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                                   FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
                   FOR THE FISCAL YEAR ENDED JUNE 30, 1997

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

           For the transition period from__________ to___________

                        Commission File Number   0-4096

                             COMSHARE, INCORPORATED

             (Exact name of registrant as specified in its charter)
<TABLE>
<S><C>

          MICHIGAN                                            38-1804887
 (State or other jurisdiction of                          (I.R.S. employer
 incorporation or organization)                         identification number)

               555 BRIARWOOD CIRCLE, ANN ARBOR, MICHIGAN 48108
            (Address of principal executive offices)  (Zip Code)


      Registrant's telephone number, including area code:  (313) 994-4800

       Securities registered pursuant to Section 12(b) of the Act:  None

     Securities registered pursuant to Section 12(g) of the Act: 
                                                                     Common Stock $1.00 Par Value
                                                                     Rights to Purchase Preferred Shares
</TABLE>

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 statement
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant as of August 29, 1997 based on $8.19 per share, the last sale price
for the Common Stock on such date as reported on the Nasdaq Stock Market -
National Market System, was approximately $77,668,000.

As of August 29, 1997 the Registrant had 9,871,773 shares of Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE
  
           Document                                    
Portions of Proxy Statement for the            Part of Form 10-K Report
1997 Annual Meeting of Shareholders            into which it is incorporated 
("The 1997 Proxy Statement")                              III


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                                     PART 1
ITEM 1. BUSINESS

This Business section contains forward looking statements that involve
uncertainties.  Actual results could differ materially from those in the
forward looking statements due to a number of uncertainties, including, but not
limited to those discussed below, particularly in "Business - Uncertainties
Relating to Forward Looking Statements."


GENERAL

Comshare, Incorporated and its subsidiaries (collectively referred to as
"Comshare" or the "Company") develop, market and support client/server decision
support software applications designed to improve business analysis, planning,
reporting and decision making.  The Company's software products enable the
enterprise-wide integration and transformation of data into business-critical
information and provide customers with robust multidimensional analysis
capabilities.  More specifically, the Company focuses on delivering complete
decision support solutions by providing implementation, consulting, training
and support services in these markets.  Such complete decision support
solutions permit the implementation and adoption of the Company's software
applications throughout an enterprise, thus enabling end-users to make faster
and better decisions.  Comshare offers several decision support applications
designed for use by customers in any industry, as well as decision support
applications targeted to meet the specific needs of the retail industry.


BUSINESS STRATEGY

The Company's objective is to be the leading provider of client/server decision
support applications in its target markets.  The Company's strategy includes
the following key elements:

1.   A product strategy of offering complete decision support solutions.  The
     Company's  software products address the full range of a customer's
     information access and analysis needs from data extraction to end-user
     desktop access. Packaged applications are designed to satisfy the specific
     decision support needs of a company, especially in budgeting, planning,
     sales analysis, and performance measurement.

2.   A product development strategy which uses a common technology platform,
     Comshare Application Architecture, for new products.  Commander Decision
     was the first product built using the Comshare Application Architecture.
     The use of a common technology platform permits the addition of new
     software tools and technological advances to all products developed using
     the Comshare Application Architecture at the same time.  In addition, the
     Company expects to be able to develop new packaged applications more
     quickly by leveraging the underlying technology capabilities of the
     Comshare Application Architecture.

3.   A product design strategy which capitalizes on innovative
     internally-developed technology and third-party software tools offering
     the latest technological advances.  The Company believes the use of
     third-party tools allows it to focus product development efforts on
     differentiating applications and developing innovative technology, while
     offering products which include the latest technological advances and
     reducing product development risk and time to market.

4.   A marketing strategy designed to leverage the Company's current customer
     base through sales of additional or new products to existing clients and
     the extension into other departments or functional areas of existing
     clients, and to leverage the Company's established direct and indirect
     international sales distribution network in 41 countries.  By utilizing
     its extensive worldwide sales network, the Company can address the global
     needs of its international customers for decision support applications
     software and provide the implementation, consulting, training and support
     services required.

5.   A service and support strategy of offering superior implementation,
     consulting, training and support to the Company's customers.


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The foregoing statements regarding the Company's product expansion, design,
development and market strategy contain "forward looking statements" within the
meaning of the Securities Exchange Act of 1934.  Actual results could differ
materially from those in the forward looking statements due to a number of
uncertainties, including, but not limited to, those described below and under
"Business - Uncertainties Relating to Forward Looking Statements".


PRODUCTS

The Company offers several decision support applications designed for use by
customers in any industry, as well as decision support applications targeted to
meet the specific needs of the retail industry.

Comshare's software products are generally licensed to end-user customers under
non-exclusive perpetual license agreements.  Software license fees for the
Company's decision support software applications vary widely depending upon the
product, platform and number of users supported.  Add-on features and products
are available for additional fees.  The initial amount paid by customers
purchasing decision support applications typically covers the software license
fee and product maintenance for the first year of the license.  Customers may
continue product maintenance thereafter for an annual fee normally ranging from
15 to 20 percent of the software license fee.


GENERAL INDUSTRY APPLICATIONS

The general industry sales force services all customers outside of the retail
industry and sells the Company's products designed for use by customers in any
industry.  These products include Commander Decision, Commander DecisionWeb,
Commander BudgetPLUS, Commander FDC and Commander Sales Analysis.


DSS Applications

Comshare's flagship products are Commander Decision and Commander DecisionWeb,
the latest generation decision support products for client/server systems and
web-based systems, respectively, which follow a long line of Executive
Information Systems ("EIS") products offered by the Company.  Comshare was
among the first software companies to successfully introduce EIS products to
the market.

Commander Decision and Commander DecisionWeb are decision support ("DSS")
application designed to provide information to a wide range of business users
for planning, analysis, reporting and decision-making.  Typical applications
include customer and product profitability analysis, sales reporting and
analysis, business unit profitability analysis, critical success factor
reporting and key performance indicator monitoring.  The Company designed them
to be customized by the Company's consultants, third parties or the customers
themselves to meet specific customer requirements. 

These products capitalize on the increased use of multidimensional analysis by
business professionals to solve business problems.  Using multidimensional
analysis, business professionals view information in a manner which is
consistent with their perception of the underlying business.  For example, for
a business organized along geographic lines and product lines, a business
professional is able to view this data across multiple time periods.  Commander
Decision and Commander DecisionWeb facilitate these and other multidimensional
analyses by permitting end-users to structure business data across the multiple
dimensions of importance to these users.

Commander Decision includes a full suite of client/server software necessary to
deliver enterprise-wide decision support solutions.  Commander Decision is
designed using the latest 32-bit Microsoft technology, and supports NT on the
server and Windows 95 and Windows NT on the client/desktop.



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The Commander Decision software includes:

      Data Integrator.  A powerful back-end which gathers, consolidates,
      interprets, cleanses and reshapes data from multiple, disparate data
      sources, including spreadsheets, relational database management systems
      ("RDBMS"), data warehouses, legacy systems and other data repositories.

      Multidimensional Database Software.  Customers can choose from one of
      three multidimensional databases: Essbase developed by Arbor Software
      Corporation ("Arbor"), Oracle Express provided by Oracle Corporation
      ("Oracle"), or TM1 provided by Applix, Inc. ("Applix").  Each of these
      multidimensional databases provides a comprehensive on-line analytical
      processing ("OLAP") solution that stores and summarizes data, and
      supports concurrent multi-user read-write for multidimensional analysis.

      Decision Access Module ("DecAM").  Comshare's internally-developed
      technology which is the backbone of Commander Decision.  DecAM
      facilitates fast-response sorting of large volumes of data by reducing
      the size of the multidimensional database and increasing the speed of
      computation-intensive functions, such as sorting and ad hoc calculations,
      by processing the calculations on the server.

      Decision Desktop.  An analysis and presentation front-end which presents
      business information in five ways: graphically, through charts;
      geographically, through an integrated mapping system; visually, through
      color-coded exception reporting; analytically, through ad hoc queries and
      calculations; and proactively, through Comshare's innovative Detect &
      Alert technology and advanced exceptions technology.  By pointing and
      clicking, end-users are able to easily and quickly query the information,
      drill down for more detail, change dimensions and extract data for
      further analysis.  End-users alternatively may select Microsoft Excel or
      Lotus 1-2-3 front-ends, which provide spreadsheet capability.

Commander DecisionWeb includes a full suite of software necessary for delivery
of enterprise-wide decision support applications using a company's intranet.
Commander DecisionWeb is a Web server-based component of Commander Decision
which provides users with an alternative method of accessing the same
multidimensional decision support applications available through Decision
Desktop.

Using DecisionWeb, users around the world can link to DSS applications using
only a Java-enabled Internet browser. DecisionWeb can deliver web-based
applications with the functionality found in traditional client/server
solutions, such as exception reporting, personal calculations, sorting, the
ability to write data back to the central database, and customizable points of
entry for individual users.

In addition to providing powerful user capabilities, the Java applet approach
simplifies the process of building and maintaining production-scale
applications.  Commander DecisionWeb includes a developer module that allows
administrators or information providers to define grid and chart formats,
select data sources, and choose dimensions.  DecisionWeb generates the
appropriate Web pages, which can be distributed and customized as needed.

Commander Decision and its companion DecisionWeb are both based on the Comshare
Application Architecture, so organizations can deliver the same applications
using a combination of Commander Decision Desktops and Internet browsers.
Decision and DecisionWeb together provide an effective solution for a wide
range of application requirements and user needs.  For example, sophisticated
users can get the benefit of Decision Desktop's rich analysis environment,
while the typical business user can analyze and report using the browser, and
all users are able to access and work with the same applications and consistent
data.


Budgeting and Financial Reporting Applications

Commander BudgetPLUS, commercially available at the end of fiscal 1996, is a
client/server based application offering full multi-dimensional budgeting
functionality.

As an integrated budgeting, analysis, and reporting application, Commander
BudgetPLUS is designed to improve productivity, shorten budget cycles and
enhance the quality and usability of an enterprise's budgeting information.
Commander BudgetPLUS has built in data collection mechanisms that integrate
with Lotus and Excel spreadsheets, and load enterprise data from other systems.
Commander BudgetPLUS also offers salary planning and asset

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planning capabilities.  Commander BudgetPLUS allows the end-users to define
enterprise wide calculations, allocations and adjustments to the budget data.
The use of the Comshare Application Architecture provides a powerful
information delivery and analysis mechanism, exception reporting and
enterprise-wide information distribution.

Commander FDC is a statutory consolidation and financial reporting application
which collects and consolidates financial data from different general ledgers,
spreadsheets, and other sources within a multi-division or multi-location
company and produces consolidated financial reports for management, public and
statutory reporting.  Commander FDC performs currency translation, handles
intercompany eliminations and account reclassifications and is readily
adaptable to the changing reporting needs of the end-user.

Commander FDC consists of data extraction tools, a central database and a
choice of front ends.  The data extraction tools within Commander FDC collect,
integrate, summarize and filter data from multiple, disparate data sources.
Commander FDC utilizes a Btrieve database that permits the integration of
consolidated historical and budgetary financial data, giving the end-user the
option of a fully-integrated financial management system.  Commander FDC is
offered with Microsoft Excel or Lotus 1-2-3.  Customers may separately purchase
Execu-View Finance, which allows users point-and-click access to interactively
browse, report, graph and analyze information generated by Commander FDC.


Other

Commander Sales Analysis, initially aimed solely at the consumer goods market,
is now available to the broad general market.  This application is designed for
sales representatives, key account managers, business unit managers, and sales
executives.  Sales Analysis allows users to track sales and profits, compare
actual results to planned targets, and monitor growth trends and product
contributions.  A unique and intuitive "Question and Answer" interface guides
users through the database to find the most relevant information.

Comshare continues to support Commander OLAP, the client/server predecessor to
Commander Decision, and earlier LAN-based EIS products.  The Company also sells
and supports System W and IFPS decision support products for use on mainframe
and UNIX-based computers.  Customers use System W and IFPS for applications
similar to those performed with Commander Decision and Commander OLAP, although
the multidimensional database resides on the mainframe, rather than on the
server.  Because market demand has shifted towards client/server technology,
the mainframe-related portions of Comshare's general industry business have
declined significantly in recent years.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."


RETAIL DECISION SUPPORT APPLICATIONS

The Company offers retailers a suite of decision support software, sold under
the ARTHUR brand name, specifically tailored to their merchandise planning
needs, as well as the general industry products described above.

The Arthur Enterprise Suite

Comshare's Arthur Enterprise Suite, a set of retail decision support
applications, enables retailers to focus an entire organization on strategic
decision making, and integrates the critical business processes of merchandise
planning, allocation and tracking.   Arthur Enterprise Suite allows the
retailer to review results, plan future merchandise seasons, and respond
quickly to actual performance as necessary.

Members of Arthur Enterprise Suite

TRACKING is a sale reporting application which enables retailers to see trends
across the product lines at various levels of detail over multiple periods on a
store-by-store basis.  With Arthur's powerful exception highlighting, the users
can spot market opportunities and changing sales patterns.

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PLANNING enables retailers to create detailed merchandise plans.  Goals can be
pushed down rapidly to the detailed levels.  The impact of a change at a
detailed level can be quickly viewed at the summary.  Gaps between desired
sales targets and planned targets can be identified.  The impact of intake
timing, pricing, markdowns, or promotions can be analyzed, allowing the users
to formulate alternative merchandise strategies quickly.

ALLOCATION gives the retailer an automatic way to allocate merchandise received
among its stores.  Using the assortment plan as the basis for distribution,
Allocation can blend in current performance to optimize product allocations.
Allocation allows retailers to match various products to each store's
particular characteristics, customer base and capacity.


SERVICES AND SUPPORT

The Company offers implementation, consulting, training, pre-sales and
post-sales technical support and maintenance to complement its software product
offerings.  Comshare supports its product offerings with customer support from
its teams of industry and product decision support specialists and its
worldwide agent/distributor network.


IMPLEMENTATION AND CONSULTING SERVICES

Implementation and consulting services are offered for all of the Company's
decision support software products, and include application design and
modification, installation assistance, implementation and troubleshooting
support.

Comshare complements its services through partnership arrangements with value
added consultants who complete a certification process.  Implementation and
consulting certification is a distinction given to recognize consultants
qualified in the use of Comshare applications and products.  The certification
process is also designed to help Comshare's customers receive quality service
and support, training, project oversight and service monitoring.  Comshare
certified value added consultants include, among others, Andersen Consulting,
Applied Retail Technology, Legacy Technology, Orion Financials, and Technium in
the U.S.; A.G. Solutions, Ltd. in the U.K.; Cap Gemini Sogeti and Valoris in
France and Kurt Salmon Associates in the U.S., U.K. and Germany.


SOFTWARE MAINTENANCE AND SUPPORT

The Company provides customer telephone helpline support staffed with
experienced professionals.  Customers under maintenance receive product
enhancements and updates, bug fixes and access to Comshare's helpline web
pages.  Initial product license fees typically include the first year of
maintenance support.  Thereafter, maintenance customers pay an annual
maintenance fee, which is typically 15 to 20 percent of the software license
fee.


CUSTOMER TRAINING

Comshare offers a training program to customers and third party consultants.
Training classes are provided by the Company at customer sites, at its local
sales offices and at its central training centers in Ann Arbor, Michigan and
London, England.  The Company's training program is designed for end-users and
system support staff and includes a variety of training classes covering
software applications functional use, applications building, and system
administration.



CUSTOMERS

Comshare has implemented its client/server and mainframe decision support
applications software, and is currently providing maintenance, at more than
3,000 corporate and public sector customer sites in 41 countries. Comshare's
diversified customer base includes many Fortune 1000 and Financial Times 1000
industrial companies as well as

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large and mid-sized companies in the communications, financial services, health
care, retail and transportation industries, and many governmental and other
public sector organizations.


SALES AND MARKETING

Comshare products and services are sold on a worldwide basis by a direct sales
operation and by an extensive worldwide agent/distributor network.  Both of
these complementary distribution channels leverage the Company's industry and
application expertise and offer pre-sales and post-sales implementation,
consulting, and customer support and services.

The Company sells and markets its software products and services in the United
States, Canada, United Kingdom, France and Germany through direct sales
organizations.  Direct sales operations are organized geographically, and
within a geographic region, are generally organized by industry.

The Company has an extensive agent/distributor network covering 36 countries
not directly served by the Company.  The Company has selected established
software application vendors or systems integration firms to act as agents and
distributors to market, implement and support Comshare products in their
respective geographic areas.  Comshare derived  20% of its total revenue in
fiscal 1997 from the Company's agent/distributor network.

To generate sales, the Company conducts comprehensive marketing programs which
include direct mail, public relations, advertising, seminars, trade shows and
on-going customer communication programs.  The sales cycle begins with the
generation of a sales lead or request for proposal from a prospect.  After a
lead is qualified, the Company's sales force analyzes the potential customer's
decision support needs and makes one or more presentations to the potential
customer.  After obtaining a preliminary commitment, the Company often develops
customized demonstrations to illustrate how the Company's products will satisfy
a customer's specific needs.  The sales cycle varies in length from customer to
customer, but typically requires three to six months or more.


RESEARCH AND PRODUCT DEVELOPMENT

The Company's product development strategies are: (1) to provide packaged
decision support applications that meet customer needs for planning, analysis,
reporting, and improving the effectiveness of an organization's management; (2)
to leverage a common technology platform, Comshare Application Architecture,
for implementation on traditional client/server platforms and on the emerging
intranet platform; (3) to provide multiple database technologies to better
support customer needs; and (4) to leverage third-party software tools.

To support its application strategy, the Company developed a common
architectural platform known as Comshare Application Architecture ("CAA").
This architecture is a three-tiered design that includes a database tier, an
application server tier, and a client-side presentation tier with standard
interfaces which allow changes in one tier without affecting the other tiers.
The CAA offers several benefits for future product development.  First, new
applications can be developed using the CAA allowing the Company to leverage
existing technology.  Second, the CAA gives the Company the ability to support
multiple platforms in its database and client tiers.  Current platforms
supported include Applix's TM1, Arbor's Essbase and Oracle's Express and
Oracle7 databases.  Third, CAA will enable the Company to implement innovative,
differentiating features in the application server tier, which will benefit all
applications developed based on CAA.  Fourth, CAA will allow the Company to
integrate its application products for the benefit of customers who buy
multiple Comshare applications.

The Company has increasingly incorporated third-party tools into its products
in order to focus its internal product development efforts on applications, and
reduce product development risk and time to market.  Commander Decision, which
was built using the Comshare Application Architecture, employs third-party OLAP
technology in its database tier and multiple third-party objects in its
presentation tier (e.g. a third-party charting object, a third-party data grid
object, a third-party geographic mapping object, and a third party scripting
language).



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During the fiscal years ended June 30, 1997, 1996, and 1995 worldwide internal
research and development expenses were (in thousands):


<TABLE>
<CAPTION>
                                           1997           1996           1995
                                           ----           ----           ----
<S>                                        <C>            <C>            <C>
Internal research and product development  $15,556        $15,977        $16,180
As a % of total revenue                       16.8%          13.4%          14.9%
</TABLE>

The markets for the Company's products are characterized by rapid technological
advances, evolving industry standards, changes in customer requirements and
frequent introductions and enhancements of competitive products.  The Company's
success and future financial performance will depend on its ability to
anticipate these changes as they occur and to enhance its existing products and
develop new products in a timely and cost-effective manner which keeps pace
with these changes.  There can be no assurance that the Company will be able to
successfully accomplish future technological or product transitions, that the
Company will not experience significant delays in developing new products or
enhancements required to accomplish such transitions, or that the Company will
have sufficient financial resources available to it to finance such efforts.
There can be no assurance as to the impact that any such transition would have
on the Company's revenue or profitability.  In addition, there can be no
assurance that the Company's new products and enhancements will adequately
address the changing needs of the marketplace and achieve market acceptance or
that developments by others will not render the Company's products obsolete or
noncompetitive.

The foregoing statements regarding the Company's product development efforts
contain "forward looking statements" within the meaning of the Securities
Exchange Act of 1934.  Actual results could differ materially from those in the
forward looking statements due to a number of uncertainties, including, but not
limited to, those described below and under "Business - Uncertainties Relating
to Forward Looking Statements".


INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company's success is dependent on its proprietary technology.  The Company
does not hold any material patents and seeks to protect its technology
primarily through trademarks, copyrights, employee and third-party
non-disclosure agreements and trade secret laws, which afford only limited
protection.

Comshare distributes its software products under software license agreements
which generally grant customers a non-exclusive license to use the Company's
products.  The Company considers its software products to be valuable and
unique assets and actively attempts to protect them contractually by generally
restricting usage to internal operations, and prohibiting the unauthorized
reproduction or transfer to third parties.  The Company also believes that the
nature of its customers and the provision of continuing maintenance and support
services reduce the risk of unauthorized reproduction.

The Company has registered certain of its trademarks and copyrights.  The
Company is the owner of various trademarks, including ARTHUR, BOOST(R),
Commander Budget, Commander BudgetPLUS, Commander Decision, Detect and
Alert(R), Commander EIS, Commander Execu-View Server, Commander FDC, Commander
NewsAlert, The Decision Support Company(R), Commander DecisionWeb, and Comshare
Application Architecture.  The Company's software bears appropriate copyright
notices. 

The laws of some foreign countries do not protect the Company's proprietary
rights to the same extent as do the laws of the United States.  In addition,
certain provisions of the Company's contracts prohibiting unauthorized
reproduction may be unenforceable under the laws of certain foreign countries.
There can be no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or development by others of similar or superior technology.
Although the Company believes that its products and technology do not infringe
on any existing proprietary rights of others, there can be no assurance that
third parties will not assert infringement claims in the future or that any
such claims will not require the Company to enter into license arrangements or
result in litigation, regardless of the merits of such claims.  No assurance
can be given that any necessary licenses will be available or that, if
available, such licenses can be obtained on commercially reasonable terms.
Should litigation with respect to any such claims commence, such litigation
could be extremely expensive and time-consuming.


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LICENSED TECHNOLOGIES

The Company licenses certain software programs and tools from third parties and
incorporates them into the Company's products.  Generally, these licenses are
non-exclusive worldwide licenses providing for varying royalty payments and
expiration dates.  The Company believes that the inclusion of third-party
software programs and tools in its products reduces product development risk
and time to market.

Examples of third-party software tools that the Company incorporates into its
products include Applix's TM1,  Arbor's Essbase, Btrieve Technology, Inc.'s
Btrieve database, Microsoft Excel, Oracle's Express, and Strategic Mapping,
Inc.'s Atlas View SDK.  During fiscal 1997, the Company was substantially
dependent upon Arbor's Essbase to provide the critical multidimensional
functionality for Commander Decision and certain of its other products.  The
Company's worldwide license for Essbase expires December 31, 2001.  The license
may be terminated in the event of an uncured material breach.  The Company and
Arbor disagree about certain definitions in the license agreement related to
the calculation of royalties and are currently in litigation, see Item 3 -
"Legal Proceedings" and Note 12 of Notes to Consolidated Financial Statements.

In fiscal 1997, the Company completed agreements with Oracle and Applix, and
now offers Commander Decision on three different databases: Essbase, Express
and TM1.  The Company has under development relational versions of certain of
its other applications.  The Company's strategy is to support multiple
databases through the use of Comshare Application Architecture.


COMPETITION

The markets for Comshare's software products are highly competitive and
characterized by continued change and rapid technological advancements.  In
general, the Company competes principally on the basis of:  (1) software
application utility, which includes the extent to which its product offerings
meet specific end-user markets and needs; (2) functionality, which includes the
breadth and depth of features and functions and ease-of-use; (3) service and
support, which includes the range and quality of technical support, training
and consulting services; (4) vendor reputation; (5) product architecture, which
includes distributed computing capability, and ease of customization and
integration with other applications; and (6) product pricing in relation to
performance.  The Company believes it competes favorably with respect to these
factors.

The client/server applications software market, including the market for
decision support software, is intensely competitive, highly fragmented and
subject to rapid change and evolving industry standards.  Because the Company
offers multiple products, the Company competes with a variety of other
companies depending on the target market for their applications software
products.  The Company competes primarily with Oracle Corporation, which
purchased Express software from Information Resources, Inc., and Hyperion
Software Corporation.  In the retail decision support applications markets, the
Company also competes with a few software vendors who have specific planning
and sales tracking applications.

The Company also competes with a variety of additional software companies,
third-party professional service organizations that develop custom software and
with internal information technology departments which develop decision support
solutions.  Among The Company's current and potential competitors are a number
of large software companies, including developers of spreadsheets, RDBMSs, data
warehouses, database query and reporting tools, transaction processing-based
applications and OLAP technologies, that may elect to increase the decision
support capabilities of their current products or that may develop or acquire
products that compete with the Company's products.  In addition, recent
acquisitions and adoptions of OLAP technologies by various software vendors may
result in increased competition in the Company's markets.  Increased
competition could result in price reductions, reduced operating margins and
loss of market share.  In addition, many of the Company's current and potential
competitors have significantly greater financial, technical, marketing and
other resources than the Company.  As a result, they may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of products than the Company.  There can be no assurance that the Company
will be able to compete successfully against current and future competitors.

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INTERNATIONAL OPERATIONS

The Company derived 47.6%, 53.1% and 55.3% of its total revenue from outside
North America in fiscal 1997, 1996, and 1995, respectively, and expects that
revenue generated outside North America will continue to represent a
significant portion of the Company's total revenue.  This international
business is subject to various risks inherent in international activities,
including the impact on the Company's operations of, and the burdens of
complying with, a wide variety of laws, regulations, rules and policies of
local foreign governments, such as those relating to currency controls, hiring
and termination of employees, import restrictions and the protection of
proprietary rights.

The Company's international operations also expose the Company to constantly
fluctuating currency rates.  Currency fluctuations have in the past adversely
affected, and may in the future adversely affect, the Company's reported
revenue, expenses and shareholders' equity.  The Company's international sales
are primarily denominated in foreign currencies.  As a result, an increase in
the value of the U.S. dollar relative to foreign currencies may have the effect
of reducing the Company's reported revenue and profits from international sales
denominated in such currencies.  Currency exchange rate fluctuations can also
result in gains and losses from foreign currency exchange transactions.  The
Company at various times has entered into forward exchange contracts to hedge
exposures related to foreign currency exchange transactions.  Because the
Company only selectively hedges against certain large transactions that present
the most exposure to exchange rate fluctuations, the Company's results of
operations will continue to be impacted by fluctuations in foreign currency
exchange rates, which at times could be material.  See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Note 1 of
Notes to Consolidated Financial Statements.


EMPLOYEES

Comshare employed 579 full-time employees as of June 30, 1997; including 220 in
sales and marketing, 121 in consulting and implementation services, 106 in
research and product development, and 132 in customer support and
administration.  None of the Company's employees is represented by a collective
bargaining agreement, nor has the Company experienced any work stoppages.  The
Company considers its relations with its employees to be good.


MISCELLANEOUS

Compliance with federal, state and local laws and ordinances that regulate the
discharge of materials into the environment has not had, and is not expected to
have, a material effect upon the capital expenditures, earnings or competitive
position of Comshare.


UNCERTAINTIES RELATING TO FORWARD LOOKING STATEMENTS

"Item 1.  Business" and other parts of this Form 10-K contain "forward-looking
statements" within the meaning of the Securities Exchange Act of 1934, as
amended.  Actual results could differ materially from those in the forward
looking statements due to a number of uncertainties, including, but not limited
to, those discussed in this section and in "Business Strategy", "Research and
Product Development", "Intellectual Property and Proprietary Rights", "Licensed
Technologies", "Competition" and "International Operations" above.

The Company's future results could differ materially from those in the forward
looking statements due to a number of uncertainties, including, but not limited
to, the demand for the Company's products and services; the size, timing and
recognition of revenue from significant orders; increased competition; the
Company's success in and expense associated with developing, introducing and
shipping new products, particularly in markets not previously served by the
Company; new product introductions and announcements by the Company's
competitors; changes in Company strategy; product life cycles; the cost and
continued availability of third party software and technology incorporated into
the Company's products; the impact of rapid technological advances, evolving
industry standards and changes in customer requirements; the impact of recent
transitional changes in North American and international management and sales
personnel; the impact of the investigation into violations of the Company's
revenue recognition policies on the Company's ongoing operations; cancellations
of maintenance and support agreements; software defects; changes in operating
expenses; variations in the amount of cost savings anticipated to result from

                                       11


<PAGE>   12



cost reduction actions; the impact of cost reduction actions on the Company's
operations;  fluctuations in foreign exchange rates; and economic conditions
generally or in specific industry segments.  In addition, a significant portion
of the Company's revenue in any quarter is typically derived from non-recurring
license fees, a substantial portion of which is booked in the last month of a
quarter.  Since the purchase of the Company's products is relatively
discretionary and generally involves a significant commitment of capital, in
the event of any downturn in any potential customer's business or the economy
in general, purchases of the Company's products may be deferred or canceled.
Further, the Company's expense levels are based, in part, on its expectations
as to future revenue and a significant portion of the Company's expenses do not
vary with revenue.  As a result, if revenue is below expectations, results of
operations are likely to be materially adversely affected.


                                       12


<PAGE>   13




ITEM 2. PROPERTIES

Comshare leases sales offices and general office space in 18 major cities
throughout the United States, Canada and Europe.  Comshare's primary leased
locations are identified in the following table:


<TABLE>
<CAPTION>

            Approximate                                           Lease
            Area in        Principal                              Expiration
Location    Square Feet    Activity                               Date
--------    -----------    --------                               ----
<S>         <C>           <C>                                     <C>
                          Headquarters,
                          Administration, Sales,
                          Marketing, Research
Ann Arbor,                and Product Development
Michigan      70,700      and Customer Support                    February 2005*

London,                   Administration, Sales, Marketing and
England       52,115      Implementation Services                 January 2008
</TABLE>

* Option to cancel February 2000.



ITEM 3. LEGAL PROCEEDINGS

Between August 9, 1996 and September 5, 1996, following the Company's
announcement of certain violations of the Company's revenue recognition
policies, four separate shareholder class action suits were filed in the United
States District Court for the Eastern District of Michigan against the Company
and certain of its officers and directors on behalf of shareholders who had
purchased the Company's common stock between April 17, 1996 and August 6, 1996. 
The Court consolidated the four suits into one class action, In Re Comshare,
Incorporated Securities Litigation, and the plaintiffs amended their complaint
to expand the class to shareholder who had purchased the Company's common stock
between August 2, 1995 and August 6, 1996.   The action alleged that the
plaintiffs sustained losses as a result of the defendant's alleged untrue
statements of material facts and alleged omissions to state material facts
necessary in order to make the statements made not misleading.  The complaint
sought unspecified damages and costs.  On September 18, 1997 the court
dismissed all of the claims.  The plaintiffs have thirty days from the date of
entry of the order in which to appeal the dismissal.

In 1996, Arbor Software Corporation ("Arbor"), following an audit of the
Company's records, demanded that the Company submit certain issues involving
interpretation of royalty provisions of the license agreement between the
Company and Arbor to binding arbitration.  Arbor and the Company were in the
process of working out a procedure for and definition of all legal and
accounting issues to be resolved by such arbitration when, on September 27,
1996, Arbor filed a lawsuit against Comshare in the United States District
Court for the Northern District of California alleging breach of contract and
fraud relating to royalty calculations.  The Company filed a denial of all of
Arbor's claims and filed a counterclaim against Arbor for fraud, defamation,
unfair competition, interference with economic relationships and breach of
contract.  The parties are in the process of conducting discovery, and trial
is currently scheduled for May 1998.  The Company is contesting Arbor's claims
and pursuing its own counterclaims vigorously.


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

Not applicable.

                                       13


<PAGE>   14




                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

                          PRICE RANGE OF COMMON STOCK

The Company's common stock is traded on The Nasdaq Stock Market - National
Market System under the symbol "CSRE".

The following table sets forth, for the periods indicated, the high and low per
share closing sales prices for the Company's common stock as reported on The
Nasdaq Stock Market - National Market System.  All amounts in the following
table have been adjusted to reflect the three-for-two stock split effective in
the second quarter of fiscal 1996.


<TABLE>
<CAPTION>
                 FISCAL YEAR                       MARKET PRICES
                ENDING JUNE 30             HIGH                   LOW
                --------------             ----                   ---
         <S>   <C>                        <C>                    <C>
         1995  First Quarter              $ 8.50                   6.00
               Second Quarter               9.83                   7.17
               Third Quarter               11.50                   8.83
               Fourth Quarter              14.33                  10.00
                                                                  
         1996  First Quarter               21.58                  13.50
               Second Quarter              25.67                  17.33
               Third Quarter               27.25                  20.00
               Fourth Quarter              31.50                  20.25

         1997  First Quarter               31.63                  11.63
               Second Quarter              17.50                  13.00
               Third Quarter               18.75                  13.00
               Fourth Quarter              14.38                  11.25

         1998  First Quarter              $12.38                   8.13
               (through August 29, 1997)

</TABLE>


At August 29, 1997, there were approximately 1,200 holders of record of the
Company's common stock.


                               DIVIDEND POLICY

The Company has not paid dividends on its common stock since incorporation.  It
is the Company's present policy to retain earnings for use in the Company's
business.  Accordingly, the Company does not anticipate that cash dividends
will be paid in the foreseeable future.  The Company's credit agreement
contains covenants which prohibit the payment of cash dividends on the common
stock.  See Note 3 of the Notes to Consolidated Financial Statements regarding
restrictions on the payment of dividends.

                                       14


<PAGE>   15




ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION

The selected financial data for the five fiscal years ended June 30 are derived
from the audited Consolidated Financial Statements of the Company.  This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related Notes included elsewhere in this annual report
on Form 10-K.




<TABLE>
<CAPTION>
                                                             FISCAL YEAR ENDED JUNE 30,
                                          --------------------------------------------------------------------
                                          1997           1996               1995         1994             1993
                                          ----           ----               ----         ----             ----     
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
<S>                                     <C>            <C>               <C>           <C>               <C>
Revenue                                 $ 92,831       $118,984           $108,358      $96,626         $105,194
Income from operations
  before unusual and
  restructuring charges                  (19,727)         6,375              8,850        3,991              218
Income (loss) from operations            (25,972)       (16,792)             2,485        1,648           (1,271)
Net income (loss)                        (17,117)        (9,891)             5,328          222           (1,763)
  Per share                             $  (1.75)      $  (1.09)          $   0.63      $  0.03         $  (0.22) 
Average shares
  (thousands)                              9,770          9,048              8,398        8,234            7,978

</TABLE>

<TABLE>
<CAPTION>
               
                                                                        JUNE 30,
                                       ------------------------------------------------------------
                                          1997        1996        1995        1994          1993
                                        -------      ------      ------      ------        ------
                                                                 (IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
<S>                                    <C>         <C>        <C>           <C>            <C>
Cash & cash equivalents                $11,651     $27,468     $ 1,398      $ 1,774        $ 2,593
Total assets                            80,751      98,238      79,310       88,944         92,582
Long-term debt                             343       1,913       5,436       15,354         16,058
Total shareholders' equity             $31,959     $48,664     $32,548      $26,506        $26,161


ADDITIONAL DATA:

Number of employees at year-end            579         695         686          729            862
</TABLE>


NOTES:   (1)   The income (loss) from operations for the fiscal years ended
               June 30, 1997, 1996, 1995, 1994 and 1993 includes restructuring
               and unusual charges of $6,245,000, $23,167,000, $6,365,000,
               $2,343,000 and $1,489,000, respectively. See Note 2 of the Notes
               to Consolidated Financial Statements for information regarding
               restructuring and unusual charges.


         (2)   The fiscal year ended June 30, 1996 included a $1,200,000 tax
               benefit which related to the settlement of certain tax issues and
               the amendment of certain tax returns to claim credits which had
               previously not been claimed.

         (3)  The fiscal year ended June 30, 1995 included a $4,100,000 tax
              benefit related to the recognition of prior years net operating
              losses and tax credits, as well as tax reserves released.

         (4)  The fiscal year ended June 30, 1994 included a $1,100,000
              gain from the sale of undeveloped land.

                                       15


<PAGE>   16




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

RESULTS OF OPERATIONS


The following table sets forth for the periods indicated, certain financial
data as a percentage of total revenue:


<TABLE>
<CAPTION>

                                                         AS A PERCENT OF TOTAL REVENUE
                                                                 YEAR ENDED
                                                                  JUNE 30,
                                                                -------------
                                                  1997              1996                1995
                                                  ----              ----                ----
<S>                                               <C>               <C>                 <C>
REVENUE
  Software licenses                                39.2 %          48.5 %               45.5 % 
  Software maintenance                             38.8            31.2                 33.8
  Implementation, consulting and other services    22.0            20.3                 20.7
                                                 ------          ------               ------
TOTAL REVENUE                                     100.0           100.0                100.0
COSTS AND EXPENSES
  Selling and marketing                            57.7            43.2                 41.8
  Cost of revenue and support                      32.9            26.7                 22.9
  Internal research and product development        16.8            13.4                 14.9
  Internally capitalized software                  (7.5)           (5.2)               (10.8)
  Software amortization                             7.7             5.5                 12.2
  General and administrative                       13.7            11.0                 10.8
  Unusual charge                                      -            19.5                  5.9
  Restructuring related costs                       6.7               -                    -
                                                 ------          ------               ------
TOTAL COSTS AND EXPENSES                          128.0           114.1                 97.7
                                                 ------          ------               ------
INCOME (LOSS) FROM OPERATIONS                     (28.0)          (14.1)                 2.3
Interest and other income (expense)                 0.2             0.4                 (0.2)
                                                 ------          ------               ------
INCOME (LOSS) BEFORE INCOME TAXES                 (27.8)          (13.7)                 2.1
Provision (benefit) for income taxes               (9.4)           (5.4)                (2.8)
                                                 ------          ------               ------
NET INCOME (LOSS)                                 (18.4)%          (8.3)%                4.9 %
                                                 ======          ======               ======
</TABLE>


                                       16



<PAGE>   17




REVENUE


<TABLE>
<CAPTION>

                           YEAR ENDED                 YEAR ENDED             YEAR ENDED
                           JUNE 30,     PERCENT       JUNE 30,     PERCENT    JUNE 30,
REVENUE                    1997         CHANGE        1996         CHANGE      1995
                           ----         ------        ----         ------     ------
<S>                        <C>          <C>           <C>          <C>        <C>
  Software licenses      $  36,455      (36.8)%      $ 57,715      17.1%     $  49,294
  Software maintenance      35,983       (3.0)         37,095       1.2         36,649
  Implementation &
  consulting svcs.          20,393      (15.6)         24,174       7.8         22,415
                         ---------                   --------                ---------
TOTAL REVENUE            $  92,831      (22.0)%      $118,984       9.8%     $ 108,358
                         =========                   ========                =========
</TABLE>

Total revenue decreased 22% in fiscal 1997 compared with fiscal 1996 primarily
due to the decline in software license revenue.  Total revenue increased 9.8%
in fiscal 1996 compared with fiscal 1995 primarily due to the growth in
software license revenue.


SOFTWARE LICENSE REVENUE

Software license revenue decreased 36.8% in fiscal 1997 compared with fiscal
1996.  The decline in software license fee revenue was mainly due to a loss of
sales momentum from turnover in the Company's international sales force, as a
result of the Company's investigation into violations of the Company's revenue
recognition policies, and turnover in the Company's domestic sales force as a
result of transitional changes in the sales organization.

Software license revenue increased 17.1% in fiscal 1996 compared with fiscal
1995.  This growth in software license revenue primarily reflected the strong
demand for the Company's application products, primarily Commander Decision and
Commander OLAP, its predecessor.

In connection with the Company's fiscal 1996 year end audit, the Company
discovered side letters setting forth conditions to certain foreign orders in
violation of the Company's revenue recognition policies.  No violations were
found in U.S. orders.  The growth in fiscal 1996 for all the Company's products
was negatively impacted by these violations, although it is difficult to
estimate what license growth would have been in fiscal 1996 without the
violation of Company policies.  The full impact on fiscal 1996 loss before
taxes from orders requiring non-recognition or reversal was approximately $6.9
million, which included amounts for prior quarters and years.  These prior
period adjustments are not material to the quarters or year to which they
relate, and prior period results were not restated.


SOFTWARE MAINTENANCE REVENUE

Software maintenance revenue decreased 3.0% in fiscal 1997 compared with fiscal
1996.  The decrease in fiscal 1997 was mainly due to the decline in software
maintenance revenue from mainframe products.  Mainframe software maintenance
revenue decreased 26.7% in fiscal 1997 and 30.9% in fiscal 1996 primarily due
to mainframe maintenance cancellations and continued customer migration to
client/server platforms.  The decline in mainframe software maintenance revenue
in fiscal 1997 was partially offset by an 8% increase in client/server
maintenance revenue.  Client/server software maintenance revenue represented
76%, or $27.4 million, of total software maintenance revenue in fiscal 1997,
compared to 68%, or $25.4 million, in fiscal 1996 and 54%, or $19.7 million, in
fiscal 1995.

Software maintenance revenue increased 1.2% in fiscal 1996 compared to fiscal
1995 principally due to the 28.8% growth in client/server maintenance revenue,
partially offset by the 30.9% decline in mainframe software maintenance
revenue.

Mainframe software maintenance revenue is expected to continue to decline.


IMPLEMENTATION AND CONSULTING SERVICES REVENUE

Implementation, consulting and other service revenue decreased 15.6% in fiscal
1997 compared with fiscal 1996 principally due to a lower number of billable
consultants as a result of the lower level of software license revenue, and to
the sale of the Company's Australian business to an agent in June 1996.

                                       17


<PAGE>   18





Implementation, consulting and other service revenue increased 7.8% in fiscal
1996 compared to fiscal 1995 primarily due to increased demand for such
services resulting from the growth in client/server software license revenue,
primarily in the EIS market.


COSTS AND EXPENSES




<TABLE>
<CAPTION>

                                                YEAR                                YEAR                            YEAR
                                                ENDED                               ENDED                           ENDED
                                                JUNE 30,            PERCENT        JUNE 30,         PERCENT         JUNE 30,
                                                1997                CHANGE          1996            CHANGE           1995
                                                ----                ------          ----            ------          ------
<S>                                             <C>                 <C>            <C>              <C>             <C>
COST AND EXPENSES
  Selling and marketing                         $ 53,552               4.3  %        $ 51,354          13.4 %         $ 45,283
  Cost of revenue and support                     30,594              (3.8)            31,814          28.3             24,799
  Internal research and product development       15,556              (2.6)            15,977          (1.3)            16,180
  Internally capitalized software                 (6,966)             13.2             (6,153)        (47.3)           (11,667)
  Software amortization                            7,129               9.1              6,535         (50.7)            13,250
  General and administrative                      12,693              (3.0)            13,082          12.2             11,663
                                                --------                             --------                        -------- 
   Total costs and expenses before unusual
   charge and restructuring costs                112,558                 -            112,609          13.2             99,508
  Unusual charge                                       -                 *             23,167             *              6,365
  Restructuring related costs                      6,245                 *                  -             -                  -
                                                --------                             --------                         --------
TOTAL COSTS AND EXPENSES                        $118,803             (12.5) %        $135,776          28.2 %         $105,873
                                                ========                             ========                         ========
</TABLE>

* % not meaningful.

Total costs and expenses in fiscal 1997 included a $6.2 million charge for
restructuring related costs, and in fiscal 1996 a $23.2 million non-cash charge
to write off capitalized software.  Total operating expenses, excluding
restructuring and unusual charges, in fiscal 1997 were relatively flat compared
with fiscal 1996, and increased 13.2% from fiscal 1995 to fiscal 1996.

Selling and marketing expense increased 4.3% in fiscal 1997 compared to fiscal
1996 primarily due to increased spending on marketing activities to promote the
Company's new applications.  The increase was partially offset by the cost
reduction actions taken in the third quarter of fiscal 1997 and decreased
commissions on lower software license revenue.  Selling and marketing expense
increased 13.4% in fiscal 1996 compared to fiscal 1995 mainly due to increased
employee-related expenses, including travel and compensation costs, and agency
fees, incurred in support of the growth in software license revenue.

Cost of revenue and support expense decreased 3.8% in fiscal 1997 compared with
fiscal 1996 principally due to the decrease in implementation services costs
with lower service revenue.  Cost of revenue and support expense increased
28.3% in fiscal 1996 compared with fiscal 1995 primarily due to increased third
party royalty fees as a result of increased software license revenue from
certain Comshare products, and higher employee-related costs and outside
consulting fees related to the growth in implementation and consulting services
revenue.

Internal research and product development expense decreased 2.6% in fiscal 1997
compared to fiscal 1996 mainly due to the cost reduction actions taken early in
the third quarter of fiscal 1997 in connection with the consolidation of the
Company's product development activities in Ann Arbor, Michigan and closing of
the Leicester, England product development facility, partially offset by
increased spending for on-going enhancements to existing software products.
Internal research and product development expense in fiscal 1996 was relatively
flat compared with fiscal 1995 reflecting relatively little change in the size
of the development staff.

Internally capitalized software increased 13.2% in fiscal 1997 compared to
fiscal 1996 mainly due to the increased levels of development costs that were
capitalizable.  Software amortization expense increased in fiscal 1997 compared
to fiscal 1996 due to the increased levels of capitalized software.  Internally
capitalized software and software amortization expense decreased in fiscal 1996
compared to fiscal 1995 primarily due to the reduced levels of capitalized
software as a result of the $23.2 million write-off of capitalized software in
the second quarter of fiscal 1996 as described below.

                                       18


<PAGE>   19





General and administrative expense, excluding the fiscal 1996 provisions for
$900,000 of professional service fees associated with the investigation into
violations of the Company's revenue recognition policies, $760,000 reserved in
connection with the termination of the Company's vacated office facility in
London, England and $600,000 gain on sale of the Company's Australian business,
increased 5.6% in fiscal 1997 compared to fiscal 1996, and increased 3.1% in
fiscal 1996 compared to fiscal 1995.  The increase in fiscal 1997 was primarily
due to increased legal fees as a result of the Arbor Software litigation as
described under Item 3 - "Legal Proceedings" and Note 12 of the Notes to
Consolidated Financial Statements.  The increase in fiscal 1996 was primarily
attributable to employee-related costs.

In fiscal 1997, during the third quarter ended March 31, 1997, the Company
recorded a $6.2 million restructuring charge for management actions or plans in
connection with the consolidation of the Company's product development
activities in Ann Arbor, Michigan and reductions in staff and non-revenue
generating costs.  The restructuring had a $4.2 million negative after tax
impact on net income. The restructuring charge included staff reductions of
approximately 70 employees.  These cost reduction actions were expected to save
approximately $6.8 million annually.  At June 30, 1997, $2.0 million remains to
be paid for termination of employment and contractual obligations related to
these restructuring actions taken during the third quarter ended March 31,
1997.  See Note 2 of Notes to Consolidated Financial Statements.  The Company
will incur a charge of approximately $1.6 million related to the termination of
certain executives and others in the first quarter of fiscal 1998.

In fiscal 1996, during the second quarter ended December 31, 1995, the Company
recorded a $23.2 million non-cash charge to write off certain capitalized
software.  The write-off had a $15.5 negative after tax impact on net income.
The write-off was the result of strong customer interest in the Company's
product, Commander Decision, for customizable decision support applications,
which substantially reduced the realizable value of the Company's older desktop
products.  The write-off also reflected the reduction of the estimated useful
service life of the Company's products and the amortization period of its
capitalized software costs, prompted by the Company's acceleration of its
product development cycles in response to changes in the technological
environment in the decision support applications market.  See Note 2 of Notes
to Consolidated Financial Statements.


OTHER INCOME AND EXPENSE


<TABLE>
<CAPTION>
                                          YEAR ENDED JUNE 30,
                                  ---------------------------------
                                  1997          1996           1995
                                  ----          ----           ----
<S>                               <C>           <C>            <C>
OTHER INCOME (EXPENSE)
  Interest income (expense)      $ 494         $ 492          $ (512)
  Exchange gain (loss)            (310)          (50)            307
                                 -----         -----          ------ 
TOTAL OTHER INCOME (EXPENSE)     $ 184         $ 442          $ (205)
                                 =====         =====          ====== 
</TABLE>

The increase in net interest income resulted from a decline in interest expense
and bank related charges in fiscal 1997 compared to fiscal 1996.  Partially
offsetting lower interest expense was a decrease in interest income in fiscal
1997 compared to fiscal 1996 primarily due to lower cash levels as a result of
cash used in operating and investment activities. Interest income increased in
fiscal 1996 compared to fiscal 1995 due to investment of the net proceeds
received from the public offering of the Company's common stock closed in the
second quarter ended December 31, 1995 (see Note 4 of Notes to Consolidated
Financial Statements) and the reduced loan balances outstanding following the
closing of the offering.


FOREIGN CURRENCY

In fiscal 1997, 1996, and 1995, 47.6%, 53.1%, and 55.3% of the Company's total
revenue was from outside North America.  Most of the Company's international
revenue is denominated in foreign currencies. Comshare recognizes currency
transaction gains and losses in the period of occurrence.  As currency rates
are constantly changing, these gains and losses can, at times, fluctuate
greatly.  The $310,000 foreign exchange loss in fiscal 1997 principally
reflected the weakening of certain foreign currencies against the British pound
during the twelve months ended June 30, 1997.  The Company had an exchange loss
of $50,000 in fiscal 1996, compared with an exchange gain in fiscal 1995.  The
exchange gain in fiscal 1995 was attributable to the strengthening of certain
foreign currencies against the British pound.

                                       19


<PAGE>   20





Foreign currency fluctuations in fiscal 1997, 1996, and 1995 impacted operating
income as currency fluctuations on revenue denominated in a foreign currency
were partially offset by currency fluctuations on expenses denominated in a
foreign currency.  In fiscal 1997, the decrease in total revenue, at actual
exchange rates, was $1,142,000 less than at comparable exchange rates.  The
decrease in total expenses in fiscal 1997, at actual exchange rates, was
$858,000 less than at comparable exchange rates.  As a result of the changes in
the foreign currency exchange rates, the increase in the net loss before taxes
in fiscal 1997, at actual exchange rates, was $284,000 less than at comparable
exchange rates.  In fiscal 1996, the increase in total revenue at actual
exchange rates was $216,000 less than at comparable exchange rates.  The
increase in total expenses in fiscal 1996 at actual exchange rates was $34,000
more than at comparable exchange rates.  As a result of the changes in the
foreign currency exchange rates, the increase in net loss before taxes in
fiscal 1996, at actual exchange rates, was $250,000 more than at comparable
exchange rates.

The Company at various times denominates borrowings in foreign currencies and
enters into forward exchange contracts to hedge exposures related to foreign
currency transactions.  The Company does not use any other types of derivatives
to hedge such exposures nor does it speculate in foreign currency.  In general,
the Company uses forward exchange contracts to hedge against large selective
transactions that present the most exposure to exchange rate fluctuations.  At
June 30, 1997 and June 30, 1996 the Company had forward contracts of
approximately $1.8 million and $5.7 million (notional amounts), respectively,
denominated in foreign currencies.  The contracts outstanding at June 30, 1997
mature through July 25, 1997 and are intended to hedge various foreign currency
commitments due from foreign subsidiaries and the Company's agents and
distributors.  Due to the short term nature of these financial instruments, the
fair value of these contracts is not materially different than their notional
amount at June 30, 1997 and 1996.

Inflation did not have a material impact on the Company's revenue or income
from operations in fiscal 1997, 1996 or 1995.


INCOME TAXES

The benefit from income taxes in fiscal 1997 was $8.7 million related to the
Company's operating loss for the current year.  The benefit from income taxes
in fiscal 1996 was $6.5 million which included the tax benefits related to the
Company's operating loss, and $1.2 million related to the settlement of certain
tax issues and the amendment of certain tax returns to claim credits which had
previously not been claimed.  The benefit from income taxes in fiscal 1995 was
$3.0 million which included the release of tax valuation reserves of $2.5
million related to tax credits.  This release was attributable to the
significant improvement in the Company's profitability in fiscal 1995, which
allowed the realization of a significant portion of these credits.  In
addition, settlements with tax authorities regarding certain outstanding issues
allowed the Company to release tax reserves of $1.6 million in fiscal 1995
previously established against these exposures.

Realization of deferred tax assets associated with the Company's future
deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration.  Although realization of the deferred tax assets is
not assured, management believes it is more likely than not that the deferred
tax assets will be realized through future taxable income or by using a tax
strategy currently available to the Company.  On a quarterly basis, management
will assess whether it remains more likely than not that the deferred tax
assets will be realized.  This assessment could be impacted by a combination of
continuing operating losses and a determination that the tax strategy is no
longer sufficient to realize some or all of the deferred tax assets.  If
management determines that it is no longer more likely than not that the
deferred tax assets will be realized, a valuation allowance will be required
against some or all of the deferred tax assets.  This would require a charge to
the income tax provision, and such charge could be material to the Company's
results of operations.

A comparative analysis of the factors influencing the effective income tax rate
is presented in Note 8 of the Notes to Consolidated Financial Statements.


LIQUIDITY AND CAPITAL RESOURCES

At June 30, 1997, cash and cash equivalents were $11.7 million, compared with
cash and cash equivalents of $27.5 million at June 30, 1996.  The decrease in
cash and cash equivalents was principally due to the net cash used for
operating and investing activities in the twelve months ended June 30, 1997.

Net cash used in operating activities was $8.4 million in fiscal 1997, compared
with net cash provided by operating activities of $13.8 million in fiscal 1996.
The decrease in net cash provided by operating activities was primarily due to
a $17.1 million net loss from operations, and a $2.4 million payment to
terminate the Company's lease obligation on its

                                      20


<PAGE>   21



vacated London office facility.  Partially offsetting the net loss from
operations was a $ 10.2 million decrease in accounts receivable balances as a
result of improved collections in fiscal 1997.

Net cash used in investing activities was flat in fiscal 1997 compared to
fiscal 1996.  At June 30, 1997, the Company did not have material capital
expenditure commitments.  In fiscal 1998, property and equipment purchases are
expected to be comparable or lower than fiscal 1997, while additions to
internally developed software are expected to continue at levels similar to
those in fiscal 1997.

Net cash provided by financing activities was $3.5 million in fiscal 1997,
compared with $23.0 million in fiscal 1996.  During fiscal 1996, the Company
completed a public offering in which it received net proceeds of $25.2 million
in the second quarter ended December 31, 1995.

Working capital as of June 30, 1997 was a negative $1 million, compared with
$24.6 million as of June 30, 1996.  Working capital includes deferred revenue
of  $19.9 million as of June 30, 1997, compared with $18.4 million as of June
30, 1996.  Deferred revenue principally relates to maintenance contracts, and
represents a noncash obligation.  Total assets were $80.8 million at June 30,
1997, compared with total assets of $98.2 million at June 30, 1996.  The
decrease in both working capital and total assets was primarily due to the
decrease in cash and cash equivalents and accounts receivable.

Effective September 23, 1997 the Company entered into a new $10 million credit
agreement with its bank which matures on October 1, 2000.  Borrowings are
secured by accounts receivable and the credit agreement contains covenants
regarding among other things, earnings, leverage, net worth and payment of
dividends.  Under the terms of the agreement, the Company is not permitted to
pay cash dividends on its common stock.  Permitted borrowings available as of 
September 23, 1997 under the credit agreement, which are based on a percentage 
of worldwide eligible accounts receivable, were $9.2 million.  The interest 
rate is based on LIBOR, plus applicable margin, which varies between 1.0% and 
1.75%.  The Company will borrow approximately $3 million under the new credit
agreement to repay all amounts borrowed under its existing credit agreement.

The Company had a $10 million credit agreement with another bank as of June 30, 
1997, which it will terminate on or about September 30, 1997.  At June 30, 
1997, there was $4 million outstanding under this credit agreement.  At June 
30, 1997 interest was at 8.5% for domestic borrowings, and at the Eurodollar 
rate for foreign borrowings, which varied between 0.5% and 6% plus applicable 
margin, which varied between 1.5% and 2% (2% at June 30, 1997).

In addition, certain of the Company's European subsidiaries have local currency
overdraft facilities with banks, which  totaled $1.1 million at June 30, 1997.
The Company had outstanding borrowings of $138,000 at June 30, 1997 under these
facilities. The interest rates generally vary with the banks' base rate.  Most
of such borrowings are guaranteed by the Company.

The Company believes that the combination of present cash balances, lease
financing, and amounts available under credit facilities will be sufficient to
meet the Company's currently anticipated cash requirements for at least the
next twelve months.  The foregoing statement is a "forward looking statement"
within the meaning of the Securities Exchange Act of 1934.  The extent to which
such sources will be sufficient to meet the Company's anticipated cash
requirements is subject to a number of uncertainties including the ability of
the Company's operations to generate sufficient cash to support operations, and
other uncertainties described in "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Safe Harbor Statement."


SAFE HARBOR STATEMENT
                                                                           
Certain information in this Form 10-K contains "forward looking statements"
within the meaning of the Securities Exchange Act of 1934, including those
concerning the Company's future results and expected cost savings from cost
reduction actions described in Note 2 of "Notes to Consolidated Financial
Statements" and Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Costs and Expenses".  Actual results
could differ materially from those in the forward looking statements due to a
number of uncertainties, including, but not limited to, the demand for the
Company's products and services; the size, timing and recognition of revenue
from significant orders; increased competition; the Company's success in and
expense associated with developing, introducing and shipping new products; new
product introductions and announcements by the Company's competitors; changes
in Company strategy; product life cycles; the cost and continued availability
of third party software and technology incorporated into the Company's
products; the impact of rapid technological advances, evolving industry
standards and changes in customer requirements; the impact of recent
transitional changes in North American and international management and sales
personnel; the impact of the investigation into violations of the Company's
revenue recognition policies on the Company's 

                                       21


<PAGE>   22
ongoing operations; cancellations of maintenance and support agreements;
software defects; changes in operating expenses; variations in the amount of
cost savings anticipated to result from cost reduction actions; the impact
of cost reduction actions on the Company's operations; fluctuations in foreign
exchange rates; and economic conditions generally or in specific industry
segments.  In addition, a significant portion of the Company's revenue in any
quarter is typically derived from non-recurring license fees, a substantial
portion of which is booked in the last month of a quarter.  Since the purchase
of the Company's products is relatively discretionary and generally involves a
significant commitment of capital, in the event of any downturn in any
potential customer's business or the economy in general, purchases of the
Company's products may be deferred or canceled. Further, the Company's expense
levels are based, in part, on its expectations as to future revenue and a
significant portion of the Company's expenses do not vary with revenue.  As a
result, if revenue is below expectations, results of operations are likely to
be materially adversely affected.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
          RISK
  
Not applicable.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and schedule filed herewith are set forth on the Index
to Consolidated Financial Statements and Schedule on page 25 and are
incorporated herein by reference.


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

Not applicable.




                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item is incorporated herein by reference to
the Company's 1997 Proxy Statement under the captions "Election of Directors"
and "Further Information-Executive Officers."

          
ITEM 11.  EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference to
the Company's 1997 Proxy Statement under the caption "Executive Compensation."

ITEM 12.  SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

Information required by this Item is incorporated herein by reference to the
Company's 1997 Proxy Statement under the captions "Further
Information-Principal Shareholders" and "Further Information-Stock Ownership of
Management."


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item is incorporated herein by reference to the
Company's 1997 Proxy Statement under the captions "Certain Relationships and
Related Transactions."

                                      22


<PAGE>   23





                                    PART IV

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


   (a) The following documents are filed as part of this Report:

       1. Consolidated Financial Statements:
          The Financial Statements filed with this report are listed in the  
          Index to Consolidated Financial Statements and Schedule which appears
          on page 25.

       2. Consolidated Financial Statement Schedule:
          The Financial Statement Schedule filed with this report is listed in 
          the Index to Consolidated Financial Statements and Schedule which 
          appears on page 25.

       3. The exhibits filed with this report are listed in the Exhibit
          Index which appears on page 48.  The following are the Company's
          management contracts and compensatory plans and arrangements which are
          required to be filed as exhibits to this Form 10-K:



EXHIBIT NO.                     DESCRIPTION

10.01 Benefit Adjustment Plan of Comshare, Incorporated, effective June 1,
      1986, as amended - incorporated by reference to Exhibit 10.20 to the
      Registrant's Form 10-K Report for the fiscal year ended June 30, 1993.

10.02 Comshare, Incorporated 1988 Stock Option Plan, as amended - incorporated
      by reference to Exhibit 10.21 to the Registrant's Form 10-K Report for the
      fiscal year ended June 30, 1990 and Exhibit 10.22 to the Registrant's Form
      10-Q Report for the quarter ended September 30, 1994.

10.03 Amended and Restated Profit Sharing Plan of Comshare, Incorporated,
      effective as of October 1, 1995 - incorporated by reference to Exhibit 4.1
      to the Registrant's Form S-8 Registration Statement No. 33-65109.

10.04 Rules of the Comshare Retirement and Death Benefits Plan for employees
      of the United Kingdom, effective January 1, 1991, as amended -
      incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K
      Report for the fiscal year ended June 30, 1993.

10.05 Deed of Variation relating to the Comshare Retirement and Death Benefits
      Plan for employees of United Kingdom, dated July 30, 1997.

10.06 Interim Trust Deed establishing the Comshare Money Purchase Plan for
      employees of the United Kingdom, effective March 1, 1994 - incorporated by
      reference to Exhibit 10.08 to the Registrant's Form 10-K for the fiscal
      year ended June 30, 1994.

10.07 Employment and NonCompetition Agreement between Comshare, Incorporated
      and T. Wallace Wrathall, effective as of April 1, 1994 - incorporated by
      reference to Exhibit 10.23 to the Registrant's Form 10-Q Report for the
      quarter ended December 31, 1994.

10.08 Amended and Restated Employee Agreement between Comshare, Incorporated
      and Richard L. Crandall effective July 1, 1994, as amended - incorporated
      by reference to Exhibit 10.10 to the Registrant's Form 10-K for the fiscal
      year ended June 30, 1994.

10.09 Non-Competition Agreement between Comshare, Incorporated and Richard L.
      Crandall - incorporated by reference to Exhibit 10.11 of the Registrant's
      Form 10-K for the fiscal year ended June 30, 1994.  (Portions of this
      exhibit have been omitted and filed separately with the Securities and
      Exchange Commission pursuant to a request for confidential treatment
      pursuant to Rule 24b-2).

10.10 Letter Agreement from Comshare, Incorporated to Kathryn A. Jehle
      regarding terms of employment dated April 18, 1994 - incorporated by
      reference to Exhibit 10.12 to the Registrant's Form 10-K for the fiscal
      year ended June 30, 1994.

                                       23


<PAGE>   24


10.11   Description of Incentive Arrangements for certain executive officers for
        fiscal years 1994 and 1995-2000 - incorporated by reference to Exhibit
        10.12 to the Registrant's Form 10-K Report for the fiscal year ended
        June 30, 1996.

10.12   Stock Option Agreement, effective as of March 10, 1997, between
        Comshare, Incorporated and Daniel T. Carroll - incorporated by reference
        to Exhibit 10.22 to the Registrant's Form 10-Q Report for the quarter
        ended March 31, 1997.

10.13   Trust Agreement under the Benefit Adjustment Plan of Comshare,
        Incorporated, effective April 25, 1988, as amended - incorporated by
        reference to Exhibit 10.31 to the Registrant's Form 10-K Report for the
        fiscal year ended June 30, 1993.

10.14   Trust Agreement between Comshare, Incorporated and Vanguard Fiduciary
        for maintaining the Profit Sharing Plan of Comshare, Incorporated
        effective March 31, 1992, as amended - incorporated by reference to
        Exhibit 10.15 to the Registrant's Form 10-K for the fiscal year ended
        June 30, 1994.

10.15   1994 Executive Stock Purchase Program of Comshare, Incorporated -
        incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-Q
        Report for the quarter ended September 30, 1994.

10.16   Employee Stock Purchase Plan of Comshare, Incorporated - incorporated by
        reference to Exhibit 10.20 to the Registrant's Form 10-Q Report for the
        quarter ended September 30, 1994.

10.17   1994 Directors Stock Option Plan of Comshare, Incorporated -
        incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-Q
        Report for the quarter ended September 30, 1994.

10.18   Letter of understanding between Comshare, Incorporated and Steven J.
        Tonissen regarding employment termination dated August 4, 1997.

10.19   Agreement between Comshare, Incorporated and Dion T. O'Leary dated July
        9, 1997.

10.20   Letter agreement between Comshare, Incorporated and Geoffrey R. Cluett
        dated April 29, 1997 regarding term of employment and non-compete
        agreement.


(b)     Reports on Form 8-K.
                     There were no reports on Form 8-K filed during the 
                     quarter ended June 30, 1997.

                                      24


<PAGE>   25



                             COMSHARE, INCORPORATED

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

                              FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                               PAGE
                                                               ----
                                                                   
<S>                                                           <C>
Report of Independent Public Accountants                          26

Consolidated Statement of Operations for
  the Fiscal Years Ended June 30, 1997, 1996 and 1995             27

Consolidated Balance Sheet as of June 30, 1997 and 1996        28-29

Consolidated Statement of Cash Flows for the
  Fiscal Years Ended June 30, 1997, 1996 and 1995                 30
  
Consolidated Statement of Shareholders' Equity
  for the Fiscal Years Ended June 30, 1997, 1996 and 1995         31

Notes to Consolidated Financial Statements                     32-45
</TABLE>




                                    SCHEDULE

II. Consolidated Schedule of Valuation and Qualifying Accounts    46



                                       25


<PAGE>   26













                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

                                       

To Comshare, Incorporated:

We have audited the accompanying consolidated balance sheets of COMSHARE,
INCORPORATED (a Michigan corporation) and subsidiaries as of June 30, 1997 and
1996, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended June 30,
1997.  These financial statements and the schedule referred to below are the
responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Comshare, Incorporated and
subsidiaries as of June 30, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1997, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The schedule listed in the accompanying
index is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements.  This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



                                                     ARTHUR ANDERSEN LLP

Detroit, Michigan,
  September 23, 1997.

                                      26


<PAGE>   27




COMSHARE, INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)





<TABLE>
<CAPTION>
                                                           FISCAL YEAR ENDED JUNE 30,
                                                    ----------------------------------------
                                                      1997            1996           1995
                                                      ----            ----           ----
<S>                                                 <C>             <C>            <C>
REVENUE
  Software licenses                                 $ 36,455       $  57,715       $ 49,294
  Software maintenance                                35,983          37,095         36,649
  Implementation, consulting and other services       20,393          24,174         22,415
                                                    --------       ---------       --------
TOTAL REVENUE                                         92,831         118,984        108,358

COSTS AND EXPENSES
  Selling and marketing                               53,552          51,354         45,283
  Cost of revenue and support                         30,594          31,814         24,799
  Internal research and product development           15,556          15,977         16,180
  Internally capitalized software                     (6,966)         (6,153)       (11,667)
  Software amortization                                7,129           6,535         13,250
  General and administrative                          12,693          13,082         11,663
  Unusual charge                                           -          23,167          6,365
  Restructuring related costs                          6,245               -              -
                                                    --------       ---------       --------
TOTAL COSTS AND EXPENSES                             118,803         135,776        105,873
                                                    --------        --------       --------
INCOME (LOSS) FROM OPERATIONS                        (25,972)        (16,792)         2,485
OTHER INCOME (EXPENSE) 
  Interest income (expense)                              494             492           (512)
  Exchange gain (loss)                                  (310)            (50)           307
                                                    --------        --------       --------
TOTAL OTHER INCOME (EXPENSE)                             184             442           (205)

INCOME (LOSS) BEFORE TAXES                           (25,788)        (16,350)         2,280
Benefit for income taxes                              (8,671)         (6,459)        (3,048)
                                                    --------        --------       --------
NET INCOME (LOSS)                                   $(17,117)       $ (9,891)      $  5,328
                                                    ========        ========       ========
WEIGHTED AVERAGE NUMBER OF COMMON
AND DILUTIVE COMMON EQUIVALENT SHARES                  9,770           9,048          8,398
                                                    ========        ========       ========
NET INCOME (LOSS) PER COMMON SHARE                  $  (1.75)       $  (1.09)      $   0.63
                                                    ========        ========       ======== 
</TABLE>

        The accompanying notes are an integral part of this statement.

                                       27


<PAGE>   28




COMSHARE, INCORPORATED
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                AS OF JUNE 30,
                                                            -----------------------
                                                        1997                      1996
                                                        ----                      ----
Assets

Current assets
<S>                                                     <C>                    <C>
  Cash and cash equivalents                          $ 11,651                  $  27,468
  Accounts receivable, less allowance for
      doubtful accounts of $1,053 and $1,411 as of
      June 30, 1997 and 1996, respectively             24,675                     34,853  
  Deferred income taxes                                 1,953                        758
  Prepaid expenses and other current assets             5,298                      5,733
                                                     --------                   --------
      Total current assets                             43,577                     68,812
Property and equipment, at cost
  Computers and other equipment                        18,678                     24,946
  Leasehold improvements                                2,708                      2,999
                                                     --------                   --------
                                                       21,386                     27,945
  Less - Accumulated depreciation                      16,432                     23,426
                                                     --------                   --------
         Property and equipment, net                    4,954                      4,519
Computer software, net of accumulated
     amortization of $10,685 and $3,423 as of
     June 30, 1997 and 1996, respectively               9,175                      9,064
Goodwill, net of accumulated
     amortization of $1,551 and $1,684 as of
     June 30, 1997 and 1996, respectively               1,609                      1,947
Deferred income taxes                                  15,580                      7,940

Other assets                                            5,856                      5,956
                                                     --------                   --------   
                                                     $ 80,751                   $ 98,238
                                                     ========                   ========   
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       28


<PAGE>   29




COMSHARE, INCORPORATED
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                           AS OF JUNE 30,
                                                           --------------
                                                   1997                 1996
                                                   ----                 ----
<S>                                                <C>                  <C>        
Liabilities and Shareholders' Equity
 Current liabilities
   Notes payable                                $  4,332             $      -
   Accounts payable                               12,597               17,934
   Accrued liabilities -
      Payroll                                      3,191                3,394
      Taxes                                        1,953                3,171
      Other                                        2,601                1,391
                                                --------             --------
          Total accrued liabilities                7,745                7,956
   Deferred revenue                               19,868               18,364
                                                --------             --------
      Total current liabilities                   44,542               44,254
Long-term debt                                       343                1,913

Other liabilities                                  3,907                3,407

Commitments and contingencies

Shareholders' equity
   Capital stock:
     Preferred stock, no par value;
     authorized 5,000,000 shares; none issued          -                    -
     Common stock, $1.00 par value;
     authorized 20,000,000 shares; outstanding
     9,871,260 shares as of June 30, 1997
     and 9,691,443 shares as of June 30, 1996      9,871                9,691
   Capital contributed in excess of par           39,528               38,132
   Retained earnings (deficit)                   (12,363)               5,239
   Currency translation adjustments               (4,021)              (3,586)
                                                --------             --------
                                                  33,015               49,476
Less - Notes receivable                            1,056                  812
                                                --------             --------
      Total shareholders' equity                  31,959               48,664
                                                --------             --------
                                                $ 80,751             $ 98,238
                                                ========             ======== 
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       29
<PAGE>   30




COMSHARE, INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                                   Fiscal Year Ended June 30,
                                                                           --------------------------------------- 
                                                                            1997              1996           1995
                                                                            ----              ----           ----
<S>                                                                       <C>                  <C>         <C> 
Operating activities
  Net income (loss)                                                     $(17,117)           $ (9,891)       $   5,328
  Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating activities:
    Depreciation and amortization                                          9,582               8,330           15,901
    Write-off of capitalized software                                          -              23,167            6,365
    Noncash restructuring costs                                            1,317                   -                -
    Changes in operating assets and liabilities:
      Accounts receivable                                                 10,226              (5,679)           2,556
      Prepaid expenses and other assets                                      537                (928)              77
      Accounts payable                                                    (5,728)              6,686             (469)
      Accrued liabilities                                                   (160)                 58             (337)
      Deferred revenue                                                     1,314                 (19)          (1,489)
      Deferred income taxes                                               (8,829)             (8,238)          (4,645)
      Other liabilities                                                      427                 338               42
                                                                        --------            --------        ---------
      Net cash provided by (used in) operating activities                 (8,431)             13,824           23,329
Investing activities
    Additions to computer software                                        (7,066)             (6,207)         (11,667)
    Payments for property and equipment                                   (2,835)             (3,220)          (1,207)
    Other                                                                   (783)             (1,272)          (1,227)
                                                                        --------            --------        ---------
      Net cash used in investing activities                              (10,684)            (10,699)         (14,101)
Financing activities
    Net borrowings (payments) under notes payable                          4,053                   -              (33)
    Net repayments under debt agreements and capital lease
      obligations                                                         (1,403)             (3,394)         (10,044)
    Stock options exercised                                                  878                 474              248
    Issuance of common stock                                                   -              25,148                -
    Other                                                                    (31)                730              202
                                                                        --------            --------        ---------
      Net cash provided by (used in) financing activities                  3,497              22,958           (9,627)
Effect of exchange rate changes                                             (199)                (13)              23
                                                                        --------            --------        ---------
Net increase (decrease)  in cash                                         (15,817)             26,070             (376)

Balance at beginning of period                                            27,468               1,398            1,774
                                                                        --------            --------        ---------
Balance at end of period                                                $ 11,651            $ 27,468        $   1,398
                                                                        ========            ========        =========
Supplemental disclosures:
 Cash paid for interest                                                 $    169            $    371        $     690
                                                                        ========            ========        =========

 Cash paid for income taxes                                             $    740            $  1,869        $     558
                                                                        ========            ========        ==========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                       30


<PAGE>   31




COMSHARE, INCORPORATED
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)






<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended June 30,
                                                        ---------------------------------------------------
                                                         1997                1996                 1995
                                                         ----                ----                 -----
Common stock

<S>                                              <C>                  <C>                         <C>   
   Balance beginning of year                             $ 9,691          $  8,221                $   8,037
   Employee Stock Purchase Plan                               18                26                       22
   1994 Executive Stock Purchase Program                      21                 -                      104
   Retirement of shares                                      (39)              (16)                      (2)
   Sale of common stock in a public offering                   -             1,294                        -
   Stock options exercised                                   180               166                       60
                                                         -------          --------                ---------
   Balance end of year                                     9,871             9,691                    8,221
                                                         -------          --------                ---------
Capital contributed in excess of par

   Balance beginning of year                              38,132            13,199                    11,982
   Employee Stock Purchase Plan                              333               384                       155
   1994 Executive Stock Purchase Program                     392                 -                       855
   Retirement of shares                                     (160)              (62)                       (3)
   Sale of common stock in a public offering                  --            23,854                         -
   Stock options exercised                                   831               757                       210
                                                         -------          --------                ----------
   Balance end of year                                    39,528            38,132                    13,199
                                                         -------          --------                ----------
Retained earnings (deficit)

   Balance beginning of year                               5,239            15,500                    10,190
   Net income (loss)                                     (17,117)           (9,891)                    5,328
   Retirement of shares                                     (485)             (370)                      (18)
                                                         -------          --------                ----------
   Balance end of year                                   (12,363)            5,239                    15,500
                                                         -------          --------                ----------
Currency translation adjustments

   Balance beginning of year                              (3,586)           (3,239)                   (3,504)
   Translation adjustments                                  (435)             (347)                      265
                                                         -------          --------                ----------
   Balance end of year                                    (4,021)           (3,586)                   (3,239)
                                                         -------          --------                ----------
Less - Notes receivable

   Balance beginning of year                                 812             1,133                       199
   1994 Executive Stock Purchase Program                     244              (122)                      934
   Employee Stock Ownership Plan                               -              (199)                        -
                                                        --------          --------                ---------- 
                                                    
   Balance end of year                                     1,056               812                     1,133
                                                        --------          --------                ----------
         Total shareholders' equity                     $ 31,959          $ 48,664                $   32,548
                                                        ========          ========                ==========
                                        
</TABLE>

         The accompanying notes are an integral part of this statement.


                                       31
<PAGE>   32




COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY.  Comshare, Incorporated (the "Company") develops, markets and
supports client/server decision support applications software designed for
business analysis, planning, reporting and decision making.  The Company also
provides services such as maintenance, training, consulting and support
services.  Comshare is currently providing maintenance at more than 3,000
corporate and public sector customer sites.  The Company markets its products
through a direct sales force in the United States, Canada, United Kingdom,
France and Germany and has an extensive agent/distributor network in 36 other
countries.  The Company was incorporated in Michigan in February 1966 and
commenced operations at that time.

PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly owned.
All material intercompany accounts and transactions have been eliminated.

REVENUE.  The Company's revenue consists of software license, software
maintenance and implementation, consulting and other service revenue.  Software
license revenue is recognized when a customer contract is fully executed and
the software has been shipped.  Software maintenance revenue, whether bundled
with a product license or priced separately, is recorded as deferred revenue on
the balance sheet when invoiced and is recognized over the term of the
maintenance contract.  Implementation, consulting and other services revenue is
recognized as the services are performed.

EXPENSE CLASSIFICATION.  Selling and marketing expense primarily includes
employee costs, travel costs, facilities expenses, advertising and agency fees.
Cost of revenue and support includes personnel and other costs related to
implementation and consulting services revenue, customer support costs, direct
cost of producing software and royalty expense for products licensed from
others for use in the Company's product offerings.  Internal research and
product development expense includes all such expense before computer software
capitalization and amortization.

FOREIGN CURRENCY TRANSLATION.  All assets and liabilities of the Company's
foreign operations are translated at current exchange rates and revenue and
expenses are translated at monthly exchange rates.  Resulting translation
adjustments are reflected as a separate component of shareholders' equity.
Foreign currency transaction gains and losses are included in net loss.

FINANCIAL INSTRUMENTS.  The Company at various times enters into forward
exchange contracts to hedge certain exposures related to identifiable foreign
currency transactions that are relatively certain as to both timing and amount.
Gains and losses on the forward contracts are recognized concurrently with the
gains and losses from the underlying transactions.  The forward exchange
contracts used are classified as "held for purposes other than trading."  The
Company does not use any other types of derivative financial instruments to
hedge such exposures, nor does it use derivatives for speculative purposes.  At
June 30, 1997 and 1996, the Company had forward foreign currency exchange
contracts of approximately $1,809,000 and $5,746,000 (notional amounts),
respectively.  The contracts outstanding at June 30, 1997 mature through July
25, 1997 and are intended to hedge various foreign currency commitments due
from foreign subsidiaries and the Company's agents and distributors.  Due to
the short term nature of these financial instruments, the fair value of these
contracts is not materially different than their notional amount at June 30,
1997 and 1996.

CASH AND CASH EQUIVALENTS.  Cash and cash equivalents includes investments in
highly liquid investments with maturities of ninety days or less.

                                      32


<PAGE>   33

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



COMPUTER SOFTWARE.  The costs of developing and purchasing new software
products and enhancements to existing software products are capitalized after
technological feasibility is established.  The establishment of technological
feasibility and the ongoing assessment of the recoverability of these costs
require considerable judgment by management with respect to certain external
factors, including, but not limited to, anticipated future gross product
revenue, estimated economic product lives and changes in software and hardware
technology.  Beginning October 1, 1995, capitalized development costs were
amortized using the straight-line method over a two-year service life (see Note
2).  Previously, capitalized development costs were amortized using a rolling
three-year method, effectively a service life of approximately six years.  The
policy is reevaluated and adjusted as necessary at the end of each accounting
period.  On an ongoing basis, management reviews the valuation and amortization
of capitalized development costs.  As part of this review, the Company
considers the value of future cash flows attributable to the capitalized
development costs in evaluating potential impairment of the asset.

DEPRECIATION.  The cost of depreciable assets is charged to operations on a
straight-line basis.  Principal service lives for computers and other equipment
are three to five years.  Leasehold improvements are amortized over the
expected life of the asset or term of the lease, whichever is shorter.

GOODWILL.  Goodwill represents the unamortized cost in excess of fair value of
net assets acquired and is amortized on a straight-line basis over forty years.
On an ongoing basis, management reviews the valuation and amortization of
goodwill.  As part of this review, the Company considers the value of future
cash flows attributable to the acquired operations in evaluating potential
impairment of goodwill.

OTHER ASSETS.  In fiscal 1997, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" which requires an
evaluation of long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable.  There was no adjustment to the Company's financial statements in
fiscal 1997 as a result of this evaluation.

INCOME TAXES.  The Company accounts for estimated income taxes under the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes."  This statement provides for an asset and liability approach
under which deferred income taxes are provided based upon enacted tax laws and
rates applicable to the periods in which the taxes become payable.

EARNINGS PER SHARE.  Earnings per share of common stock is based on the daily
weighted average number of shares of common stock outstanding considering the
dilutive effect of outstanding stock options when appropriate. In February
1997, the Financial Accounting Standard Board issued Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share."  See Note 4 of
Notes to Consolidated Financial Statements for further discussion and pro forma
disclosure.

STOCK PLANS.  The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion (APB)
No. 25 "Accounting for Stock Issued to Employees", and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the stock at grant date over the amount an
employee must pay to acquire the stock.  As supplemental information, the
Company has provided pro forma disclosure of the fair value of stock options
granted during fiscal 1997 and 1996 in accordance with the requirements of
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation."  See Note 5 of Notes to Consolidated Financial
Statements.

COMPREHENSIVE INCOME.  The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" which establishes standards for reporting comprehensive income and its
components in a full set of financial statements.  Comprehensive income is
defined as the total of net income and all other nonowner changes in equity.
The Company has not yet adopted this statement but is required to adopt this
statement for the fiscal year ending June 30, 1999.

SEGMENTS OF AN ENTERPRISE.  The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 131 "Disclosures About Segments
of an Enterprise and Related Information" which establishes standards for
disclosures of certain segment information based on the "management approach"
which organizes segments within a company the way the chief operating decision
maker of that company organizes the

                                       33


<PAGE>   34

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


segments. The Company has not yet adopted this statement but is required to
adopt this statement for the fiscal year ending June 30, 1999.


USE OF ESTIMATES.  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the period.  Actual results may differ from these estimates.

RECLASSIFICATIONS. Certain amounts in the 1995 and 1996 financial statements
have been reclassified to conform with 1997  presentations.


                                       34


<PAGE>   35

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



2. RESTRUCTURING AND UNUSUAL CHARGES

During the quarter ended March 31, 1997, the Company recorded a $6.2 million
pre-tax restructuring charge for management actions or plans in connection with
the consolidation of the Company's product development activities in Ann Arbor,
Michigan and reductions in staff and non-revenue generating costs.  This $6.2
million pre-tax charge was composed of a $2.4 million for personnel reductions,
$2.6 million in space and office costs, and $1.2 million for non-compete and
consulting agreement.  The restructuring charge includes staff reductions of
approximately 70 employees.  These cost reduction actions were expected to save
approximately $6.8 million annually.  At June 30, 1997, $2.0 million remains to
be paid for termination of employment and contractual obligations related to
these restructuring actions.

The foregoing statements regarding the Company's expected cost savings from
cost reduction actions contain "forward looking statements" within the meaning
of the Securities Exchange Act of 1934.  Actual results could differ materially
from those in the forward looking statements due to a number of uncertainties,
including, but not limited to, those described under Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Safe
Harbor Statement".

During the year ended June 30, 1996, the Company recorded a $23,167,000
non-cash charge to write off certain capitalized software.  The write-off
resulted from the strong customer interest in Commander Decision, the Company's
newest generation product for customizable decision support applications, which
substantially reduced the realizable value of the Company's older Commander
desktop products, and the Company's acceleration of its product development
cycles in response to changes in the technological environment in the decision
support application software market.

The write-off reflected principally the Company's decision to focus its sales
efforts on Commander Decision, which was released in December 1995.  Commander
Decision was introduced at the Company's Users Conference held during the
second quarter of fiscal 1996 and generated greater interest than originally
anticipated by the Company.  This strong customer interest, combined with the
Company's decision in fiscal 1996 to offer the new Commander Decision end-user
front-end to existing maintenance-paying Commander OLAP customers at no charge,
was expected to result in rapid migration from Commander OLAP front-ends to the
Commander Decision front-end.

The write-off also reflected the reduction of the estimated useful service life
of the Company's products and the amortization period for its capitalized
software costs, prompted by the Company's acceleration of its product
development cycle.  The reduction of the software amortization period to two
years and a review of projected revenues over this two-year service life
resulted in the write-off of unamortized capitalized software development
costs.

During the year ended June 30, 1995, the Company recorded an unusual charge of
$6,365,000.  This charge related to the write-off of capitalized software
associated with its mature mainframe products.  The write-off of capitalized
software associated with the Company's mainframe products was the result of
industry trends and reflected the Company's strategic product plan to focus on
client/server software products.


3.   BORROWINGS


<TABLE>
<CAPTION>
                                          1997               1996
                                           ----               ----
<S>                                        <C>                <C>
Line of credit and overdraft facilities    $ 4,161          $ 1,913
Capital lease obligations                      514                -
                                           -------          -------
    Total debt outstanding                   4,675            1,913
Less: current portion                        4,332                -
                                           -------          -------
                                           $   343          $ 1,913
                                           =======          =======
</TABLE>


                                       35


<PAGE>   36

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



Effective September 23, 1997 the Company entered into a new $10 million credit
agreement with its bank which matures on October 1, 2000.  Borrowings are
secured by accounts receivable and the credit agreement contains covenants
regarding among other things, earnings, leverage, net worth and payment of
dividends.  Under the terms of the agreement, the Company is not permitted to
pay cash dividends on its common stock.  Permitted borrowings available as of
September 23, 1997 under the credit agreement,  which are based on a percentage 
of worldwide eligible accounts receivable, were $9.2 million.  The interest 
rate is based on LIBOR, plus applicable margin, which varies between 1.0% and 
1.75%.  The Company will borrow approximately $3 million under the new credit
agreement to repay all amounts borrowed under its existing credit agreement.

The Company had a $10 million credit agreement with another bank as of June 30, 
1997, which it will terminate on or about September 30, 1997.  At June 30, 
1997, there was $4 million outstanding under this credit agreement.  At June 
30, 1997 interest was at 8.5% for domestic borrowings, and at the Eurodollar 
rate for foreign borrowings, which varied between 0.5% and 6% plus applicable 
margin, which varied between 1.5% and 2% (2% at June 30, 1997).

In addition, certain of the Company's European subsidiaries have local currency
overdraft facilities with banks, which totaled $1.1 million at June 30, 1997.
The Company had outstanding borrowings of $138,000 at June 30, 1997 under these
facilities. The interest rates generally vary with the banks' base rate.  Most
of such borrowings are guaranteed by the Company.

See Note 9 of Notes to Consolidated Financial Statements regarding capital
lease obligations.


4. SHAREHOLDERS' EQUITY

The Board of Directors has the authority to issue up to 5,000,000 shares of no
par value preferred stock.  The shares can be issued in one or more series with
full, limited or no voting powers and with such special rights, qualifications,
limitations and restrictions as may be adopted by the Board of Directors.

In September 1996, the Company's Board of Directors approved a Shareholder
Rights Plan ("Rights Plan").  Under the Rights Plan, the Company declared a
dividend of one preferred stock purchase right on each outstanding share of
common stock.  Under certain conditions, each right may be exercised to
purchase one one-hundredth share of Series A Preferred Stock at an exercise
price of $110.  Of the 5,000,000 preferred shares the Company is authorized to
issue, 200,000 shares have been designated Series A Preferred.  The Series A
Preferred has certain dividend, voting and liquidation preferences.  No
preferred shares have been issued.  The rights may only be exercised beginning
ten business days following a public announcement that a person or group
acquires 15% or more of the Company's common stock (subject to certain
exceptions) or beginning ten business days (or under certain circumstances a
later date) following the commencement or announcement of a tender or exchange
offer which would cause that result.  In addition, under certain circumstances,
the rights will entitle shareholders (other than the acquiror) to purchase the
Company's common stock, or stock of the acquiror, at a discount to market
prices.  The rights, which do not have voting rights, expire on September 30,
2006.

Effective November 20, 1995, upon approval of the Company's Board of Directors,
Comshare declared a three-for-two stock split of the Company's common stock
distributable to shareholders of record as of November 13, 1995.  All share and
per share data included in the consolidated financial statements and
accompanying notes have been adjusted to reflect this stock split.

In December 1995, the Company completed a public offering of its common stock
which involved the issuance and sale by the Company of 1,293,750 shares
resulting in net proceeds to the Company of approximately $25,150,000.

The Company's senior executives are encouraged to own Comshare common stock.
To facilitate such ownership, the shareholders approved the 1994 Executive
Stock Purchase Program which enables certain executives to purchase Comshare
common stock at then current market prices directly from the Company via a
promissory note. The promissory note cannot exceed the executive's base annual
salary and is secured by the related common stock issued by the Company.  The
promissory note matures four years from the date of issuance.  Interest is at
the prime rate plus 1% and may be deferred until the promissory note matures.
A total of 300,000 shares of the Company's 


                                       36


<PAGE>   37

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

common stock has been reserved for issuance under the 1994 Executive Stock
Purchase Program. For the year  ended June 30, 1997, a total of 30,813 shares
at prices ranging from $11.50 to $16 were issued in exchange for notes
totaling $410,600.  No shares were purchased under this program during
fiscal 1996.  For the year ended June 30, 1995, a total of 104,044 shares at
prices ranging from $8.67 to $12.33 were issued in exchange for notes totaling
$934,000.  The aggregate principal balance of these promissory notes
outstanding and due to the Company was $1,056,000 and $812,000 at June 30, 1997
and 1996, respectively.

During 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 128, "Earning per Share", which changes
the calculation of earnings per share to be more consistent with countries
outside of the United States.  Under the new statement, primary earnings per
share is replaced by basic earnings per share and fully diluted earnings per
share is replaced by diluted earnings per share.  Basic EPS is computed using
weighted average shares outstanding and does not include potentially dilutive
securities.  Diluted EPS is to be computed using the average share price for
the period when calculating the dilution of options and warrants.  This
statement will be adopted by the Company as required in the second quarter
ended December 31, 1997 consolidated financial statements (an interim period).
Early adoption of SFAS 128 is not permitted.  If this statement had been
adopted for the periods presented, the net income per share amounts would have
been as follows:


<TABLE>
<CAPTION>
                                               1997        1996        1995
                                               ----        ----        ----
<S>                                            <C>         <C>         <C>
Net income (loss) per share as reported       $(1.75)     $(1.09)     $0.63

Pro forma basic net income (loss) per share    (1.75)      (1.09)      0.66

Pro forma diluted net income (loss) per share  (1.75)      (1.09)      0.63
</TABLE>

5. STOCK OPTIONS

The Company has two stock option plans, the 1988 Stock Option Plan (the "1988
Plan") and the 1994 Directors Stock Option Plan (the "Directors Plan").  On
March 10, 1997, the Company granted an option for 10,000 shares to the
Company's Chairman at an exercise price of $15.75 per share which was the
closing price of the common stock on that date.  The option vests on March 10,
1998 or the date on which the Chairman ceases to be Chairman of the Board of
the Company, whichever occurs last.  The option vests immediately in the event
of a change in control of the Company.  The option expires thirty months from
the grant date or six months after which the Chairman ceases to be Chairman of
the Board of the Company, whichever occurs earlier.


1988 STOCK OPTION PLAN

The Company's 1988 Plan provides for the grant of both incentive stock options
and non-qualified options to officers and key employees.  Options under the
1988 Plan are granted at 100% of market price on the date of grant, are
exercisable at the rate of 25% per year after one year from the date of grant
and have a term of five years.  The Board of Directors may, at its discretion,
grant stock appreciation rights in connection with the grant of options, but to
date has not elected to do so.

The 1988 Stock Option Plan was amended in November 1994 to increase the number
of shares of common stock authorized for grant from 900,000 shares to
1,275,000.

At June 30, 1997, the Company has reserved 849,782 shares of common stock for
the exercise of employee stock options.  The number of options outstanding and
exercisable under the 1988 Plan was 603,884 and 225,011 at June 30, 1997,
respectively.


                                       37


<PAGE>   38

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

1994 DIRECTORS STOCK OPTION PLAN

The 1994 Directors Stock Option Plan, approved by the shareholders in November
1994, provides for the issuance of options to purchase up to 150,000 shares of
the Company's common stock to non-employee directors of the Company.  Options 
under the Directors Plan are granted at 100% of the market price on the date of 
grant, are exercisable at a rate of 25% per year after one year from the date 
of grant and have a term of five years.

At June 30, 1997 the Company has reserved 146,250 shares of common stock for
the exercise of directors' stock options.  The number of options outstanding
and exercisable under the Directors Plan was 61,500 and 22,500 at June 30,
1997, respectively.


SUMMARY OF ACTIVITY

Stock option activity under all plans is summarized below:


<TABLE>
<CAPTION>
                                          1997                   1996
                                   -----------------      ----------------
                                            Weighted               Weighted
                                            Average                Average
                                            Exercise               Exercise
                                   Shares   Price         Shares   Price
                                   ------   -----         ------   -----
<S>                                <C>      <C>           <C>      <C>    
Outstanding at beginning of year   762,756  $10.70        818,025  $6.71
Granted                            265,500   18.01        177,750  24.02
Exercised                         (179,501)   5.63       (167,394)  5.51
Canceled                          (173,371)  16.36        (65,625)  8.32
Outstanding at end of year         675,384   13.45        762,756  10.70
Options exercisable at year end    247,511                215,443
Weighted average fair value of     
  options granted during the year   $17.31                 $22.87
</TABLE>

A summary of outstanding and exercisable stock options as of June 30, 1997
is as follows:


<TABLE>
<CAPTION>
                                  OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                         -----------------------------------     -------------------
                                       WEIGHTED
                                       AVERAGE      WEIGHTED                  WEIGHTED
                                       REMAINING    AVERAGE                   AVERAGE
RANGE OF                 NUMBER        CONTRACTUAL  EXERCISE     NUMBER       EXERCISE
EXERCISE PRICES          OUTSTANDING   LIFE         PRICE        EXERCISABLE  PRICE
---------------          -----------   ------       -----        -----------  -----
<S>                      <C>            <C>         <C>         <C>         <C>
$ 4.08   to    $ 6.00     83,875        1.03        $ 4.64        71,875     $ 4.41
  6.17   to      7.33     90,000        1.66          6.75        56,250       6.63
  7.67   to      8.67     96,759        2.34          8.48        43,511       8.48
  8.75   to     13.00    115,000        3.22         11.26        47,625      10.89
 14.75   to     14.87     17,500        4.21         14.77             0       0.00
 14.88   to     14.88     69,500        4.46         14.88             0       0.00
 15.38   to     24.25    123,250        3.76         20.57        19,125      23.59
 24.50   to     26.00     11,500        3.54         25.48         2,875      25.48
 27.25   to     27.25     63,000        3.96         27.25         6,250      27.25
 27.50   to     27.50      5,000        4.05         27.50             0       0.00
                         -------        ----        ------       -------    -------
$ 4.08   to    $27.50    675,384        2.95        $13.45       247,511    $  9.18
                         =======                                 =======
</TABLE>


                                       38


<PAGE>   39

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



PRO FORMA DISCLOSURE UNDER SFAS 123, "ACCOUNTING FOR STOCK-BASED
COMPENSATION"

Using the intrinsic value method of accounting for the value of stock options
granted during fiscal 1997 and 1996, no compensation cost was recorded in the
accompanying consolidated statement of operations.  Had compensation costs been
determined based on the fair value at the date of grant for awards in fiscal
1997 and 1996 consistent with the provisions of SFAS 123, net loss and net loss
per share would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):



<TABLE>
<CAPTION>
                                  1997           1996
                                  ----           ----
<S>                               <C>            <C>
Net loss - as reported           $(17,117)      $ (9,891)
Net loss - pro forma              (17,785)       (10,292)

Net loss per share - as reported   (1.75)          (1.09)
Net loss per share - pro forma     (1.82)          (1.14)
</TABLE>

The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option-pricing model.  Because the SFAS 123 method of
accounting has not been applied to options granted prior to July 1, 1995, the
resulting pro forma compensation cost may not be representative of that to be
expected in future years.  The following weighted average assumptions were used
in valuing the option grants:


<TABLE>
<CAPTION>
                                    1997               1996
                                    ----               ----
<S>                                 <C>                <C>
STOCK OPTION PLANS:
  Expected life (years)               3.26               3.26
  Risk free interest rate             6.1%               6.4%
  Expected stock price volatility     0.56               0.59
  Expected dividend yield                -                  -

EMPLOYEE STOCK PURCHASE PLAN:
  Expected life (years)               0.50               0.50
  Risk free interest rate             6.1%               6.4%
  Expected stock price volatility     0.56               0.59
  Expected dividend yield                -                  -
</TABLE>

6. EMPLOYEE STOCK PURCHASE PLAN

The Employee Stock Purchase Plan (the "ESPP") was approved by the shareholders
in November 1994.  A total of 300,000 shares of the Company's common stock have
been reserved for issuance under the ESPP.  The ESPP allows participating
employees to purchase shares of the Company's common stock through payroll
deductions at 85% of the fair market value at July 1 and January 1.
Substantially all employees are eligible to participate in the ESPP. Under the
ESPP, 18,233 shares, 26,218 shares and 21,834 shares were issued in fiscal
1997, 1996 and 1995, respectively.


7. BENEFIT PLANS

The Company has a profit sharing plan covering substantially all United States
employees.  The profit sharing plan provides for a minimum annual Company
contribution of 2% of an employee's salary, and matching contributions based on
employee 401(K) contributions.  The Company also has a deferred compensation
plan for United States officers for the payment of benefits which would not
otherwise be eligible under its tax-qualified retirement plans.  The Company
contributions, other than the above, are discretionary and are determined by
the Board of Directors.

                                       39


<PAGE>   40

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


The total contributions for both plans were $826,000, $1,183,000 and $1,224,000
in fiscal 1997, 1996 and 1995, respectively.

A subsidiary in the United Kingdom maintains, through a trustee, a defined
benefit pension plan for substantially all of its employees hired before
January 1, 1994 and a defined contribution plan for employees hired after
January 1, 1994.  Effective April 1, 1997, the defined benefit plan was frozen,
with no further contributions or benefits accruing under the plan.  The
resulting curtailment loss was partially included in the restructuring related
costs during fiscal 1997.  As of the same date, the defined contribution plan
was amended, providing a minimum annual company contribution of 2-1/2% of the
employee's compensation, and matching contributions up to an additional 2-1/2%
of compensation based on employee contributions. The defined contribution plan 
now covers substantially all United Kingdom employees.  Prior to April 1, 1997,
the defined contribution plan provided that participating employees contribute 
a minimum of 5% of their pensionable salary with the Company contributing 5%.

The components of pension expense for the fiscal year ended June 30 are as
follows (in thousands):


<TABLE>
<CAPTION>
                                                            1997               1996                 1995
                                                            ----               ----                 ----
<S>                                                      <C>                   <C>                <C>
Service cost for benefits earned during the year          $   473            $   429              $   540
Interest cost on projected benefit obligation               1,519              1,340                1,292
Actual return on assets                                    (3,468)            (1,899)              (1,347)
Net amortization and deferral                               1,913                722                  101
                                                          -------            -------              -------
Net pension expense                                       $   437            $   592              $   586
                                                          =======            =======              =======  
</TABLE>
The funded status of the pension plan as of June 30 is as follows (in 
thousands):


<TABLE>
<CAPTION>
                                                           1997                       1996
                                                           ----                       ----
<S>                                                    <C>                         <C>
Actuarial present value of benefit obligations
  Vested benefits                                       $ 19,280                    $15,742
  Non-vested benefits                                          -                          -
                                                        --------                    -------
  Accumulated benefit obligation                          19,280                     15,742
Effects of salary progression                                  -                      1,583
                                                        --------                    -------
Projected benefit obligation                              19,280                     17,325
Plan assets at fair value                                 20,730                     17,314
                                                        --------                   --------
Plan assets over (under) projected benefit obligation      1,450                        (11)

Amounts not recognized in balance sheet:
  Unamortized transition obligation                           -                         650
  Unamortized net loss                                      599                       1,796
                                                        -------                     -------
Amount unamortized                                          599                       2,446
                                                        -------                     -------
Net pension assets                                      $ 2,049                     $ 2,435
                                                        =======                     =======
</TABLE>

The actuarial present value of the projected benefit obligation was determined
using a weighted average discount rate of 8.5% and an annual increase in future
compensation of 6.5% for fiscal 1997, 1996 and 1995 calculations.  The long
term weighted average rate of return on assets used was 8.5% for fiscal 1997,
1996 and 1995.

The Company provides defined retirement benefits to the employees of the other
foreign subsidiaries through various contribution plans.  The amount charged to
expense for these benefits was $146,000 in fiscal 1997, $228,000 in fiscal 1996
and $142,000 in fiscal 1995.


                                       40


<PAGE>   41

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



8. INCOME TAXES

A summary of income (loss) before provision (benefit) for income taxes and
components of the provision (benefit) for income taxes for the years ended June
30 is as follows (in thousands):


<TABLE>
<CAPTION>
                                                  1997                      1996                      1995
                                                  ----                      ----                      ----
<S>                                             <C>                   <C>                            <C>
Income (loss) before provision (benefit)
  for income taxes:
  Domestic                                        $ (8,650)               $(12,428)                  $    486
  Foreign                                          (17,138)                 (3,922)                     1,794
                                                  --------                --------                   --------
                                                  $(25,788)               $(16,350)                  $  2,280
                                                  ========                ========                   ========
Domestic provision (benefit) for income taxes:
  Current                                         $      -                $    731                   $    (15)
  Deferred                                          (2,907)                 (5,781)                    (2,773)

Foreign provision (benefit) for income taxes:
  Current                                                -                   1,000                      1,499
  Deferred                                          (5,764)                 (2,409)                    (1,759)
                                                  --------                --------                   --------
Benefit for income taxes                          $ (8,671)               $ (6,459)                  $ (3,048)
                                                  ========                ========                   ========         
</TABLE>

The differences between the United States Federal statutory income tax benefit
and the consolidated income tax benefit for the years ended June 30 are
summarized as follows (in thousands):


<TABLE>
<CAPTION>
                                                          1997             1996          1995
                                                          ----             ----          ----
<S>                                                       <C>              <C>            <C> 
Federal statutory provision (benefit)                   $(8,768)         $(5,559)     $   775
Non-deductible meals and entertainment                      181              256          109
State income taxes, net of federal tax benefit               22              146           67
Increase in valuation reserve due to domestic
  and foreign losses without tax benefit and tax credits      -              872           42
Recognition of tax credits                                    -           (1,222)      (2,500)
Tax reserves released                                      (312)          (1,200)      (1,600)
Tax rate differences                                        (63)              76          (51)
Other, net                                                  269              172          110
                                                        -------          -------      -------
Actual income tax benefit                               $(8,671)         $(6,459)     $(3,048)
                                                        =======          =======      =======
</TABLE>


                                       41


<PAGE>   42
COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Deferred income taxes represent temporary differences in the recognition of
certain items for income tax and financial reporting purposes.  The components
of the net deferred income tax asset as of June 30 are summarized as follows
(in thousands):


<TABLE>
<CAPTION>
                                         1997             1996
                                         ----             ----
<S>                                  <C>             <C>        
Deferred income tax assets:
  Research and development           $    1,721      $     2,810
  Tax credits                             2,964            3,097
  Depreciation and amortization             729              975
  Net operating loss                     11,305            1,290
  Deferred revenue                          429              458
  Employee benefits                         752              901
  Accrued liabilities                       856              851
  Other                                   1,276              495
                                     ----------      -----------
                                         20,032           10,877
Valuation allowance                      (1,594)          (1,241)
                                     ----------      -----------     
                                         18,438            9,636
Deferred income tax liabilities:
Employee benefits                          (790)            (808)
Other                                      (115)            (130)
                                     ----------      -----------     
                                           (905)            (938)
                                     ----------      -----------     
Net deferred income tax asset        $   17,533      $     8,698
                                     ==========      ===========
</TABLE>

Realization of deferred tax assets associated with the Company's future
deductible temporary differences, net operating loss carryforwards and tax
credit carryforwards is dependent upon generating sufficient taxable income
prior to their expiration.  Although realization of the deferred tax assets is
not assured, management believes it is more likely than not that the deferred
tax assets will be realized through future taxable income or by using a tax
strategy currently available to the Company.  On a quarterly basis, management
will assess whether it remains more likely than not that the deferred tax
assets will be realized.  This assessment could be impacted by a combination of
continuing operating losses and a determination that the tax strategy is no
longer sufficient to realize some or all of the deferred tax assets.  If
management determines that it is no longer more likely than not that the
deferred tax assets will be realized, a valuation allowance will be required
against some or all of the deferred tax assets.  This would require a charge to
the income tax provision, and such charge could be material to the Company's
results of operations.

At June 30, 1997, for income tax purposes, the Company and certain of its
foreign subsidiaries had available net operating loss carryforwards of
approximately $33 million.   If not used, these net operating loss
carryforwards, as well as the Company's general business tax credits, will
expire between 1998 and 2012.


9. LEASES

The Company leases most of its office space, transportation and certain of its
equipment under noncancelable capital and operating leases.  Initial lease
terms vary in length and several of the leases contain renewal options.  The
Company leases certain equipment under long-term lease agreements that are
classified as capital leases, and the leased assets are included in "Property
and equipment" in the accompanying Consolidated Balance Sheet.  These capital
leases terminate at various dates through fiscal 2000.  Other leases are
classified as operating leases and are not capitalized.  Future minimum lease
payments under all noncancelable capital and operating leases are as follows
(in thousands):



                                      42


<PAGE>   43
COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)





<TABLE>
<CAPTION>
                                                                  OPERATING           CAPITAL
        FISCAL YEAR ENDING JUNE 30,              TOTAL              LEASE              LEASE
        ---------------------------              -----            ---------           -------
<S>                                         <C>                   <C>               <C>
1998                                        $     4,369           $   4,144         $    225
1999                                              3,583               3,358              225
2000                                              3,120               2,962              158
2001                                              2,774               2,774                -
2002                                              2,428               2,428                -
2003 and thereafter                               8,243               8,243                -
                                            -----------           ---------         --------
Total minimum payments                      $    24,517           $  23,909         $    608
                                            ===========           =========    
Less: amount representing interest                                                       (94)
                                                                                    --------         
Present value of capital lease obligations                                               514
Less: current portion                                                                   (171)
                                                                                    --------           
Long-term capital lease obligations                                                 $    343
                                                                                    ========   
</TABLE>

Total rental expense was $7,818,000 in fiscal 1997, $8,513,000 in fiscal 1996
and $7,252,000 in fiscal 1995.  In August 1996, the Company surrendered its
lease of the vacated London office.  The cost to terminate the lease,
approximately $2,600,000, was fully reserved for by the Company at June 30,
1996.


10. GEOGRAPHIC OPERATIONS AND SEGMENT INFORMATION

The following table summarizes selected financial information of the Company's
operations by geographic location (in thousands):


<TABLE>
<CAPTION>
                                            Fiscal Year Ended June 30,
                                            --------------------------
                                        1997             1996                1995
                                        ----             ----                ----                     
<S>                               <C>                   <C>                <C>              
Revenue from customers:
  North America                     $   48,684         $   55,782          $    48,478
  International                         44,147             63,202               59,880
                                    ----------         ----------          -----------
    Total revenue                   $   92,831         $  118,984          $   108,358
                                    ==========         ==========          ===========
Operating income:
  North America                     $    5,377         $   15,720          $    15,205
  International                         (2,262)            12,438               15,392
                                    ----------         ----------          -----------
    Total operating income               3,115             28,158               30,597
Unallocated expenses, net              (28,903)           (44,508)             (28,317)
                                    ----------         ----------          -----------
Income (loss) before taxes          $  (25,788)        $  (16,350)         $     2,280
                                    ==========         ==========          ===========
Identifiable assets:
  North America                     $   38,948         $   53,635          $    16,672
  International                         32,628             35,539               29,962
                                    ----------         ----------          -----------
    Total identifiable assets           71,576             89,174               46,634
Computer software                        9,175              9,064               32,676
                                    ----------         ----------          -----------
Total assets                        $   80,751         $   98,238          $    79,310
                                    ==========         ==========          ===========
</TABLE>

Unallocated expenses consist of general corporate expenses, internal research
and product development expenses, interest expense and interest income.
Unallocated expenses include $6,245,000 of restructuring related costs for cost
reduction actions in fiscal 1997 and $23,167,000 and $6,365,000 of unusual
charges related to the write-off of capitalized software in fiscal 1996 and
1995, respectively.


                                       43
<PAGE>   44

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



The presentation of information on a geographical basis requires the use of
estimation techniques and does not take into account the extent to which the
Company's marketing and management skills are inter-dependent.

The Company operates in one business segment: the development and marketing of
computer software and related services.

No customer accounted for more than 5% of total revenues in the fiscal years
ended June 30, 1997, 1996 and 1995.


11. QUARTERLY FINANCIAL DATA

Summarized quarterly financial data is as follows (unaudited and in thousands
except per share data):

<TABLE>
<CAPTION>

                                                           INCOME                                          NET
                                                           (LOSS)                   NET                   INCOME
                                                            FROM                   INCOME                 (LOSS)
                                     REVENUE              OPERATIONS               (LOSS)                PER SHARE
                                     -------              ----------               ------                ---------
<S>                                <C>                    <C>                    <C>                    <C>
 1997
 First Quarter                      $ 19,984              $ (7,709)              $ (4,931)                $(0.51)
 Second Quarter                       26,195                (4,173)                (2,762)                 (0.28)
 Third Quarter                        24,045               (10,198)                (6,923)                 (0.71)
 Fourth Quarter                       22,607                (3,892)                (2,501)                 (0.25)
                                    --------              ---------              -------- 
 Year ended June 30                 $ 92,831              $(25,972)              $(17,117)                $(1.75)
                                    ========              =========              ======== 

 1996
 First Quarter                      $ 28,653              $  2,628               $  1,510                 $ 0.17
 Second Quarter                       32,183               (18,979)               (12,864)                 (1.48)
 Third Quarter                        31,534                 2,759                  2,038                   0.20
 Fourth Quarter                       26,614                (3,200)                  (575)                 (0.06)
                                    --------              --------               -------- 
 Year ended June 30                 $118,984              $(16,792)              $ (9,891)                $(1.09)
                                    ========              ========               ======== 

 1995
 First Quarter                      $ 24,158              $  1,418               $    751                $  0.09
 Second Quarter                       27,656                 2,846                  1,681                   0.20
 Third Quarter                        27,704                 1,828                  1,204                   0.14
 Fourth Quarter                       28,840                (3,607)                 1,692                   0.20
                                    --------              --------               -------- 
 Year ended June 30                 $108,358              $  2,485               $  5,328                $  0.63
                                    ========              ========               ========                 
</TABLE>



 During the quarter ended March 31, 1997, the Company recorded a $6,245,000
 restructuring charge for management actions or plans in connection with the
 consolidation of the Company's product development activities in Ann Arbor,
 Michigan and reductions in staff and non-revenue generating costs.

 During the quarter ended June 30, 1996, the Company realized a $1,200,000 tax
 benefit related to the settlement of certain tax issues and the amendment of
 certain tax returns to claim credits which had previously not been claimed.

 During the quarter ended December 31, 1995, the Company recorded a non-cash
 charge of $23,167,000 to write off certain capitalized software.

 During the quarter ended June 30, 1995, the Company wrote off $6,365,000 of
 capitalized mainframe computer software.

 The fourth quarter ended June 30, 1995, also included a $4,100,000 tax benefit
 related to the recognition of prior years' net operating losses and tax
 credits as well as tax reserves released.

                                       44


<PAGE>   45

COMSHARE, INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)



12.  LITIGATION

Between August 9, 1996 and September 5, 1996, following the Company's
announcement of certain violations of the Company's revenue recognition
policies, four separate shareholder class action suits were filed in the United
States District Court for the Eastern District of Michigan against the Company
and certain of its officers and directors on behalf of shareholders who had
purchased the Company's common stock between April 17, 1996 and August 6, 1996. 
The Court consolidated the four suits into one class action, In Re Comshare,
Incorporated Securities Litigation, and the plaintiffs amended their complaint
to expand the class to shareholders who had purchased the Company's common stock
between August 2, 1995 and August 6, 1996.   The action alleged that the
plaintiffs sustained losses as a result of the defendants' alleged untrue
statements of material facts and alleged omissions to state material facts
necessary in order to make the statements made not misleading.  The complaint
sought unspecified damages and costs.  On September 18, 1997 the Court
dismissed all of the claims.  The plaintiffs have thirty days from the date of
entry of the order in which to appeal the dismissal.

In 1996, Arbor Software Corporation ("Arbor"), following an audit of the
Company's records, demanded that the Company submit certain issues involving
interpretation of royalty provisions of the license agreement between the
Company and Arbor to binding arbitration.  Arbor and the Company were in the
process of working out a procedure for and definition of all legal and
accounting issues to be resolved by such arbitration when, on September 27,
1996, Arbor filed a lawsuit against Comshare in the United States District
Court for the Northern District of California alleging breach of contract and
fraud relating to royalty calculations.  The Company filed a denial of all of
Arbor's claims and filed a counterclaim against Arbor for fraud, defamation,
unfair competition, interference with economic relationships and breach of
contract.  The parties are in the process of conducting discovery, and trial
is currently scheduled for May 1998.  The Company is contesting Arbor's claims
and pursuing its own counterclaims vigorously.



                                      45

<PAGE>   46



                             COMSHARE, INCORPORATED


                                  SCHEDULE II
                             CONSOLIDATED SCHEDULE
                       OF VALUATION & QUALIFYING ACCOUNTS



<TABLE>
<CAPTION>
                                   Balance    Charged to   Deductions                        Balance
                                  Beginning   Costs and     from        Translation           End of
DESCRIPTION                       of Period   Expenses     Reserves     Adjustments  Other    Period
-----------                       ----------  --------     --------     -----------  -----    ------
<S>                               <C>         <C>         <C>         <C>          <C>        <C>
Allowance for doubtful accounts
For the year ended June 30:
    1997                            $1,411      $  526      $ (916)     $   32        $  -     $1,053
                                    ======      ======      ======      ======        ======   ======
    1996                            $  887      $  578      $  (52)     $   (2)       $  -     $1,411
                                    ======      ======      ======      ======        ======   ======
    1995                            $1,161      $ (119)     $ (173)     $   18        $  -     $  887
                                    ======      ======      ======      ======        ======   ======
</TABLE>


                                       46


<PAGE>   47




                                   SIGNATURES

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


                                     Comshare, Incorporated     


Date:  September 29, 1997            By:  /s/ Kathryn A. Jehle
       ------------------                 ---------------------------------
                                         Kathryn A. Jehle
                                         Senior Vice President,
                                         Chief Financial Officer,
                                         Treasurer and Assistant Secretary


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


<TABLE>
<CAPTION>
   Signature                        Title                                                 Date
   ---------                        -----                                                 ----
<S>                                <C>                                                    <C>
/s/ Dennis G. Ganster                President, Chief Executive
----------------------               Officer, and a Director                             September 29, 1997
Dennis G. Ganster                    (Principal Executive Officer)                       ------------------


/s/ Kathryn A. Jehle                 Senior Vice President,
----------------------               Chief Financial Officer,                            September 29, 1997
Kathryn A. Jehle                     Treasurer and Assistant Secretary                   ------------------
                                     (Principal Financial Officer)


/s/ R. Michael Mahoney               Senior Director of Finance,
----------------------               Chief Accounting Officer,                           September 29, 1997
R. Michael Mahoney                   (Principal Accounting Officer)                      ------------------

/s/ Daniel T. Carroll                Chairman of the Board
-----------------------                                                                  September 29, 1997
Daniel T. Carroll                                                                        ------------------

/s/ Geoffrey B. Bloom                Director
-----------------------                                                                  September 29, 1997
Geoffrey B. Bloom                                                                        ------------------

/s/ Richard L. Crandall              Director
-----------------------                                                                  September 29, 1997
Richard L. Crandall                                                                      ------------------

/s/ Stanley R. Day                   Director
-----------------------                                                                  September 29, 1997
Stanley R. Day                                                                           ------------------

/s/ W. John Driscoll                 Director
-----------------------                                                                  September 29, 1997
W. John Driscoll                                                                         ------------------

/s/ Alan G. Merten                   Director
-----------------------                                                                  September 29, 1997
Alan G. Merten                                                                           ------------------

/s/ John F. Rockart                  Director
-----------------------                                                                  September 29, 1997
John F. Rockart                                                                          ------------------

/s/ T. Wallace Wrathall              Director
-----------------------                                                                  September 29, 1997
T. Wallace Wrathall                                                                      ------------------
</TABLE>


                                      47


<PAGE>   48





                               INDEX TO EXHIBITS

                                 

<TABLE>
<CAPTION>
EXHIBIT NO.                       DESCRIPTION     

<S>                               <C>
 3.01                             Restated Articles of Incorporation of the Registrant, as amended -                  
                                  incorporated by reference to Exhibit 3.02 to the Registrant's 10-K Report           
                                  for the fiscal year ended June 30, 1996.                                            
                                                                                                                      
 3.02                             Bylaws of the Registrant, as amended - incorporated by reference to                 
                                  Exhibit 3.02 to the Registrant's 10-K Report for the fiscal year ended              
                                  June 30, 1995.                                                                      
                                                                                                                      
 4.01                             Specimen form of Common Stock Certificate - incorporated by reference to            
                                  Exhibit 4(c) to the Registrant's Form S-1 Registration Statement No.                
                                  2-29663.                                                                            
                                                                                                                      
 4.02                             Credit agreement dated September 23, 1997 among Comshare, Incorporated, its Borrowing           
                                  Subsidiary (as defined therein) and Harris Trust and Savings Bank. 
                                                                                                                      
 4.03                             Rights Agreement, dated as of September 16, 1996, between Comshare,                 
                                  Incorporated and KeyBank National Association, as Rights Agent -                    
                                  incorporated by reference to Exhibit 2 to the Registrant's Registration             
                                  Statement on Form 8-A, filed on September 17, 1996.                                 
                                                                                                                      
 4.04                             Form of certificate representing Rights (included as Exhibit B to the               
                                  form of Rights Agreement filed as Exhibit 4.03).  Pursuant to the Rights            
                                  Agreement, Rights Certificates will not be mailed until after the earlier           
                                  of (i) the tenth business day (or such later date as may be determined by           
                                  the Board of Directors, with the concurrence of a majority of the                   
                                  Continuing Directors, prior to such time as any person becomes an                   
                                  Acquiring Person) after the date of the commencement of, or first public            
                                  announcement of the intent to commence, a tender or exchange offer by any           
                                  person or group of affiliated or associated persons (other than the                 
                                  Company or certain entities affiliated with or associated with the                  
                                  Company), if, upon consummation thereof, such person or group of                    
                                  affiliated or associated persons would be the beneficial owner of 15% or            
                                  more of such outstanding shares of common stock - incorporated by                   
                                  reference to Exhibit 1 to the Registrant's Registration Statement on Form           
                                  8-A, filed on September 17, 1996.                                                   
                                                                                                                      
10.01                             Benefit Adjustment Plan of Comshare, Incorporated, effective June 1,                
                                  1986, as amended - incorporated by reference to Exhibit 10.20 to the                
                                  Registrant's Form 10-K Report for the fiscal year ended June 30, 1993.              
                                                                                                                      
10.02                             Comshare, Incorporated 1988 Stock Option Plan, as amended - incorporated            
                                  by reference to Exhibit 10.21 to the Registrant's Form 10-K Report for the          
                                  fiscal year ended June 30, 1990 and Exhibit 10.22 to the Registrant's Form          
                                  10-Q Report for the quarter ended September 30, 1994.                               
                                                                                                                      
10.03                             Amended and Restated Profit Sharing Plan of Comshare, Incorporated,                 
                                  effective as of October 1, 1995 - incorporated by reference to Exhibit 4.1          
                                  to the Registrant's Form S-8 Registration Statement No. 33-65109.                   
                                                                                                                      
10.04                             Rules of the Comshare Retirement and Death Benefits Plan for employees              
                                  of the United Kingdom, effective January 1, 1991, as amended -                      
                                  incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K            
                                  Report for the fiscal year ended June 30, 1993.                                     
                                                                                                                      
10.05                             Deed of Variation relating to the Comshare Retirement and Death Benefits            
                                  Plan for employees of United Kingdom, dated July 30, 1997.                          
                                                                                                                      
10.06                             Interim Trust Deed establishing the Comshare Money Purchase Plan for                
                                  employees of the United Kingdom, effective March 1, 1994 - incorporated by          
                                  reference to Exhibit 10.08 to the Registrant's Form 10-K for the fiscal             
                                  year ended June 30, 1994.                                                           
                                                                                                                      
10.07                             Employment and NonCompetition Agreement between Comshare, Incorporated              
                                  and T. Wallace Wrathall, effective as of April 1, 1994 - incorporated by            
                                  reference to Exhibit 10.23 to the Registrant's Form 10-Q Report for the             
                                  quarter ended December 31, 1994.                                                    
</TABLE>

                                       48


<PAGE>   49




10.08 Amended and Restated Employee Agreement between Comshare, Incorporated
      and Richard L. Crandall effective July 1, 1994, as amended - incorporated
      by reference to Exhibit 10.10 to the Registrant's Form 10-K for the fiscal
      year ended June 30, 1994.

10.09 Non-Competition Agreement between Comshare, Incorporated and Richard L.
      Crandall - incorporated by reference to Exhibit 10.11 of the Registrant's
      Form 10-K for the fiscal year ended June 30, 1994.  (Portions of this
      exhibit have been omitted and filed separately with the Securities and
      Exchange Commission pursuant to a request for confidential treatment
      pursuant to Rule 24b-2).

10.10 Letter Agreement from Comshare, Incorporated to Kathryn A. Jehle
      regarding terms of employment dated April 18, 1994 - incorporated by
      reference to Exhibit 10.12 to the Registrant's Form 10-K for the fiscal
      year ended June 30, 1994.

10.11 Description of Incentive Arrangements for certain executive officers for
      fiscal years 1994 and 1995-2000 - incorporated by reference to Exhibit 
      10.12 to the Registrant's Form 10-K Report for the fiscal year ended June
      30, 1996.

10.12 Stock Option Agreement, effective as of March 10, 1997, between
      Comshare, Incorporated and Daniel T. Carroll - incorporated by reference
      to Exhibit 10.22 to the Registrant's Form 10-Q Report for the quarter
      ended  March 31, 1997.

10.13 Trust Agreement under the Benefit Adjustment Plan of Comshare,
      Incorporated, effective April 25, 1988, as amended - incorporated by
      reference to Exhibit 10.31 to the Registrant's Form 10-K Report for the
      fiscal year ended June 30, 1993.

10.14 Trust Agreement between Comshare, Incorporated and Vanguard Fiduciary
      for maintaining the Profit Sharing Plan of Comshare, Incorporated
      effective March 31, 1992, as amended - incorporated by reference to
      Exhibit 10.15 to the Registrant's Form 10-K for the fiscal year ended June
      30, 1994.

10.15 1994 Executive Stock Purchase Program of Comshare, Incorporated -
      incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-Q
      Report for the quarter ended September 30, 1994.

10.16 Employee Stock Purchase Plan of Comshare, Incorporated - incorporated by
      reference to Exhibit 10.20 to the Registrant's Form 10-Q Report for the
      quarter ended September 30, 1994.

10.17 1994 Directors Stock Option Plan of Comshare, Incorporated -
      incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-Q
      Report for the quarter ended September 30, 1994.

10.18 Letter of understanding between Comshare, Incorporated and Steven J.
      Tonissen regarding employment termination dated August 4, 1997.

10.19 Agreement between Comshare, Incorporated and Dion T. O'Leary dated July
      9, 1997.

10.20 Letter agreement between Comshare, Incorporated and Geoffrey R. Cluett
      dated April 29, 1997 regarding term of employment and non-compete
      agreement.

10.21 Lease dated September, 1994, between Comshare, Incorporated, Tenant and
      MGI Holding, Inc., Landlord for office space located at 555 Briarwood
      Circle, Ann Arbor, Michigan 48108 - incorporated by reference to Exhibit
      10.18 to the Registrant's Form 10-Q Report for the quarter ended September
      30, 1994.

10.22 Agreement between Taurusbuild Limited, Comshare and Svenska
      Handelsbanken related to the lease of office space for the Company's
      London office facility - incorporated by reference to Exhibit 10.17 of the
      Registrant's Form 10-K Report for the fiscal year ended June 30, 1994.

10.23 Software License Agreement by and between Arbor Software Corporation and
      Comshare, Incorporated dated December 23, 1993 - incorporated by reference
      to Exhibit 10.20 to Amendment Number 3 to the Registrant's Form 10-K
      Report, filed November 8, 1995, for the fiscal year ended June 30, 1995.
      (Portions

                                       49


<PAGE>   50



      of this exhibit have been omitted and filed separately with the
      Securities and Exchange Commission pursuant to a request for confidential
      treatment pursuant to Rule 24b-2).

10.24 First Amendment to License Agreement by and between Arbor Software
      Corporation and Comshare, Incorporated dated March 1, 1994 - incorporated
      by reference to Exhibit 10.20 to the Registrant's Form 10-K Report for the
      fiscal year ended June 30, 1995.  (Portions of this exhibit have been
      omitted and filed separately with the Securities and Exchange Commission
      pursuant to a request for confidential treatment pursuant to Rule 24b-2).

11.1  Computation of per share earnings.

21.01 Subsidiaries of the Registrant.

23.01 Consent of Independent Public Accountants.

27.00 Financial Data Schedule.

99.00 Amended and Restated Profit Sharing Plan of Comshare, Incorporated, Form
      11-K Annual Report - filed pursuant to Section 15(d) of the Securities
      Exchange Act of 1934 for the fiscal year ended June 30, 1997.



                                       50