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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, 2007

                        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.)
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                  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:

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             <Caption>
                                                          NAME OF EACH EXCHANGE ON WHICH
                       TITLE OF EACH CLASS                          REGISTERED
                       -------------------                ------------------------------
             <S>                                      <C>
                Common stock, par value $0.01 per             The Nasdaq Stock Market
                              share
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           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

     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 Section 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 such
filing requirements for the past 90 days.  Yes [X]     No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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.  [X]

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

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<S>                            <C>                      <C>                          <C>
Large accelerated filer [X]    Accelerated filer [ ]    Non-accelerated filer [ ]    Smaller reporting company [ ]
</Table>


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

     The aggregate market value of the registrant's voting stock held by non-
affiliates of the registrant on June 29, 2007 (based upon the per share closing
sale price of $44.14 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
$822.8 million.

     The number of shares outstanding of the registrant's Common Stock, par
value $0.01, as of February 15, 2008, was 17,763,850.

                         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 2008 Annual Meeting of
Stockholders to be held on April 24, 2008.

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                                    SPSS INC.

                                TABLE OF CONTENTS


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                                                                               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................................................    16
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.............................................    71
Item 9A.   Controls and Procedures..........................................    71
Item 9B.   Other Information................................................    71

                                      PART III
Item 10.   Directors, Executive Officers and Corporate Governance...........    72
Item 11.   Executive Compensation...........................................    72
Item 12.   Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters..................................    72
Item 13.   Certain Relationships and Related Transactions, and Director
           Independence.....................................................    73
Item 14.   Principal Accountant Fees and Services...........................    73

                                      PART IV
Item 15.   Exhibits and Financial Statement Schedules.......................    73
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                                    SPSS INC.

                             FORM 10-K ANNUAL REPORT
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

                                     PART I

FORWARD-LOOKING STATEMENTS

IN ADDITION TO HISTORICAL INFORMATION, 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 THE COMPANY ON THE DATE HEREOF. THE COMPANY CAUTIONS INVESTORS THAT
ITS BUSINESS AND FINANCIAL PERFORMANCE AND THE MATTERS DESCRIBED IN THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO SUBSTANTIAL RISKS AND UNCERTAINTIES.
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 EXPRESSED IN OR IMPLIED BY THE FORWARD-
LOOKING STATEMENTS. THE POTENTIAL RISKS AND UNCERTAINTIES THAT COULD CAUSE
RESULTS TO DIFFER MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO: THE COMPANY'S
ABILITY TO PREDICT REVENUE, THE COMPANY'S ABILITY TO RESPOND TO RAPID
TECHNOLOGICAL CHANGES, A POTENTIAL LOSS OF RELATIONSHIPS WITH THIRD PARTIES FROM
WHOM THE COMPANY LICENSES CERTAIN SOFTWARE, FLUCTUATIONS IN CURRENCY EXCHANGE
RATES, THE IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS, INCREASED COMPETITION AND
RISKS ASSOCIATED WITH PRODUCT PERFORMANCE AND MARKET ACCEPTANCE OF NEW PRODUCTS.
A DETAILED DISCUSSION OF THESE AND OTHER RISK FACTORS THAT AFFECT THE COMPANY'S
BUSINESS IS CONTAINED BELOW UNDER THE HEADING "RISK FACTORS." THE COMPANY 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 software and solutions.

     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 are then applied to improve business
processes by increasing revenues, reducing costs and preventing 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, such 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 types of software and service offerings to two distinct
audiences. For analysts proficient in the use of data 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 business
people acquainted with, but not

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proficient in, data analysis techniques, SPSS delivers predictive analytic
solutions that embed the power of predictive analytics directly into particular
business processes, thereby enabling the widespread use of the power of
prediction and an increased return on investments in information technology.

     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.

     SPSS has been a publicly traded company since the completion of its August
1993 initial public offering of common stock. SPSS common stock is listed on the
NASDAQ Stock 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 internal processes and describing characteristics, attitudes,
and behavior of the people with whom the organization interacts. These
structured and unstructured data sets, are cleaned, transformed, and evaluated
using statistical, mathematical, and other algorithmic techniques. These
techniques, often in conjunction with advanced visualization capabilities, then
generate predictive models for classification, segmentation, forecasting, and
propensity scoring, as well as the detection of patterns and anomalies. The
resulting models are then used to predict which actions produce optimal
outcomes. The predictions can be delivered as recommendations to people and
customer-facing systems so that effective action can be taken. 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 advanced analytics. The predictive analytics market initially
developed with the convergence of statistical tools and data mining tools which
combined to form a market for predictive analytic tools. These predictive
analytic tools, in turn, combined with new deployment technologies to create an
emerging market for predictive analytic solutions.

     Predictive Analytic Tools.  The Company has two main product lines that
     serve the market for predictive analytic tools:

          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.

          Data Mining Tools.  Data mining tools extend predictive analytics by
          providing a visual user interface that allows the analyst to build
          predictive models by drawing a diagram that describes the analytical
          process through which the data will be put. SPSS is a leading provider
          of data mining tools.

     Predictive Analytic Solutions.  Predictive analytic solutions are a
     synergistic combination of statistical tools, data mining tools, data
     collection technology, and new technologies (such as scoring engines, rules
     and

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     optimization techniques) that are harnessed to implement real time decision
     making. Predictive analytic solutions are an important driver of future
     growth for the Company. Business process applications such as customer
     relationship management (CRM) 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.

STRATEGY

     The Company's strategy is to dominate the predictive analytics market by
both continuing its focus on data about people and making feedback part of the
solutions that the Company delivers. SPSS will seek to achieve this goal by
integrating the Company's predictive analytic tools into an inter-operable
product suite that builds upon its predictive analytic architecture. The Company
will use the resulting software platform to deploy predictive analytic solutions
for business process application in particular markets.

MARKETS

     SPSS targets the following markets defined by International Data
Corporation (IDC) in its research reports entitled Worldwide Business
Intelligence Tools 2006 Vendor Shares, Worldwide Business Analytics Software
2007-2011 Forecast Update and 2006 Vendor Shares, Worldwide CRM Analytic
Software Applications 2007-2011 Forecast and 2006 Vendor Shares:

     - The global market for "Advanced Analytics" tools, an IDC sector that
       consolidates the former sectors of statistical software and data mining
       software. In 2006, this market was approximately $1.25 billion in size
       with SPSS holding approximately 14% of its market share. IDC estimates
       that this market will increase by approximately 10% per year and reach
       approximately $2.0 billion in size by 2011.

     - The global market for analytical customer relationship management (CRM)
       applications. In 2006, this market was approximately $1.31 billion in
       size with SPSS holding approximately 3% of its market share. IDC
       estimates that this market will increase by approximately 13% per year
       and reach approximately $2.4 billion in size by 2011.

     In 2006, these target markets, combined, represented approximately $2.6
billion in revenue with SPSS holding approximately 10% of the total market
share. IDC estimates that these two target markets, together, will represent a
total of approximately $4.4 billion in revenues by 2011.

OFFERINGS

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

  PREDICTIVE ANALYTIC 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 2007, the Company continued the process of
streamlining the tools offerings into an integrated suite of products. Today
there are three families of products that fit under the predictive analytic
tools umbrella. These three product families are described below. Together, the
predictive analytic tools represented 75%, 76% and 78% of total revenue in 2005,
2006 and 2007, respectively.

     In general, the Company's predictive analytic 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;


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

     - 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
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. A typical purchase from the SPSS product line includes
an SPSS Base product and related optional add-on modules. These optional
offerings usually provide additional statistical functionality specific to
particular types of analysis.

     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.

     Business Intelligence Family.  The Business Intelligence Family consists of
the ShowCase product line. ShowCase products support query, reporting, and on-
line analytical processing (OLAP) functions for the IBM eServer iSeries (AS/400)
computer market.

  PREDICTIVE ANALYTIC SOLUTIONS

     Predictive analytic solutions combine SPSS tools with people-data
collection technology and deployment technologies (Predictive Enterprise
Services) along with a defined business discovery and implementation methodology
to apply predictive analytics in business operational systems. The Company's
solutions offerings represented 14%, 14% and 12% of total revenue in 2005, 2006
and 2007, respectively. In general, these predictive analytic solutions
seamlessly integrate with operational software from other vendors to provide
predictive capability to business users in their management of that operational
system. Examples of business areas in which these applications are used include,
but are not limited to, marketing campaigns, programs to improve call center
effectiveness or efforts to identify fraudulent activity in the insurance claims
processes.

     People-data collection technology, represented by the Dimensions product
family for surveys, is at the core of many of the solutions the Company
delivers. Dimensions provides companies with a direct link to their customers
allowing companies to capture feedback from their customers. The ability to
capture customer feedback has become a fundamental differentiating point for the
Company's solutions. The capture of customer feedback is becoming known as the
enterprise feedback management market. The Dimensions product family also serves
the market research industry for survey software where this product set remains
the industry standard.

SERVICES

     To support the implementation of its predictive analytic tools, SPSS offers
a comprehensive training program with courses covering product operations,
general data analytical concepts and processes, as well as the manner in which
statistical and data mining techniques can be applied to address particular
business problems. These courses are regularly scheduled in cities around the
world or organizations can contract with the Company for on-site training
tailored to their specific requirements. Many courses are now offered in an "on-
demand" format over the Internet. Courseware is also made available to SPSS
partners and integrators, which increases potential capacity for delivering
customer solutions.

     To support its predictive analytic solutions, SPSS offers consulting and
customization services to assist in new implementations or configure existing
applications to customer requirements. SPSS consultants also help organizations
develop plans that align analytical efforts with organizational goals doing
business discovery, assist with the collection and structuring of data, and
facilitate the building of predictive analytic models. Services represented
approximately 11%, 10% and 10% of total revenue in 2005, 2006 and 2007,
respectively.

     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

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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

     SPSS has an inside sales force that focuses on product-based transactions
to sell the predictive analytic tools to research analysts. Sales made by the
inside sales organization are typically driven by direct mail campaigns and
customer references, are typically completed within thirty days and average
about $2,800 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 inside sales
organization to encompass most short sales cycle transactions. The Company
maintains a network of over forty distributors around the world to increase its
penetration into smaller international markets.

     The SPSS field sales force is focused on enterprise customers and
predictive analytic solutions. This field sales force is organized by the
Company's primary targeted industries, including the financial services
industry, the market research industry 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 perform business discovery 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 three to twelve months and range in value from
$50,000 to $500,000 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,
Washington D.C., and Cincinnati. SPSS international operations consist of 13
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.

     SPSS has two marketing groups focused on products, one of which is devoted
to product management and the other of which is 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 software engineering 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 communications 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. The SPSS corporate communications group
also supports other important areas of Company visibility, including the
development of expert reviews of SPSS tools and applications which appear in
trade and market-specific publications, and participation in professional
association meetings.

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 markets.
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 elements of the predictive analytic
       platform;


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     - Integrating and improving the interoperability of various SPSS tools and
       technologies;

     - 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 product management, algorithm development, software
engineering, user interface design, 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 $54.4 million in 2005, $64.4 million in
2006, and $63.9 million in 2007.

     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 and predictive analytic solutions,
SPSS competes primarily on the basis of the return on investment that the use of
its software produces. In addition, the Company competes 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 SAS Institute, although SPSS believes that the SAS Institute's
revenues are derived primarily from offerings in areas other than predictive
analytics.

     Within the predictive analytic tools market, the Company competes with the
SAS Institute, StatSoft, Inc., Minitab, Inc., Insightful Corporation and
StataCorp with regard to products in the Company's Statistics Family. With the
exception of the SAS Institute, the annual revenues of these companies from
statistical products are believed to be considerably less than the revenues of
SPSS. Also within the predictive analytic tools market, the Company competes
with offerings from the SAS Institute, NCR Corporation, Fair Isaac Corporation,
KXEN, Inc. and Angoss Software Corporation with regard to products in the
Company's Data Mining Family. With the exception of the SAS Institute, none of
the Company's competitors with regard to either statistical tools or data mining
products are believed to currently offer the range of predictive analytic
capability provided by SPSS.

     Within the predictive analytic solutions market, SPSS faces indirect
competition from well-financed companies such as Oracle Corporation, Fair Isaac
Corporation, Choicepoint Inc., Unica Corporation, NCR Corporation and Infor.
Within the enterprise feedback management (EFM) market, SPSS faces competition
from companies such as Confirmit ASA, Vovici Corporation, Voxco and Global
Market Insite, Inc. SPSS holds a strong position in this market and believes
that no competitors in this market are larger and better financed. The annual
revenues of competitors in the enterprise feedback management (EFM) market are
thought to be less than the Company's revenues in this market.

     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, companies in the data provider sector, as well as
from companies in other sectors of the broader market for enterprise
applications, which could add

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predictive 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, patents 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 and patent 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 six patents and has one patent in registration, judicial enforcement of
patent laws, copyright laws and trade secrets may be uncertain, particularly
outside of the United States. 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 registered 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;

     - 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. SPSS is currently party
to a lawsuit regarding its right to use the SPSS trademark. See Item 1A, "Risk
Factors," and Item 3, "Legal Proceedings."

     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, 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 solutions,
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.


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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

     Data Direct licenses to SPSS software products that enable data to transfer
between SPSS products and third party databases. SPSS has an agreement with Data
Direct that expires in May 2009. 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 a majority of
the Company's software products in the United States and multiple international
locations. 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 January 2007, SPSS renewed its strategic relationship with Hyperion
Solutions. This renewal extended the term of the Company's contract with
Hyperion until 2012. Under the revised agreement, SPSS has the non-exclusive
right to license, market and distribute earlier releases of Hyperion's Essbase
and Analyzer software. Such right will not extend to Release 9 or subsequent
releases of Hyperion's software. SPSS will, however, continue to port future
releases of the software to the i-Series computer platform and provide customer
support for that software in exchange for a portion of the support fees charged
to end-users.

     Following the acquisition of Hyperion by Oracle Corporation, the Company's
contract with Hyperion has been assigned to Oracle USA, Inc.

EMPLOYEES

     As of December 31, 2007, SPSS had 1,246 full-time employees, 664
domestically and 582 internationally. Of the 1,246 employees, there were 536 in
sales, marketing and professional services, 489 in research and development, and
221 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 52 part-time employees as of December 31,
2007.


                                        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,
                                               ------------------------------------
                                                 2005          2006          2007
                                               --------   --------------   --------
                                                          (IN THOUSANDS)
<S>                                            <C>        <C>              <C>
Sales to unaffiliated customers:
  United States..............................  $102,775      $109,752      $118,076
  Europe.....................................    98,643       111,537       129,410
  Pacific Rim................................    34,645        40,243        43,514
                                               --------      --------      --------
     Total...................................  $236,063      $261,532      $291,000
                                               ========      ========      ========
Sales or transfers between geographic areas:
  United States..............................  $ 28,598      $ 34,467      $ 36,742
  Europe.....................................   (15,017)      (18,372)      (19,109)
  Pacific Rim................................   (13,581)      (16,095)      (17,633)
                                               --------      --------      --------
     Total...................................  $     --      $     --      $     --
                                               ========      ========      ========
Operating income:
  United States..............................  $  2,945      $  2,959      $ 14,785
  Europe.....................................    19,587        22,625        28,051
  Pacific Rim................................     5,492         8,719         6,621
                                               --------      --------      --------
     Total...................................  $ 28,024      $ 34,303      $ 49,457
                                               ========      ========      ========
Identifiable assets:
  United States..............................  $167,744      $187,761      $333,033
  Europe.....................................    62,764        90,890       133,031
  Pacific Rim................................    41,389        53,843        34,996
                                               --------      --------      --------
     Total...................................  $271,897      $332,494      $501,060
                                               ========      ========      ========

</Table>


     SPSS revenues from operations outside of the United States accounted for
approximately 56% of total revenues in 2005, 58% in 2006 and 59% in 2007. 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 influence of third party vendors and development delays on 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;

     - The timing of product shipments as a result of the delivery schedules of
       fulfillment vendors and the timing of 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.

     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 THE UNITED STATES MAY HAVE A MATERIAL ADVERSE AFFECT ON ITS
BUSINESS.

     Revenues from operations outside of the United States accounted for
approximately 56% of the Company's total revenues in 2005, 58% in 2006 and 59%
in 2007. 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;

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

     - fluctuations in anticipated tax liabilities.

     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.

THE COMPANY'S CONTINUED USE OF THE SPSS TRADEMARK MAY BE PROHIBITED OR OTHERWISE
SUBJECTED TO ECONOMICALLY BURDENSOME CONDITIONS.

     As discussed further under Item 3, "Legal Proceedings," the Company has
filed a lawsuit against Norman H. Nie, a former director of the Company, and C.
Hadlai Hull, an employee of the Company, regarding the Company's right to use
the SPSS trademark. The filing of the lawsuit was in response to recent
assertions by Dr. Nie that the Company's use of the trademark is subject to a
License Agreement (the "Agreement") dated September 30, 1976 between a
predecessor of the Company, as licensee, and Norman H. Nie and C. Hadlai Hull,
as licensors. Dr. Nie has stated his desire to enforce alleged ownership rights
under the Agreement, which rights he claims include the right to inspect and
approve the Company's products sold under the SPSS trademark and to obtain other
information regarding those products. Dr. Nie and Mr. Hull have subsequently
filed a counterclaim against the Company pursuant to which they are seeking to
enjoin the Company from continuing to use the SPSS trademark.

     The Company is seeking a declaratory judgment that Dr. Nie and Mr. Hull are
estopped from enforcing any rights under the Agreement and that the Company
shall be deemed to have an irrevocable, assignable and exclusive license to use
the SPSS trademark. Even if the Company's use of the SPSS trademark is
determined to be subject to the Agreement, the Company believes that it is in
full compliance with any obligations it may have under the Agreement and expects
to continue to have the right to use the SPSS trademark consistent with its past
practices. However, an adverse result in this lawsuit could result in the
Company losing the right to use the SPSS trademark; increase the Company's costs
to comply with the inspection and product approval rights asserted by Dr. Nie;
hinder or delay the development and introduction by the Company of new products
sold under the SPSS trademark; or result in the Company having to pay damages
for trademark infringement.

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 a 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 a majority of the Company's software products to its
domestic and international customers and various international subsidiaries.
Either party may terminate the agreement for cause if

                                       13

<PAGE>

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 INDUSTRY 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 solutions and
enterprise feedback management applications. 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.

     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 key executives and 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 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.


                                       14

<PAGE>

     There can be no assurance that third parties will not assert infringement
claims against SPSS 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.

THE AVAILABILITY OF COMPETITIVE OPEN SOURCE SOFTWARE TO THE PREDICTIVE ANALYTICS
MARKET OR THE USE OF OPEN SOURCE SOFTWARE IN THE COMPANY'S PRODUCTS MAY HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS.

     Open source software includes a broad range of software applications and
operating environments produced by companies, development organizations and
individual software developers and is typically licensed for use, distribution
and modification at a nominal cost or often, free of charge. To the extent that
the open source software models expand and non-commercial companies and software
developers create and contribute competitive analytical software to the open
source community, SPSS may have to adjust its pricing, maintenance and
distribution strategies and models, which could have a material adverse effect
on the Company's financial position and results of operation. In addition, if
one of the Company's developers embedded open source software into one or more
of the Company's products without the Company's knowledge or authorization or a
third party has incorporated open source software into such third party's
software without disclosing the presence of such open source software and SPSS
embedded such third party software into one or more of its products, SPSS could,
under certain circumstances, be required to disclose the source code to such
products. In that case, SPSS would not own such products and could not charge
license fees for such products, which could have a material adverse effect on
the Company's business.

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 rights 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 staggered 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 By-laws
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.

     Certain of the Company's executive officers and other officers may be
entitled to substantial payments and other benefits following a change of
control of SPSS. These payments could have the effect of discouraging a
potential acquirer from acquiring control of SPSS.

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. SPSS maintains a 15 year sublease
agreement to sublease 99,444 square feet of office space in the Sears Tower,
which sublease agreement will expire in 2012. SPSS also maintains a lease
agreement for an additional 41,577 square feet of office space in the Sears
Tower, which lease agreement will also expire in 2012. The aggregate annual
gross rental payments on these leases for office space in the Sears Tower were
approximately $3.7 million for the year 2007.


                                       15

<PAGE>

     In addition, SPSS leases office space in the United States in New York,
Virginia, Ohio, Minnesota 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 $8.9
million for the year 2007.

     SPSS believes its facilities are suitable and adequate for the present
needs of the Company, 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

     Basu 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 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.

     Trademark Litigation

     On January 3, 2008, the Company filed a complaint for declaratory judgment
in the U.S. District Court for the Northern District of Illinois against Norman
H. Nie and C. Hadlai Hull. The filing of the complaint was in response to recent
assertions by Dr. Nie that the Company's use of the SPSS trademark is subject to
a License Agreement (the "Agreement") dated September 30, 1976 between a
predecessor of the Company, as licensee, and Norman H. Nie and C. Hadlai Hull,
as licensors. Dr. Nie has stated his desire to enforce his alleged rights under
the Agreement, which he claims include the right to inspect and approve products
sold under the SPSS trademark and to obtain other information regarding those
products. The complaint seeks a declaratory judgment that Dr. Nie and Mr. Hull
are estopped from enforcing any rights under the Agreement and that the Company
shall be deemed to have an irrevocable, assignable and exclusive license to use
the SPSS trademark.

     On January 28, 2008, Dr. Nie and Mr. Hull filed a counterclaim against the
Company. The counterclaim asserts that the Company has repudiated the Agreement
and that the Company's use of the SPSS trademark is unauthorized and constitutes
an infringement on their rights as owners of the trademark. The counterclaim
seeks an injunction prohibiting the Company from continuing to use the SPSS
trademark and an award of damages, costs and attorneys fees.

     On February 15, 2008, the Company filed its answer to the counterclaim. In
its answer, the Company denies liability for trademark infringement and asserts
that Dr. Nie and Mr. Hull are barred from asserting the counterclaim on several
grounds, including but not limited to the doctrines of estoppel, laches and
waiver.

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 Global Select tier of the
Nasdaq Stock 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
YEAR END DECEMBER 31, 2006                                  ------   ------
<S>                                                         <C>      <C>
First Quarter.............................................  $34.10   $28.75
Second Quarter............................................   39.51    30.74
Third Quarter.............................................   33.74    21.73
Fourth Quarter............................................   31.83    23.92
YEAR END DECEMBER 31, 2007
First Quarter.............................................   37.28    29.07
Second Quarter............................................   44.98    35.85
Third Quarter.............................................   47.87    34.51
Fourth Quarter............................................   44.98    33.30
</Table>


     As of February 15, 2008, there were 695 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.

PERFORMANCE GRAPH

     The following graph shows the changes in $100 invested since December 31,
2002, in the Company's common stock, the NASDAQ 100 Stocks Index and the Goldman
Sachs Software Index, assuming that all dividends were reinvested.

                               (PERFORMANCE GRAPH)


<Table>
<Caption>
--------------------------------------------------------------------------------------------------------------------
                                         12/31/2002   12/31/2003   12/31/2004   12/31/2005   12/31/2006   12/31/2007
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>          <C>          <C>          <C>          <C>
SPSS (NASDAQ: SPSS)                       $100.00      $127.81      $111.79      $221.09      $214.94      $256.68
--------------------------------------------------------------------------------------------------------------------
NASDAQ 100 Stock Index                    $100.00      $149.61      $163.79      $165.82      $177.10      $210.18
--------------------------------------------------------------------------------------------------------------------
Goldman Sachs Software Index              $100.00      $150.08      $170.43      $162.28      $179.88      $208.76
--------------------------------------------------------------------------------------------------------------------
</Table>




                                       17

<PAGE>

ISSUER PURCHASES OF EQUITY SECURITIES

     A summary of the Company's repurchase activity for the three months ended
December 31, 2007 is as follows:

<Table>
<Caption>
                                                                    TOTAL NUMBER OF
                                                                  SHARES PURCHASED AS      MAXIMUM NUMBER OF
                                                                    PART OF PUBLICLY      SHARES THAT MAY YET
                               TOTAL NUMBER OF    AVERAGE PRICE    ANNOUNCED PLANS OR      BE PURCHASED UNDER
PERIOD                        SHARES PURCHASED   PAID PER SHARE         PROGRAMS        THE PLANS OR PROGRAM(1)
------                        ----------------   --------------   -------------------   -----------------------
<S>                           <C>                <C>              <C>                   <C>
October 1, 2007 to October
  31, 2007..................            --               --                  --                2,000,000
November 1, 2007 to November
  30, 2007..................       185,000           $35.98             185,000                1,815,000
December 1, 2007 to December
  31, 2007..................       422,200           $35.92             422,200                1,392,800
                                   -------                              -------
Total.......................       607,200           $35.94             607,200                1,392,800(2)
</Table>


--------

   (1) On May 1, 2007, the Company announced that its Board of Directors had
       authorized the Company to repurchase up to a maximum of 2,000,000 shares
       of its issued and outstanding common stock. This authorization extends
       until December 31, 2008.

   (2) In January 2008, the Company repurchased an additional 853,800 shares of
       its issued and outstanding common stock.


                                       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, 2007 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, 2006 and 2007, and for each of the years in the
three-year period ended December 31, 2007, are included elsewhere in this Form
10-K.

<Table>
<Caption>
                                                          YEAR ENDED DECEMBER 31,
                                           ----------------------------------------------------
                                             2003       2004       2005       2006       2007
                                           --------   --------   --------   --------   --------
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>        <C>        <C>        <C>        <C>
Net revenues:
  License(1).............................  $ 91,473   $ 95,819   $107,568   $125,017   $143,954
  Maintenance(2).........................    83,557     97,735    102,241    109,277    118,312
  Services(3)............................    33,337     30,520     26,254     27,238     28,734
                                           --------   --------   --------   --------   --------
     Net revenues........................   208,367    224,074    236,063    261,532    291,000
                                           --------   --------   --------   --------   --------
Operating expenses:
  Cost of license and maintenance
     revenues............................    14,359     14,642     16,381     17,479     17,728
  Cost of license and maintenance
     revenues -- software write-offs.....     1,961         --         --      1,283         --
  Sales, marketing and services..........   123,454    129,987    117,872    124,127    139,386
  Research and development...............    44,167     47,765     45,418     51,595     50,640
  General and administrative(4)..........    18,194     25,104     28,368     32,745     33,789
  Special general and administrative
     charges(5)..........................     6,104         --         --         --         --
                                           --------   --------   --------   --------   --------
     Operating expenses..................   208,239    217,498    208,039    227,229    241,543
                                           --------   --------   --------   --------   --------
Operating income.........................       128      6,576     28,024     34,303     49,457
                                           --------   --------   --------   --------   --------
Net interest and investment income
  (expense)..............................       (42)      (282)       161      3,139      7,964
Gain on divestiture of Sigma-series
  product line(6)........................     8,577         82      1,000      1,000         --
Other income (expense)...................     1,798      1,680     (2,013)    (3,981)    (1,812)
                                           --------   --------   --------   --------   --------
Income before income taxes...............    10,461      8,056     27,172     34,461     55,609
Provision for income taxes...............     1,147      2,513     11,080     19,321     21,884
                                           --------   --------   --------   --------   --------
Net income...............................  $  9,314   $  5,543   $ 16,092   $ 15,140   $ 33,725
                                           ========   ========   ========   ========   ========
Basic net income per share...............  $   0.54   $   0.31   $   0.88   $   0.78   $   1.77
Diluted net income per share.............  $   0.53   $   0.31   $   0.85   $   0.73   $   1.65
Shares used in basic EPS calculation.....    17,351     17,671     18,228     19,451     19,106
Shares used in diluted EPS calculation...    17,562     17,884     18,880     20,645     20,440
Balance Sheet Data:
  Working capital........................  $ 16,629   $ 13,846   $ 37,415   $ 92,099   $236,289
  Total assets...........................   229,007    235,325    271,897    332,494    501,060
  Current deferred revenue...............    59,051     62,148     63,980     73,483     83,862
  Long term obligations, less current
     portion.............................     7,764      4,994      1,867      1,540    152,361
  Total stockholders' equity.............   119,639    128,459    163,746    216,523    209,353
</Table>


--------

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

   (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.


                                       19

<PAGE>

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

   (6) 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. Systat made a final payment of $1.0 million to SPSS in 2006 to
       exercise its option to purchase the licensed property. See additional
       discussion in Note 7 of the Notes to 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 software and solutions.
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 are then applied to improved business
processes by increasing revenues, reducing costs, and preventing fraudulent
activities.

     The Company sells its products and services to a broad scope of industries.
Approximately 64% of the Company's 2007 revenues came from sales to customers in
corporate settings, with another 21% in academic institutions, 12% in government
agencies and 3% from nonprofit and healthcare organizations.

     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 recognized 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 "NOTES" WITHIN THIS ITEM 7 REFER TO THE NOTES TO 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.


                                       20

<PAGE>

RESULTS OF OPERATIONS

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007

  NET REVENUE

     Revenues by product category, related amount changes, related percent
changes and percent of total revenues for 2005, 2006 and 2007 were as follows:

<Table>
<Caption>
                                        PERIOD
                            ------------------------------
                                YEAR ENDED DECEMBER 31,           AMOUNT CHANGE           PERCENTAGE CHANGE
                            ------------------------------   -----------------------   -----------------------
                              2005       2006       2007     '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                            --------   --------   --------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)
<S>                         <C>        <C>        <C>        <C>          <C>          <C>          <C>
License...................  $107,568   $125,017   $143,954     $17,449      $18,937        16%          15%
Maintenance...............   102,241    109,277    118,312       7,036        9,035         7%           8%
Services..................    26,254     27,238     28,734         984        1,496         4%           5%
                            --------   --------   --------     -------      -------
  Net Revenues............  $236,063   $261,532   $291,000     $25,469      $29,468        11%          11%
                            ========   ========   ========     =======      =======
As a Percent of Revenue
License...................        46%        48%        49%
Maintenance...............        43%        42%        41%
Services..................        11%        10%        10%
                            --------   --------   --------
  Net Revenues............       100%       100%       100%
                            ========   ========   ========

</Table>


  2006 Compared with 2007

     The increase in license revenues from 2006 to 2007 was primarily driven by
higher sales volume of SPSS data mining and desktop statistical analysis tools
in all major geographic regions. From 2006 to 2007, license revenues increased
by $7.6 million in the United States, $9.9 million in Europe and $1.4 million in
the Pacific Rim. The impact of foreign currency exchange rates increased license
revenue by $4.5 million in 2007.

     The increase in maintenance revenue from 2006 to 2007 occurred in all major
geographic regions. The increase was due to foreign currency, higher pricing and
increased renewal rates, which increased maintenance revenue by $6.5 million in
Europe, $1.5 million in the Pacific Rim and $1.0 million in the United States.
Foreign currency increased maintenance revenue by $5.4 million in 2007.

     The increase in service revenue from 2006 to 2007 was primarily due to
foreign currency and due to an increased number of solution-related projects in
Europe and the Pacific Rim as a result of higher license revenue during 2007.
During 2007, service revenues increased by $1.3 million in Europe and by $0.4
million in the Pacific Rim offset by a $0.2 million decrease in the United
States. The impact of foreign currency exchange rates increased service revenues
by $1.1 million in 2007.

  2005 Compared with 2006

     The increase in license revenues from 2005 to 2006 was primarily driven by
higher sales of SPSS desktop statistical analysis tools in all major geographic
regions and by higher market research product revenues in the United States. The
impact of foreign currency decreased license revenue by $0.3 million in 2006
compared with 2005.

     The increase in maintenance revenues from 2005 to 2006 was primarily due to
higher and consistent renewal rates for the Company's major offerings, including
increases in all geographic regions. The impact of foreign currency increased
maintenance revenue by $0.2 million in 2006 compared with 2005.

     The increase in services revenues from 2005 to 2006 was primarily due to an
increase in consulting projects as a result of higher license revenue during
2006. Currency exchange rates had an immaterial impact on services revenue in
2006.


                                       21

<PAGE>

     Net revenues per geographic region, related amount changes, related percent
changes and percent of total revenues for 2005, 2006 and 2007 were as follows:

<Table>
<Caption>
                                        PERIOD
                            ------------------------------
                                YEAR ENDED DECEMBER 31,           AMOUNT CHANGE           PERCENTAGE CHANGE
                            ------------------------------   -----------------------   -----------------------
                              2005       2006       2007     '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                            --------   --------   --------   ----------   ----------   ----------   ----------
                                    (IN THOUSANDS)
<S>                         <C>        <C>        <C>        <C>          <C>          <C>          <C>
United States.............  $102,775   $109,752   $118,076     $ 6,977      $ 8,324         7%           8%
                            --------   --------   --------     -------      -------
United Kingdom............    31,911     34,047     38,665       2,136        4,618         7%          14%
The Netherlands...........    27,411     32,092     38,760       4,681        6,668        17%          21%
Other.....................    39,321     45,398     51,985       6,077        6,587        15%          15%
                            --------   --------   --------     -------      -------
  Total Europe............    98,643    111,537    129,410      12,894       17,873        13%          16%
                            --------   --------   --------     -------      -------
Japan.....................    22,416     25,446     26,120       3,030          674        14%           3%
Other.....................    12,229     14,797     17,394       2,568        2,597        21%          18%
                            --------   --------   --------     -------      -------
  Total Pacific Rim.......    34,645     40,243     43,514       5,598        3,271        16%           8%
                            --------   --------   --------     -------      -------
  Total International.....   133,288    151,780    172,924      18,492       21,144        14%          14%
                            --------   --------   --------     -------      -------
     Net Revenue..........  $236,063   $261,532   $291,000     $25,469      $29,468        11%          11%
                            ========   ========   ========     =======      =======
Percent of Net Revenues
United States.............        44%        42%        41%
International.............        56%        58%        59%
                            --------   --------   --------
Net Revenue...............       100%       100%       100%
                            ========   ========   ========

</Table>


     Net revenue growth in 2006 and 2007 reflected the increased demand for
certain data mining and desktop statistical analysis tools, a strong renewal
base for the Company's product offerings and the impact of foreign currency
exchange rates.

  2006 Compared with 2007

     Net revenues derived internationally increased 14% from 2006 to 2007. This
increase resulted from revenue growth in major international markets including
Europe and the Pacific Rim. Net revenues from international regions also
increased due to changes in foreign currency exchange rates which resulted in a
total increase in international revenues of $11.0 million for 2007. The most
significant portions of these 2007 increases were $2.9 million in the United
Kingdom, $2.9 million in the Netherlands, $3.4 million in other Euro-denominated
countries and $1.0 million in Australia. Net revenues derived from the United
States increased by 8% from 2006 to 2007 reflecting increases in the license
revenue category.

  2005 Compared with 2006

     Net revenues derived internationally increased 14% from 2005 to 2006. This
increase resulted from expansion in generally all significant international
markets including Europe and the Pacific Rim. The increases in international
revenues were partially offset by changes in foreign currency exchange rates
which resulted in a decrease in international revenues of $0.1 million in 2006
compared with 2005. Significant foreign currency impacts on 2006 net revenues
included increases of $0.4 million in the United Kingdom, $0.3 million in the
Netherlands and $0.2 million in other European offices offset by decreases of
$1.1 million in the Pacific Rim. Net revenues derived from the United States
increased by 7% from 2005 to 2006 reflecting increases in license and
maintenance revenue.


                                       22

<PAGE>

  COST OF LICENSE AND MAINTENANCE REVENUES

<Table>
<Caption>
                                          PERIOD
                               ---------------------------
                                 YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                               ---------------------------   -----------------------   -----------------------
                                 2005      2006      2007    '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                               -------   -------   -------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)
<S>                            <C>       <C>       <C>       <C>          <C>          <C>          <C>
Cost of License and
  Maintenance Revenues.......  $16,381   $17,479   $17,728     $1,098        $249           7%           1%
  Percent of Total Revenues..        7%        7%        6%
</Table>


     Cost of license and maintenance revenues consists of costs of goods sold,
amortization of capitalized software development costs and royalties incurred
related to third parties. These costs increased from 2006 to 2007 primarily due
to higher royalty expense associated with higher revenue and higher amortization
expense of capitalized software development costs.

     The increase in cost of license and maintenance revenues from 2005 to 2006
was primarily due to higher royalty expense associated with higher revenue and
higher amortization expense of capitalized software development costs.

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

<Table>
<Caption>
                                            PERIOD
                                     --------------------
                                      YEAR ENDED DECEMBER
                                              31,                AMOUNT CHANGE           PERCENTAGE CHANGE
                                     --------------------   -----------------------   -----------------------
                                     2005    2006    2007   '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                                     ----   ------   ----   ----------   ----------   ----------   ----------
                                        (IN THOUSANDS)
<S>                                  <C>    <C>      <C>    <C>          <C>          <C>          <C>
Cost of License and Maintenance
  Revenues-Software Write-offs.....   $--   $1,283    $--     $1,283       $(1,283)       NM           NM
  Percent of Total Revenues........    --%      --%    --%
</Table>


     During 2006, the Company wrote off certain software to a fair value of zero
after the Company determined that the future use of this software was no longer
likely.

  SALES, MARKETING AND SERVICES

<Table>
<Caption>
                                              PERIOD
                                  ------------------------------
                                      YEAR ENDED DECEMBER 31,           AMOUNT CHANGE           PERCENTAGE CHANGE
                                  ------------------------------   -----------------------   -----------------------
                                    2005       2006       2007     '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                                  --------   --------   --------   ----------   ----------   ----------   ----------
                                          (IN THOUSANDS)
<S>                               <C>        <C>        <C>        <C>          <C>          <C>          <C>
Sales, Marketing and Services..   $117,872   $124,127   $139,386     $6,255       $15,259         5%          12%
  Percent of Total Revenues....         50%        47%        48%
</Table>


     Sales, marketing and services expenses increased from 2006 to 2007
primarily due to higher travel and organization meeting costs and higher
compensation costs associated with higher revenues. These increases were
consistent with revenue growth of 11% in 2007. Changes in foreign currency
exchange rates contributed $5.1 million to the increase in sales, marketing and
services expenses.

     The increase in sales, marketing and services expenses from 2005 to 2006
was primarily due to higher travel and organization meeting costs, higher
compensation costs associated with higher revenues and increased costs due to
share-based expense of $2.0 million arising out of the implementation of SFAS
No. 123 (R) in 2006.


                                       23

<PAGE>

  RESEARCH AND DEVELOPMENT

<Table>
<Caption>
                                          PERIOD
                               ---------------------------
                                 YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                               ---------------------------   -----------------------   -----------------------
                                 2005      2006      2007    '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                               -------   -------   -------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)
<S>                            <C>       <C>       <C>       <C>          <C>          <C>          <C>
Research and Development.....  $45,418   $51,595   $50,640     $6,177        $(955)        14%          (2)%
  Percent of Total Revenues..       19%       20%       17%
</Table>


     Research and development (R&D) costs decreased from 2006 to 2007 primarily
due to benefits derived from the consolidation of certain R&D facilities
completed in December 2006 as discussed in Note 13. The Company also recorded
charges of $4.0 million related to the closing of certain research and
development facilities during 2007.

     The increase in research and development expenses from 2005 to 2006 was
primarily due to severance costs of $0.9 million as a result of consolidating
activities discussed in Note 13. Additional increases are due to annual
compensation merit increases and increased costs due to share-based expense of
$1.4 million arising out of the implementation of SFAS No. 123 (R) in 2006.

  GENERAL AND ADMINISTRATIVE

<Table>
<Caption>
                                          PERIOD
                               ---------------------------
                                 YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                               ---------------------------   -----------------------   -----------------------
                                 2005      2006      2007    '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                               -------   -------   -------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)
<S>                            <C>       <C>       <C>       <C>          <C>          <C>          <C>
General and Administrative...  $28,368   $32,745   $33,789     $4,377       $1,044         15%           3%
  Percent of Total Revenues..       12%       13%       12%
</Table>


     General and administrative expenses increased from 2006 to 2007 primarily
due to increased share-based compensation of $1.8 million reflecting incremental
expense of 2007 share-based compensation grants.

     The increase in general and administrative expenses from 2005 to 2006 was
primarily due to increased costs due to share-based expense of $3.3 million
arising out of the implementation of SFAS No. 123 (R) in 2006, higher
compensation due to improved performance and higher professional service
expense. In 2005, the Company incurred a one-time charge of $1.5 million related
to exit costs for certain office space that was no longer used.

  NET INTEREST AND INVESTMENT INCOME

<Table>
<Caption>
                                           PERIOD
                                   ----------------------
                                     YEAR ENDED DECEMBER
                                             31,                 AMOUNT CHANGE           PERCENTAGE CHANGE
                                   ----------------------   -----------------------   -----------------------
                                   2005    2006     2007    '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                                   ----   ------   ------   ----------   ----------   ----------   ----------
                                       (IN THOUSANDS)
<S>                                <C>    <C>      <C>      <C>          <C>          <C>          <C>
Net Interest and Investment
  Income.........................  $161   $3,139   $7,964     $2,978       $4,825         NM           154%
  Percent of Total Revenues......    --%       1%       3%
</Table>


     Net interest and investment income increased from 2006 to 2007 principally
due to higher investment cash balances. The higher investment cash balances
reflected increased cash flow from operations in 2007 compared to 2006 as well
as net cash derived from the Company's private placement of convertible notes
during the first quarter of 2007. As discussed in Note 10, the Company completed
a private placement of convertible notes resulting in a net increase in cash of
approximately $96.0 million, following the concurrent purchase of outstanding
common stock and payment of offering costs.

     The increase in net interest and investment income from 2005 to 2006 was
principally due to higher investment cash balances. In addition, the Company's
interest expense decreased from 2005 to 2006 due to the repayment of the
remainder of the Company's term loan during the first quarter of 2006.


                                       24

<PAGE>

  GAIN ON DIVESTITURE OF SIGMA-SERIES PRODUCT LINE

<Table>
<Caption>
                                           PERIOD
                                   ----------------------
                                     YEAR ENDED DECEMBER
                                             31,                 AMOUNT CHANGE           PERCENTAGE CHANGE
                                   ----------------------   -----------------------   -----------------------
                                    2005     2006    2007   '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                                   ------   ------   ----   ----------   ----------   ----------   ----------
                                       (IN THOUSANDS)
<S>                                <C>      <C>      <C>    <C>          <C>          <C>          <C>
Gain on Divestiture of Sigma-
  Series Product Line............  $1,000   $1,000    $--       $--        $(1,000)       NM           NM
  Percent of Total Revenues......       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. This
transaction was completed in December 2003. See Note 7 for an explanation of the
terms of this transaction.

     During the third quarter of 2006, Systat made a final payment of $1.0
million to SPSS to exercise Systat's option to purchase the licensed property.
This $1.0 million payment was recorded as other income. 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 EXPENSE

<Table>
<Caption>
                                           PERIOD
                                ---------------------------
                                  YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                                ---------------------------   -----------------------   -----------------------
                                  2005      2006      2007    '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                                -------   -------   -------   ----------   ----------   ----------   ----------
                                       (IN THOUSANDS)
<S>                             <C>       <C>       <C>       <C>          <C>          <C>          <C>
Other Expense.................  $(2,013)  $(3,981)  $(1,812)    $(1,968)     $2,169         98%          (54)%
  Percent of Total Revenues...       (1)%      (2)%      (1)%
</Table>


     Other expense decreased from 2006 to 2007 due to lower transactional
losses. Most notably these losses resulted from changes in the value of
Singapore dollar denominated receivables and payables, U.S. dollar denominated
cash held in foreign countries and the increase in value of U.S. dollar-
denominated receivables held in international locations, principally related to
the Euro and the Japanese Yen.

     Other expense in 2006 was due to losses from foreign currency. The losses
were principally due to the decline in value of U.S. dollar-denominated
receivables held in international locations principally related to the British
Pound and Euro and British Pound-denominated receivables held in international
locations principally related to the Japanese Yen and Euro.

     Other expense in 2005 was due to losses from foreign currency. 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.

  PROVISION FOR INCOME TAXES

<Table>
<Caption>
                                          PERIOD
                               ---------------------------
                                 YEAR ENDED DECEMBER 31,          AMOUNT CHANGE           PERCENTAGE CHANGE
                               ---------------------------   -----------------------   -----------------------
                                 2005      2006      2007    '05 VS '06   '06 VS '07   '05 VS '06   '06 VS '07
                               -------   -------   -------   ----------   ----------   ----------   ----------
                                      (IN THOUSANDS)
<S>                            <C>       <C>       <C>       <C>          <C>          <C>          <C>
Provision for Income Taxes...  $11,080   $19,321   $21,884     $8,241       $2,563         74%          13%
  Percent of Pre-Tax Income..       41%       56%       39%
</Table>


     The income tax provision increased $2.6 million from 2006 to 2007
reflecting higher income. As a percent of pre-tax income, the income tax
provision was 39% for 2007, down from 56% in 2006. This decrease in 2007 was
primarily due to additional income tax expense of $6.9 million recorded in 2006,
compared to $2.7 million recorded in 2007, related to information obtained from
worldwide tax audits.

     The income tax provision increased from 2005 to 2006 due to an increase in
earnings. Additionally, during the fourth quarter 2006, the Company became aware
of information related to its ongoing worldwide tax audits that has

                                       25

<PAGE>

caused it to determine that certain tax attributes on its balance sheet may no
longer be able to be realizable. The Company had estimated the possible loss of
these tax attributes to be $6.9 million and recognized an income tax expense in
2006 with a corresponding decrease in selected tax attributes on its balance
sheet (see Note 12).

     Generally, the Company expects its effective tax rate to be 36% to 39%.

LIQUIDITY AND CAPITAL RESOURCES

     During 2007, SPSS generated cash in excess of its operating requirements.
As of December 31, 2007, SPSS had $306.9 million in cash and cash equivalents
compared with $140.2 million at December 31, 2006. Factors affecting cash and
cash equivalents during 2007 include:

  Operating Cash Flows:

     - Cash derived from operating activities was $84.9 million. This cash
       resulted primarily from net income, accrued expenses, timing of income
       tax payments and deferred revenue.

     - Accrued expenses, including the timing of purchases of common stock,
       increased operating cash flow by $7.4 million.

     - Timing of accounts payable disbursements increased operating cash flow by
       $1.1 million of cash.

     - Changes in deferred taxes and income taxes added $10.6 million and $3.8
       million, respectively.

     - Increases in deferred revenue contributed $7.0 million to cash from
       operating activities.

     - Accounts receivable decreased operating cash flow by $0.1 million due to
       higher revenue volume offset by improved collections. Average days sales
       outstanding were 65 days at December 31, 2007, compared to 70 days at
       December 31, 2006.

  Investing Activities:

     - Capital expenditures were $5.7 million in 2007.

     - Capitalized software costs were $13.2 million in 2007.

  Financing Activities:

     - Financing activities provided cash proceeds of $96.0 million primarily
       from the issuance of long-term debt, which provided $150 million.

     - Debt issuance costs related to the issuance of long-term debt were $4.3
       million.

     - Purchases of outstanding common stock used $71.8 million of the cash
       generated from financing activities.

     - Cash proceeds of $16.7 million were generated from the exercise of stock
       options.

     - Tax benefits recognized from stock option exercises were $5.4 million.

     Cash flows from operating activities in 2007 were more than adequate to
fund capital expenditures and software development costs of $18.9 million.
Management believes that the Company has ample capacity in its property and
equipment to meet expected needs for future growth.

     On March 19, 2007, the Company issued $150 million aggregate principal
amount of 2.50% Convertible Subordinated Notes due 2012 (the "Convertible
Notes") in a private placement. The Convertible Notes bear interest at a rate of
2.50% per year payable semiannually in arrears on March 15 and September 15 of
each year. The Convertible Notes will mature on March 15, 2012.

     The Convertible Notes will be convertible into cash and, if applicable,
shares of the Company's common stock based on an initial conversion rate of
21.3105 shares of common stock per $1,000 principal amount of Convertible Notes
(which is equal to an initial conversion price of approximately $46.93 per
share) only under the following circumstances: (1) during any calendar quarter
beginning after June 30, 2007 (and only during such calendar

                                       26

<PAGE>

quarter), if the closing sale price of the common stock for at least 20 trading
days in the 30 consecutive trading days ending on the last trading day of the
immediately preceding calendar quarter is more than 120% of the conversion price
per share, which is $1,000 divided by the then applicable conversion rate; (2)
during any five business day period after any five consecutive trading day
period in which the trading price per $1,000 principal amount of Convertible
Notes for each day of that period was less than 98% of the product of the
closing price of the common stock for each day in that period and the conversion
rate; (3) if specified distributions to holders of the common stock occur; (4)
if a fundamental change occurs; or (5) during the period beginning on February
15, 2012 and ending on the close of business on the business day immediately
preceding the maturity date. If the Company makes a physical settlement election
as described below, the Convertible Notes will become convertible at the option
of the holder at any time after the date of such physical settlement election
and prior to the close of business on the business day immediately preceding the
maturity date of the Convertible Notes.

     Unless the Company has made a physical settlement election, upon conversion
of each $1,000 principal amount of Convertible Notes, a holder will receive, in
lieu of common stock, an amount in cash equal to the lesser of (i) $1,000, or
(ii) the conversion value of the Convertible Notes. If the conversion value
exceeds $1,000 on the conversion date, the Company will also deliver as payment
for the excess value, at its election, cash or common stock or a combination of
cash and common stock. At any time prior to maturity, the Company may make a
physical settlement election. A physical settlement election is the irrevocable
election to provide upon conversion, in lieu of providing cash and common stock,
shares of common stock equal to the conversion rate for each $1,000 principal
amount of Convertible Notes converted.

     The holders of the Convertible Notes who convert their Convertible Notes in
connection with a fundamental change may be entitled to a make-whole premium in
the form of an increase in the conversion rate. Additionally, in the event of a
fundamental change, the holders of the Convertible Notes may require the Company
to purchase all or a portion of their Convertible Notes at a purchase price
equal to 100% of the principal amount of Convertible Notes, plus accrued and
unpaid interest, if any.

     As of December 31, 2007, the Convertible Notes were not convertible and the
holders of the Convertible Notes had no right to require the Company to
repurchase the Convertible Notes.

     In connection with the issuance of the Convertible Notes, the Company used
approximately $50 million of the net proceeds of the offering to purchase 1.5
million shares of its outstanding common stock. The Company then retired the
purchased common stock during the second quarter of 2007.

     On May 1, 2007, the Company announced that its Board of Directors had
authorized the Company to repurchase up to a maximum of 2.0 million shares of
its issued and outstanding common stock. This authorization extends until
December 31, 2008. During the fourth quarter of 2007, the Company purchased 607
thousand shares of common stock at a cost of $21.8 million pursuant to such
authorization. In January 2008, the Company purchased an additional 854 thousand
shares of its issued and outstanding common stock pursuant to such
authorization. On May 1, 2007, the Company also announced that its Board of
Directors had authorized the Company to repurchase up to $20.0 million principal
amount of its Convertible Notes. These repurchases are not mandatory and will be
made from time to time based on the availability of alternative investment
opportunities and market conditions. This authorization extends until December
31, 2008. To date, the Company has not repurchased any of its Convertible Notes
pursuant to this authorization.

     The Company's four year, $25.0 million credit facility with Wells Fargo
Foothill, Inc. (f/k/a Foothill Capital Corporation) expired by its terms on
March 31, 2007 and was not renewed.

     Certain unique cash-related events occurred in 2005 and 2006. The Company
received scheduled payments totaling $1.0 million in 2005 and $1.0 million in
2006 on the sale of its Sigma-Series product line, which consummated in December
2003.

     SPSS intends to fund its future capital needs through operating cash flows
and cash and cash equivalents on hand. SPSS anticipates that these amounts 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.


                                       27

<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,
2007 (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>
Long-term debt(1)................  $150,000    $    --     $    --     $150,000     $   --
Capital lease obligations........        --         --          --           --         --
Operating lease obligations(2)...    48,921     10,996      18,651       14,579      4,695
Purchase obligations and other
  commitments....................        --         --          --           --         --
Other long-term liabilities(3)...    12,950         --      12,950           --         --
                                   --------    -------     -------     --------     ------
  Total..........................  $211,871    $10,996     $31,601     $164,579     $4,695
                                   ========    =======     =======     ========     ======

</Table>


--------

   (1) See Note 10 for a description of the Company's long-term debt.

   (2) See Note 8 for a description of the Company's operating lease
       obligations.

   (3) As discussed in Note 12, effective January 1, 2007, the Company adopted
       the provisions of FASB interpretation No. 48, "Accounting for Uncertainty
       in Income Taxes- an interpretation of FASB Statement No. 109." The
       Company has a liability for uncertain tax positions of $13.0 million at
       December 31, 2007. See additional discussion in Note 12.

INTERNATIONAL OPERATIONS

     Revenues from international operations increased from 56% to 58% of total
net revenues between 2005 and 2006, and were approximately 59% of total net
revenues in 2007. As international revenues increase, the Company may experience
increasing risk with regards to foreign currency exchange rates. To reduce this
risk, the Company may enter into forward contracts for the purpose of hedging
future foreign currency exposure on intercompany balances between certain of its
subsidiaries. The Company does not have any outstanding forward contracts at
December 31, 2007. The Company does not use derivative instruments for
speculative or trading purposes.

     During 2007, SPSS generated operating income of $49.5 million. The Company
generated operating income of $34.7 million outside of the United States. Of the
non-U.S. income, SPSS derived operating income of $14.7 million in Euro nations,
operating income of $12.9 million in the United Kingdom, which utilizes the
British Pound, and operating income of $5.1 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 2007 and 2006. The
exchange rate impacts on operating income in 2007 relative to 2006 were as
follows: an increase of $1.3 million for Euro nations due to a 9.1% variance in
exchange rates in the respective period, an increase of $1.1 million in the
United Kingdom, which utilizes the British pound, due to an 8.6% variance in
exchange rates in the respective period and a decrease of $0.1 million in Japan,
which utilizes the Japanese Yen, due to a 1.2% variance in exchange rates in the
respective period.

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.


                                       28

<PAGE>

     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 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.


                                       29

<PAGE>

  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 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 based upon selling prices of the
items when sold separately 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 customers 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

                                       30

<PAGE>

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 the preliminary project stage and post-
implementation/operations stage of an internal-use computer software development
project be expensed as incurred.

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 past due status, delinquency status, 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 also records tax benefits when the
Company believes that it is more likely than not that the benefit will be
sustained by the taxing authority. 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 $69.4
million valuation allowance as of December 31, 2007 would be reversed as a
benefit to the provision for income taxes in the period such determination was
made.


                                       31

<PAGE>

SHARE-BASED COMPENSATION

     As discussed in the Summary of Significant Accounting Policies in Note 1,
effective January 1, 2006, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards No. 123(R), "Share-
Based Payment" ("SFAS No. 123(R)"), using the modified prospective transition
method. Under that transition method, compensation expense recognized in 2006
includes: (a) compensation expense for all share-based payments granted prior
to, but not yet vested as of January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS No. 123, and (b)
compensation expense for all share-based payments granted subsequent to January
1, 2006, based on the grant date fair value estimated in accordance with the
provisions of SFAS No. 123(R). Determining the fair value of share-based awards
at the grant date requires judgment to identify the appropriate valuation model
and estimate the assumptions, including the expected term of the stock options,
expected stock-price volatility and dividend yield, to be used in the
calculation. Judgment is also required in estimating the percentage of share-
based awards that are expected to be forfeited. The Company estimated the fair
value of stock options granted using the Black-Scholes pricing valuation model
with assumptions based primarily on historical data. If actual results differ
significantly from these estimates, share-based compensation expense and our
results of operations could be materially impacted. Prior to January 1, 2006,
the Company accounted for stock option grants made in 2004 and 2005 under the
recognition and measurement provisions of APB Opinion No. 25 and related
interpretations.

FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

     The Company accounts for derivative financial instruments in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Company recognizes all derivative financial instruments, such
as foreign exchange contracts, in the consolidated financial statements at fair
value. Changes in fair values of derivatives accounted for as fair value hedges
are recorded in income along with the portions of the changes in the fair value
of the hedged items that relate to the hedged risk(s).

OFF-BALANCE SHEET ARRANGEMENTS

     The Company does not have any off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes -- an Interpretation of SFAS No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes." FIN 48 prescribes a recognition threshold and measurement of
a tax position taken or expected to be taken in an enterprise's tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest,
penalties, accounting in interim periods and disclosure related to uncertain
income tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company adopted FIN 48 as of January 1, 2007, as
required. The Company has total uncertain tax positions recorded of $13.0
million as of December 31, 2007. The impact of adopting FIN 48 was a reduction
to retained earnings and a corresponding decrease in deferred tax assets of $1.6
million. See Note 12 for further discussion.

     In June 2006, the FASB ratified a consensus opinion reached by the Emerging
Issues Task Force (EITF) on EITF Issue 06-3, "How Taxes Collected from Customers
and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation)." The guidance in EITF Issue
06-3 requires disclosure in interim and annual financial statements of the
amount of taxes on a gross basis, if significant, that are assessed by a
governmental authority that are imposed on and concurrent with a specific
revenue producing transaction between a seller and customer such as sales, use,
value added, and some excise taxes. Additionally, the income statement
presentation (gross or net) of such taxes is an accounting policy decision that
must be disclosed. The consensus in EITF Issue 06-3 is effective for interim and
annual reporting periods beginning after December 15, 2006. The Company adopted
EITF Issue 06-3 effective January 1, 2007. The Company presents sales tax on a
net basis in its consolidated financial statements. The adoption did not have a
material effect on the consolidated financial statements.


                                       32

<PAGE>

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"). SFAS 157 provides guidance for using fair value to measure assets
and liabilities. The standard expands required disclosures about the extent to
which companies measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements on
earnings. SFAS 157 is effective for fiscal years beginning after November 15,
2007. The Company intends to adopt SFAS 157 effective January 1, 2008 and does
not expect the implementation to have a material effect on its consolidated
financial statements.

     In June 2007, the FASB ratified EITF Issue No. 07-03, "Accounting for
Nonrefundable Advance Payments for Goods and Services Received for Use in Future
Research and Development Activities." EITF 07-03 requires companies to defer
nonrefundable advance payments for goods and services and to expense that
advance payment as the goods are delivered or services are rendered. If the
Company does not expect to have the goods delivered or services performed, the
advance should be expensed. EITF 07-03 is effective for fiscal years beginning
after December 15, 2007. The Company intends to adopt EITF 07-03 effective
January 1, 2008 and does not expect the implementation to have a material effect
on its consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" (SFAS 141R). SFAS 141R establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS 141R is effective for financial
statements issued for fiscal years beginning after December 15, 2008. The
Company is currently evaluating the potential impact of adoption of SFAS 141R on
its consolidated financial statements. However, the Company does not expect the
adoption of SFAS 141R to have a material effect on its consolidated financial
statements.

     In December 2007, the FASB issued SFAS No. 160. "Noncontrolling Interests
in Consolidated Financial Statements-an Amendment of ARB No. 51" (SFAS 160).
SFAS 160 establishes accounting and reporting standards pertaining to ownership
interests in subsidiaries held by parties other than the parent, the amount of
net income attributable to the parent and to the noncontrolling interest,
changes in a parent's ownership interest, and the valuation of any retained
noncontrolling equity investment when a subsidiary is deconsolidated. This
statement also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008. The Company is currently evaluating the potential
impact of adoption of SFAS 160 on its consolidated financial statements.
However, the Company does not expect the adoption of SFAS 160 to have a material
effect on its consolidated financial statements.

     In December 2007, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 110 Share-Based Payment (SAB 110). SAB 110
establishes the continued use of the simplified method for estimating the
expected term of equity based compensation. The simplified method was intended
to be eliminated for any equity based compensation arrangements granted after
December 31, 2007. SAB 110 is being published to help companies that may not
have adequate exercise history to estimate expected terms for future grants. The
Company believes the adoption of SAB 110 will not have a material impact on the
Company's consolidated financial statements.


                                       33

<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to market risk from fluctuations in interest rates
on cash and cash equivalents. As of December 31, 2007, the Company had $306.9
million of cash and cash equivalents. A 100 basis point decrease in interest
rates would result in $3.1 million of lower annual interest income, assuming the
same level of cash and cash equivalents.

     The Company is exposed to risk from fluctuations in foreign currency
exchange rates. Since a substantial portion of the Company's operations and
revenue occur outside of 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. Additionally, these changes can significantly
affect intercompany balances that are denominated in different currencies.

     To reduce this risk, the Company entered into forward contracts during the
third quarter of 2006 for the purpose of hedging future foreign currency
exposure on intercompany balances between certain of its subsidiaries. The
objective for holding the derivative instruments was to eliminate or reduce the
impact of these exposures. The principal currency hedged was the Japanese Yen
relative to the British Pound with a notional weighted average exchange rate
between the currencies of 212.12. These contracts called for the purchase of
local currencies at a specified future date to settle the intercompany balance
between the Company's U.K. and Japan-based subsidiaries. The settlement date for
these contracts was June 18, 2007. The Company does not use derivative
instruments for speculative or trading purposes.

     On the date the contracts were entered into, the Company designated them as
fair value hedges. The Company formally documented its hedging relationship,
including identification of the hedging instruments and the hedged items, as
well as its risk management objectives and strategies for undertaking the hedge
transactions. Additionally, at inception, the Company formally assessed that the
transactions will be highly effective in offsetting changes in the fair value of
the hedged items.

     The change in the fair value of the contracts between the date they were
entered into and June 18, 2007 was recorded as a current asset in the
Consolidated Balance Sheets. The fair value is based upon foreign exchange spot
rates at the end of the period. Any changes in the fair value of the instrument
were recorded as a component of other income/expense. As of the settlement date,
the change in fair value in 2007 was $0.4 million.

     As of December 31, 2007, the Company had no outstanding forward contract
agreements.

     Were the foreign currency exchange rates to depreciate immediately and
uniformly against the U.S. dollar by 10 percent from levels at December 31,
2007, the reported cash balance would decrease $9.6 million from a reported cash
balance of $306.9 million at December 31, 2007.


                                       34

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           SPSS INC. AND SUBSIDIARIES

                                      INDEX


<Table>
<Caption>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
Report of Independent Registered Public Accounting Firm.................    36
Management's Report on Internal Control Over Financial Reporting........    38
Consolidated Balance Sheets as of December 31, 2006 and 2007............    39
Consolidated Statements of Income for the years ended December 31, 2005,
  2006 and 2007.........................................................    40
Consolidated Statements of Comprehensive Income for the years ended
  December 31, 2005, 2006 and 2007......................................    41
Consolidated Statements of Stockholders' Equity for the years ended
  December 31, 2005, 2006 and 2007......................................    42
Consolidated Statements of Cash Flows for the years ended December 31,
  2005, 2006 and 2007...................................................    43
Notes to Consolidated Financial Statements..............................    44
Consolidated Financial Statement Schedule:
Schedule II Valuation and Qualifying Accounts...........................    70
</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

Board of Directors and Shareholders
SPSS Inc.:

     We have audited the accompanying consolidated balance sheets of SPSS Inc.
(a Delaware corporation) and Subsidiaries (the "Company") as of December 31,
2007 and 2006, and the related consolidated statements of income, comprehensive
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2007. Our audits of the basic financial statements
included the financial statement schedule listed in the index appearing under
Schedule II. We also have audited the Company's internal control over financial
reporting as of December 31, 2007, 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 these financial statements and the financial statement schedule,
for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management's Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule and an opinion on the
Company's internal control over financial reporting 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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audit of the financial statements included 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, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide 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.

     As discussed in Note 12 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 48, Accounting
for Uncertainty in Income Taxes an Interpretation of FASB Statement No. 109, on
January 1, 2007.


                                       36

<PAGE>

     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, 2007 and 2006, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2007, in
conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

     In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control -- Integrated Framework issued by COSO.

                                               /s/ GRANT THORNTON LLP

Chicago, Illinois
February 20, 2008


                                       37

<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 internal control over
financial reporting of SPSS Inc., a Delaware corporation, and subsidiaries
(collectively, the Company) as of December 31, 2007, 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,
2007, the Company's internal control over financial reporting was effective.

                                By:              /s/ Jack Noonan
                                    --------------------------------------------
                                                     Jack Noonan
                                       Chief Executive Officer, President and
                                         Chairman of the Board of Directors

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


                                       38

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<Table>
<Caption>
                                                            DECEMBER 31,   DECEMBER 31,
                                                                2006           2007
                                                            ------------   ------------
<S>                                                         <C>            <C>
                                         ASSETS
CURRENT ASSETS:
  Cash and cash equivalents...............................    $140,203       $306,930
  Accounts receivable, net of allowances $1,986 in 2006
     and $1,211 in 2007...................................      53,814         56,580
  Inventories, net........................................         752            698
  Deferred income taxes...................................       3,784          3,964
  Prepaid income taxes....................................       3,285          3,301
  Other current assets....................................       4,692          4,162
                                                              --------       --------
     Total current assets.................................     206,530        375,635
                                                              --------       --------
Property, equipment and leasehold improvements, net.......      17,708         16,429
Capitalized software development costs, net...............      31,583         34,140
Goodwill..................................................      41,923         42,093
Intangibles, net..........................................       3,470          3,273
Noncurrent deferred income taxes..........................      28,714         22,731
Other noncurrent assets...................................       2,566          6,759
                                                              --------       --------
       Total assets.......................................    $332,494       $501,060
                                                              ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable........................................    $  6,496       $  7,759
  Income taxes and value added taxes payable..............      10,249         14,737
  Deferred revenues.......................................      73,483         83,862
  Other accrued liabilities...............................      24,203         32,988
                                                              --------       --------
     Total current liabilities............................     114,431        139,346
                                                              --------       --------
Long-term debt............................................          --        150,000
Noncurrent deferred income taxes..........................         795            784
Other noncurrent liabilities..............................         745          1,577

STOCKHOLDERS' EQUITY:
  Common Stock, $0.01 par value; 50,000,000 shares
     authorized; 19,774,073 and 18,905,933 shares issued
     in 2006 and 2007, respectively.......................         198            189
  Additional paid-in capital..............................     205,912        175,267
  Accumulated other comprehensive (loss) income...........      (1,335)         2,696
  Retained earnings.......................................      11,748         43,881
  Treasury stock; 353,100 shares in 2007, at cost.........          --        (12,680)
                                                              --------       --------
     Total stockholders' equity...........................     216,523        209,353
                                                              --------       --------
       Total liabilities and stockholders' equity.........    $332,494       $501,060
                                                              ========       ========

</Table>



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


                                       39

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

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


<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2005       2006       2007
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Net revenues:
  License............................................  $107,568   $125,017   $143,954
  Maintenance........................................   102,241    109,277    118,312
  Services...........................................    26,254     27,238     28,734
                                                       --------   --------   --------
Net revenues.........................................   236,063    261,532    291,000
                                                       --------   --------   --------
Operating expenses:
  Cost of license and maintenance revenues...........    16,381     17,479     17,728
  Cost of license and maintenance
     revenues -- software write-offs.................        --      1,283         --
  Sales, marketing and services......................   117,872    124,127    139,386
  Research and development...........................    45,418     51,595     50,640
  General and administrative.........................    28,368     32,745     33,789
                                                       --------   --------   --------
Operating expenses...................................   208,039    227,229    241,543
                                                       --------   --------   --------
Operating income.....................................    28,024     34,303     49,457
                                                       --------   --------   --------
Other income (expense):
  Net interest and investment income.................       161      3,139      7,964
  Gain on divestiture of Sigma-series product line...     1,000      1,000         --
  Other..............................................    (2,013)    (3,981)    (1,812)
                                                       --------   --------   --------
Other income (expense)...............................      (852)       158      6,152
                                                       --------   --------   --------
Income before income taxes...........................    27,172     34,461     55,609
Income tax expense...................................    11,080     19,321     21,884
                                                       --------   --------   --------
Net income...........................................  $ 16,092   $ 15,140   $ 33,725
                                                       ========   ========   ========
Basic net income per share...........................  $   0.88   $   0.78   $   1.77
                                                       ========   ========   ========
Diluted net income per share.........................  $   0.85   $   0.73   $   1.65
                                                       ========   ========   ========
Shares used in computing basic net income per share..    18,228     19,451     19,106
                                                       ========   ========   ========
Shares used in computing diluted net income per
  share..............................................    18,880     20,645     20,440
                                                       ========   ========   ========

</Table>



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


                                       40

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                 (IN THOUSANDS)


<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                         ---------------------------
                                                           2005      2006      2007
                                                         -------   -------   -------
<S>                                                      <C>       <C>       <C>
Net income.............................................  $16,092   $15,140   $33,725
Other comprehensive income (loss):
  Foreign currency translation adjustment..............   (1,602)    8,085     4,031
                                                         -------   -------   -------
Comprehensive income...................................  $14,490   $23,225   $37,756
                                                         =======   =======   =======

</Table>



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


                                       41

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

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

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2005       2006       2007
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Common stock, $.01 par value:
  Balance at beginning of period.....................  $    177   $    187   $    198
  Sale of 8,270, 42,177 and 39,931 shares of common
     stock to the Employee Stock Purchase Plans in
     2005, 2006 and 2007, respectively...............        --         --         --
  Retirement of 1,772,400 shares of treasury stock...        --         --        (18)
  Exercise of stock options and issuance of
     restricted share units..........................        10         11          9
                                                       --------   --------   --------
  Balance at end of period...........................       187        198        189
                                                       --------   --------   --------
Additional paid-in capital:
  Balance at beginning of period.....................   155,729    177,440    205,912
  Reclassification of deferred compensation upon
     adoption of SFAS No. 123(R).....................        --     (1,069)        --
  Retirement of 1,772,400 shares of treasury stock...        --         --    (59,121)
  Sale of 8,270, 42,177 and 39,931 shares of common
     stock to the Employee Stock Purchase Plans in
     2005, 2006 and 2007, respectively...............       112      1,047      1,216
  Exercise of 1,010,635, 980,936 and 804,703 stock
     options in 2005, 2006 and 2007, respectively....    17,422     18,826     15,473
  Amortization of stock option compensation..........        --      3,105      2,512
  Grant of restricted and deferred share units in
     2005, 2006 and 2007, respectively...............     1,428      3,129      3,873
  Income tax benefit related to stock options........     2,749      3,434      5,402
                                                       --------   --------   --------
  Balance at end of period...........................   177,440    205,912    175,267
                                                       --------   --------   --------
Deferred compensation:
  Balance at beginning of period.....................      (145)    (1,069)        --
  Reclassification of deferred compensation upon
     adoption of SFAS No. 123(R).....................        --      1,069         --
  Net issuance of 78,200 restricted share units in
     2005............................................    (1,428)        --         --
  Amortization of deferred compensation..............       504         --         --
                                                       --------   --------   --------
  Balance at end of period...........................    (1,069)        --         --
                                                       --------   --------   --------
Accumulated other comprehensive (loss) gain:
  Balance at beginning of period.....................    (7,818)    (9,420)    (1,335)
  Foreign currency translation adjustment............    (1,602)     8,085      4,031
                                                       --------   --------   --------
  Balance at end of period...........................    (9,420)    (1,335)     2,696
                                                       --------   --------   --------
Retained earnings (Accumulated deficit):
  Balance at beginning of period.....................   (19,484)    (3,392)    11,748
  Implementation of FIN 48...........................        --         --     (1,592)
  Net income.........................................    16,092     15,140     33,725
                                                       --------   --------   --------
  Balance at end of period...........................    (3,392)    11,748     43,881
                                                       --------   --------   --------
Treasury stock:
  Balance at beginning of period.....................        --         --         --
  Purchase of 2,125,500 shares of treasury stock.....        --         --    (71,819)
  Retirement of 1,772,400 shares of treasury stock...        --         --     59,139
                                                       --------   --------   --------
  Balance at end of period...........................        --         --    (12,680)
                                                       --------   --------   --------
Total stockholders' equity...........................  $163,746   $216,523   $209,353
                                                       ========   ========   ========

</Table>



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


                                       42

<PAGE>

                           SPSS INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2005       2006       2007
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Cash flows from operating activities:
  Net income.........................................  $ 16,092   $ 15,140   $ 33,725
     Adjustments to reconcile net income to net cash
       provided by operating activities:
     Depreciation and amortization...................    16,948     16,536     18,220
     Deferred income taxes...........................    (1,711)     9,844     10,627
     Excess tax benefit from share-based
       compensation..................................        --     (3,434)    (5,402)
     Amortization of share-based compensation........       504      6,704      7,772
     Asset impairment and cost management charges....        --      1,283      2,310
     Gain on sale of product line....................    (1,000)    (1,000)        --
     Tax benefit from stock option exercises.........     2,749         --         --
     Changes in assets and liabilities, net of
       effects of acquisitions:
       Accounts receivable...........................     3,984     (8,872)       (97)
       Inventories...................................      (125)       136         60
       Prepaid and other assets......................      (147)       676        623
       Accounts payable..............................     3,841     (3,382)     1,079
       Accrued expenses..............................    (1,488)     2,403      7,385
       Income taxes..................................     3,991      2,755      3,772
       Deferred revenue..............................     5,916      5,898      6,964
  Other, net.........................................     1,955      3,523     (2,148)
                                                       --------   --------   --------
Net cash provided by operating activities............    51,509     48,210     84,890
                                                       --------   --------   --------
Cash flows from investing activities:
  Capital expenditures...............................    (7,543)    (4,287)    (5,698)
  Capitalized software development costs.............    (9,021)   (12,761)   (13,232)
  Proceeds from the divestiture of Sigma-series
     product line....................................     1,000      1,000         --
  Purchase of business and intangibles...............      (780)        --         --
                                                       --------   --------   --------
Net cash used in investing activities................   (16,344)   (16,048)   (18,930)
                                                       --------   --------   --------
Cash flows from financing activities:
  Proceeds from issuance of long-term debt...........        --         --    150,000
  Debt issuance costs................................        --         --     (4,281)
  Purchase of common stock...........................        --         --    (71,819)
  Proceeds from stock option exercises and employee
     stock purchase plan.............................    17,544     19,884     16,698
  Tax benefit from stock option exercises............        --      3,434      5,402
  Net repayments under line-of-credit agreements.....    (2,509)    (3,372)        --
                                                       --------   --------   --------
Net cash provided by financing activities............    15,035     19,946     96,000
                                                       --------   --------   --------
Effect of exchange rates on cash.....................    (2,899)     3,687      4,767
                                                       --------   --------   --------
Net change in cash and cash equivalents..............    47,301     55,795    166,727
Cash and cash equivalents at beginning of period.....    37,107     84,408    140,203
                                                       --------   --------   --------
Cash and cash equivalents at end of period...........  $ 84,408   $140,203   $306,930
                                                       ========   ========   ========
Supplemental disclosures of cash flow information:
  Interest paid......................................  $    691   $    105   $  1,913
  Income taxes paid..................................     8,546      7,899      8,185
  Cash received from income tax refunds..............     4,496      1,889      2,089
  Purchases of common stock in accrued expenses......        --         --      7,380
</Table>



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


                                       43

<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.


                                       44

<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.

     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 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

                                       45

<PAGE>

labor hours for each contract. Management considers labor hours to be the best
available measure of progress on these contracts.

     We evaluate the criteria outlined in Emerging Issues Task Force (EITF)
Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent,
in determining whether it is appropriate to record the gross amount of sales and
related costs or the net amount earned. Generally, we are primarily obligated in
a transaction, subject to inventory risk, have latitude in establishing prices
and selecting suppliers, or have several but not all of these indicators. As
such, revenue is recorded gross.

     SPSS enters into arrangements which may consist of the sale of: (1)
licenses of the Company's software, (2) professional services and maintenance or
(3) 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.

     (1) 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. Annual licenses
         with maintenance renewable annually are recognized ratably over the
         term of the 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. 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
         typically has a 60-day return policy for these types of licenses and
         the Company calculates its return allowance using a 12-month rolling
         average 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.

     (2) 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.

     (3) 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,


                                       46

<PAGE>

         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.
Revenue allocated to undelivered maintenance under a perpetual license is
recognized ratably over the term of the initial maintenance period as a
component of license revenue.

  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 $1.6 million, $1.6 million and $1.7 million for the years ended
December 31, 2005, 2006 and 2007, 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>
                                                       2005     2006     2007
                                                      ------   ------   ------
<S>                                                   <C>      <C>      <C>
Basic weighted average common shares outstanding....  18,228   19,451   19,106
Dilutive effect of stock options....................     652    1,194    1,334
                                                      ------   ------   ------
Diluted weighted average common shares outstanding..  18,880   20,645   20,440
                                                      ======   ======   ======
Anti-dilutive shares not included in diluted EPS....     266       24        2
                                                      ======   ======   ======

</Table>


  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.


                                       47

<PAGE>

  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 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.

  EQUITY INCENTIVE PLANS

     The Company maintains one active equity incentive plan that is flexible and
allows various forms of equity incentives to be issued. On January 1, 2006, the
Company adopted the provisions of SFAS No. 123(R) using the modified prospective
method. The Statement requires entities to recognize compensation expense for
awards of equity instruments.

     Prior to the adoption of SFAS No. 123(R), the Company followed the
intrinsic value method in accordance with APB No. 25 to account for its employee
stock options and share-based awards during 2004 and 2005. Accordingly, no
compensation expense was recognized in those years for share-based awards
granted in connection with the issuance of employee stock options under the
Company's equity incentive plans; however, compensation expense was recognized
in connection with the issuance of restricted share units and stock options
granted to non-employees under the Company's equity incentive plans. The
adoption of SFAS No. 123(R) primarily resulted in a change in the Company's
method of recognizing the fair value of share-based compensation and estimating
forfeitures for all unvested awards. Specifically, the adoption of SFAS No.
123(R) resulted in the Company recording compensation expense for employee stock
options and employee share-based awards granted prior to the adoption using the
Black-Scholes pricing valuation model. See additional discussion at Note 15.

  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, 2007, the
Company had $24.9 million invested in an overnight investment in the form of
commercial paper. The Company places temporary cash investments with
institutions of high credit quality. 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 its cash concentration.
Consequently, no significant concentration of credit risk is considered to
exist. The Company held approximately $77.0 million and $96.2 million of cash
outside of the United States at December 31, 2006 and 2007, respectively.

  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
past due status, delinquency status, collection 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.


                                       48

<PAGE>

  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. The Company performed an
impairment test in the fourth quarter of 2006 and 2007 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.

  FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

     Financial Accounting Standards Board Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133"), as amended by
Financial Accounting Standards Board Statement No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities" ("SFAS No. 138"), and by
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," ("SFAS No. 149") requires
companies to recognize all of their derivative instruments as either assets or
liabilities at fair value in the statement of financial position. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
relationship and further, on the type of hedging relationship. For those
derivative instruments that are designated and qualify as hedging instruments, a
company must designate the hedging instrument, based upon the exposure being
hedged, as either a fair value hedge or a cash flow hedge.


                                       49

<PAGE>

     The Company accounts for derivative financial instruments in accordance
with SFAS No. 133 and related amendments. The Company recognizes all derivative
financial instruments, such as foreign exchange contracts, in the consolidated
financial statements at fair value. Changes in fair values of derivatives
accounted for as fair value hedges are recorded as a component of "Other
income/expense" in the Consolidated Statements of Income along with the portions
of the changes in the fair value of the hedged items that relate to the hedged
risk(s).

  DEBT EXPENSE

     Expenses incurred in issuing debt are amortized over the life of the
remaining debt and included as a component of interest expense.

  RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes -- an Interpretation of SFAS No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes." FIN 48 prescribes a recognition threshold and measurement of
a tax position taken or expected to be taken in an enterprise's tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest,
penalties, accounting in interim periods and disclosure related to uncertain
income tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company adopted FIN 48 as of January 1, 2007, as
required. The Company has total uncertain tax positions recorded of $13.0
million as of December 31, 2007. The impact of adopting FIN 48 was a reduction
to retained earnings and a corresponding decrease in deferred tax assets of $1.6
million. See Note 12 for further discussion.

     In June 2006, the FASB ratified a consensus opinion reached by the Emerging
Issues Task Force (EITF) on EITF Issue 06-3, "How Taxes Collected from Customers
and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation)." The guidance in EITF Issue
06-3 requires disclosure in interim and annual financial statements of the
amount of taxes on a gross basis, if significant, that are assessed by a
governmental authority that are imposed on and concurrent with a specific
revenue producing transaction between a seller and customer such as sales, use,
value added, and some excise taxes. Additionally, the income statement
presentation (gross or net) of such taxes is an accounting policy decision that
must be disclosed. The consensus in EITF Issue 06-3 is effective for interim and
annual reporting periods beginning after December 15, 2006. The Company adopted
EITF Issue 06-3 effective January 1, 2007. The Company presents sales tax on a
net basis in its consolidated financial statements. The adoption did not have a
material effect on the consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"). SFAS 157 provides guidance for using fair value to measure assets
and liabilities. The standard expands required disclosures about the extent to
which companies measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements on
earnings. SFAS 157 is effective for fiscal years beginning after November 15,
2007. The Company intends to adopt SFAS 157 effective January 1, 2008 and does
not expect the implementation to have a material effect on its consolidated
financial statements.

     In June 2007, the FASB ratified EITF Issue No. 07-03, "Accounting for
Nonrefundable Advance Payments for Goods and Services Received for Use in Future
Research and Development Activities." EITF 07-03 requires companies to defer
nonrefundable advance payments for goods and services and to expense that
advance payment as the goods are delivered or services are rendered. If the
Company does not expect to have the goods delivered or services performed, the
advance should be expensed. EITF 07-03 is effective for fiscal years beginning
after December 15, 2007. The Company intends to adopt EITF 07-03 effective
January 1, 2008 and does not expect the implementation to have a material effect
on its consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" (SFAS 141R). SFAS 141R establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS 141R is effective for financial
statements issued for fiscal

                                       50

<PAGE>

years beginning after December 15, 2008. The Company is currently evaluating the
potential impact of adoption of SFAS 141R on its consolidated financial
statements. However, the Company does not expect the adoption of SFAS 141R to
have a material effect on its consolidated financial statements.

     In December 2007, the FASB issued SFAS No. 160.  "Noncontrolling Interests
in Consolidated Financial Statements-an Amendment of ARB No. 51" (SFAS 160).
SFAS 160 establishes accounting and reporting standards pertaining to ownership
interests in subsidiaries held by parties other than the parent, the amount of
net income attributable to the parent and to the noncontrolling interest,
changes in a parent's ownership interest, and the valuation of any retained
noncontrolling equity investment when a subsidiary is deconsolidated. This
statement also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS 160 is effective for fiscal years beginning on or
after December 15, 2008. The Company is currently evaluating the potential
impact of adoption of SFAS 160 on its consolidated financial statements.
However, the Company does not expect the adoption of SFAS 160 to have a material
effect on its consolidated financial statements.

     In December 2007, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 110 Share-Based Payment (SAB 110). SAB 110
establishes the continued use of the simplified method for estimating the
expected term of equity based compensation. The simplified method was intended
to be eliminated for any equity based compensation arrangements granted after
December 31, 2007. SAB 110 is being published to help companies that may not
have adequate exercise history to estimate expected terms for future grants. The
Company does not expect the adoption of SAB 110 to have a material effect on its
consolidated financial statements

(2) DOMESTIC AND FOREIGN OPERATIONS

     Certain balance sheet information, net revenues and net income of
international subsidiaries as of and for the years ended December 31, 2005, 2006
and 2007 included in the consolidated financial statements are summarized as
follows (in thousands):

<Table>
<Caption>
                                                          DECEMBER 31,
                                                 ------------------------------
                                                   2005       2006       2007
                                                 --------   --------   --------
<S>                                              <C>        <C>        <C>
Working capital................................  $ 31,256   $ 54,315   $ 65,029
                                                 ========   ========   ========
Excess of noncurrent assets over noncurrent
  liabilities..................................  $ 16,007   $ 22,796   $ 23,830
                                                 ========   ========   ========
Net revenues...................................  $133,288   $151,780   $172,923
                                                 --------   --------   --------
Net income.....................................  $ 23,077   $ 14,375   $ 24,038
                                                 ========   ========   ========

</Table>




                                       51

<PAGE>

     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,
                                                 ------------------------------
                                                   2005       2006       2007
                                                 --------   --------   --------
<S>                                              <C>        <C>        <C>
United States..................................  $102,775   $109,752   $118,076
                                                 --------   --------   --------
United Kingdom.................................    31,911     34,047     38,665
The Netherlands................................    27,411     32,092     38,760
Other..........................................    39,321     45,398     51,985
                                                 --------   --------   --------
  Total Europe.................................    98,643    111,537    129,410
                                                 --------   --------   --------
Japan..........................................    22,416     25,446     26,120
Other..........................................    12,229     14,797     17,394
                                                 --------   --------   --------
  Total Pacific Rim............................    34,645     40,243     43,514
                                                 --------   --------   --------
Total International............................   133,288    151,780    172,924
                                                 --------   --------   --------
     Total.....................................  $236,063   $261,532   $291,000
                                                 ========   ========   ========

</Table>


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

<Table>
<Caption>
                                                             DECEMBER 31,
                                                          ------------------
                                                            2006      2007
                                                          -------   --------
<S>                                                       <C>       <C>
United States...........................................  $77,619   $ 81,764
                                                          -------   --------
United Kingdom..........................................    6,519      5,976
The Netherlands.........................................    8,141      7,995
Other...................................................    2,247      2,972
                                                          -------   --------
  Total Europe..........................................   16,907     16,943
                                                          -------   --------
Japan...................................................    1,736      2,455
Other...................................................      988      1,532
                                                          -------   --------
  Total Pacific Rim.....................................    2,724      3,987
                                                          -------   --------
Total International.....................................   19,631     20,930
                                                          -------   --------
     Total..............................................  $97,250   $102,694
                                                          =======   ========

</Table>


(3) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

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

<Table>
<Caption>
                                                             DECEMBER 31,
                                                         -------------------
                                                           2006       2007
                                                         --------   --------
<S>                                                      <C>        <C>
Property, equipment and leasehold improvements, at
  cost:
Furniture, fixtures, and office equipment..............  $ 15,707   $ 16,168
Computer equipment and software........................    70,355     74,798
Leasehold improvements.................................    16,518     17,334
                                                         --------   --------
Balance, cost -- end of year...........................   102,580    108,300
Less accumulated depreciation and amortization.........   (84,872)   (91,871)
                                                         --------   --------
Balance, net -- end of year............................  $ 17,708   $ 16,429
                                                         ========   ========

</Table>




                                       52

<PAGE>

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

<Table>
<Caption>
                                                             DECEMBER 31,
                                                          -----------------
                                                            2006      2007
                                                          -------   -------
<S>                                                       <C>       <C>
Balance, net -- beginning of year.......................  $20,441   $17,708
Additions...............................................    4,287     5,698
Asset write-offs........................................   (1,283)     (656)
Depreciation expense....................................   (6,318)   (6,491)
Foreign currency translation and other..................      581       170
                                                          -------   -------
Balance, net -- end of year.............................  $17,708   $16,429
                                                          =======   =======

</Table>


     During 2005, 2006 and 2007, SPSS recorded depreciation expense of $8.0
million, $6.3 million and $6.4 million, respectively, as a component of
operating expenses.

     During 2005, 2006 and 2007, SPSS capitalized $0.4 million, $0.1 million and
$0, respectively, and amortized $1.2 million, $1.0 million and $1.0 million,
respectively, of internal-use computer software.

     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.

     During 2006, the Company wrote off approximately $1.3 million of certain
software to a fair value of zero after the Company determined that the future
use of this software was no longer likely.

     During 2007, the Company wrote off approximately $0.7 million of leasehold
improvements that were no longer in use as a result of certain office
consolidations, as discussed in Note 13. The Company also identified
approximately $0.1 million of furniture, fixtures and office equipment and $0.9
million of computer equipment and software that were no longer in use, and had
been fully depreciated. Accordingly, these amounts were removed from the
property and equipment cost balances during 2007 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,
                                                         -------------------
                                                           2006       2007
                                                         --------   --------
<S>                                                      <C>        <C>
Product translations...................................  $ 11,041   $ 12,573
Acquired software technology...........................    14,800     17,095
Capitalized software development costs.................    40,209     43,845
                                                         --------   --------
Balance, cost -- end of year...........................    66,050     73,513
Accumulated amortization...............................   (34,467)   (39,373)
                                                         --------   --------
Balance, net -- end of year............................  $ 31,583   $ 34,140
                                                         ========   ========

</Table>




                                       53

<PAGE>

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

<Table>
<Caption>
                                                             DECEMBER 31,
                                                          ------------------
                                                            2006      2007
                                                          -------   --------
<S>                                                       <C>       <C>
Balance, net -- beginning of year.......................  $28,522   $ 31,583
Additions...............................................   12,761     13,232
Amortization expense charged to cost of license and
  maintenance revenues..................................   (9,899)   (10,705)
Foreign currency translation............................      199         30
                                                          -------   --------
Balance, net -- end of year.............................  $31,583   $ 34,140
                                                          =======   ========

</Table>


     During 2005, 2006 and 2007, SPSS recorded amortization expense of $8.7
million, $9.9 million and $10.7 million, respectively, charged to cost of
license and maintenance revenues.

     Total software development expenditures, including amounts expensed as
incurred, amounted to approximately $54.4 million, $64.4 million and $63.9
million for the years ended December 31, 2005, 2006 and 2007, respectively.

     During 2006 and 2007, the Company identified approximately $6.0 million and
$5.9 million, respectively, of capitalized software development costs that were
fully amortized versions of the Company's software products no longer in use.
Accordingly, these amounts were removed from the capitalized software balances
during 2006 and 2007 with an offsetting charge to accumulated amortization.

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

<Table>
<S>                                                               <C>
For the year ended December 31, 2008............................  $1,628
For the year ended December 31, 2009............................   1,174
For the year ended December 31, 2010............................     916
For the year ended December 31, 2011............................     793
For the year ended December 31, 2012............................     650
</Table>




                                       54

<PAGE>

(5) GOODWILL AND INTANGIBLE ASSETS

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

<Table>
<Caption>
                                                            DECEMBER 31,
                                         -------------------------------------------------
                                                   2006                      2007
                                         -----------------------   -----------------------
                                           GROSS                     GROSS
                                         CARRYING    ACCUMULATED   CARRYING    ACCUMULATED
                                          AMOUNT    AMORTIZATION    AMOUNT    AMORTIZATION
                                         --------   ------------   --------   ------------
<S>                                      <C>        <C>            <C>        <C>
Amortizable intangible assets:
  Other intangible assets -- Customer
     relationships.....................   $ 2,264       $(701)      $ 2,411      $(1,005)
  Other intangible
     assets -- Trademarks..............       400        (320)          400         (360)
Unamortizable intangible assets:
  Other intangible assets..............     1,827                     1,827
Goodwill...............................    41,923                    42,093
Aggregate amortization expense:
  2007.................................                                 344
Estimated amortization expense:
  2008.................................                                 335
  2009.................................                                 295
  2010.................................                                 295
  2011.................................                                  78
  2012.................................                                  78
</Table>


     The aggregate amortization expense for the years ended December 31, 2005,
2006 and 2007 was $0.2 million, $0.3 million and $0.3 million, respectively.

     The following tables present the changes in the carrying amount of goodwill
and other intangibles as of December 31, 2006 and December 31, 2007 (in
thousands):

<Table>
<Caption>
                                                             DECEMBER 31, 2006
                                                          ----------------------
                                                          GOODWILL   INTANGIBLES
                                                          --------   -----------
<S>                                                       <C>        <C>
Balance at beginning of year............................   $41,207      $3,627
Amortization expense....................................        --        (319)
Foreign currency translation and other..................       716         162
                                                           -------      ------
Balance at end of year..................................   $41,923      $3,470
                                                           =======      ======

</Table>



<Table>
<Caption>
                                                             DECEMBER 31, 2007
                                                          ----------------------
                                                          GOODWILL   INTANGIBLES
                                                          --------   -----------
<S>                                                       <C>        <C>
Balance at beginning of year............................   $41,923      $3,470
Amortization expense....................................        --        (344)
Foreign currency translation and other..................       170         147
                                                           -------      ------
Balance at end of year..................................   $42,093      $3,273
                                                           =======      ======

</Table>




                                       55

<PAGE>

(6) INTANGIBLE ASSETS

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

<Table>
<Caption>
                                                    2006      2007    USEFUL LIVES
                                                  -------   -------   ------------
<S>                                               <C>       <C>       <C>
Trademarks......................................  $   400   $   400      10 years
Customer relationships..........................    2,264     2,411    7-10 years
                                                  -------   -------
                                                    2,664     2,811
Less accumulated amortization...................   (1,021)   (1,365)
                                                  -------   -------
                                                    1,643     1,446
Unamortizable trademarks........................    1,827     1,827    Indefinite
                                                  -------   -------
Total intangible assets, net....................  $ 3,470   $ 3,273
                                                  =======   =======

</Table>


(7) 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 product line 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 granted
Systat an option to purchase the licensed property.

     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 license payment made, as noted above. Systat made a final payment
of $1.0 million to SPSS in 2006 to exercise its option to purchase the licensed
property. This $1.0 million payment was recorded as other income.

(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.


                                       56

<PAGE>

     The following is a schedule of future noncancellable minimum lease payments
required under operating leases as of December 31, 2007 (in thousands):

<Table>
<Caption>
YEAR ENDING DECEMBER 31,                                          AMOUNT
------------------------                                         -------
<S>                                                              <C>
2008...........................................................  $10,996
2009...........................................................   10,279
2010...........................................................    8,372
2011...........................................................    7,555
2012...........................................................    7,024
Thereafter.....................................................    4,695
                                                                 -------
Total operating lease obligation...............................  $48,921
                                                                 =======

</Table>


     There are certain renewal options with respect to the operating leases. If
the Company does not exercise any such options, the leased space will be
returned to the lessors at the end of the lease term. In accordance with SFAS
No. 13, when cash payments are not made on a straight-line basis, the Company
recognizes rent expense on a straight-line basis over the lease term. Rent
expense related to operating leases was approximately $12.6 million, $12.2
million and $12.6 million during the years ended December 31, 2005, 2006 and
2007, respectively.

  HYPERION SOLUTIONS

     In January 2007, SPSS renewed its contract with Hyperion Solutions. This
renewal extended the term of the Company's contract with Hyperion until 2012.
Under the revised agreement, SPSS has the non-exclusive right to license, market
and distribute earlier releases of Hyperion's Essbase and Analyzer software.
Such right will not extend to Release 9 or subsequent releases of Hyperion's
software. SPSS will, however, continue to port future releases of the software
to the i-Series computer platform and provide customer support for that software
in exchange for a portion of the support fees charged to end-users. The risk to
the Company is that a breach to this agreement may affect certain maintenance
revenue of $18.5 million.

     Following the acquisition of Hyperion by Oracle Corporation, the Company's
contract with Hyperion has been assigned to Oracle USA, Inc.

  BANTA GLOBAL TURNKEY

     Banta Global Turnkey manufactures, packages and distributes a majority of
the Company's software products in the United States and multiple international
locations. 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. The risk to the
Company is that a breach to this agreement may temporarily affect shipments of
the Company's products to its customers of up to one month.

  LITIGATION

     Basu 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 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

                                       57

<PAGE>

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.

     Trademark Litigation

     On January 3, 2008, the Company filed a complaint for declaratory judgment
in the U.S. District Court for the Northern District of Illinois against Norman
H. Nie and C. Hadlai Hull. The filing of the complaint was in response to recent
assertions by Dr. Nie that the Company's use of the SPSS trademark is subject to
a License Agreement (the "Agreement") dated September 30, 1976 between a
predecessor of the Company, as licensee, and Norman H. Nie and C. Hadlai Hull,
as licensors. Dr. Nie has stated his desire to enforce his alleged rights under
the Agreement, which he claims include the right to inspect and approve products
sold under the SPSS trademark and to obtain other information regarding those
products. The complaint seeks a declaratory judgment that Dr. Nie and Mr. Hull
are estopped from enforcing any rights under the Agreement and that the Company
shall be deemed to have an irrevocable, assignable and exclusive license to use
the SPSS trademark.

     On January 28, 2008, Dr. Nie and Mr. Hull filed a counterclaim against the
Company. The counterclaim asserts that the Company has repudiated the Agreement
and that the Company's use of the SPSS trademark is unauthorized and constitutes
an infringement on their rights as owners of the trademark. The counterclaim
seeks an injunction prohibiting the Company from continuing to use the SPSS
trademark and an award of damages, costs and attorneys fees.

     On February 15, 2008, the Company filed its answer to the counterclaim. In
its answer, the Company denies liability for trademark infringement and asserts
that Dr. Nie and Mr. Hull are barred from asserting the counterclaim on several
grounds, including but not limited to the doctrines of estoppel, laches and
waiver.

(9) OTHER ACCRUED LIABILITIES

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

<Table>
<Caption>
                                                            2006      2007
                                                          -------   -------
<S>                                                       <C>       <C>
Payroll.................................................  $10,598   $10,601
Purchase of common stock................................       --     7,380
Rent....................................................    3,059     3,110
Customer advances.......................................    2,282     3,432
Royalties...............................................    1,966     1,375
Other accrued expenses..................................    6,298     7,090
                                                          -------   -------
Total other accrued liabilities.........................  $24,203   $32,988
                                                          =======   =======

</Table>


(10) FINANCING ARRANGEMENTS AND HEDGING ACTIVITIES

     The Company accounts for derivative financial instruments in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Company recognizes all derivative financial instruments, such
as foreign exchange contracts, in the consolidated financial statements at fair
value. Changes in fair values of derivatives accounted for as fair value hedges
are recorded in income along with the portions of the changes in the fair value
of the hedged items that relate to the hedged risk(s).

     The Company is exposed to risk from fluctuations in foreign currency
exchange rates. Since a substantial portion of the Company's operations and
revenue occur outside of 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. Additionally, these changes can significantly
affect intercompany balances that are denominated in different currencies.

     To reduce this risk, the Company entered into forward contracts during the
third quarter of 2006 for the purpose of hedging future foreign currency
exposure on intercompany balances between certain of its subsidiaries. The

                                       58

<PAGE>

objective for holding the derivative instruments was to eliminate or reduce the
impact of these exposures. The principal currency hedged was the Japanese Yen
relative to the British Pound with a notional weighted average exchange rate
between the currencies of 212.12. These contracts called for the purchase of
local currencies at a specified future date to settle the intercompany balance
between the Company's U.K. and Japan-based subsidiaries. The settlement date for
these contracts was June 18, 2007. The Company does not use derivative
instruments for speculative or trading purposes.

     On the date the contracts were entered into, the Company designated them as
fair value hedges. The Company formally documented its hedging relationship,
including identification of the hedging instruments and the hedged items, as
well as its risk management objectives and strategies for undertaking the hedge
transactions. Additionally, at inception, the Company formally assessed that the
transactions will be highly effective in offsetting changes in the fair value of
the hedged items.

     The change in the fair value of the contracts between the date they were
entered into and June 18, 2007 was recorded as a current asset in the
Consolidated Balance Sheets. The fair value was based upon foreign exchange spot
rates at the end of the period. The total gain that resulted from the change in
fair value was recorded as a component of other income/expense in the
Consolidated Statements of Income. As of the settlement date, the total change
in fair value of the instruments was $0.4 million.

     As of December 31, 2007, the Company had no outstanding forward contract
agreements.

     On March 19, 2007, the Company issued $150 million aggregate principal
amount of 2.50% Convertible Subordinated Notes due 2012 (the "Convertible
Notes") in a private placement. The Convertible Notes bear interest at a rate of
2.50% per year payable semiannually in arrears on March 15 and September 15 of
each year. The Convertible Notes will mature on March 15, 2012.

     The Convertible Notes will be convertible into cash and, if applicable,
shares of the Company's common stock, based on an initial conversion rate of
21.3105 shares of common stock per $1,000 principal amount of Convertible Notes
(which is equal to an initial conversion price of approximately $46.93 per
share) upon the occurrence of certain events.

     Interest on the Convertible Notes is included as a component of interest
expense in the consolidated financial statements. As of December 31, 2007, the
Convertible Notes were not convertible and the holders of the Convertible Notes
had no right to require the Company to repurchase the Convertible Notes.

     In connection with the issuance of the Convertible Notes, the Company used
approximately $50 million of the net proceeds of the offering to purchase 1.5
million shares of its outstanding common stock. The Company then retired the
purchased common stock during the second quarter of 2007.

     The Company's four year, $25.0 million credit facility with Wells Fargo
Foothill, Inc. (f/k/a Foothill Capital Corporation) expired by its terms on
March 31, 2007 and was not renewed.

(11) OTHER INCOME (EXPENSE)

     Other income consists of the following (in thousands):

<Table>
<Caption>
                                                      YEAR ENDED DECEMBER 31,
                                                    ---------------------------
                                                      2005      2006      2007
                                                    -------   -------   -------
<S>                                                 <C>       <C>       <C>
Interest and investment income....................  $   990   $ 3,359   $11,557
Interest expense..................................     (829)     (220)   (3,593)
                                                    -------   -------   -------
Net interest and investment income................      161     3,139     7,964
                                                    -------   -------   -------
Gain on divestiture of Sigma-series product line..    1,000     1,000        --
Exchange loss on foreign currency transactions....   (2,013)   (3,981)   (1,812)
                                                    -------   -------   -------
Other, net........................................   (1,013)   (2,981)   (1,812)
                                                    -------   -------   -------
Total other income (expense)......................  $  (852)  $   158   $ 6,152
                                                    =======   =======   =======

</Table>




                                       59

<PAGE>

     In 2003, the Company recognized a gain of $8.6 million on the divestiture
of the Sigma-Series product line. During 2004, SPSS recorded a $0.1 million
adjustment to reduce certain professional fee accruals associated with this
transaction. During 2005, the Company recognized income of $1.0 million related
to the final license payment from Systat related to the divestiture of the
Sigma-series product line. Systat made a final payment of $1.0 million to SPSS
in 2006 to exercise its option to purchase the licensed property. See additional
discussion in Note 7.

(12) INCOME TAXES

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

<Table>
<Caption>
                                                     YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                     2005      2006      2007
                                                   -------   -------   -------
<S>                                                <C>       <C>       <C>
Domestic.........................................  $(2,120)  $13,545   $21,883
Foreign..........................................   29,292    20,916    33,726
                                                   -------   -------   -------
Pretax income....................................  $27,172   $34,461   $55,609
                                                   =======   =======   =======

</Table>


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

<Table>
<Caption>
                                                   CURRENT   DEFERRED    TOTAL
                                                   -------   --------   -------
<S>                                                <C>       <C>        <C>
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
                                                   =======    =======   =======
Year ended December 31, 2006
  U.S. Federal...................................  $ 2,753    $10,128   $12,881
  State..........................................      451       (552)     (101)
  Foreign........................................    7,530       (989)    6,541
                                                   -------    -------   -------
  Income tax expense.............................  $10,734    $ 8,587   $19,321
                                                   =======    =======   =======
Year ended December 31, 2007
  U.S. Federal...................................  $ 6,572    $ 4,538   $11,110
  State..........................................      790        299     1,086
  Foreign........................................    8,886        802     9,688
                                                   -------    -------   -------
  Income tax expense.............................  $16,248    $ 5,639   $21,884
                                                   =======    =======   =======

</Table>




                                       60

<PAGE>

     For the years ended December 31, 2005, 2006 and 2007 the reconciliation of
the statutory Federal income tax rate to the Company's effective tax rate is as
follows (in thousands):

<Table>
<Caption>
                                                      YEAR ENDED DECEMBER 31,
                                                   ----------------------------
                                                     2005       2006      2007
                                                   --------   -------   -------
<S>                                                <C>        <C>       <C>
Statutory Federal income tax rate................        35%       35%       35%
                                                   --------   -------   -------
Income taxes using the Federal statutory rate....  $  9,510   $12,061   $19,463
State income taxes, net of Federal tax benefit...      (438)      295       602
Foreign taxes at net rates different from U.S.
  Federal rates..................................    (3,074)     (591)   (1,690)
Deemed income from foreign operations............     6,989     2,178     4,348
Dividends from foreign affiliates................        --     2,987     4,472
Foreign tax credit...............................   (17,007)    1,281    (8,767)
Research and development credit..................        --      (400)   (1,384)
Net operating loss...............................    13,664        --        --
Nondeductible costs including meals and
  entertainment..................................      (143)      226       609
Extra territorial income and domestic
  manufacturing deduction........................      (160)     (263)       --
Prior year tax refunds / Prior period
  adjustments....................................      (963)       --        --
Change in valuation allowance....................     3,677     1,966     2,594
Other, net.......................................      (975)     (419)    1,637
                                                   --------   -------   -------
Income tax expense...............................  $ 11,080   $19,321   $21,884
                                                   ========   =======   =======

</Table>


     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets/(liabilities) at December 31, 2006 and 2007,
are presented below (in thousands):

<Table>
<Caption>
                                                           2006       2007
                                                         --------   --------
<S>                                                      <C>        <C>
Deferred revenues......................................  $ 13,300   $ 14,777
Foreign tax credit carryforwards.......................    15,108     15,474
Research and experimentation credit carryforwards......     3,202      3,787
AMT credits............................................       115        136
Acquisition-related items..............................     5,734      5,803
Depreciation, amortization and capitalized interest....    (2,308)    (2,539)
Capitalized software costs.............................    (9,121)    (9,776)
Net operating loss carryforwards.......................    62,390     61,747
Foreign currency loss..................................     1,556        298
Stock Based Compensation...............................     2,016      3,286
Allowances, accruals and other.........................     4,417      2,349
                                                         --------   --------
Total gross deferred income taxes......................    96,409     95,342
  Less valuation allowance.............................   (64,727)   (69,431)
                                                         --------   --------
Net deferred income tax asset..........................  $ 31,682   $ 25,911
                                                         ========   ========
Balance sheet classification:
  Current deferred income tax asset....................  $  3,784   $  3,964
  Noncurrent deferred income tax asset.................    28,714     22,731
  Current deferred income tax liability................       (21)        --
  Noncurrent deferred income tax liability.............      (795)      (784)
                                                         --------   --------
Net deferred income taxes..............................  $ 31,682   $ 25,911
                                                         ========   ========

</Table>




                                       61

<PAGE>

     In assessing the realization 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, taxable income in prior carry
back years, tax planning strategies and projected future taxable income in
making this assessment. During the fourth quarter 2007, the Company reduced the
valuation allowance against the foreign net operating losses, based on the fact
that some foreign entities had a profitable year and anticipate profitability
going forward. The company will be able to utilize prior years net operating
losses against the income. The Company has reduced the valuation allowance on
the balance sheet in the amount of $0.2 million and has recognized an offsetting
benefit by reducing income tax expense in 2007.

     As of December 31, 2007, SPSS has U.S. net operating loss carryforwards of
approximately $94.2 million, the majority of which begins to expire in 2021. The
Company has provided a valuation allowance on $90.8 million of the U.S. pre-tax
operating loss carryforwards. In addition, as of December 31, 2007, the Company
has foreign pre-tax operating loss carryforwards of approximately $80.5 million
against which the Company has provided a valuation allowance on $74.3 million.

     At December 31, 2007, the Company has foreign tax credit carryforwards of
$15.5 million, which begin to expire in 2010. The Company has a valuation
allowance of $10.2 million against these credits.

     As of December 31, 2007, SPSS had a research and experimentation credit
carryforward of approximately $3.8 million, which begins to expire in 2010. The
Company has a valuation allowance of $1.5 million, against these credits.

     Federal income and foreign withholding taxes have not been provided on
$108.9 million of undistributed earnings of international subsidiaries of which
$69.1 million has been previously 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 2006 and prior years because in accordance with
APB 23, the Company 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. At
December 31, 2007, a deferred income tax liability relating to Federal income
and foreign withholding taxes have not been provided on $108.8 million of
undistributed earnings of international subsidiaries of which $69.1 million has
been previously taxed in the United States because the Company currently does
not expect to remit those earnings in the foreseeable future. The Company has
recognized a deferred tax asset of $0.2 million for the undistributed earnings
of its Japanese subsidiary as the Company currently expects to remit those
earnings in the foreseeable future.

     In June 2006, the FASB issued Interpretation No. 48 (FIN 48), "Accounting
for Uncertainty in Income Taxes -- an Interpretation of SFAS No. 109." FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, "Accounting
for Income Taxes." FIN 48 prescribes a recognition threshold and measurement of
a tax position taken or expected to be taken in an enterprise's tax return. In
addition, FIN 48 provides guidance on derecognition, classification, interest,
penalties, accounting in interim periods and disclosure related to uncertain
income tax positions. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company adopted FIN 48 as of January 1, 2007, as
required. The Company has total uncertain tax positions recorded of $13.0
million as of December 31, 2007. The impact of adopting FIN 48 was a reduction
to retained earnings and a corresponding decrease in deferred tax assets of $1.6
million.


                                       62

<PAGE>

     Total amount of unrecognized tax benefits that would affect our effective
tax rate if recognized is $12.5 million as of December 31, 2007 and $9.8 million
as of January 1, 2007. A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows (in thousands):

<Table>
<S>                                                              <C>
Unrecognized tax benefits balance at January 1, 2007...........  $ 9,768
Gross increase for tax positions from prior year...............    3,182
Gross decrease for tax positions from prior year...............       --
Settlements with taxing authorities............................       --
Decreases due to lapse of statute of limitations...............       --
                                                                 -------
Unrecognized tax benefits balance at December 31, 2007.........  $12,950
                                                                 =======

</Table>


     The Company's unrecognized tax benefits relate to U.S. federal, U.S. state
and foreign jurisdictions. The Company does not expect these unrecognized tax
benefits to change significantly over the next twelve months. The Company files
tax returns related to U.S. federal, U.S. state, and foreign jurisdictions. The
Internal Revenue Service in the U.S. is currently examining tax returns for the
periods December 31, 2002, 2003, and 2004. The Company is also under examination
in the U.K. for the December 31, 2005 tax period and is under audit in selected
states as well.

(13) COST MANAGEMENT PROGRAMS

     During the fourth quarter 2006, the Company incurred expenses totaling $0.9
million related to the closure of its Amsterdam facility. These costs included
lease termination costs, severance payments for fifteen employees and a loss on
the disposal of surplus fixed assets. These costs are primarily recorded as a
component of Research and Development expense in the Consolidated Statements of
Income. As of December 31, 2007, the Company has remaining approximately $0.3
million in liabilities related to these expenses and expects the liabilities to
be paid in early 2008.

     During 2007, the Company incurred expenses totaling $4.6 million related to
a management reorganization and a planned consolidation of certain research and
development facilities. These costs principally included employee severance
costs, lease exit costs and the write-off of leasehold improvements. These costs
are primarily recorded as a component of Research and Development expense in the
Consolidated Statements of Income. As of December 31, 2007, the Company has
remaining approximately $0.8 million in other accrued liabilities and $0.9
million in other noncurrent liabilities related to these expenses and expects
the liabilities to be paid by 2010.

(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, $0.4 million and $0.3 million for 2005, 2006, and 2007,
respectively. These matching contributions were recorded as compensation
expense.

     At the annual stockholders' meeting held on June 15, 2005, the SPSS
stockholders approved a 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 40
thousand shares issued under this qualified plan during 2007.


                                       63

<PAGE>

(15) STOCK COMPENSATION PLANS

  SHARE-BASED COMPENSATION

     In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment
("SFAS No. 123(R)" or the "Statement"). This Statement is a revision of SFAS No.
123, Accounting for Stock-Based Compensation ("SFAS No. 123"), and supersedes
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB No. 25"), and its related implementation guidance. On January 1,
2006, the Company adopted the provisions of SFAS No. 123(R) using the modified
prospective method.

     Share-based compensation expense, including expense related to restricted
share units, under the provision of SFAS No. 123(R) and APB No. 25 was comprised
as follows (in thousands) :

<Table>
<Caption>
                                                         FOR THE YEAR ENDED
                                                            DECEMBER 31,
                                                       ----------------------
                                                       2005    2006     2007
                                                       ----   ------   ------
<S>                                                    <C>    <C>      <C>
Sales, Marketing and Services........................  $ --   $2,022   $1,406
Research and Development.............................    --    1,425    1,302
General and Administrative...........................   504    3,257    5,064
                                                       ----   ------   ------
Total share-based compensation expense...............  $504   $6,704   $7,772
                                                       ====   ======   ======

</Table>


     During 2007, the Company revised certain accounting estimates related to
estimated forfeitures of share-based compensation expense. The adjustment to
share-based compensation expense was primarily the result of employee
terminations during the second and third quarters of 2007. As a result, the
Company decreased its share-based compensation expense by $0.8 million in 2007.
This resulted in lower expense of $0.4 million recorded in each of the "Sales,
Marketing and Services" and "Research and Development" line captions on the
Company's Consolidated Statements of Income.

     Results for fiscal year 2005 have not been restated as the Company adopted
the provisions of SFAS No. 123(R) using the modified prospective method. Had
compensation expense for employee stock options and employee share-based awards
under the Company's equity incentive plans been determined based on fair value
at the grant date consistent with SFAS No. 123, the Company's net income and
earnings per share for the year ended December 31, 2005 would have been reduced
to the pro forma amounts indicated below (in thousands, except share data):

<Table>
<Caption>
                                                            FOR THE YEAR ENDED
                                                               DECEMBER 31,
                                                                   2005
                                                            ------------------
<S>                                                         <C>
Net income, as reported...................................        $16,092
Add:
  Stock-based employee compensation cost, net of related
     tax, included in net income, as reported.............            281
Deduct:
  Total stock-based employee compensation expense
     determined under the fair value based method for all
     awards, net of related taxes.........................         (2,536)
                                                                  -------
Pro forma net income......................................        $13,837
                                                                  =======
Income per share:
  Basic-- as reported.....................................        $  0.88
  Basic-- pro forma.......................................        $  0.76
  Diluted-- as reported...................................        $  0.85
  Diluted-- pro forma.....................................        $  0.73
</Table>




                                       64

<PAGE>

     For purposes of calculating the compensation expense consistent with SFAS
No. 123(R), the fair value of each grant is estimated on the date of grant using
the Black-Scholes option-pricing model. The following weighted-average
assumptions were used:

<Table>
<Caption>
                                                 FOR THE YEARS ENDED DECEMBER 31,
                                             ---------------------------------------
                                                 2005          2006          2007
                                             -----------   -----------   -----------
<S>                                          <C>           <C>           <C>
Expected volatility........................        37.49%        37.09%        45.20%
Expected dividend yield....................           --%           --%           --%
Expected risk-free interest rate...........         4.06%         4.92%         4.54%
Expected term of options...................   8.00 years    6.15 years    5.89 years
Maximum contractual term...................     10 years      10 years      10 years
Weighted average grant date fair value of
  options
  granted..................................  $      9.61   $     14.83   $     17.57
</Table>


     The Company uses historical data to estimate volatility, the expected term
and forfeitures of awards due to employee terminations in order to estimate
compensation cost for awards expected to vest.

  EQUITY INCENTIVE PLANS

     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 and, again, in April 2006. The plan
authorizes the Board of Directors to award stock options and a variety of other
equity incentives to directors, officers, 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 4.4 million shares reserved for issuance upon the
exercise of option rights that qualify as nonqualified stock options,
appreciation rights or as restricted shares.


                                       65

<PAGE>

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

<Table>
<Caption>
                                            2005                2006                       2007
                                     ------------------  ------------------  -------------------------------
                                               WEIGHTED            WEIGHTED            WEIGHTED    WEIGHTED
                                               AVERAGE             AVERAGE             AVERAGE     AVERAGE
                                               EXERCISE            EXERCISE            EXERCISE   REMAINING
                                                PRICE               PRICE               PRICE    CONTRACTUAL
                                     OPTIONS  PER SHARE  OPTIONS  PER SHARE  OPTIONS  PER SHARE      LIFE
                                     -------  ---------  -------  ---------  -------  ---------  -----------
<S>                                  <C>      <C>        <C>      <C>        <C>      <C>        <C>
Outstanding at beginning of year...    4,695    $18.87    3,263     $18.95    2,177     $18.76       5.46
  Granted..........................      140     17.46       35      33.57       40      36.72       9.49
  Forfeited and expired............     (562)    20.92     (140)     23.83      (60)     19.81       7.04
  Exercised........................   (1,010)    17.28     (981)     19.21     (805)     19.24       3.47
                                      ------    ------    -----     ------    -----     ------
Outstanding at end of year.........    3,263    $18.95    2,177     $18.76    1,352     $18.96       5.10
                                      ======    ======    =====     ======    =====     ======

</Table>



<Table>
<Caption>
                                                        FOR THE YEARS ENDED
                                                           DECEMBER 31,
                                                    --------------------------
                                                     2005      2006      2007
                                                    ------   -------   -------
<S>                                                 <C>      <C>       <C>
Weighted average grant-date fair value of stock
  options granted.................................  $ 8.77   $ 14.83   $ 17.57
                                                    ======   =======   =======
Total fair value of stock options vested..........   6,007     3,892     2,637
                                                    ======   =======   =======
Total intrinsic value of stock options exercised..   8,726    14,165    17,568
                                                    ======   =======   =======

</Table>



<Table>
<Caption>
                                                              WEIGHTED    WEIGHTED
                                                               AVERAGE     AVERAGE
                                                             GRANT DATE   EXERCISE
                                                   OPTIONS   FAIR VALUE     PRICE
                                                   -------   ----------   --------
<S>                                                <C>       <C>          <C>
Non-vested options at December 31, 2007..........     124       $9.50      $18.80
                                                    =====       =====      ======
Vested options at December 31, 2007..............   1,228       $9.62      $18.98
                                                    =====       =====      ======

</Table>


     The aggregate intrinsic value of stock options outstanding as of December
31, 2007 was $25.6 million.

     Additional information regarding stock options that are exercisable at the
end of each fiscal year is as follows (in thousands, except per share data):

<Table>
<Caption>
                                                        FOR THE YEARS ENDED
                                                           DECEMBER 31,
                                                    --------------------------
                                                     2005      2006      2007
                                                    ------   -------   -------
<S>                                                 <C>      <C>       <C>
Options exercisable at year end...................   2,309     1,793     1,228
Weighted average exercise price per share.........  $19.75   $ 19.14   $ 18.98
Weighted average remaining contractual life.......    5.34      5.05      5.61
Aggregate intrinsic value.........................  $5,719   $20,053   $23,303
</Table>


     The following table summarizes information about stock options outstanding
at December 31, 2007:


                                       66

<PAGE>

<Table>
<Caption>
                                        WEIGHTED AVERAGE
RANGE OF EXERCISE           OPTIONS         REMAINING      WEIGHTED AVERAGE     OPTIONS     WEIGHTED AVERAGE
PRICES                    OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
-----------------         -----------   ----------------   ----------------   -----------   ----------------
                                           (OPTION DATA IN THOUSANDS, EXCEPT PER SHARE DATE)
<S>                       <C>           <C>                <C>                <C>           <C>
4.50  - 6.91...........          1            0.68                5.51               1             5.51
11.63 - 15.98..........        436            6.17               14.61             380            14.57
16.00 - 17.25..........        222            5.98               16.96             199            17.01
17.50 - 19.09..........        234            4.37               18.76             229            18.77
20.50 - 23.25..........        321            3.39               21.27             291            21.18
25.25 - 36.78..........        136            5.59               30.43             126            29.95
40.91 - 92.78..........          2            2.77               74.46               2            74.46
                             -----                              ------           -----           ------
Total Stock Options....      1,352            5.10              $18.96           1,228           $18.98
                             =====            ====              ======           =====           ======

</Table>


     The Company has one active equity incentive plan with 1.8 million shares
available for grant at December 31, 2007.

  RESTRICTED AND DEFERRED SHARE UNITS

     The Company began issuing restricted share units (RSUs) in 2005. Each RSU
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 or
four year period. The Company also issues deferred share units (DSUs) to its
directors on an annual basis. The DSUs are similar to the RSUs, except that
under the terms of the equity incentive plan the DSUs that have been granted
vest either immediately or, with respect to those grants made after 2006, on the
earlier of the one year anniversary of the grant date or the date on which a
director's directorship terminates other than for cause. In either case, the
underlying shares are not delivered until a director leaves the Board of
Directors. Compensation expense for both RSUs and DSUs is the product of the
number of shares issued and the market value at the time of issuance. The RSUs
are structured as deferred compensation and are being amortized on a straight-
line basis over the related vesting period. DSUs granted in 2006 vested
immediately and, therefore, the expense was recognized immediately. For DSUs
granted in 2007, the expense is amortized on a straight-line basis over the
related vesting period. The vesting period for the 2007 DSU grants is based on
the terms of the equity incentive plan as detailed above. As the RSUs vest, the
holder has the option to surrender RSUs as consideration for taxes associated
with the transaction. In 2006 and 2007, there were approximately 11 thousand and
31 thousand RSUs, respectively, surrendered for taxes. As of December 31, 2007,
there was approximately $9.4 million of unrecognized compensation cost related
to RSUs that will be recognized over an estimate weighted average period of 2.72
years.

     Additional information regarding RSUs and DSUs is as follows (in thousands,
except fair value data):

<Table>
<Caption>
                                                   WEIGHTED AVERAGE          WEIGHTED AVERAGE          WEIGHTED AVERAGE
                                            2005      FAIR VALUE      2006      FAIR VALUE      2007      FAIR VALUE
                                            ----   ----------------   ----   ----------------   ----   ----------------
<S>                                         <C>    <C>                <C>    <C>                <C>    <C>
Outstanding at beginning of year.........    --             --          78        $18.20         273        $32.03
Share units granted......................    84         $18.10         250        $33.88         364        $35.35
Share units forfeited....................    (6)        $16.64         (18)       $25.91        (112)       $ 9.77
Share units vested.......................    --             --         (37)       $18.29         (96)       $ 8.11
                                             --         ------         ---                      ----
Outstanding at end of year...............    78         $18.20         273        $32.03         429        $43.07
                                             ==         ======         ===        ======        ====        ======

</Table>


     The total amount of RSU and DSU expense included in the total share-based
compensation expense noted above is $3,449 and $5,072 in 2006 and 2007,
respectively.

(16) COMMON STOCK

     Authorized Capital Stock.  Under the Company's certificate of
incorporation, its authorized capital stock consists of 50,000,000 shares of
common stock, $0.01 par value per share.


                                       67

<PAGE>

     Voting Rights.  Each holder of the Company's common stock is entitled to
one vote for each share of common stock held of record on the applicable record
date in the election of directors and on all other matters submitted to a vote
of stockholders. Holders of the Company's common stock do not have cumulative
voting rights.

     Dividend Rights; Rights Upon Liquidation.  The holders of the Company's
common stock are entitled to receive pro rata, from funds legally available,
dividends when and as declared by resolution of the board of directors. In the
event of liquidation, each share of the Company's common stock is entitled to
share pro rata in any distribution of the Company's assets after provision for
the payment of all liabilities.

     Other Matters.  Holders of the Company's common stock have no preemptive,
conversion or other subscription rights to purchase, subscribe for or otherwise
acquire any unissued or treasury shares or other securities. There are no
redemption rights or sinking fund provisions with respect to the common stock.
Holders of common stock are not subject to further call or assessment.

     Common Stock Purchase Rights.  A common stock purchase right is attached to
each share of the Company's common stock. This common stock purchase right
entitles its holder to purchase from the Company one share of common stock at a
price of $175 per share upon the earlier to occur of (i) 10 days following a
public announcement that a person has acquired beneficial ownership of 15% or
more of the outstanding shares of the Company's common stock or (ii) 10 business
days following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer by a person that would result in such person
becoming the beneficial owner of 15% or more of the outstanding shares of the
Company's common stock. Until such time, these common stock purchase rights are
not exercisable and are not freely tradable separate from the common stock.

     At such time as a person acquires beneficial ownership of 15% or more of
the outstanding shares of the Company's common stock (such person being referred
to as an "acquiring person") then each holder of a common stock purchase right,
other than the acquiring person, shall have the right to receive, upon
exercising the right, that number of shares of common stock having a market
value of two times the exercise price of the common stock purchase right. The
common stock purchase rights will expire on June 18, 2008 unless their
expiration date is extended or unless the common stock purchase rights are
earlier redeemed. The Company may redeem the common stock purchase rights, in
whole but not in part, at a price of $0.01 per common stock purchase right at
any time before they become exercisable.

(17) COMMON STOCK PURCHASED

     In March 2007, in connection with the issuance of the Notes discussed in
Note 10, the Company purchased 1.5 million shares of its outstanding common
stock using approximately $50.0 million of the net proceeds from the sale of the
Notes. These 1.5 million shares of outstanding common stock were retired in
2007.

     In April 2007, the Company's Board of Directors authorized the purchase of
up to 2 million shares of issued and outstanding common stock. During November
and December of 2007, the Company purchased 607 thousand shares of its issued
and outstanding common stock at a cost of $21.8 million under this program. The
Company retired 254 thousand shares of this purchased common stock in 2007. 353
thousand shares of purchased common stock remained in treasury as of December
31, 2007 and are reflected as a reduction of stockholders' equity under the
caption "Treasury Stock."


                                       68

<PAGE>

(18) 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,
                               2006       2006        2006       2006       2007       2007        2007       2007
                             --------   --------   ---------   --------   --------   --------   ---------   --------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                          <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>
Net revenues:
  License Fees.............   $29,873    $29,312    $30,013     $35,819    $34,972    $32,366    $34,477     $42,139
  Maintenance..............    26,063     27,428     27,970      27,816     28,926     30,449     28,475      30,462
  Services.................     6,290      6,739      6,701       7,508      6,268      6,107      9,328       7,031
                              -------    -------    -------     -------    -------    -------    -------     -------
     Net revenues..........    62,226     63,479     64,684      71,143     70,166     68,922     72,280      79,632
Operating expenses:
  Cost of license and
     maintenance revenues..     4,150      4,046      4,253       5,030      4,247      4,546      4,277       4,658
  Cost of license and
     maintenance
     revenues -- software
     write-offs............     1,283         --         --          --         --         --         --          --
  Sales, marketing and
     services..............    30,396     31,561     31,448      30,722     33,629     33,034     35,176      37,547
  Research and
     development...........    12,829     13,089     11,414      14,263     12,271     12,351     11,822      14,196
  General and
     administrative........     6,616      8,761      7,935       9,433      7,944      8,746      8,555       8,544
                              -------    -------    -------     -------    -------    -------    -------     -------
     Operating expenses....    55,274     57,457     55,050      59,448     58,091     58,677     59,830      64,945
Operating income...........     6,952      6,022      9,634      11,695     12,075     10,245     12,450      14,687
Other income (expenses)....       496     (1,552)      (692)      1,906        722      1,188      2,112       2,130
                              -------    -------    -------     -------    -------    -------    -------     -------
Income before income
  taxes....................     7,448      4,470      8,942      13,601     12,797     11,433     14,562      16,817
Income tax expense.........     2,607      1,922      3,189      11,603      4,646      4,242      6,190       6,806
                              -------    -------    -------     -------    -------    -------    -------     -------
Net income.................   $ 4,841    $ 2,548    $ 5,753     $ 1,998    $ 8,151    $ 7,191    $ 8,372     $10,011
                              =======    =======    =======     =======    =======    =======    =======     =======
Basic net income per
  share....................   $  0.25    $  0.13    $  0.29     $  0.10    $  0.42    $  0.39    $  0.44     $  0.53
                              =======    =======    =======     =======    =======    =======    =======     =======
Diluted net income per
  share....................   $  0.24    $  0.12    $  0.28     $  0.10    $  0.39    $  0.36    $  0.41     $  0.50
                              =======    =======    =======     =======    =======    =======    =======     =======
Shares used in basic per
  share....................    19,294     19,473     19,697      19,733     19,604     18,569     19,071      18,969
                              =======    =======    =======     =======    =======    =======    =======     =======
Shares used in diluted per
  share....................    20,266     20,922     20,649      20,794     20,997     19,928     20,304      20,120
                              =======    =======    =======     =======    =======    =======    =======     =======

</Table>




                                       69

<PAGE>

                                                                     SCHEDULE II

                                    SPSS INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2005, 2006 AND 2007
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                           ADDITIONS
                                                    -----------------------
                                       BALANCE AT   CHARGED TO                             BALANCE AT
                                        BEGINNING    COSTS AND   CHARGED TO                  END OF
DESCRIPTION                             OF PERIOD    EXPENSES     REVENUES    DEDUCTIONS     PERIOD
-----------                            ----------   ----------   ----------   ----------   ----------
<S>                                    <C>          <C>          <C>          <C>          <C>
2005
Allowance for doubtful accounts,
  product returns, and
  cancellations......................    $2,465        $151(1)     $1,610       $2,478       $1,748
Inventory obsolescence reserve.......       311         411            --          398          324
2006
Allowance for doubtful accounts,
  product returns, and
  cancellations......................    $1,748        $163(1)     $1,995       $1,920       $1,986
Inventory obsolescence reserve.......       324          52            --           67          309
2007
Allowance for doubtful accounts,
  product returns, and
  cancellations......................    $1,986        $ 14(1)     $  735       $1,524       $1,211
Inventory obsolescence reserve.......       309         117            --           80          346
</Table>


--------

   (1) - Included in General and Administrative expense in the Consolidated
       Statements of Income

   See accompanying reports of independent registered public accounting firm.


                                       70

<PAGE>

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

     N/A.

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 quarterly basis. In
connection with this review, SPSS has established a committee referred to as the
"Disclosure Committee" that is responsible for accumulating potentially material
information regarding the Company's activities and considering the materiality
of this information. This Disclosure 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 Disclosure
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 Disclosure 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 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.

ITEM 9B.  OTHER INFORMATION

     None.


                                       71

<PAGE>

                                    PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     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, 2007 and distributed in connection with the Company's 2008
Annual Meeting of Stockholders to be held on April 24, 2008, and such
information is incorporated herein by reference.

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

CODE OF ETHICS

     SPSS has adopted the SPSS Inc. Second 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 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 the listing standards established
by the Nasdaq Stock 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
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, 2007 and distributed in connection with the Company's 2008
Annual Meeting of Stockholders to be held on April 24, 2008, and such
information is incorporated herein by reference.

     Information related to this Item 11, "Executive Compensation" appears under
the captions: "Compensation Discussion and Analysis," "Summary Compensation
Table," "Grants of Plan-Based Awards," "Outstanding Equity Awards at Fiscal Year
End," "Option Exercises and Stock Vested," "Potential Payments Upon Termination
or Change of Control," "2007 Director Compensation," "Information Concerning the
Board of Directors -- Board Committees -- Compensation Committee -- Compensation
Committee Interlocks and Insider Participation" and "Information Concerning the
Board of Directors -- Board Committees -- Compensation Committee -- Compensation
Committee Report."

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, 2007 and distributed in connection with the Company's 2008
Annual Meeting of Stockholders to be held on April 24, 2008, 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

                                       72

<PAGE>

Management" and "Securities Authorized for Issuance under Equity Compensation
Plans" in the definitive proxy statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
          INDEPENDENCE

     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, 2007 and distributed in connection with the Company's 2008
Annual Meeting of Stockholders to be held on April 24, 2008, and such
information is incorporated herein by reference.

     Information related to this Item 13, "Certain Relationships and Related
Transactions, and Director Independence" appears under the captions: "Certain
Relationships and Related Transactions" and "Information Concerning the Board of
Directors -- Director Independence" 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, 2007 and distributed in connection with the Company's 2008
Annual Meeting of Stockholders to be held on April 24, 2008, 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 39:

          Consolidated Balance Sheets as of December 31, 2006 and 2007

          Consolidated Statements of Income for the years ended December 31,
     2005, 2006 and 2007

          Consolidated Statements of Comprehensive Income for the years ended
     December 31, 2005, 2006 and 2007

          Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 2005, 2006 and 2007

          Consolidated Statements of Cash Flows for the years ended December 31,
     2005, 2006 and 2007

          Notes to Consolidated Financial Statements

     (2) Consolidated Financial Statement Schedule -- see page 70:

          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.


                                       73

<PAGE>

     (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       Stock Purchase Agreement dated as of November 4, 2003, by    (9), 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       Amended and Restated By-Laws of SPSS.                        (20), Ex. 3.1
     4.1       Amended and Restated Rights Agreement, dated as of August    (10), Ex. 4.2
               31, 2004, by and between SPSS Inc. and Computershare
               Investor Services LLC, as Rights Agent.
     4.2       Indenture related to the 2.50% Convertible Subordinated      (17), Ex. 4.1
               Notes due 2012, dated as of March 19, 2007, between SPSS
               Inc. and LaSalle Bank National Association, as Trustee
               (including form of 2.50% Convertible Subordinated Notes
               due 2012).
     4.3       Registration Rights Agreement, dated as of March 19, 2007,   (17), Ex. 4.2
               between SPSS Inc. and Merrill Lynch, Pierce, Fenner &
               Smith Incorporated.
    10.1       1995 Equity Incentive Plan.+                                 (2), Ex. 10.14
    10.2       Amended and Restated 1995 Equity Incentive Plan.+            (3), Appendix A
    10.3       Sublease Agreement, dated April 1, 1997, between Ernst &     (4), Ex. 10.20
               Young U.S. LLP and SPSS Inc.
    10.4       Second Amended and Restated 1995 Equity Incentive Plan.+     (5), Appendix A
    10.5       Third Amended and Restated 1995 Equity Incentive Plan.+      (6), Ex. 10.1
    10.6       1999 Employee Equity Incentive Plan.+                        (7), Ex. 4.1
    10.7       2000 Equity Incentive Plan.+                                 (8), Ex. 10.45
    10.8       OEM Agreement, dated as of November 5, 2004, by and
               between SPSS Inc. and Hyperion Solutions Corporation
    10.9       SPSS Inc. Employee Stock Purchase Plan+                      (11), Ex. 10.55
    10.10      Lease Agreement, dated as of November 22, 2005, by and       (12), Ex. 10.56
               between 233 S Wacker LLC and SPSS Inc.
    10.11      Distribution Agreement, dated as of January 3, 2006, by      (13), Ex. 10.57
               and between SPSS Inc. and Banta Global Turnkey Ltd.
    10.12      Second Amended and Restated 2002 Equity Incentive Plan+      (14), Appendix B
    10.13      Fourth Amendment to OEM Agreement, dated as of January 3,    (15), Ex. 10.1
               2007, by and between SPSS Inc. and Hyperion Solutions
               Corporation*
    10.14      2007 Executive Incentive Cash Compensation Plan+             (16), Ex. 10.1
    10.15      Form of Indemnification Agreement+                           (18), Ex. 10.1
    10.16      Employment Separation Agreement and Release, dated as of     (19), Ex. 10.1
               June 4, 2007, by and between SPSS Inc. and Jonathan P.
               Otterstatter.+
    10.17      Consulting Agreement, dated as of June 8, 2007, by and       (19), Ex. 10.2
               between SPSS Inc. and Jonathan P. Otterstatter.+
    10.18      Form of Change of Control Agreement+                         (21), Ex. 10.1
    10.19      Amended and Restated Employment Agreement, dated as of       (21), Ex. 10.2
               December 17, 2007, by and between SPSS Inc. and Jack
               Noonan.+
    10.20      Amended and Restated Employment Agreement, dated as of       (21), Ex. 10.3
               December 17, 2007, by and between SPSS Inc. and Raymond H.
               Panza.+
    21.1       Subsidiaries.
    23.1       Consent of Grant Thornton LLP.
</Table>

                                       74

<PAGE>

<Table>
<Caption>
                                                                              INCORPORATION
   EXHIBIT                                                                    BY REFERENCE
   NUMBER                        DESCRIPTION OF DOCUMENT                     (IF APPLICABLE)
   -------                       -----------------------                     ---------------
<S>            <C>                                                          <C>
    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       License Agreement, dated September 30, 1976, by and          (22), Ex. 99.1
               between SPSS Inc., as licensee, and Norman H. Nie and C.
               Hadlai Hull, as licensors.
</Table>


--------

      * By order of the Securities and Exchange Commission dated July 13, 2007,
        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 1995 Proxy Statement of SPSS Inc., filed on May
        19, 1995. (File No. 000-22194)

    (3) Previously filed with 1996 Proxy Statement of SPSS Inc., filed on May
        16, 1996 (File No. 000-22194)

    (4) 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)

    (5) Previously filed with 1998 Proxy Statement of SPSS Inc., filed on May
        19, 1998 (File No. 000-22194)

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

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

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

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

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

   (11) 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)

   (12) 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)

   (13) 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)

   (14) Previously filed with the 2006 Proxy Statement of SPSS Inc., filed on
        March 28, 2006. (File No. 000-22194)

   (15) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        January 3, 2007, filed on January 9, 2007. (File No. 000-22194)

   (16) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        February 8, 2007, filed on February 9, 2007. (File No. 000-22194)


                                       75

<PAGE>

   (17) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        March 19, 2007, filed on March 22, 2007. (File No. 000-22194)

   (18) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        May 21, 2007, filed on May 25, 2007. (File No. 000-22194)

   (19) Previously filed with the Quarterly Report on Form 10-Q of SPSS Inc.,
        for the quarterly period ended June 30, 2007. (File No. 000-22194)

   (20) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        October 25, 2007, filed on October 26, 2007. (File No. 000-22194)

   (21) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        December 17, 2007, filed on December 17, 2007. (File No. 000-22194)

   (22) Previously filed with the Current Report on Form 8-K of SPSS Inc., dated
        December 31, 2007, filed on December 31, 2007. (File No. 000-22194)


                                       76

<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
                                            Chief Executive Officer, President
                                                             and
                                             Chairman of the Board of Directors
Date: February 21, 2008

     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>                                   <C>
      /s/ Jack Noonan              Chief Executive Officer, President    February 21, 2008
                                      and Chairman of the Board of
-------------------------------                 Directors
          Jack Noonan

    /s/ Raymond H. Panza                Executive Vice President,        February 21, 2008
                                       Corporate Operations, Chief
-------------------------------      Financial Officer and Secretary
        Raymond H. Panza

     /s/ Marc D. Nelson                 Vice President, Corporate        February 21, 2008
                                        Controller and Principal
-------------------------------            Accounting Officer
         Marc D. Nelson

    /s/ William B. Binch                        Director                 February 21, 2008

-------------------------------
        William B. Binch

     /s/ Michael Blair                          Director                 February 21, 2008

-------------------------------
         Michael Blair

    /s/ Michael E. Lavin                        Director                 February 21, 2008

-------------------------------
        Michael E. Lavin

      /s/ Merritt Lutz                          Director                 February 21, 2008

-------------------------------
          Merritt Lutz

  /s/ Patricia B. Morrison                      Director                 February 21, 2008

-------------------------------
      Patricia B. Morrison

 /s/ Charles R. Whitchurch                      Director                 February 21, 2008

-------------------------------
     Charles R. Whitchurch
</Table>




                                       77

<PAGE>

                                  EXHIBIT INDEX

<Table>
<Caption>
   EXHIBIT
   NUMBER                               DOCUMENT DESCRIPTION
   -------                              --------------------
<S>            <C>
    10.8       OEM Agreement, dated as of November 5, 2004, by and between SPSS Inc.
               and Hyperion Solutions Corporation
    21.1       Subsidiaries.
    23.1       Consent of Grant Thornton 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.
</Table>




                                       78