
and Directors," "Information Concerning the Board" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the definitive proxy statement.

CODE OF ETHICS.

     SPSS has adopted the SPSS Inc. Amended and Restated Code of Business
Conduct & Ethics (the "Code of Ethics") which is applicable to all of the SPSS
directors, officers and employees, including the Company's Chief Executive
Officer, Chief Financial Officer, Controller and other senior financial officers
performing similar functions. The Code of Ethics satisfies, and in many respects
exceeds, all of the requirements of the Sarbanes-Oxley Act of 2002 and the rules
and regulations promulgated by the Securities and Exchange Commission pursuant
to the Sarbanes-Oxley Act. The Code of Ethics also satisfies, and in many
respects exceeds, the listing standards established by the Nasdaq National
Market, the stock market on which the Company's stock is listed. The Company has
posted the Code of Ethics on its website at http://www.spss.com. The Company
will furnish a copy of the Code of Ethics to any person, without charge, upon
written request directed to: Corporate Secretary, SPSS Inc., 233 South Wacker
Drive, 11th Floor, Chicago, Illinois 60606.

     SPSS has satisfied and intends to continue to satisfy its obligation to
disclose any amendment to or waiver of a provision of the Code of Ethics that
applies to the Company's Chief Executive Officer, Chief Financial Officer,
Controller and other senior financial officers performing similar functions by
(a) disclosing such information on a Form 8-K filed within four (4) business
days of the date of such amendment or waiver and (b) posting such information on
its website at http://www.spss.com.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item 11 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2005 and distributed in connection with the Company's 2006
Annual Meeting of Stockholders to be held on April 27, 2006, and such
information is incorporated herein by reference.

     Information related to this Item 11, "Executive Compensation" appears under
the captions: "Executive Compensation," "Compensation of Directors," "Employment
Agreements," "Consulting Agreements," "Change of Control Agreements" and
"Compensation Committee Interlocks and Insider Participation" in the definitive
proxy statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     The information required by this Item 12 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2005 and distributed in connection with the Company's 2006
Annual Meeting of Stockholders to be held on April 27, 2006, and such
information is incorporated herein by reference.

     Information related to this Item 12, "Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters" appears under
the captions: "Security Ownership of Certain Beneficial Owners and Management"
and "Securities Authorized for Issuance under Equity Compensation Plans" in the
definitive proxy statement.



                                       71

<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item 13 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2005 and distributed in connection with the Company's 2006
Annual Meeting of Stockholders to be held on April 27, 2006, and such
information is incorporated herein by reference.

     Information related to this Item 13, "Certain Relationships and Related
Transactions" appears under the caption: "Certain Relationships and Related
Transactions" in the definitive proxy statement.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this Item 14 is included in the Company's
definitive proxy statement, which is to be filed with the Securities and
Exchange Commission within 120 days after the end of the Company's fiscal year
ended December 31, 2005 and distributed in connection with the Company's 2006
Annual Meeting of Stockholders to be held on April 27, 2006, and such
information is incorporated herein by reference.

     Information related to this Item 14, "Principal Accountant Fees and
Services" appears under the caption: "Ratification of the Appointment of
Independent Auditors" in the definitive proxy statement.

                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) (1) Consolidated Financial Statements commence on page 40:

          Consolidated Balance Sheets as of December 31, 2004 and 2005

          Consolidated Statements of Income for the years ended December 31,
          2003, 2004 and 2005

          Consolidated Statements of Comprehensive Income for the years ended
          December 31, 2003, 2004 and 2005

          Consolidated Statements of Stockholders' Equity for the years ended
          December 31, 2003, 2004 and 2005

          Consolidated Statements of Cash Flows for the years ended December 31,
          2003, 2004 and 2005

          Notes to Consolidated Financial Statements

     (2) Consolidated Financial Statement Schedule -- see page 68:

          Schedule II Valuation and Qualifying Accounts

          Schedules not filed:

     All schedules other than that indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
consolidated financial statements or related notes.

     (3) Exhibits required by Item 601 of Regulation S-K. (Note: Management
contracts and compensatory plans or arrangements are identified with a "+" in
the following list.)

<Table>
<Caption>

                                                                              INCORPORATION
   EXHIBIT                                                                     BY REFERENCE
   NUMBER                        DESCRIPTION OF DOCUMENT                     (IF APPLICABLE)
   -------                       -----------------------                     ---------------

<S>            <C>                                                           <C>


2.1            Agreement and Plan of Merger dated as of November 6, 2000,    (8), Ex. 2.1
               among SPSS Inc., SPSS Acquisition Sub Corp., and ShowCase
               Corporation.

2.2            Agreement and Plan of Merger dated as of October 28, 2001,    (11), Ex. 99.1
               among SPSS Inc., Red Sox Acquisition Corp. and NetGenesis
               Corp.

2.3            Stock Purchase Agreement by and among SPSS Inc., LexiQuest,   (13), Ex. 2.14
               S.A. and the owners of all of the issued and outstanding
               shares of capital stock of LexiQuest, S.A., dated as of
               January 31, 2002.

</Table>


                                       72

<PAGE>

<Table>
<Caption>
                                                                              INCORPORATION
   EXHIBIT                                                                     BY REFERENCE
   NUMBER                        DESCRIPTION OF DOCUMENT                     (IF APPLICABLE)
   -------                       -----------------------                     ---------------

<S>            <C>                                                           <C>
2.4            Stock Purchase Agreement dated as of November 4, 2003, by     (17), Ex. 2.15
               and among SPSS Inc., SPSS International B.V. and the owners
               of all of the issued and outstanding shares of Data
               Distilleries B.V. identified on Exhibit A thereto.

3.1            Certificate of Incorporation of SPSS.                         (1), Ex. 3.2

3.2            By-Laws of SPSS.                                              (1), Ex. 3.4

4.1            Amended and Restated Rights Agreement, dated as of August     (19), Ex. 4.2
               31, 2004, by and between SPSS Inc. and Computershare
               Investor Services LLC, as Rights Agent.

10.1           HOOPS Distribution License Agreement, dated as of February    (2), Ex. 10.7
               20, 1991, by and between SPSS Inc. and Ithaca Software.

10.2           Amended 1991 Stock Option Plan.+                              (1), Ex. 10.10

10.3           1995 Equity Incentive Plan.+                                  (3), Ex. 10.14

10.4           Amended and Restated 1995 Equity Incentive Plan.+             (4), Appendix A

10.5           Sublease Agreement, dated April 1, 1997, between Ernst &      (5), Ex. 10.20
               Young U.S. LLP and SPSS Inc.

10.6           Second Amended and Restated 1995 Equity Incentive Plan.+      (6), Appendix A

10.7           Third Amended and Restated 1995 Equity Incentive Plan.+       (7), Ex. 10.1

10.8           2000 Equity Incentive Plan.+                                  (9), Ex. 10.45

10.9           Sublease Agreement, dated as of January 14, 2000, by and      (27), Ex. 10.28
               between Harza Engineering Company and SPSS Inc.

10.10          Stock Purchase Agreement, dated as of September 28, 2001,     (10), Ex. 10.31
               by and between SPSS Inc. and Siebel Systems, Inc.

10.11          1999 Employee Equity Incentive Plan.+                         (12), Ex. 4.1

10.12          Loan and Security Agreement, dated as of March 31, 2003, by   (14), Ex. 10.43
               and between SPSS Inc. and each of SPSS' subsidiaries that
               may become additional borrowers, as Borrower, and Foothill
               Capital Corporation, as Lender.

10.13          Amendment to Stock Purchase Agreement, dated as of October    (15), Ex. 10.44
               1, 2003, by and between SPSS Inc. and America Online, Inc.

10.14          Amended and Restated Strategic Online Research Services       (15), Ex. 10.45
               Agreement, dated as of October 1, 2003, by and between SPSS
               Inc. and America Online, Inc.

10.15          Consulting Agreement, dated as of June 1, 2003, by and        (16), Ex. 10.46
               between SPSS Inc. and Norman H. Nie Consulting, L.L.C.+

10.16          SPSS Inc. Amended and Restated 2002 Equity Incentive Plan.+   (20), Ex. 10.47

10.17          Amended and Restated Employment Agreement, dated as of        (21), Ex. 10.48
               August 16, 2004, by and between SPSS Inc. and Raymond H.
               Panza.+

10.18          Employment Agreement, dated as of August 16, 2004, by and     (21), Ex. 10.49
               between SPSS Inc. and Edward Hamburg.+

10.19          OEM Agreement, dated as of November 5, 2004, by and between   (25), Ex. 10.50
               SPSS Inc. and Hyperion Solutions Corporation.*

10.20          Amended and Restated Consulting Agreement, dated as of        (21), Ex. 10.51
               January 1, 2005, by and between SPSS Inc. and Norman H. Nie
               Consulting, L.L.C.+

10.21          Amended and Restated Employment Agreement, dated as of        (21), Ex. 10.52
               March 1, 2005, by and between SPSS Inc. and Jack Noonan.+

10.22          Form of Amended and Restated Change of Control Agreement.+    (22), Ex. 10.53

10.23          Form of Change of Control Agreement.+                         (22), Ex. 10.54

10.24          SPSS Inc. Employee Stock Purchase Plan.+                      (24), Ex. 10.55

10.25          Lease Agreement, dated as of November 22, 2005, by and        (26), Ex. 10.56
               between 233 S Wacker LLC and SPSS Inc.

</Table>


                                       73

<PAGE>

<Table>
<Caption>
                                                                              INCORPORATION
   EXHIBIT                                                                     BY REFERENCE
   NUMBER                        DESCRIPTION OF DOCUMENT                     (IF APPLICABLE)
   -------                       -----------------------                     ---------------

<S>            <C>                                                           <C>
10.26          Distribution Agreement, dated as of January 3, 2006, by and   (28), Ex. 10.57
               between SPSS Inc. and Banta Global Turnkey Ltd.

14.1           SPSS Inc. Amended and Restated Code of Business Conduct and   (23), Ex. 14.2
               Ethics.

21.1           Subsidiaries.

23.1           Consent of Grant Thornton LLP.

23.2           Consent of KPMG LLP.

31.1           Certification of the Chief Executive Officer and President
               pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2           Certification of the Chief Financial Officer pursuant to
               Section 302 of the Sarbanes-Oxley Act of 2002.

32.1           Certification of the Chief Executive Officer and President
               pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002.

32.2           Certification of the Chief Financial Officer pursuant to 18
               U.S.C. Section 1350, as adopted pursuant to Section 906 of
               the Sarbanes-Oxley Act of 2002.

99.1           SPSS Inc. Charter of the Audit Committee of the Board of
               Directors.

99.2           Supplement A to the SPSS Inc. Charter of the Audit            (18), Ex. 99.2
               Committee of the Board of Directors.
</Table>


--------

    *  By order of the Securities and Exchange Commission dated January 23,
       2006, a request for confidential treatment has been granted for certain
       portions of this exhibit. Confidential portions of this exhibit are
       omitted and have been filed separately with the Securities and Exchange
       Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
       1934.

   (1) Previously filed with Amendment No. 2 to the Registration Statement on
       Form S-1 of SPSS Inc. filed on August 4, 1993. (File No. 33-64732)

   (2) Previously filed with Amendment No. 1 to the Registration Statement on
       Form S-1 of SPSS Inc. filed on July 23, 1993. (File No. 33-64732)

   (3) Previously filed with 1995 Proxy Statement of SPSS Inc. (File No. 000-
       22194)

   (4) Previously filed with 1996 Proxy Statement of SPSS Inc. (File No. 000-
       22194)

   (5) Previously filed with the Quarterly Report on Form 10-Q of SPSS Inc. for
       the quarterly period ended March 31, 1997. (File No. 000-22194)

   (6) Previously filed with 1998 Proxy Statement of SPSS Inc. (File No. 000-
       22194)

   (7) Previously filed with Quarterly Report on Form 10-Q of SPSS Inc. for the
       quarterly period ended June 30, 1999. (File No. 000-22194)

   (8) Previously filed with the Report on Form 8-K of SPSS Inc., filed November
       15, 2000. (File No. 000-22194).

   (9) Previously filed with the Registration Statement on Form S-4 on of SPSS
       Inc., filed on December 19, 2000. (File No. 333-52216)

  (10) Previously filed with the Registration Statement on Form S-3 of SPSS Inc.
       filed on October 9, 2001. (File No. 333-71236)

  (11) Previously filed with the Report on Form 8-K of SPSS Inc., dated October
       28, 2001, filed on October 29, 2001. (File No. 000-22194)

  (12) Previously filed with the Registration Statement on Form S-8 of SPSS Inc.
       filed on September 15, 2000. (File No. 333-45900)

  (13) Previously filed with the Report on Form 8-K of SPSS Inc., dated February
       6, 2002, filed on February 21, 2002. (File No. 000-22194)


                                       74

<PAGE>

  (14) Previously filed with the Annual Report on Form 10-K of SPSS Inc. for the
       year ended December 31, 2002. (File No. 000-22194)

  (15) Previously filed with the Report on Form 8-K of SPSS Inc., dated October
       1, 2003, filed on October 15, 2003. (File No. 000-22194)

  (16) Previously filed with the Quarterly Report on Form 10-Q of SPSS Inc. for
       the quarterly period ended September 30, 2003. (File No. 000-22194)

  (17) Previously filed with the Report on Form 8-K of SPSS Inc., dated November
       5, 2003, filed on November 18, 2003. (File No. 000-22194)

  (18) Previously filed with the Annual Report on Form 10-K of SPSS Inc. for the
       year ended December 31, 2003. (File No. 000-22194)

  (19) Previously filed with the Form 8-A12G/A of SPSS Inc. filed on August 31,
       2004. (File No. 000-22194)

  (20) Previously filed with the Registration Statement on Form S-8 of SPSS Inc.
       filed on October 29, 2004. (File No. 222-120066)

  (21) Previously filed with the Annual Report on Form 10-K of SPSS Inc. for the
       year ended December 31, 2004. (File No. 000-22194)

  (22) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
       April 28, 2005, filed on May 2, 2005. (File No. 000-22194)

  (23) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
       April 28, 2005, filed on April 28, 2005. (File No. 000-22194)

  (24) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
       June 15, 2005, filed on June 15, 2005. (File No. 000-22194)

  (25) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
       November 5, 2004, filed on November 8, 2004, as amended on Form 8-K/A
       filed January 20, 2006. (File No. 000-22194)

  (26) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
       November 22, 2005, filed on November 23, 2005. (File No. 000-22194).

  (27) Previously filed with the Quarterly Report on Form 10-Q of SPSS Inc. for
       the quarterly period ended March 31, 2000. (File No. 000-22194)

  (28) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
       January 16, 2006, filed on January 17, 2006. (File No. 000-22194)



                                       75

<PAGE>

                                   SIGNATURES

     Pursuant to 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.

                                        SPSS INC.

                        By:                  /s/ Jack Noonan

                            ----------------------------------------------------
                                                 Jack Noonan
                                  President and Chief Executive Officer

Date:  March 6, 2006

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

<Table>
<Caption>

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

<S>                              <C>                                                <C>

    /s/ Norman H. Nie                   Chairman of the Board of Directors          March 6, 2006
-----------------------------
        Norman H. Nie

     /s/ Jack Noonan             President, Chief Executive Officer and Director    March 6, 2006
-----------------------------
         Jack Noonan

   /s/ Raymond H. Panza          Executive Vice President, Corporate Operations,    March 6, 2006
-----------------------------         Chief Financial Officer and Secretary
       Raymond H. Panza

    /s/ Marc D. Nelson               Vice President, Corporate Controller and       March 6, 2006
-----------------------------              Principal Accounting Officer
        Marc D. Nelson

/s/ Charles R. Whitchurch                            Director                       March 6, 2006
-----------------------------
    Charles R. Whitchurch

     /s/ Merritt Lutz                                Director                       March 6, 2006
-----------------------------
         Merritt Lutz

    /s/ Michael Blair                                Director                       March 6, 2006
-----------------------------
        Michael Blair

     /s/ Promod Haque                                Director                       March 6, 2006
-----------------------------
         Promod Haque

   /s/ William B. Binch                              Director                       March 6, 2006
-----------------------------
       William B. Binch

   /s/ Kenneth H. Holec                              Director                       March 6, 2006
-----------------------------
       Kenneth H. Holec

   /s/ Michael E. Lavin                              Director                       March 6, 2006
-----------------------------
       Michael E. Lavin
</Table>




                                       76

<PAGE>

                                  EXHIBIT INDEX


<Table>
<Caption>

EXHIBIT
 NUMBER                            DOCUMENT DESCRIPTION
-------                            --------------------

<S>       <C>


21.1      Subsidiaries.

23.1      Consent of Grant Thornton LLP.

23.2      Consent of KPMG LLP.

31.1      Certification of the Chief Executive Officer and President pursuant to
          Section 302 of the Sarbanes-Oxley Act of 2002.

31.2      Certification of the Chief Financial Officer pursuant to Section 302
          of the Sarbanes-Oxley Act of 2002.

32.1      Certification of Chief Executive Officer and President pursuant to 18
          U.S.C. Section 1350, as adopted pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002.

32.2      Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
          1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
          2002.

99.1      SPSS Inc. Charter of the Audit Committee of the Board of Directors.

</Table>