FRITZ COMPANIES, INC.                                                FORM 10-K
25



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

                                    FORM 10-K

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                       EXCHANGE ACT OF 1934 [FEE REQUIRED]


                     For the Fiscal Year Ended May 31, 1999
                         Commission File Number 0-20548


                              FRITZ COMPANIES, INC.
             (Exact name of registrant as specified in its charter)

                                     Delaware
         (State of other jurisdiction of incorporation or organization

                                    94-3083515
                       (IRS Employer Identification Number)

         706 Mission Street, Suite 900, San Francisco, California    94103
         (Address of principal executive offices)                  (Zip Code)

         Registrant's  telephone  number,  including  area code  (415) 904-8360
         Securities registered pursuant to Section 12(b) of the Act:

         Title of each class         Name on each exchange on which registered
                 None                       None
         Securities registered pursuant to Section 12(g) of the Act:

                              Common Stock, $.01 par value
                                (Title of Class)

         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.[ X ] Yes
         [ ] No

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

         At June 28, 1999, the aggregate market value of the registrant's Common
         Stock held by non-affiliates  of the registrant was approximately  $229
         million.

         At June 28, 1999, the number of shares outstanding of registrant's
         Common Stock was 36,434,661

                       DOCUMENTS INCORPORATED BY REFERENCE
              Portions              of the Proxy Statement  relating to the 1999
                                    annual  meeting  of  shareholders  have been
                                    incorporated by reference -- Part III of the
                                    Form 10-K ( Items 10, 11, 12 and 13 )





                                       1
<PAGE>




         Recent Developments:

         Strategy:  During the second half of the 1999 fiscal year,  building on
         strategic  plans laid out more than two years  ago,  the  Company  made
         several  strategic  moves  to  accelerate  the  planned  changes.   The
         construction  of our  unique  franchise,  reinforced  by our  worldwide
         locations and multiple  services,  has essentially been completed.  For
         the past two years, we have involved  ourselves in the execution phase.
         In  order  to  maximize   these   efforts,   best-in-class   processes,
         measurements  and methods must be put in place.  To this end, the skill
         set of the top  management  team was  significantly  broadened with the
         addition of several new key executives with diverse backgrounds.  Also,
         a series of new initiatives were undertaken to increase customer focus,
         reduce costs and build  employee  loyalty.  The Company  believes these
         actions will  contribute  directly to enhancing  profitable  growth and
         building shareholder value.

         Strategic  Update:  With the new management  team in place, a series of
         actions have been initiated to enhance our strategic plans and make the
         company  increasingly  customer focused and responsive.  This strategic
         update focuses on the following:
o        building employee loyalty while reducing costs,
o        enhancing customer focus,
o        applying important new management models.

         As a first step, the Company's mission statement was revised to include
         best-in-class   customer  satisfaction  as  the  stated  organizational
         purpose.  Then the Company formalized and disseminated to all employees
         the core values that are the foundation of the "Fritz Way." A series of
         customer  surveys have been conducted to evaluate  satisfaction  levels
         and provide  specific  targets  for  improvement.  Further,  a model of
         continuous  improvement in customer  satisfaction has been designed and
         communicated  throughout  the  organization,  providing the  underlying
         logic for all operational decisions.

         Consistent  with  the  continuous   improvement   model,  a  new  sales
         management structure has been put in place. This structure includes new
         training   and   incentive   programs   that  are  designed  to  assure
         significantly  improved  company  response  to  customer  requirements.
         Similarly,  the Company has established a global Fritz  University,  to
         facilitate training and assure consistency in worldwide  practices,  as
         well as a reliable and  predictable  level of service to our customers.
         This  employee-run  training  organization  reflects  the  belief  that
         employees  are our most  valuable  assets  in  providing  best-in-class
         customer satisfaction.

         The Company  values its  employees  and its loyal base of customers who
         are working with the Company during this period of  re-engineering  and
         revitalization.  The Company believes the results will  increasingly be
         seen in improved  levels of  service,  efficiency,  accountability  and
         measurable quality  performance.  The enhancements the Company has made
         to its strategic  plan  constitute  essential  steps toward placing the
         Company on a path toward  stable,  profitable  growth which the Company
         feels will contribute meaningfully to enhanced shareholder value.


                                     PART I
         Item 1-   Business

         General

         Fritz  Companies,  Inc. (the  Company) is a leader in providing  global

                                       2
<PAGE>


         logistics services and related  information  services for importers and
         shippers  worldwide.  The  Company is  primarily  engaged in  providing
         logistics  management,  international air and ocean freight forwarding,
         customs brokerage,  and material management and distribution  services.
         The  Company  also  provides  value-added  services  through  logistics
         information  as well as  international  and domestic  movement of goods
         customarily provided by traditional freight forwarders.  These services
         are  designed to provide  integrated  global  logistics  solutions  for
         customers to  streamline  their  operations,  improve  their  inventory
         management  information and enhance their  profitability and to provide
         customers   with   more    efficient   and   effective    international
         transportation strategies.

         The Company was  incorporated  in  Delaware  in August  1988,  and is a
         successor   to  a  company   incorporated   in   California   in  1933.
         Internationally,  the Company  operates a number of subsidiaries  under
         the names "Fritz  Transportation  International,"  "Fritz Air Freight,"
         "Fritz  Starber,"   "Fritz  Fliway,"  "Fritz   Logistics,"  and  "Fritz
         Companies,"  among  others.  Unless  the  context  otherwise  requires,
         references in this Form 10-K to the Company  include  Fritz  Companies,
         Inc., its  subsidiaries  and its  predecessor  companies.  Although the
         Company's  executive  office is  located  in the  United  States at 706
         Mission Street, Suite 900, San Francisco, California 94103, its network
         is global. The Company has offices throughout North America, Australia,
         New Zealand,  South Africa, Asia, Europe, Latin America, and the Middle
         East.

         See  Management's  Discussion  and Analysis of Financial  Condition and
         Results  of  Operations  and  the  Company's   Consolidated   Financial
         Statements,  including  the  Notes  thereto,  for data  related  to the
         Company's   revenues,   operating  profit  and  long-lived   assets  by
         geographic  regions.  Unless otherwise stated, all amounts in this Form
         10-K are in thousands, except per share amounts.

         The following  table  presents  revenue and net revenue in thousands of
         dollars and as a percentage  of total  revenue or net  revenue,  as the
         case  may  be,   attributable  to  the  Company's  principal  logistics
         services:

<TABLE>

                                                     For the Year Ended May 31,
                                             ----------------------------------------------------------------------------------
                                                       1999                            1998                         1997
                                             --------------------- ------------------------------ -----------------------------
                                                  Amount     %                Amount        %               Amount        %
                                           ------------ --------          ------------ --------         ------------ --------
         Revenue


<S>                                       <C>                <C>         <C>                <C>        <C>                <C>
         Customs Brokerage                $      163,701     11.8        $      165,055     12.7       $      152,257     13.2
         Ocean Freight Forwarding                416,108     30.0               375,933     28.9              334,701     28.9
         Airfreight Forwarding                   606,526     43.7               576,643     44.4              531,100     45.9
         Material Management
         &                Distribution           201,392     14.5               182,452     14.0              138,712     12.0
                                             ------------ --------
                                          ==                             == ============ ========     === ============ ========
         Total Revenue                    $    1,387,727    100.0        $    1,300,083    100.0       $    1,156,770    100.0
                                          == ============ ========       == ============ ========     === ============ ========

         Net Revenue
         Customs Brokerage                $      163,701     28.3        $      165,055     29.6       $      152,257     29.9
         Ocean Freight Forwarding                126,060     21.8               120,497     21.6              107,480     21.1
         Airfreight Forwarding                   166,832     28.9               158,514     28.4              149,333     29.3
         Material Management
         &                Distribution           121,384     21.0               114,199     20.4              100,301     19.7
                                             ------------ --------
                                          ==                             == ============ ========     === ============ ========
         Total Net Revenue                $      577,977    100.0        $      558,265    100.0       $      509,371    100.0
                                          == ============ ========       == ============ ========     === ============ ========
</TABLE>

         Narrative Description of Business

         International  Airfreight  and Ocean Freight  Forwarding The Company is
         among the largest  forwarders of international air and ocean freight in
         the United States.

                                       3
<PAGE>

         The Company's revenue from  international  ocean freight  forwarding is
         derived from  logistics  services both as an indirect  ocean carrier (a
         "Non-Vessel  Operating  Common  Carrier" or NVOCC) and as an authorized
         agent for shippers and  importers.  The Company may also function as an
         agent for steamship companies. The Company's revenue from international
         airfreight  forwarding  is derived from  logistics  services both as an
         indirect air carrier  (IAC) and as an  authorized  cargo sales agent of
         various airlines.

         The Company also provides  logistics  services  including  warehousing,
         protective  packing,  cargo  consolidation,  document  preparation  and
         electronic transmittal,  electronic purchase  order/shipment  tracking,
         inventory   management,   expedited   document   delivery  for  customs
         clearance,  priority  notification  to consignee of cargo arrival,  and
         inland transportation of freight from point of origin to a distribution
         center or the carrier's cargo terminal.

         The Company serves a broad range of freight forwarding  customers.  The
         Company's  ocean freight  forwarding  customers  include  retailers and
         industrial companies shipping automotive parts, heavy equipment, steel,
         chemicals,   forest  products,   clothing,  and  produce.  In  general,
         airfreight  has a high  value  relative  to its  weight and the cost of
         shipment  is  usually  a small  portion  of its  value.  The  Company's
         principal  airfreight  customers are shippers of medical  equipment and
         parts,  drugs  and   pharmaceuticals,   computer  and  high  technology
         equipment  and  parts,   aircraft  and  automotive  parts,   electrical
         equipment,   machinery  and  machine   parts,   measuring  and  testing
         instruments, chemicals and fashion apparel.

         As a  NVOCC  and an  IAC,  the  Company  procures  customer  shipments,
         consolidates shipments bound for a particular  destination,  determines
         the routing for consolidated  shipments,  selects the direct carrier or
         charters an ocean vessel or aircraft and tenders each  consolidated lot
         as a single  shipment  to the direct  carrier for  transportation  to a
         distribution point.

         The Company's  rates are based on the shipment  weight  and/or  volume.
         Rates  charged by the  Company  are  ordinarily  less than the rate the
         shipper  would  be  charged  by a  steamship  line or an  airline.  The
         consolidation  of  customers'  shipments  allows the  Company to obtain
         lower rates from steamship lines or airlines than the rates the Company
         charges to its  customers for  individual  shipments.  In addition,  in
         certain  tradelanes the Company  controls a high volume of freight and,
         accordingly,  is able to obtain reduced rates from certain  carriers or
         charter operators.  This rate differential is the primary source of the
         Company's net ocean and airfreight revenue as an indirect carrier.

         By  accepting  goods for ocean or air  shipment as a NVOCC or IAC,  the
         Company  assumes the role as a carrier and becomes  responsible  to the
         shipper  for the safe  delivery  of the  shipments,  subject to a legal
         limitation  on  liability  of $500  (not  in  thousands)  per  ordinary
         shipping unit of ocean freight and $20 (not in thousands)  per kilogram
         of airfreight.  Because the Company's  relationship  with the steamship
         line  or  airline  is as a  shipper,  the  steamship  line  or  airline
         generally assumes the same responsibility to the Company as the Company
         assumes to its clients.

         As an authorized agent for shippers and importers, and as an authorized
         cargo agent of various  airlines and steamship  companies,  the Company
         arranges   transportation  of  individual   shipments  and  receives  a
         commission  from the direct carrier for arranging the  shipments.  When
         acting as such an agent, the Company does not consolidate shipments and
         does not have responsibility for shipments once they have been accepted
         by the direct carrier.

         As part of the Company's  freight  forwarding  activities,  the Company


                                       4
<PAGE>

         provides   project   forwarding   and  logistics   services   involving
         governmental and commercial projects, including foreign military sales,
         power plant construction,  shipbuilding,  construction of manufacturing
         assembly  facilities,  civil  infrastructures  and  other  large  scale
         installations.   The  Company's  project  forwarding  services  include
         integrated  logistics for conveying  heavy materials and equipment from
         multiple  origins to project sites.  Such services may include managing
         the   customer's   transportation,   customs   clearance  and  material
         management and distribution. Most of these shipments are transported by
         ocean  carrier.   The  government  portion  of  the  Company's  project
         forwarding  business requires a United States Government  Department of
         Defense security  clearance of the Company's  management team and those
         employees assigned to the project. The warehouses receiving and storing
         the cargo must have a security clearance.

         In addition to ocean and airfreight  forwarding  services,  the Company
         provides  forwarding  services and cross marketing in the United States
         for a number of its agents.  The Company is  compensated  by sharing in
         the agents' profits on their consolidation shipments.

         The  Company is  licensed by the  Federal  Maritime  Commission  of the
         United  States  and is a  member  of the  International  Air  Transport
         Association.

         Customs  Brokerage:  The Company is the largest  customs  broker in the
         United  States  according to the United  States  Customs  Service.  The
         Company's customs brokerage  operations for air and ocean imports cover
         over 400 (not in thousands)  ports of entry in the United  States.  The
         Company's customs brokerage  operation is among the most  sophisticated
         in  the  United  States  as  a  result  of  its  size,  technology  and
         integration with other  transportation  logistics  services provided to
         its  customers.  In addition,  the Company  provides  overseas  customs
         brokerage  services in countries such as Australia,  Canada, the United
         Kingdom, Mexico and many Latin American countries.

         As a customs  broker in the United  States,  the  Company is engaged by
         importers   to  prepare  the   documentation   required   for  entering
         merchandise  into the United States.  In this capacity,  the Company is
         responsible for coordinating all events and communicating the status of
         shipments from the time of shipment arrival through customs  clearance.
         The  Company  receives  commercial  and  transportation  documentation,
         reviews it for completeness and accuracy,  prepares and files documents
         necessary to clear customs, obtains customs bonds, assists the importer
         in obtaining the appropriate commodity  classification and arranges for
         payment of collect  freight  charges.  In most cases,  the Company also
         deposits import duties with the United States Customs Service on behalf
         of the importer.  In addition,  the Company provides  ancillary customs
         brokerage  services to its  customers,  including  placement  of surety
         bonds, duty reduction  programs and  duty-drawback  (recovery of duties
         paid when  imported  merchandise  is  re-exported).  The  Company  also
         provides  bonded  warehouse  services  which enable  importers to defer
         payment  of customs  duties  until the cargo is  released  from bond in
         conjunction  with  their  production  or  distribution  schedules.  See
         "Material Management and Distribution".

         In  providing  customs  brokerage  services,  the Company has access to
         information  concerning a shipment's origin and value,  destination and
         mode of  transportation.  As a  result,  the  Company  has been able to
         obtain  additional  business by  identifying  opportunities  to improve
         customer  service  or  reduce  customers'   expenses  through  expanded
         utilization  of  the  Company's  other  services,  including  container
         unloading,  inventory  warehousing  and  arranging  delivery of cleared
         cargo to its final destination.

         The Company is a leader in the use of computer  technology  for customs
         brokerage  activities on behalf of its clients.  The Company was one of


                                       5
<PAGE>

         the first customs  brokerage  operations to link with the United States
         Customs  Service  through the Automated  Broker  Interface  information
         system  and  to   develop  a   comprehensive,   proprietary,   on-line,
         interactive customs brokerage system which permits customers to monitor
         the status of a shipment as it passes through the government  clearance
         process.  The  Company's  information  systems  enable  the  Company to
         electronically  prepare documents,  transmit information  necessary for
         cargo pre-clearance through customs, expedite cargo release and provide
         nationwide  control of customs clearance at multiple ports of entry for
         its customers. See "Information Systems."

         The Company's customs brokerage  services are provided by the Company's
         licensed  customs  brokers  and  support  staff  who  have  substantial
         knowledge  regarding  the  complex  tariff and  government  regulations
         applicable  to  customs  duty   payments  and  other  fees,   commodity
         classifications,  valuation and import restrictions.  In addition,  the
         Company has developed  substantial  customs brokerage  expertise within
         particular  client  industries.   The  Company  believes  its  industry
         specialization  is unique among  competitors and enables the Company to
         provide high levels of service to customers  in these  industries.  The
         Company provides ongoing training programs,  which include  preparation
         for the United States customs broker license  examination to employees,
         as well as to customers.

         The  following  table sets forth the number (in 000's) of United States
Customs entries filed by the Company:

<TABLE>

                                                                     For the Year Ended May 31,
                                                        -----------------------------------------------------------
                                                               1999                 1998                1997
                                                               ----                 ----                ----
                    Number of Entries Filed
<S>                                                            <C>                  <C>                <C>
                                                               2,699                2,652              2,204

</TABLE>
         As a customs  broker  operating  in the United  States,  the Company is
         licensed by the United States  Department of the Treasury and regulated
         by the United States  Customs  Service.  The Company's fees for customs
         brokerage  services are not  regulated  and the Company does not have a
         fixed fee schedule for such services.  Instead,  customs brokerage fees
         are based on the complexity of the transaction and the type of services
         required,  but are generally not related to the value of the customers'
         goods.  In addition to its fees,  the Company  bills the  importer  for
         amounts  which the Company  pays on the  importer's  behalf,  including
         duties, taxes, collect freight charges and similar payments.

         The  Company  offers  its  customs  brokerage   services  primarily  to
         purchasers of imported goods. The Company's  largest customs  brokerage
         customer in 1999 accounted for 21.1% of customs  brokerage  revenue and
         2.5% of the total consolidated  revenue.  The Company believes the loss
         of this customer  would not have a material  adverse  effect on results
         from operations.

         Material Management and Distribution:  As part of its integrated global
         logistics   services,   the  Company  provides  an  array  of  material
         management and distribution services to its customers. The Company uses
         state of the art  warehouse  management  systems  to  deliver  material
         management solutions to its global customer base.

         The Company  manages a mixture of  multi-client  facilities  as well as
         stand-alone contract logistics operations. The Company supports clients
         from a wide variety of industry  segments  with  emphasis on high-tech,
         retail, footwear, and manufacturing.

         Warehousing  services  are  available  for the  Company's  customers in


                                       6
<PAGE>

         certain of its facilities,  as well as in space leased from others. The
         Company  maintains  approximately  7.3 million square feet of owned and
         leased  warehouse  space.  The Company's  warehousing  services include
         receiving,  deconsolidation and  decontainerization,  cargo loading and
         unloading,  assembly  of freight,  customer  inventory  management  and
         protective  packing  and  storage.  For import  shipments,  the Company
         provides bonded warehouse services at certain locations to importers so
         they can defer  payment of customs  duties  until  cargo  releases  are
         required to meet customers' production or distribution  schedules.  The
         goods stored in bonded  warehouses are held until the importer is ready
         to withdraw or re-export  them. The Company is paid storage charges for
         use of its warehouses and fees for other services.

         The Company provides surface  transportation and domestic  distribution
         services  involving  the movement of shipments  for local and long-haul
         delivery to and from customers'  doors.  In this capacity,  the Company
         procures shipments from its customers, consolidates less than truckload
         quantities,  determines  the  routing,  selects the carrier and tenders
         each shipment to such carrier for transportation.  The Company provides
         this service as an indirect  carrier and as an agent.  The Company also
         provides  logistics  services by  coordinating  the most  efficient and
         cost-effective   mode  of  long-haul  surface   transportation  to  its
         customers.

         No  single  customer  accounted  for  ten  percent  or  more  of  total
         consolidated revenue in fiscal 1999.

         Information Systems

         The Company invests substantial resources in its information systems to
         accomplish  the global  objective  of  developing  and  maintaining  an
         integrated logistics system. The Company's  information system strategy
         is to  provide  accurate,  reliable  and timely  access to  information
         regarding  logistics and internal  operations  through  responsive  and
         cost-effective information systems technologies.

         The Company  developed the Fritz Logistics  Expediting System (FLEX) to
         enable   customers   to  track  the  flow  of  goods   throughout   the
         transportation  process.  Customers can complete queries to receive the
         current  status  of  shipments.   Most  customers  utilizing  FLEX  are
         multi-national  corporations with a large number of foreign  suppliers.
         Customers  can  use  FLEX  to  generate  special  reports  on  supplier
         compliance   with   purchase   order   requirements   to  enhance   the
         effectiveness  of  their   merchandising   programs.   Development  and
         enhancements to the FLEX system have continued since its inception, and
         include linking  automated customs brokerage systems to FLEX to monitor
         the status of  shipments  as they pass  through the  customs  clearance
         process.  The  Company's  on-line,   interactive,   nationwide  customs
         brokerage  system was one of the first to link with the  United  States
         Customs Service's information systems.

         An important  component of the Company's business strategy is to expand
         the  concept  and  use of the  FLEX  system.  The  Company  intends  to
         accomplish  this  objective by further  developing  FLEX and  replacing
         several domestic and international systems with one, global, integrated
         system referred to as the Global Business System (GBS).  This system is
         designed  to  improve   internal   productivity   while   providing  an
         unparalleled  level of customer service for this industry.  Segments or
         all components of this system have been deployed in over ten countries,
         with new countries coming on-line every quarter.

         The  Company  has also  developed a  Web-based  software  system  which
         provides visibility to shipping  information and customs entry activity
         for any customer with access to the Internet.  The Company continues to
         invest in Internet capabilities for our customers and adds new features
         to our Web-based products every quarter.

                                       7
<PAGE>

         For information  regarding the Company's Year 2000 compliance  program,
         see  Item  7  -  Management's  Discussion  and  Analysis  of  Financial
         Condition and Results of Operations - Year 2000.

         Marketing:  An important part of the Company's business strategy is its
         client-oriented  marketing  approach.  The Company's  marketing efforts
         focus on senior  transportation  and  logistics  executives,  financial
         officers  and  purchasing  directors of large and medium sized users of
         international transportation logistics services. In connection with the
         Company's   emphasis   on   developing   and   maintaining    long-term
         relationships  with such  clients,  the Company has  developed  several
         strategic  marketing  programs,  including a National Accounts Program,
         Global Logistics Councils and a Global Advisory Board.

         Competition and Business Conditions: The Company's principal businesses
         are   directly   affected  by  the  volume  of   international   trade,
         particularly trade between the United States and foreign nations, which
         is influenced by many factors.  These  influences  include economic and
         political  conditions  in the  United  States  and  abroad,  major work
         stoppages,  exchange controls,  currency  fluctuations,  wars and other
         armed  conflicts,  and  United  States and  foreign  laws  relating  to
         tariffs,  trade  restrictions,  foreign  investments and taxation.  The
         global  logistics  services  industry  is  intensely   competitive  and
         expected  to  remain  so  for  the  foreseeable   future.  The  Company
         encounters  competition  from a large  number  of  firms.  Much of this
         competition  is from local or  regional  firms which have only one or a
         small  number of offices and do not offer the  breadth of services  and
         integrated  approach  offered  by the  Company.  However,  some  of the
         competition is from major United States and  foreign-owned  firms which
         have  networks of offices  and offer a wide  variety of  services.  The
         Company  believes  quality of service,  including  information  systems
         capability,  global  network  capacity,  reliability,   responsiveness,
         expertise, convenience, scope of operations, customized program designs
         and price are important competitive factors in its industry.

         The Company  encounters  strong  competition in the markets for each of
         its principal services, identified as: customs brokerage, air and ocean
         freight  forwarding  and  material  management  and  distribution.  The
         Company has customs brokerage offices in most major ports in the United
         States,  Canada,  United Kingdom and other selected foreign  locations.
         Although  the Company  competes  with several  large United  States and
         foreign firms in virtually all of its locations,  the principal customs
         brokerage competition comes from local and regional firms.

         As an ocean  freight  forwarder,  the  Company's  competition  includes
         steamship  companies,  large forwarders with multiple offices and local
         and regional  forwarders  with one or a small number of offices.  As an
         airfreight  forwarder,  the Company's principal  competition comes from
         other  airfreight  forwarders in the United  States and overseas.  As a
         material  management and distribution  service provider,  the Company's
         principal   competition   includes   local,   regional,   national  and
         international providers of the same or similar services.

         Approximately  63% of the Company's  revenue was recorded by non-United
         States  subsidiaries in 1999. The strength of the United States Dollar,
         coupled with the economic  contraction in Asia, are having an impact on
         the Company's operations. For example, the Company has experienced flat
         volumes to Asia and modest  volume  increases to the United  States and
         Europe from Asia. In addition,  competitive pressures continue to exert
         downward pressure on transportation pricing.


         Regulation:  As a customs broker  operating in the United  States,  the


                                       8
<PAGE>

         Company is licensed by the United States Department of the Treasury and
         regulated by the United States Customs Service. The Company's fees as a
         customs broker are not regulated.  The Company's airfreight  forwarding
         business is subject to  regulation,  as an indirect air cargo  carrier,
         under the Federal  Aviation  Act by the  Department  of  Transportation
         (DOT), the successor to the Civil Aeronautics Board,  although Part 296
         of  the  DOT's  Economic  Aviation   Regulations   exempts   airfreight
         forwarders  from most of the act's  requirements.  In its ocean freight
         forwarding business, the Company is licensed as an ocean transportation
         intermediary by the Federal Maritime Commission (FMC). The FMC does not
         regulate the  Company's  fees in any material  respect.  The  Company's
         NVOCC business is subject to regulation under the FMC tariff filing and
         surety bond  requirements,  and under the  Shipping Act of 1984 and the
         Ocean Reform Shipping Act of 1998, particularly those terms proscribing
         rebating  practices.  The  Company  is  regulated  as a  direct  and an
         indirect  truck cargo  carrier by the DOT,  previously  the  Interstate
         Commerce Commission,  by which the Company is licensed as both a common
         carrier and a property broker. For dispatch purposes,  the Company also
         holds an FCC  Radio  License.  The  Company's  marine  cargo  insurance
         brokerage  business  is  licensed  by  the  California   Department  of
         Insurance.

         The Company's offshore  operations are subject to similar regulation by
         the regulatory  authorities of the  respective  foreign  jurisdictions.
         Some of the Company's  warehouse  operations are approved by the United
         States  Customs  Service as container  freight  stations,  and/or cargo
         examination stations and/or Class III bonded warehouses.

         Trademarks:  The Company holds  registered  trademarks  and/or  service
         marks in the United  States and numerous  foreign  countries for "Fritz
         Companies" and certain related names and the Company's logo.

         Employees:  As of May 31, 1999, the Company had approximately  10,000
         (not in thousands) employees located throughoutthe world.  The Com
         considers its relationship with its employees to be satisfactory.

         Management:  The Company's executive officers are as follows:
<TABLE>

                      Name                      Age
        ----------------------------------    --------
<S>                                             <C>
        Lynn C. Fritz                           57        Chairman of the Board and Chief Executive Officer
        Raymond L. Smith                        44        Chief Operating Officer
        Dennis L. Pelino                        51        President
        Ronald F. Dutt                          52        Executive Vice President and Chief Financial Officer
        Joseph Carnes                           42        Executive Vice President
        Jan H. Raymond                          50        Executive Vice President, Secretary and General Counsel
        Eugene E.Wojciechowski                  44        Executive Vice President and Chief Information Officer
        Brad Skinner                            51        Executive Vice President Sales, Marketing and Process
                                   Improvement
        Janice J. Washburn                      50        Controller and Principal Accounting Officer
        Janet Helvey                            47        Vice President - Accounts Receivable
        Seamus M. Owen                          55        Vice President - Human Resources

</TABLE>

         Lynn C. Fritz  became  Chief  Executive  Officer of the  Company in
         1986 after  serving in numerous  positions  sincejoining the Company
         on a full-time basis in 1965. Mr. Fritz received his B.A.  degree from
         Georgetown  University and his J.D. degree from Lincoln University
         School of Law.

                                       9
<PAGE>

         Raymond L. Smith  joined the Company in January 1999 as Chief Operati
         Officer.  Prior to joining the Company,  he served six years as
         President of US Fleet  Leasing.  Previously,  Mr. Smith was with
         GE Capital for 15 years where he graduated from GE's Financial
         Management Program and held numerous progressively higher
         responsibilities.  Mr. Smith received his BA degree, with distinction,
         from the University of Nebraska and MBA from Emory University.

         Dennis L.  Pelino  joined the  Company in 1986 as Director of Sales and
         Marketing,  became a Director of the Company in 1991 and was  appointed
         Chief  Operating  Officer  in  October  of  1993.  He was  promoted  to
         Executive  Vice  President  in May 1995 and  President  in August 1996.
         Since  1988,  Mr.  Pelino  has  been   responsible  for  the  Company's
         international  operations,  as  well  as the  Company's  transportation
         services as an indirect  carrier,  and key warehousing and distribution
         services.

         Ronald  F.  Dutt  joined  the  Company  in May 1999 as  Executive  Vice
         President and Chief Financial Officer. Prior to joining the Company, he
         was Senior Vice  President of  Financial  Planning and Analysis at Visa
         International.   Previously,   Mr.  Dutt  served  in  senior  financial
         positions  at  USL   Capital,   and  held   positions   of   increasing
         responsibilities in the Controller's  Office and Corporate  Treasurer's
         Office at Ford Motor  Company.  He received his MBA from the University
         of Washington and BA from the University of North Carolina.

         Joseph Carnes joined the Company in September 1987. During his 12 years
         with  the  Company  he  has  held  several  operational   positions  of
         increasing responsibility. In December 1998, Mr. Carnes was promoted to
         Executive   Vice  President  of  North   American   Operations   having
         responsibility for all services including warehousing.

         Jan H.  Raymond has been General  Counsel of the Company  since 1985,
         Secretary  since 1991,  Senior Vice  President since 1993 and Executive
         Vice President since 1998.  Prior to joining the Company,  Mr. Raymond
         was an associate with the law firm of Brobeck,  Phleger & Harrison.
         Mr. Raymond,  who is a licensed  customs  broker,  holds a B.S. degree
         from Cornell University with a J.D. degree from the University of
         California at Berkeley's Boalt Hall School of Law.

         Eugene E.  Wojciechowski  joined the Company in January  1997 as Senior
         Vice  President and Chief  Information  Officer and became an Executive
         Vice President in April 1999. Prior to joining the Company, he was Vice
         President of Information Systems at USL Capital Corporation, a division
         of Ford Motor Company, and held positions of increasing  responsibility
         at  GE  Capital,  PHH  Group  Inc.,  and  ADP  Network  Services.   Mr.
         Wojciechowski holds a MBA in Information Systems from the University of
         Maryland and a B.S. in  Mathematics  and Business  Administration  from
         Towson State University.

         Brad Skinner  joined the Company in January  1999 as Vice  President of
         Sales,  Marketing  and  Worldwide  Process  Improvement  and  became an
         Executive  Vice  President  in April 1999. A twenty year veteran of the
         transportation  and logistics  industries,  he joined the Company after
         serving as  Executive  Vice  President  of  Transportacion  Ferroviaria
         Mexicana  (TFM),  where  he was a  principle  architect  of  the  newly
         privatized  Mexican  railroad  and  logistics   company.   Mr.  Skinner
         previously   served  as  Vice   President  at  Southern   Pacific  Rail
         Corporation,  and has held management positions with American President
         Company, Burlington Northern Motor Carriers and Schneider National.

         Janice J. Washburn  joined the Company in September  1998 as Controlle
         and Principal  Accounting  Officer.  For the prior year she was the
         Controller for CIS  Consulting,  Inc.  Previously,  Ms.  Washburn held
         financial positions of increasing responsibility at APL Limite, Inc.,
         Pacific Gas & Electric Co. and Arthur Andersen & Co. Ms. Washburn
         holds a B.A. in accounting  from the University of Puget Sound and is
         Certified  Public  Accountant in the state of California.

                                       10
<PAGE>


         Janet  Helvey  joined the  Company in March 1997 as Vice  President of
         Accounts  Receivable.  Prior to joining  the Company,  she was the
         Controller - Accounts Receivable of BAX Global, Inc. (formerly
         Burlington Air Express,  Inc.). Ms. Helvey holds a B.A. degree from
         Muskingum College.

         Seamus M. Owen joined the Company in April 1998 as Vice President of
         Human  Resources.  Prior to joining the Company, he served as Vice
         President of Human Resources for Sydran Services, Inc. Prior to joinin
         Sydran Services,  Mr. Owen held increasingly  responsible roles with
         United Airlines, Sea-Land Services and Ross Stores, Inc. Mr. Owen holds
         a B.S. degree from San Francisco State University.

         Item 2 - Properties   (Not in thousands)

         As of May 31, 1999, the Company operated  approximately 400 offices and
         logistics  centers   worldwide,   including  its  headquarters  in  San
         Francisco.  The Company also operated approximately 115 warehousing and
         distribution  centers,  which  range in size from  approximately  1,000
         square feet to  approximately  595,000 square feet. The warehousing and
         distribution  centers totaled  approximately 7.3 million square feet as
         of May 31, 1999 of which the Company owns approximately  647,000 square
         feet and  leases the  remaining  space.  The  leases for the  Company's
         principal  properties  generally  have terms of three years or more and
         often include options to renew.  While some of the Company's leases are
         month-to-month and others expire in the near term, the Company does not
         believe  the  expiration  of any of its  leases  will  have a  material
         adverse effect on its  operations.  See Note 6 of Notes to Consolidated
         Financial Statements.


         Item 3 - Legal Proceedings

         The Company is party to routine  litigation  incident to its  business,
         primarily  claims for goods  lost or  damaged in transit or  improperly
         shipped. Most of the lawsuits in which the Company is the defendant are
         covered by insurance and are being defended by the Company's  insurance
         carriers.

         In 1996, a total of six  complaints  were filed (three in federal court
         and three in state court of California) against the Company and certain
         of its then officers and directors,  purporting to be brought on behalf
         of a class of  purchasers  or holders of the  Company's  stock  between
         August  28,  1995 and July 23,  1996.  The  complaints  allege  various
         violations  of  Federal   Securities  law  and   California   Corporate
         Securities law in connection with prior disclosures made by the Company
         and seek unspecified damages.

         The three class action  suits filed  against the Company in state court
         were  dismissed  with prejudice by the Superior Court of California for
         the County of San  Francisco on grounds the claims  asserted  under the
         California  Corporate  Securities  law and  common  law fraud  were not
         legally  tenable.  One  of  the  dismissals  was  reversed  on  appeal,
         permitting  the  plaintiff to file an amended  complaint.  That amended
         complaint  was  dismissed  with  leave  to  amend.  A  further  amended
         complaint  was filed and was  dismissed  without  leave to amend.  That
         dismissal is on appeal.

         The three class action suits filed against the Company in federal court
         were  consolidated  into one suit which was dismissed  with  prejudice,
         finding that  plaintiffs  had not alleged any statement  that was false
         and misleading in violation of the federal securities laws.  Plaintiffs
         have filed an appeal with the Ninth Circuit Court of Appeals.
         That appeal is pending.

                                       11
<PAGE>

         The  Company is unable to predict the  ultimate  outcome of these suits
         and it is possible the outcome could have a significant  adverse impact
         on the Company's future  consolidated  results of operations.  However,
         the Company  believes  the ultimate  outcome of these  matters will not
         have  a  significant  adverse  impact  on  the  Company's  consolidated
         financial position.


         Item 4 - Submission of Matters to a Vote of Security Holders

         None.

                                     PART II
         Item 5 - Market for the Registrant's Common Stock and Related Security
                  Holder Matters

         The  Company's  common  stock is traded on the NASDAQ  national  market
         system under the symbol FRTZ.

         The  following  table  sets  forth the high and low sales  price in the
         NASDAQ  national  market system for the Company's  common stock for the
         period from June 1, 1997 to May 31, 1999.
<TABLE>

                                                                                   Price Range
                                                                     ----------------------------------------
                                                                            High                      Low
                                                                          ----------               ----------
                    Fiscal Period 1999
                    --------------------------
<S>                                                                  <C>                       <C>
                        First Quarter                                $       13.875            $       7.438
                        Second Quarter                                       10.250                    5.875
                        Third Quarter                                        12.438                    7.125
                        Fourth Quarter                                       11.812                    6.875

                    Fiscal Period 1998
                    --------------------------
                        First Quarter                                $       13.500            $       8.500
                        Second Quarter                                       16.000                   11.500
                        Third Quarter                                        14.750                   11.000
                        Fourth Quarter                                       16.812                   12.625

</TABLE>

         There were approximately 598 stockholders of record as of May 31, 1999.
         No cash dividends were paid to  stockholders  during the year ended May
         31, 1999.

         The  Company  intends  to retain  its  future  earnings  for use in its
         business and,  accordingly,  anticipates no cash dividends will be paid
         to holders of shares of common stock in the foreseeable future.



                                       12
<PAGE>








         Item 6 - Selected Financial Data
         (In Thousands Except Per Share Data)
<TABLE>

                                                                        For the Year Ended May 31,
                                        -------------------------------------------------------------------------------------------
                                               1999              1998             1997                 1996            1995(a)
                                           -------------     -------------    -------------        -------------    ---------------
                                                                                                                    (Unaudited)

<S>                                     <C>              <C>                 <C>                <C>                  <C>
        Revenue                          $    1,387,727   $     1,300,083     $   1,156,770      $    1,043,858       $   870,903
        Net Revenue                             577,977           558,265          509,371              457,568           366,487
        Merger and related costs                   ----              ----             ----               14,555              ----
        Income from operations                   25,051            25,813            2,858   (b)         38,659            50,645
        Net income                               13,452            18,090              308               25,001            32,310
        Net income per share - basic
                                                    .37               .51              .01                  .73              1.00
        Net income per share - diluted
                                                    .37               .50              .01                  .71               .99

        Total  assets                           726,908           720,813          723,516              733,462           576,698
        Long-term obligations, net of
          current portion                        89,606           101,346           84,884               89,505            33,567

        Stockholders' equity                    264,082           250,328          234,695              230,747           174,215
</TABLE>

a)      On May 30, 1995, the Company completed its merger with Intertrans
        Corporation (Intertrans), which was accounted as a pooling of
        interests.  Accordingly,  the  Company's  financial  statements  were
        restated for all periods prior to the merger, to include the results of
        operations,  financial  position  and cash flows of  Intertrans.  The
        twelve months ended May 31, 1995 period represents  combined  operating
        results reported for the Company and Intertrans for the twelve months
        ended March 31, 1995 and April 30, 1995,  respectively.  In May 1995
        the Company  recorded merger and related costs in  connection  with the
        merger with  Intertrans of  approximately $30.0  million.  In 1996,  the
        Company recorded additional merger and  related costs of $14.6  million
        which were  incurred in association with the Intertrans merger.

b)       The  results  in 1997  include  a third  quarter  increase  to the
         Allowance for Doubtful Accounts of approximately $17.0 million due
         to less than satisfactory collection performance.


         Item 7 - Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

         The Company operates its integrated  logistics business as two segments
         comprised of four  principal  services.  The segments are  comprised of
         United  States  Operations  and  Foreign   Operations.   The  Company's
         principal services are customs brokerage,  international airfreight and
         ocean freight forwarding and material management and distribution.

         Revenue for ocean and airfreight forwarding and surface  transportation
         consolidation  as an indirect carrier  includes the  consolidation  and
         transportation  costs (e.g., ocean freight costs).  Revenue for customs
         brokerage,  ocean and airfreight forwarding and surface  transportation
         as an agent  includes  only the fees and  commissions  related  to such
         shipments. Margin represents the ratio of net revenue to revenue.

         The  following  discussion  should  be read  in  conjunction  with  the
         consolidated financial statements and notes thereto.

                                       13
<PAGE>

         Results of Operations:
         For  comparative  purposes,  the following  tables are provided for the
         results of operations,  for the business segments,  for the years ended
         May 31, 1999, 1998 and 1997.
<TABLE>

         UNITED STATES OPERATIONS
                                                                                  For the Year Ended May 31,
                                                             --------------------------------------------------------------------
                                                                         1999                   1998                    1997
                                                                   ---------------        ----------------         -------------
         Revenue
<S>                                                              <C>                    <C>                      <C>
           Customs Brokerage                                     $        107,100        $         101,834       $        94,751
           Ocean Freight Forwarding                                       107,166                  112,176               100,845
           Airfreight Forwarding                                          195,528                  206,515               197,212
           Material Management and Distribution                            97,327                   87,776                75,822

                                                                    --------------         ---------------         -------------
           Total Revenue                                         $         507,121      $          508,301       $       468,630
                                                                    ===============        ================         =============

         Net Revenue
           Customs Brokerage                                     $         107,100      $          101,834       $        94,751
           Ocean Freight Forwarding                                         56,022                  57,715                55,229
           Airfreight Forwarding                                            66,930                  63,253                57,889
           Material Management and Distribution                             76,973                  69,565                60,911
                                                                    --------------         ---------------          -------------
           Total Net Revenue                                     $         307,025      $          292,367       $       268,780
                                                                    ===============        ================         =============

         Operating Expenses                                      $         294,830      $          277,856       $       267,751
                                                                    ---------------        ----------------         -------------

         Income From Operations                                  $          12,195      $           14,511       $         1,029
                                                                    ===============        ================         =============

         Long-lived Assets                                       $         148,817      $          139,800       $       142,521
                                                                    ===============        ================         =============


         FOREIGN OPERATIONS
                                                                                 For the Year Ended May 31,
                                                             --------------------------------------------------------------------
                                                                         1999                   1998                    1997
                                                             ------ ---------------       -----------------         -------------
         Revenue
           Customs Brokerage                                     $          56,601     $            63,221       $        57,506
           Ocean Freight Forwarding                                        308,942                 263,757               233,856
           Airfreight Forwarding                                           410,998                 370,128               333,888
           Material Management and Distribution                            104,065                  94,676                62,890

                                                                    ---------------       -----------------         -------------
           Total Revenue                                         $         880,606     $           791,782       $       688,140
                                                                    ===============       =================         =============

         Net Revenue
           Customs Brokerage                                     $          56,601     $            63,221       $        57,506
           Ocean Freight Forwarding                                         70,038                  62,782                52,251
           Airfreight Forwarding                                            99,902                  95,261                91,444
           Material Management and Distribution                             44,411                  44,634                39,390
                                                                    ---------------       -----------------         -------------
           Total Net Revenue                                     $         270,952     $           265,898       $       240,591
                                                                    ===============       =================         =============

         Operating Expenses                                      $         258,096     $           254,596       $       238,762
                                                                    ---------------       -----------------         -------------

         Income From Operations                                  $          12,856     $            11,302       $         1,829
                                                                    ===============       =================         =============

         Long-lived Assets                                       $         195,957     $           191,047       $       190,232
                                                                    ===============       =================         =============
</TABLE>

                                       14
<PAGE>

         Fiscal Year Ended May 31, 1999 Compared to Fiscal Year Ended
         May 31, 1998

         General:

         Revenue increased 6.7% to $1,387.7 million.  Net revenue increased 3.5%
         to $578.0 million. Operating expenses increased 3.8%, marginally higher
         than the net revenue increase.  The net gains on currency  transactions
         dropped  significantly  to $1.9  million from $7.3 million in the prior
         year.  This drop was  partially  offset by a $0.6  million  increase in
         interest income and a $0.8 million decrease in interest expense.

         United States Operations:

         Revenue and Net Revenue:  Revenue  was flat for the current  year but
         net revenue increased by 5.0%. Operating expenses increased by 6.1%.


         Customs  brokerage revenue and net revenue increased 5.2%. The increase
         was largely due to growth in the retail and electronics industries from
         both new and existing  customers.  Most of this growth  involved  goods
         being  shipped  from Asia,  fueled by the robust  American  economy.  A
         significant  portion of this growth  stemmed from our  existing  client
         base reflecting a strong client retention rate. Pricing continued to be
         relatively  stable,  though  slight  erosions  occurred  in our  border
         locations.  The number of United  States  Customs  entries filed by the
         Company increased  approximately 1.8% to 2.70 million from 2.65 million
         in  the  prior  year.  Border  operations,  which  account  for  almost
         one-fifth  of the total  entries  for the  period,  continue to reflect
         double-digit growth rates driven mostly by Canadian imports.  Rescoping
         major accounts  contributed to the improvement of margin.  In addition,
         approximately    one-half   of   the   customs   brokerage   processing
         documentation  has been  centralized  to  improve  the  quality  of the
         product.


         Ocean freight  forwarding  revenue and net revenue  decreased  4.5% and
         2.9%,  respectively.  Inbound  ocean  freight  demand  remained  strong
         throughout  1999.  In  addition  the  Company  added  a  number  of new
         accounts.  Ocean freight rates from the Far East, the Company's largest
         trade lane, increased in the last half of the year.  Conversely,  ocean
         export activity was down significantly due to the economic situation in
         Asia, Latin America and Russia. U.S. export orders and volume were down
         in all three regions.  While ocean outbound NVOCC revenue from the U.S.
         increased only slightly,  net revenue  increased by more than 10%. Lack
         of growth in revenue  was a direct  reflection  of the erosion of ocean
         container rates in all of the major trade lanes.  Growth in net revenue
         was due to our ability to buy ocean  container  spaces,  either through
         service contracts, or on the spot market at favorable rate levels.

         Airfreight  forwarding  revenue decreased 5.3%, due to decreased volume
         to Asia,  Europe and Latin America and the strength of the U.S. dollar.
         However,  net revenue  increased by 5.8% due to the use of  centralized
         gateways to improve  consolidation,  cost control, and increased volume
         purchasing.

         Material management and distribution  revenue and net revenue increased
         10.9% and 10.6%,  respectively.  The  greatest  growth was in  Seattle,
         Dallas,  Atlanta,  Rochester  and Los Angeles  where new  customers and
         increased  volumes  drove the  increase in revenue.  In  addition,  the
         growth in revenue  and net  revenue  was due to  increased  demand from
         existing  integrated   logistics   customers,   expansion  of  overseas
         services,  expansion  of  warehouse  facilities  and the strong  United
         States  economy.  Rescoping of certain  customers led to an increase in
         revenue and margin.

                                       15
<PAGE>

         Operating  Expenses:  Operating expenses  increased 6.1%.  Salaries and
         related costs increased due to higher labor costs  associated with Year
         2000  compliance  and  the  Company's  new  global  transportation  and
         financial  systems,  and  higher  medical  insurance  costs.  Operating
         expenses as a percentage of net revenue rose to 96.0% from 95.0% in the
         prior year.  The Company is  committed  to the  reduction  of operating
         expenses through the continuing  implementation  of its strategic plan,
         previously discussed,  by focusing resources,  training personnel,  and
         emphasizing customer satisfaction.

         Foreign Operations:

         Revenue and Net  Revenue:  Revenue  increased  by 11.2% but net revenue
         increased  only 1.9%  reflecting the higher costs  associated  with the
         imbalance of trade with the U.S. The effect of translation rate changes
         during the period  resulted in a decrease in net revenue during 1999 of
         approximately  $12.4 million.  The resultant  growth rate was adversely
         affected by approximately 4.6 percentage points.

         Customs  brokerage  revenue and net revenue  decreased 10.5% reflecting
         the large  reduction in traffic going into the foreign  locations  from
         the U.S.

         Ocean freight  forwarding  revenue increased by 17.1% while net revenue
         increased by 11.6%.  The margin  decrease  reflected  the soft European
         market and the resultant  pressure on margins.  The Company is focusing
         on increasing  NVOCC business in an attempt to improve  margins.  Ocean
         Export revenue,  which consists of documentation  fees and commissions,
         was  negatively  impacted  because lower  shipping  costs produce lower
         commissions.

         Air freight  forwarding  revenue  increased  by 11.0% while net revenue
         increased  4.9%,  the  pressure on margins  again  reflecting  the soft
         European  markets.  The perceived  turnaround of the Asian economies in
         the third quarter of fiscal 1999 began to improve air margins.

         Material management and distribution revenue increased by 9.9%, however
         net revenue remained at prior year levels. The scheduled opening of our
         400,000 plus square foot  warehouse in South China in the first quarter
         of fiscal 2000  should  position  the  Company  for  further  growth in
         revenue and net revenue for these services.

         Operating  Expenses:  Operating expenses  increased 1.4%.  Salaries and
         related costs increased due to higher labor costs  associated with Year
         2000  compliance  and the  implementation  of the  Company's new global
         transportation   and  financial   systems.   Operating  expenses  as  a
         percentage of net revenue were 95.3% in 1999 and 95.7% in 1998.


         Fiscal Year Ended May 31, 1998 Compared to Fiscal Year Ended
         May 31, 1997

         General:

         Revenue increased 12.4% to $1,300.0 million. Net revenue increased 9.6%
         to $558.3 million.  Operating  expenses  increased  5.1%,  considerably
         lower  than  the net  revenue  increase.  The  net  gains  on  currency
         transactions increased by 126% to $7.3million.  This increase, together
         with  higher  levels  of  interest  income,  was  sufficient  to offset
         interest expense which remained unchanged at $8.2 million.

                                       16
<PAGE>

         United States Operations:

         Revenue and Net Revenue:  Revenue increased by 8.5% while net revenue
         increased 8.8%.  Operating  expenses  increased by 3.8%.

         Customs brokerage revenue and net revenue increased 7.5%. The number of
         United  States   Customs   entries  filed  by  the  Company   increased
         approximately  20.3% to 2.65  million  from 2.20  million  in the prior
         year.  The  increase  in revenue  and number of United  States  Customs
         entries  filed was caused  principally  by  increased  Canadian  border
         activity,  expansion of business  with  existing  customers,  continued
         NAFTA incentives and increased import activity from Asian countries.

         Ocean freight  forwarding  revenue and net revenue  increased 11.2% and
         4.5%  respectively,  due to  increased  shipping  volumes  from new and
         existing customers.  During 1998, management continued to expand market
         share, increased ocean tonnage and increased net ocean freight revenues
         while offering competitive market rates to customers.

         Airfreight  forwarding  revenue  decreased  by 4.7%  due  primarily  to
         decreased  exports from the U.S. to Asia,  Europe and Latin America and
         pricing pressures.  However, net revenue improved by 9.3% due primarily
         to cost  reductions  achieved  through the use of gateways and shipment
         consolidations.

         Material management and distribution  revenue and net revenue increased
         15.8% and 14.2%,  respectively.  The greatest  growth was in the United
         States  where new  customers  and  increased  volumes  led to growth in
         revenue in Seattle,  Dallas,  Atlanta and Rochester.  In addition,  the
         growth in revenue  and net  revenue  was due to  increased  demand from
         existing  integrated   logistics   customers,   expansion  of  overseas
         services,  expansion  of  warehouse  facilities  and the strong  United
         States economy.

         Operating  Expenses:  Operating expenses increased 3.8%,  significantly
         less then the 8.8% growth in net revenue.  Salaries  and related  costs
         increased due to growth in the number of personnel.  Operating expenses
         as a  percentage  of net  revenue  improved  to 95.0% from 99.6% in the
         prior year.

         Foreign Operations:

         Revenue and Net  Revenue:  Revenue  increased  by 15.1% but net revenue
         increased only 10.5%  reflecting the higher costs  associated  with the
         imbalance of trade with the U.S. The effect of translation rate changes
         during the period  resulted in a decrease in net revenue during 1998 of
         approximately  $20.2 million.  The resultant  growth rate was adversely
         affected by approximately 7.6 percentage points.

         Customs  brokerage  revenue  and net  revenue  increased  9.9%  due to
         improvement of traffic going into the foreign locations from the U.S.

         Ocean freight  forwarding revenue increased by 12.8 % while net revenue
         increased by 20.2%, due to increased shipping volumes from existing and
         new customers,  with additional products being shipped to North America
         and Europe. Increased NVOCC shipments helped to improve revenue as well
         as improving the margin.  The trend towards NVOCC business continues at
         a rapid rate as certain of our customers  realize the improved  transit
         times provided by this service.

                                       17
<PAGE>

         Air freight  forwarding  revenue  increased  by 10.9% while net revenue
         increased 4.2%. There was significant  erosion in margin,  primarily in
         the  Asia-Pacific  area due primarily to higher  airline  costs,  which
         could not be passed on to  customers.  The  increase  in  revenue  came
         primarily in Hong Kong from both new and existing customers. Europe was
         another growth area for air freight activity.

         Material management and distribution  revenue increased 50.5% while net
         revenue  increased by 13.3%.  A  significant  portion of the  increased
         revenue and net revenue  resulted  from the  expansion  of cross border
         trucking operations in Europe. The decrease in margin was due primarily
         to increased warehousing and transportation  operating costs in Europe.
         New facilities were opened in Holland and Venezuela.

         Operating  Expenses:  Operating expenses increased 6.6%,  significantly
         less than the 10.5%  growth in net  revenue.  Operating  expenses  as a
         percentage  of net revenue  decreased  to 95.7% from 99.2% in the prior
         year.

         Liquidity and Capital Resources:

         Cash and equivalents were $50.6 million at May 31, 1999, representing a
         6.1% decrease from $53.9 million at May 31, 1998. Positive  operational
         cash flow of $57.4  million was used to fund  capital  expenditures  of
         $35.7  million  resulting in free cash flow of $21.7  million.  Capital
         expenditures consisted mostly of expenditures for computer hardware and
         software, leasehold improvements, and warehouse equipment.

         The Company paid cash of $9.0 million relating to  acquisitions.  These
         payments consisted of reductions to existing debt totaling $4.3 million
         and $4.7 million for contingency  payments to the sellers of previously
         acquired  businesses  and to  purchase  all or  part  of the  remaining
         minority interest in previously acquired companies.

         On March 27, 1998, the Company entered into a $100 million  syndicated
         multi-currency credit facility (Credit Facility),  maturing March 2001.
         This facility was extended to March 2002 upon its one-year anniversary.
         Borrowings under this facility are  classified as long-term  debt. The
         purpose of the Credit  Facility is to provide  letters of credit and
         working  capital as  required.  The  Company  must comply with  certain
         financial  covenants  such as: 1) minimum working  capital,  2) minimu
         net worth, 3) maximum  leverage ratio, 4) minimum fixed charge coverag
         ratio, and 5) maximum capital expenditures.

         As of May 31,  1999,  utilization  of the  Credit  Facility  was  $15.2
         million,  comprised  of $4.5  million  of  borrowings  under the Credit
         Facility  and  $10.7  million  for   outstanding   letters  of  credit.
         Therefore,  the Company's total available  borrowing capacity under the
         Credit Facility as of May 31, 1999 was approximately $84.8 million.

         The Company makes significant  disbursements on behalf of its customers
         for items such as customs  duty and taxes.  Billings to  customers  for
         these  disbursements,  which can be  several  times  the  amount of the
         revenue  derived from these  transactions,  are not recorded as revenue
         and expenses in the  Company's  income  statement.  These  obligations,
         which greatly  exceed  reported  revenues,  are recorded as amounts due
         from customers and trade accounts payable.


         New Accounting Standards:

                                       18
<PAGE>

         In June 1998, the Financial Accounting Standards Board issued Statement
         of  Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
         Derivative   Instruments   and  Hedging   Activities".   SFAS  No.  133
         establishes   accounting   and  reporting   standards  for   derivative
         instruments, including certain derivative instruments embedded in other
         contracts  and for  hedging  activities.  It  requires  that an  entity
         recognize  all  derivatives  as  either  assets or  liabilities  in the
         statement of financial  position and measure those  instruments at fair
         value. The Company is currently  evaluating the impact, if any, of SFAS
         no. 133 which is effective  for all quarters of fiscal years  beginning
         after June 15, 2001.

         "Safe Harbor" Statement Under the Private Securities Litigation Reform
         Act of 1995:

         In this filing, the Company makes  forward-looking  statements that are
         subject to risks and uncertainties.  These  forward-looking  statements
         include  information  about  possible or assumed  future results of our
         operations,  plans, events, expectations or objectives.  Also, when any
         of the words  "believes",  "expects",  "anticipates" or similar
         expressions are used the Company is making forward-looking statements.
         Many possible events or  factors  could  affect  the  future financial
         results  and performance of the Company. Any of these events or factors
         could cause results or performance to differ materially from those
         expressed in our forward-looking  statements.  These possible events or
         factors include the following:

         Year 2000

         Many computer systems, including some utilized by the Company, use only
         two digits to represent  the year in date fields.  These systems may be
         unable to accurately process certain data before,  during, or after the
         year 2000. Business and governmental  entities are at risk for possible
         miscalculations  or systems failures,  possibly causing  disruptions in
         their  business  operations.  This is  commonly  known as the Year 2000
         (Y2K) problem.

         The  Company  is  reliant  on  its   internal   computer   systems  and
         applications, located in numerous countries, to conduct its business as
         an  international  freight  forwarder,  customs  broker  and  logistics
         provider.  The  Company  is  also  reliant  upon  the  external  system
         capabilities  of third  parties,  with  which  the  Company  has  major
         business relationships.

         The key computer systems of the Company are its  transportation  (ocean
         freight,   airfreight  and  trucking),   customs  brokerage,   material
         management,  communications,  marketing,  and  financial  systems.  The
         Company has established a Y2K program management office to identify and
         resolve specific Y2K issues and problems. A Y2K inventory,  assessment,
         and plan of action has been  completed for all of the Company's  global
         systems.  All  of  the  Company's  key  business  systems,  with  minor
         exceptions,  were Y2K  compliant  by the end of June  1999.  There  are
         several locations including  Singapore,  Indonesia,  and Peru that, for
         tactical purposes, have deferred completion dates and will be compliant
         on or before September 30, 1999.

         The  Company  believes  its  greatest  Y2K risk for  disruption  to its
         business is the potential  noncompliance of third parties.  The Company
         believes  these third party risks are an inherent  risk to the industry
         and are not  specific  to the  Company.  As a result,  the  Company has
         contacted third parties (i.e.  vendors,  governmental  agencies,  etc.)
         around the world with whom the Company has material direct and indirect
         business  relationships.  The business  partners that have responded to
         the Company's  inquiries  indicate that they will be Y2K compliant on a
         timely basis. The Company successfully completed Year 2000 testing with
         the U.S. Customs Service. Year 2000 efforts of Customs bureaus in other
         countries  are being  monitored  and are varying in scope and progress.
         Despite written assurances, there are no guarantees that the systems of
         other parties,  on which the Company and its competitors  rely, will be


                                       19
<PAGE>

         compliant.  These potential  interruptions  may have a material adverse
         effect on the Company's operations.

         Total costs to replace or modify the Company's business systems for Y2K
         are currently  estimated to be $6.1 million.  However,  there can be no
         assurance  that the costs to replace or modify the  Company's  business
         systems   will  not  exceed  this   estimate.   As  of  May  31,  1999,
         approximately  $5.5  million  had been spent on Y2K  efforts.  The cost
         estimates  include,  but are not limited to, the cost of internal staff
         and outside  consultants  who are working on  modifying,  upgrading and
         testing systems;  the Y2K project  management  office;  new or upgraded
         software;  and  various Y2K tools.  These  costs are being  expensed as
         incurred.  The funding of all past and future Y2K expenses has been, or
         will be paid through internally generated cash flows from operations or
         borrowed  funds.  The  costs  associated  with the  replacement  of the
         selected  international  stations'  operating and financial systems are
         not  included  in the  above  estimates.  The  cost of the  replacement
         systems are being  capitalized  and  amortized in  accordance  with the
         Company's normal accounting policies as Y2K compliance is an incidental
         benefit expected from these systems. The primary reasons for installing
         these replacement systems include productivity gains, improved customer
         service, improved operating procedures, and controls.

         The Company's business may be materially affected if its systems or the
         systems of critical  third  parties are not Y2K compliant by January 1,
         2000. The possible consequences of noncompliance  include,  among other
         things,  the  inability  to provide  services  to certain  areas of the
         world,  delays in product  delivery,  invoicing  errors,  and  possible
         collection difficulties.  The Company may be required to shift portions
         of its daily  operations to manual  processes and thus face time delays
         in its operations as well as increased  processing  costs. In addition,
         the  Company  may not be able to  provide  customers  with  timely  and
         pertinent  information  regarding  their orders or shipments.  This may
         negatively  affect customer  relations and potentially lead to the loss
         of customers. The Company is unable to estimate the potential financial
         impact of these scenarios.  However,  the Company believes that its Y2K
         readiness  program,  including its  contingency  plans,  should help to
         reduce material adverse effects that such disruptions may create.

         As part of the Company's  contingency  planning, it has determined that
         operating  in a  manual  mode,  for  a  limited  time,  is  a  workable
         alternative  with  the  exception  of its U.S.  customshouse  brokerage
         system.  The Company is currently  identifying and developing  specific
         contingency  plans intended to mitigate the effects of Y2K disruptions.
         In the event of a Y2K  disruption  resulting from the Company system or
         other third party system failure,  the Company believes it will be able
         to provide adequate resources to successfully transition from automated
         systems processing to manual processing.  In addition, the Company will
         have the ability to engage outside  temporary labor.  Also, the Company
         will secure  alternate  carriers who are Y2K ready in order to continue
         to provide basic business services.

         Currency and Other Risk Factors:

         The Company's  worldwide  operations are transacted in many  currencies
         other  than the U.S.  dollar.  Accordingly,  the  Company is exposed to
         inherent  risks of  international  currency  markets  and  governmental
         regulations.  The Company  manages these currency  exposures  through a
         variety  of means  such as  hedging,  conversion  of local cash to U.S.
         dollars, and accelerating and decelerating international payments among
         the Company's offices and agents. The Company's translation  adjustment
         and foreign  exchange  losses for fiscal year 1999 increased due to the
         strengthening  of the U.S.  dollar  relative to certain  currencies  of
         Asia,  Europe and Latin  America.  The charge to equity in the currency
         translation  adjustment  during 1999 was $6.1 million while net foreign


                                       20
<PAGE>

         currency gains realized during fiscal year 1999 were approximately $1.9
         million.  Devaluation of foreign  currencies could adversely impact the
         financial results of operations in future periods.

         The  Company's  ability to provide  service to its  customers is highly
         dependent on good working relationships with a variety of entities such
         as airlines,  steamship carriers and governmental agencies.  Changes in
         space  allotments  available from carriers,  governmental  deregulation
         efforts,  regulations  governing  the  Company's  products,  and/or the
         international  trade and tariff  environment could affect the Company's
         business in unpredictable ways.


         The Company  routinely  commits to  purchasing  space with carriers for
         expected volumes based on anticipated future demands.  The Company then
         solicits  freight  from its  customers  to fill that  committed  space.
         Failure to  utilize  that space  because of a downturn  in the  economy
         could have a adverse effect on operating results.


         Management  believes the Company's  business has not been significantly
         or  adversely  affected by  inflation  in the past.  Historically,  the
         Company has generally been  successful in passing cost increases to its
         customers by means of price increases. However, competitive marketplace
         conditions  could impede the  Company's  ability to pass on future cost
         increases to customers and could erode the Company's operating margins.

         Additional risks and uncertainties include:

                  (i) The  Company's  ability to continue its program to improve
                      operating  results  and cash  flows,
                 (ii) Dependence  of the Company  on  international   trade
                      resulting  from  favorable worldwide economic conditions,
                (iii) Dependence of the Company on continued  services of key
                      executives  and  managers,
                 (iv) Risks associated with  the Company's acquisition strategy,
                      including:
                     (a) Diversion of management's attention to assimilation of
                         operations and personnel of acquired companies,
                     (b) Potential adverse short-term  effects of acquisitions
                         on the Company's  operating results,
                                    and
                     (c) Integration of financial reporting systems and acquired
                         assets.
                  (v) The  possible  inability of the  Company's  information
                      systems to keep pace with the increasing complexity and
                      growth of the Company's business and Y2K issues,
                 (vi) The  increasing  level of  investment  required  by the
                      transition  of the Company from prior  predominance  of
                      customs brokerage revenue to an increasing  emphasis on
                      integrated  logistics  and  providing  a full  range of
                      international    transportation    and   supply   chain
                      management services,
                (vii  Other risks disclosed elsewhere in this Form 10-K or in
                      the  Company's  other filings with the  Securities  and
                      Exchange Commission.


         The  Company is  continuing  its  comprehensive  review of its  pricing
         structure  of its various  services  and  customer  credit  terms.  The
         Company is also  continuing  to review  its  expenses  to  improve  the
         quality and efficiencies of the Company's processes.


         Item 7a- Quantitative and Qualitative Market Risk Disclosure

                                       21
<PAGE>

         The  Company  is  exposed  to market  risks in the  ordinary  course of
         business.  These risks  relate  primarily  to  fluctuations  in foreign
         currency  exchange  rates  and short  term  interest  rates.  Financial
         derivatives  are  employed to manage  these risks in certain  countries
         under  certain  circumstances.  Under no  circumstances  are  financial
         derivatives utilized for trading or speculative purposes.

         Foreign Exchange Sensitivity

         The Company maintains  worldwide  operations and transacts  business in
         many  currencies  other than the U.S.  dollar.  Because  the  Company's
         foreign subsidiaries are typically local-currency  functional entities,
         the Company is exposed to  transactional  and  translational  gains and
         losses  as  relative  currency  values  fluctuate.  As  a  result,  the
         Company's  consolidated  cash  flow  and  net  income  are  subject  to
         variations due to changes in exchange rates.

         The Company manages its currency risks through a variety of means, such
         as  employing  financial  derivatives, converting  local  cash  to U.S.
         dollars, and accelerating and decelerating payments among the Company's
         offices and agents.  Financial  derivatives  typically take the form of
         forward foreign  exchange  contracts,  though options are  occasionally
         purchased  to  hedge  certain  transactions.  As of May 31,  1999,  the
         Company had forward  contracts  outstanding of $1.5 million  equivalent
         value and had no option  contracts.  A 10%  change in value of the U.S.
         dollar relative to the underlying  currency of these forward  contracts
         would have an immaterial effect on the Company's earnings.


         The  Company's  earnings are  sensitive to changes in foreign  exchange
         rates due to the revaluation of monetary assets and liabilities.  These
         balance sheet items,  denominated in  non-functional  currency  include
         cash, accounts  receivable,  accounts payable and debt. The table below
         provides the U.S.  dollar  equivalent of these  balances  summarized as
         assets and liabilities and shows the sensitivity of the net exposure to
         a 10%  change  in  value of the  functional  currency  relative  to the
         non-functional currency.


         ($ amounts in millions)
<TABLE>


                                                                                                 Gain / (Loss) if
                                                                                               Functional Currency
         Non-Functional             Cash             A/P &                                Appreciates       Depreciates
         Currency                 & A/R              Debt            Net Exposure               10%                  10%
         ---------                ---------        ---------         ------------          ------------          ---------

<S>                                 <C>              <C>                       <C>               <C>                <C>
         U.S. Dollar                94.7             (52.3)                    42.4              (4.2)              4.2
         Chinese Renminbi           12.4              (7.9)                     4.5              (0.5)              0.5
         U.K. Pound                  1.1              (9.2)                    (8.1)              0.8              (0.8)
         German Mark                 1.2              (6.2)                    (5.0)              0.5              (0.5)
         Belgian Franc               0.5              (3.7)                    (3.2)              0.3              (0.3)
         Japanese Yen                0.1              (1.9)                    (1.8)              0.2              (0.2)
         French Franc                1.0              (2.8)                    (1.8)              0.2              (0.2)
         Finnish Mark                0.0              (1.8)                    (1.8)              0.2              (0.2)
         Other                       6.1             (10.7)                    (4.6)              0.5              (0.5)
</TABLE>

         Interest Rate Sensitivity

         The Company's  exposure to interest rate risk relates  primarily to its
         cash and short-term  investments and its debt obligations.  The Company


                                       22
<PAGE>

         currently does not employ any financial  derivatives to manage the risk
         associated with its cash investments. It does however, currently employ
         a swap to convert a portion of its variable rate debt to a fixed rate.

         At May 31,  1999  the  Company  had  $50.6  million  of cash  and  cash
         equivalents,  subject to variable,  short-term  interest  rates. On the
         same date, the Company had debt obligations of $93.9 million,  of which
         $8.6 million was subject to variable, short-term interest rate risk. In
         addition,   the  Company  had  $13.7  million  of   off-balance   sheet
         transactions which were subject to variable interest rate risk. The net
         exposure of the Company to variable,  short-term  interest rate risk is
         therefore  $28.3  million.  A  hypothetical  increase  or  decrease  in
         variable,  short-term  interest  rates of 1% would  have an  immaterial
         effect on the Company's earnings.

         Item 8 - Financial Statements and Supplementary Data

         The  information  required  by this  item  is set  forth  at the  pages
         indicated in Item 14(a) of this Annual Report.

         Item 9 - Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure

         None.



                                    PART III


         Item 10 - Directors and Executive Officers of the Registrant

         The  information  required  by this  item  is  incorporated  herein  by
         reference  from the  sections  entitled  "Election  of  Directors"  and
         "Section  16(a)  Beneficial  Ownership  Reporting  Compliance"  of  the
         Company's  definitive  proxy  statement to be filed with the Securities
         and Exchange Commission no later than 120 days after the Company's year
         end  and  to be  delivered  by  the  Company  to  its  shareholders  in
         conjunction with the 1999 Annual Meeting of Shareholders. See also Item
         1 above.


         Item 11    -   Executive Compensation

         The  information  required  by this  item  is  incorporated  herein  by
         reference  from  the  sections  entitled   "Compensation  of  Executive
         Officers,"  "Options  Granted to Executive  Officers"  and  "Employment
         Agreements"  of the Company's  definitive  proxy  statement to be filed
         with the  Securities  and  Exchange  Commission  no later than 120 days
         after the Company's  year end and to be delivered by the Company to its
         shareholders   in   conjunction   with  the  1999  Annual   Meeting  of
         Shareholders.



         Item 12 - Security Ownership of Certain Beneficial Owners and
                   Management
                  --------------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
         reference  from the  section  entitled  "Ownership  of  Management  and
         Principal  Stockholders" of the Company's definitive proxy statement to
         be filed with the Securities and Exchange  Commission no later than 120


                                       23
<PAGE>

         days after the Company's year end and to be delivered by the Company to
         its  shareholders  in  conjunction  with the  1999  Annual  Meeting  of
         Shareholders.


         Item 13    -   Certain Relationships and Related Transactions
                        ----------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
         reference from the section entitled  "Transactions with the Company" of
         the  Company's   definitive  proxy  statement  to  be  filed  with  the
         Securities  and  Exchange  Commission  no later than 120 days after the
         Company's  year  end  and  to  be  delivered  by  the  Company  to  its
         shareholders   in   conjunction   with  the  1999  Annual   Meeting  of
         Shareholders.


                                     PART IV


  Item 14-Exhibits, Financial Statement Schedules and Reports on Form 8-K
          ---------------------------------------------------------------

    (a) The following documents are filed as part of this report on
        Form 10-K:                                                      Page No.

        (1)   Consolidated Financial Statements of the Company:
              Consolidated Balance Sheets                                 F-1
              Consolidated Statements of Operations                       F-2
              Consolidated Statements of Stockholders' Equity
                  And Comprehensive Income                                F-3
              Consolidated Statements of Cash Flows                       F-4
              Notes to Consolidated Financial Statements                  F-5
              Independent Auditors' Report                                F-19

         (2)   Financial Statement Schedules:

               Schedule II - Valuation and Qualifying Accounts            F-20

                      All  other   schedules  are  omitted  by  absence  of
                      conditions  under  which  they would be  required  or
                      because the required  information  is included in the
                      consolidated financial statements or notes thereto.

                (3) Exhibits:

                           See attached Exhibit Index                      F-21

(b)      The Company filed the following reports on Form 8-K from March 1, 1999
         through the date hereof in 1999.

                           None.




                                       24
<PAGE>


                                   Signatures

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

         Date:    July 22, 1999

                                                        FRITZ COMPANIES, INC.

                                             By          /s/ Lynn C. Fritz
                                                             Lynn C. Fritz
                                                        Chairman of the Board
<TABLE>

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
         this  report has been signed  below on July 22,  1999 by the  following
         persons on behalf of the registrant and in the capacities indicated.

                 Signature                                    Title                                        Date

<S>                                                                                                    <C> <C>
         /s/ Lynn C. Fritz                       Chairman of the Board                            July 22, 1999
         Lynn C. Fritz                           and Chief Executive Officer
                                                 (Principal Executive Officer)

         /s/ Raymond L. Smith                    Chief Operating Officer                          July 22, 1999
         Raymond L. Smith

         /s/ Dennis L. Pelino                    President and Director                           July 22, 1999
         Dennis L. Pelino

         /s/ Ronald F. Dutt                      Executive Vice President and                     July 22, 1999
         Ronald F. Dutt                          Chief Financial Officer and
                                                 Principal Financial Officer

         /s/ Janice J. Washburn                  Controller and                                   July 22, 1999
         Janice J. Washburn                      Principal Accounting Officer


         /s/ James E. Gilleran                   Director                                         July 22, 1999
         James E. Gilleran

         /s/ Preston Martin                      Director                                         July 22, 1999
         Preston Martin

         /s/ Paul Otellini                       Director                                         July 22, 1999
         Paul Otellini

         /s/ William J. Razzouk                  Director                                         July 22, 1999
         William J. Razzouk

</TABLE>


                                       25
<PAGE>



FRITZ COMPANIES, INC.                                            FORM 10-K

<TABLE>


                           CONSOLIDATED BALANCE SHEETS
                    (In thousands, except per share amounts)

                                                                                             May 31,              May 31,
                                                                                              1999                1998
                                                                                           ------------         ----------
                                                           ASSETS

   CURRENT ASSETS:
<S>                                                                                     <C>                  <C>
        Cash and equivalents                                                            $       50,599       $     53,935
        Accounts receivable, net of allowance for
          doubtful accounts of $20,466 in 1999 and $23,232 in 1998                             396,640            406,381
        Deferred income taxes                                                                   16,461             16,978
        Prepaids and other current assets                                                       17,860             23,142
                                                                                           ------------         ----------
        Total current assets                                                                   481,560            500,436
                                                                                           ------------         ----------

   PROPERTY AND EQUIPMENT - NET                                                                103,535             92,049
                                                                                           ------------         ----------
   OTHER ASSETS:
        Intangibles, net of accumulated amortization of $21,362
          in 1999 and $16,866 in 1998                                                          112,666            112,965
          Deferred income taxes                                                                 13,395              3,399
        Other assets                                                                            15,752             11,964
                                                                                           ------------         ----------
        Total other assets                                                                     141,813            128,328
                                                                                           ------------         ----------

            TOTAL ASSETS                                                                $      726,908       $    720,813
                                                                                           ============         ==========

                                            LIABILITIES AND STOCKHOLDERS' EQUITY

   CURRENT LIABILITIES:
        Current portion of long-term obligations and short-term
          borrowings                                                                    $        4,333       $      4,764
        Accounts payable                                                                       255,706            266,863
        Accrued liabilities                                                                     87,562             74,880
        Income tax payable                                                                      15,348             12,394
                                                                                           ------------         ----------
        Total current liabilities                                                              362,949            358,901
                                                                                           ------------         ----------

   LONG-TERM OBLIGATIONS                                                                        89,606            101,346
   OTHER LIABILITIES                                                                            10,271             10,238
                                                                                           ------------         ----------
            TOTAL LIABILITIES                                                                  462,826            470,485
                                                                                           ------------         ----------

   COMMITMENTS AND CONTINGENCIES

   STOCKHOLDERS' EQUITY
        Common stock: par value $.01 per share;
        60,000 shares authorized, 36,420 shares
        issued and outstanding, (35,896 shares
        issued and outstanding in 1998)                                                            364                359
   Additional paid-in capital                                                                  138,369            131,797
   Treasury stock - at cost                                                                      (174)                ---
   Retained earnings                                                                           144,437            130,985
   Accumulated other comprehensive loss                                                        (18,914)           (12,813)
                                                                                           ------------         ----------
        Total stockholders' equity                                                             264,082            250,328
                                                                                                                ----------


            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $      726,908       $    720,813
                                                                                           ============         ==========



</TABLE>



          See accompanying notes to consolidated financial statements.



                                      F-1
<PAGE>


<PAGE>


<TABLE>

                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (In thousands, except per share amounts)



                                                                           Year Ended May 31,
                                                          --------------- -- ------------- --- -------------
                                                               1999              1998              1997
                                                          ---------------    -------------     -------------
<S>                                                    <C>                <C>               <C>
REVENUE                                                $       1,387,727  $     1,300,083   $     1,156,770
FREIGHT CONSOLIDATION COSTS                                      809,750          741,818           647,399
                                                          ---------------    -------------     -------------
NET REVENUE                                                      577,977          558,265           509,371
                                                          ---------------    -------------     -------------

OPERATING EXPENSES
    Salaries and related costs                                   342,211          326,025           302,555
    General and administrative                                   210,715          206,427           203,958
                                                          ---------------    -------------     -------------
      Total operating expenses                                   552,926          532,452           506,513
                                                          ---------------    -------------     -------------

INCOME FROM OPERATIONS                                            25,051           25,813             2,858
OTHER INCOME (EXPENSE)                                             (5,268)            789             (2,384)
                                                          ---------------    -------------     -------------
INCOME BEFORE  INCOME TAX EXPENSE                                 19,783           26,602               474
INCOME TAX EXPENSE                                                 6,331            8,512               166
                                                          ---------------    -------------     -------------

NET INCOME                                             $          13,452  $        18,090   $           308
                                                          ===============    =============     =============


Weighted average shares outstanding - Basic                       36,203           35,744            35,128
                                                          ===============    =============     =============

Net Income per share - Basic                           $             .37  $           .51   $           .01
                                                          ===============    =============     =============

Weighted average shares outstanding - Diluted                     36,290           36,128            35,473
                                                          ===============    =============     =============

Net Income per share - Diluted                         $             .37  $           .50   $           .01
                                                          ===============    =============     =============

</TABLE>


          See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>























<TABLE>

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
                                 (In Thousands)


                                                                                                         Accumulated
                                                         Additional                                          Other       Total
                                                          Paid-In      Retained       Treasury Stock    Comprehensive Stockholders'
                                                                                  ------------------
                                     Shares    Amount    Capital      Earnings    Shares      Amount         Loss          Equity
                                    ---------  -------- -----------  ----------- ---------  -------- --------------  --------------
<S>          <C> <C>                  <C>       <C>       <C>         <C>                <C>  <C>           <C>             <C>
Balance, May 31, 1996                 34,898    $   349   $ 118,485   $  112,587         0    $     0   $      (674)    $   230,747

Net income                                                                   308                                               308

Foreign currency translation
adjustment                                                                                                    (2,304)       (2,304)
                                                                                                                        -----------
Comprehensive loss                                                                                                          (1,996)
Common stock issued in acquisition
   of companies                          215          2         350                                                             352
Stock grants and option
 exercised                               292          3       5,158                                                           5,161
Employee Stock Purchase Plan              40                    431                                                             431
                                    ---------     ------    --------    --------- ---------     ----------    ---------------------
Balance, May 31, 1997                 35,445    $   354   $ 124,424   $  112,895         0    $         0   $    (2,978)   $234,695

Net income                                                                18,090                                             18,090
Foreign currency translation                                                                                     (9,835)    (9,835)
   adjustment
                                                                                                                      -------------
Comprehensive income                                                                                                          8,255
Common stock issued in acquisition
   of companies                          161          2       2,155                                                           2,157
Stock grants and options exercised       251          3       4,796                                                           4,799
Employee stock purchase plan              39                    422                                                             422

                                    ---------     ------    --------    --------- ---------     ----------    ---------------------
Balance, May 31, 1998                 35,896    $   359   $ 131,797   $  130,985         0    $         0   $   (12,813) $  250,328

Net income                                                                13,452                                             13,452
Foreign currency translation                                                                                     (6,101)    (6,101)
   adjustment
                                                                                                                      -------------
Comprehensive income                                                                                                          7,351
Common stock issued in acquisition
   of companies                           90          1         699                                                             700
Stock grants and options exercised       388          4       5,484                                                           5,488

Employee stock purchase plan              46                    389                                                            389

Treasury stock purchases                                                              (27)          (174)                     (174)
                                    =========     ======    ========    ========= =========     ==========    =========== =========
Balance, May 31, 1999                 36,420    $   364   $ 138,369   $  144,437      (27)    $     (174)   $   (18,914) $  264,082
                                    =========     ======    ========    ========= =========     ==========    =====================


</TABLE>
















                     See accompanying notes to consolidated
                             financial statements.



                                      F-3
<PAGE>


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>

                                                                                      Year Ended May 31,
                                                                       -------------- --- ---------------- --- ----------------
                                                                           1999                1998                 1997
                                                                       --------------     ----------------     ----------------
 CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>                <C>                  <C>
      Net income                                                    $        13,452    $          18,090    $             308
      Adjustments to reconcile net income to net cash
          Provided by (used in) operating activities:
          Depreciation and amortization                                      27,508               26,385               24,600
          Deferred income taxes                                              (9,479)              (6,358)              (5,005)
          Stock compensation                                                  1,922                4,412                2,299
          Other                                                                 485               (1,073)              (1,559)
          Effect of changes in:
            Receivables, net                                                  9,741               14,253              (15,314)
            Prepaids and other current assets                                 5,282                4,954                  391
            Payables and accrued liabilities                                  8,441               (5,605)             (36,231)
                                                                       --------------     ----------------     ----------------
      Net cash provided by (used in) operating activities                    57,352               55,058               (30,511)
                                                                       --------------     ----------------     ----------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
      Capital expenditures                                                  (35,749)             (21,797)             (42,481)
      Acquisitions, net of cash acquired                                     (4,701)              (6,621)             (12,237)
      Payment of acquisition related debt                                    (4,313)              (8,758)             (11,873)
      Purchase of treasury stock                                               (174)                ----                 ----
      Proceeds from sale of fixed assets                                      3,802                3,485               33,747
      Acquisition of long term lease                                       (5,160)                ----                 ----
      Other                                                                    (717)              (2,806)              (1,093)
                                                                       --------------     ----------------     ----------------
      Net cash used in investing activities                                 (47,012)             (36,497)             (33,937)
                                                                       --------------     ----------------     ----------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
      Net (decrease) increase in short-term borrowings                         ----              (11,991)              22,833
      Proceeds from issuance of long-term obligations                         1,180               11,695                8,016
      Payments of debt                                                       (9,197)              (4,378)             (11,513)
      Proceeds from stock options exercised                                     925                  389                5,161
      Employee stock purchases                                                  388                  422                  431
      Other                                                                    ----                 (303)              (1,269)
                                                                       --------------     ----------------     ----------------
      Net cash (used in) provided by  financing activities                   (6,704)              (4,166)              23,659
                                                                                          ----------------
                                                                       --------------                          ----------------
 Foreign currency translation effect on cash                                 (6,972)              (3,828)              (2,304)
                                                                       --------------     ----------------     ----------------
 INCREASE (DECREASE) IN CASH AND EQUIVALENTS                                 (3,336)              10,567              (43,093)

 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD                        $        53,935               43,368               86,461
                                                                       --------------     ----------------     ----------------

 CASH AND EQUIVALENTS AT END OF PERIOD                              $        50,599               53,935               43,368
                                                                       ==============     ================     ================

 OTHER CASH FLOW INFORMATION:
      Income taxes paid                                             $        13,940                9,640                8,185
                                                                                          ================
                                                                       ==============                          ================
      Interest paid                                                 $         7,222                8,471                8,622
                                                                       ==============     ================     ================
      Noncash   investing   and  financing   activities   in
      connection   with acquisitions:
         Receivables assumed                                        $          ----               (6,084)                ----
                                                                       ==============     ================     ================
         Payables and accrued liabilities assumed                              ----                6,557                2,189
                                                                       ==============     ================     ================
         Capital stock issued                                       $           700                2,155                  350
                                                                       ==============     ================     ================
         Other                                                                 ----               (2,628)                ----
                                                                       ==============     ================     ================
</TABLE>





                     See accompanying notes to consolidated
                             financial statements.


                                      F-4
<PAGE>

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
         (In Thousands, Except Per Share Amounts)

         Note 1.     BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                     POLICIES

         Basis of Presentation:  The consolidated  financial  statements include
         the accounts of Fritz Companies, Inc. (the Company) and all significant
         domestic and international  companies wherein the Company has more than
         a 50% equity ownership or otherwise  exercises  control.  The Company's
         interest  in 20% to 50% owned  companies  are  recorded  on the  equity
         method.  All significant  intercompany  balances and transactions  have
         been eliminated in consolidation.  Certain prior year amounts have been
         reclassified  to conform with the current  year's  financial  statement
         presentation.

         The  Company's   consolidated   financial  statements  reflect  certain
         estimates and assumptions  which affect amounts  reported and disclosed
         in these  financial  statements  and related notes in  accordance  with
         generally accepted accounting  principles.  Actual results could differ
         from those estimates.

         Cash and Equivalents  Cash and equivalents  include demand deposits and
         short-term  investments  with  original  maturities  of three months or
         less.

         Property and  Equipment:  Property and equipment are stated at cost.
         Depreciation  and  amortization  are determined using the straight-line
         method for the estimated useful lives of assets as follows:

                 Buildings                                      40   years
                 Furniture and equipment                    5 - 10   years
                 Computer hardware and software             3 -  5   years

         Leasehold  improvements are amortized over their estimated useful lives
         or terms of the related  lease,  whichever  is shorter.  Certain  costs
         related to internally  developed software are capitalized and amortized
         on a straight-line basis over their expected useful life (not to exceed
         five years), commencing when the asset is placed in service.

         Maintenance  and  repair  expenditures  are  charged  to  expense  when
         incurred.

         Intangibles:  Intangibles,  including  goodwill  and  covenants-not-to-
         compete, result from  business acquisitions. Amortization is determine
         using the  straight-line  method over the estimated useful lives of the
         intangible  assets as follows:

                   Goodwill                                      40   years
                   Covenants-not-to-compete                   2 - 5   years


         Net  intangibles  as of May 31,1999  include  goodwill of $112,453  and
         covenants-not-to-compete of $213.

         Long-lived  assets,  including  goodwill,  are reviewed for  impairment
         whenever events or changes in circumstances  indicate that the carrying
         amount of an asset may not be recoverable.  Recoverability of long-term
         assets is  measured  by a  comparison  of the  carrying  amount of such


                                      F-5
<PAGE>

         assets  against  the  undiscounted  future  cash flows  expected  to be
         generated by the assets.  If such assets are determined to be impaired,
         the  impairment to be recognized is measured by the amount by which the
         assets'  carrying  amounts  exceed the assets'  discounted  future cash
         flows.

         Foreign Currency Translation Adjustment: Foreign assets and liabilities
         have been  translated at year-end  exchange rates and related  revenues
         and  expenses  have been  translated  at average  rates of  exchange in
         effect during the year. The impact of exchange rate changes is shown as
         "Accumulated  Other  Comprehensive  Income"  in  stockholders'  equity.
         Transaction  gains and losses from foreign  exchange  transactions  are
         included in results of operations.

         Comprehensive  Income  Effective  June 1,  1998,  the  Company  adopted
         Statement of Financial  Accounting Standards (SFAS) No. 130, "Reporting
         Comprehensive Income," which establishes standards for the reporting of
         comprehensive  income  and  its  components  in  financial  statements.
         Comprehensive  income consists of net income and other gains and losses
         affecting   shareholders'   equity  that,   under  generally   accepted
         accounting  principles,  are excluded from net income. For the Company,
         the  components  of  comprehensive  income  consist  of net  income and
         foreign currency translation gains and losses.

         During the years  ended May 31, 1999 and 1998,  the Company  maintained
         its  policy  to  reinvest  the  earnings  of  the   non-United   States
         subsidiaries  as a  long-term  commitment.  Accordingly,  the  "foreign
         currency  translation  adjustments"  have not been  adjusted for United
         States taxes.

         Off-Balance  Sheet Risk and  Concentration  of Credit  Risk:  Financial
         instruments which potentially  subject the Company to concentrations of
         credit risk are principally  represented by temporary cash  investments
         and  accounts  receivable.   The  Company  places  its  temporary  cash
         investments with financial institutions to limit its risk of loss.

         The  Company's  customer  base is  representative  of a wide  range  of
         industries and includes  customers  located  throughout the world.  The
         Company had no significant  concentration  of credit risk as of May 31,
         1999 or 1998.  See  Notes 3 and 8 of Notes  to  Consolidated  Financial
         Statements for discussion of the Company's off-balance sheet risks.


         Revenue   Recognition:   Revenues   and   expenses   related   to   the
         transportation  of  freight  are  recognized  at the time  the  freight
         departs the terminal of origin.  This method  approximates  recognizing
         revenues and expenses when the shipment is completed. Customs brokerage
         revenues are recognized upon completing documents necessary for customs
         entry  purposes.   Material  management  and  distribution  revenue  is
         recognized upon execution of the service provided.


         Revenue  realized by the Company as an indirect  carrier  includes  the
         direct carrier's  charges to the Company for transporting the shipment.
         Revenue realized in other capacities  includes only the commissions and
         fees charged for applicable services rendered.

         Net Revenue for air and ocean freight  forwarding and  consolidation of
         surface   transportation  as  an  indirect  carrier  is  determined  by
         deducting  freight  consolidation  and  transportation  costs from such
         revenue.


                                      F-6
<PAGE>





<TABLE>

         Net Income Per Share:  The Company adopted the provisions of Statement of Financial  Accounting  Standards (SFAS) No.
         128, "Earnings Per Share," effective December 1, 1997.  Basic and diluted earnings per share are presented below:


                                                                                                Year Ended May 31,
                                                                                       ------------------------------------
                                                                                       1999            1998            1997
                                                                                    -----------     -----------     -----------
         Basic:
<S>                                                                              <C>             <C>             <C>
           Net income                                                            $      13,452   $      18,090   $         308
           Weighted-average number of common shares outstanding                         36,203          35,744          35,128
              Basic earnings per common share                                    $        0.37   $        0.51   $        0.01
                                                                                    ===========     ===========     ===========

         Diluted:
           Net income                                                            $      13,452   $      18,090   $         308
         Shares:
           Weighted-average number of common shares outstanding                         36,203          35,744          35,128
           Potentially dilutive common shares                                               87             384             345
                                                                                    -----------     -----------     -----------
              Total shares                                                              36,290          36,128          35,473
              Diluted earnings per common share                                  $        0.37   $        0.50   $        0.01
                                                                                    ===========     ===========     ===========
</TABLE>

         Options with an exercise price greater than the average market price of
         common shares were not included in the computation of diluted  earnings
         per share, as they were anti-dilutive.

         Income Taxes:  The Company uses the asset and liability  method.  Under
         this method,  the net  deferred  tax asset or  liability is  determined
         based on the tax effects of  differences  between book and tax bases of
         various   balance  sheet  assets  and  liabilities  and  gives  current
         recognition to the effect of any change in tax rates and laws.

         Stock Options:  The Company accounts for its stock  compensation  plans
         using the intrinsic  method as allowed  under SFAS No. 123;  therefore,
         costs are reflected in the  consolidated  statements of operations only
         when stock  options  are granted at less than 90% of fair value at date
         of grant.  The Company realizes an income tax benefit from the exercise
         or early  disposition  of certain stock options.  This benefit  reduces
         current income taxes payable and increases  additional paid in capital.
         See Note 10 of Notes to Consolidated Financial Statements.

         Note 2.     PROPERTY AND EQUIPMENT

         Property and equipment consist of the following:
<TABLE>

                                                                                                 May 31,
                                                                               --------------------------------------------
                                                                                       1999                      1998
                                                                               --- -------------             --------------
<S>                                                                             <C>                       <C>
         Land                                                                   $            950          $           1,006
         Building and leasehold improvements                                              40,479                     40,018
         Furniture and equipment                                                          72,836                     61,637
         Computer hardware and software                                                   82,414                     65,103
         Software development in progress                                                  3,482                      3,488
                                                                                   -------------             --------------
              Total                                                                      200,161                    171,252
         Less accumulated depreciation and amortization                                  (96,626)                   (79,203)
                                                                                   -------------             --------------
              Total                                                             $        103,535          $          92,049
                                                                                   =============             ==============
</TABLE>

         Depreciation  and  amortization  of property and equipment  amounted to
         $22,611  in  1999,  $21,125  in 1998,  and  $19,639  in 1997.  Software
         development  in progress  includes  external  costs incurred to develop
         software which has not been completed as of balance sheet date.  During
         the years ended May 31, 1999 and 1998,  $444 and $1,495,  respectively,


                                      F-7
<PAGE>

         represented  software  development  costs  completed and transferred to
         "Computer hardware and software."


         Note 3: OBLIGATIONS AND BORROWINGS

         Short-term   borrowings  and  long-term   obligations  consist  of  the
following:
<TABLE>

                                                                                                       May 31,
                                                                                          ----------------------------------
                                                                                            1999                  1998
                                                                                          ------------ ---- --- ------------

         Long-term obligations:
              6.43% Senior Notes due on April 15, 2003, interest payable
<S>                                                                                    <C>                   <C>
              semi-annually                                                            $       75,000        $       75,000

         Bank credit agreement providing a $100 million
              credit  facility  maturing  March 27, 2002 with  interest at LIBOR
              (6.3% as of May 31, 1999) plus 0.325% to 0.750% as determined by
              fixed charge coverage ratio .                                                     4,500                10,000

         Installment obligations related to acquisitions,
              non-interest  bearing, due 1999 - 2002 (less unamortized discount
              based on imputed  interest rate of 7.0% -  approximately  $117 and
              $229 in 1999 and 1998, respectively)                                             3,888                  6,678


         Term note, paid during 1999                                                             ---                  1,851

         Term note  payable to a bank dated June 18, 1997,  bearing  interest at
              SIBOR (6.4% as of May 31, 1999) plus a margin ranging from 0.5% to
              0.7% with seven  quarterly  payments  of $250  beginning  the 40th
              month from date of the agreement and remaining balance outstanding
              due at the end of the 60th month                                                 7,245                  8,294


         Other obligations                                                                     3,306                  4,287
                                                                                          ------------          ------------
              Total long-term obligations                                                     93,939                106,110
                 Less current portion                                                         (4,333)                (4,764)
                                                                                          ------------          ------------
              Net long-term obligations                                                $      89,606         $     101,346
                                                                                          ============          ============

</TABLE>

         At May 31, 1999, the Company's aggregate maturing long-term obligations
         and short-term  borrowings for the years 2000 through 2004 were $4,333;
         $2,765; $5,376; $81,372 and $93, respectively and none thereafter.  The
         carrying  value of the  Company's  long-term  obligations  approximates
         their fair value.

         On March 27, 1998, the Company  entered into a $100 million  syndicated
         multi-currency credit facility (Credit Facility),  maturing March 2001.
         In March 1999,  this facility was extended to expire in March 2002. The
         purpose of the  Credit  Facility  is to  provide  letters of credit and
         working capital not covered by internally  generated funds. The Company
         must maintain  compliance with certain financial  covenants such as: 1)
         minimum  working  capital,  2) minimum net worth,  3) maximum  leverage
         ratio, 4) minimum fixed charge  coverage ratio,  and 5) maximum capital
         expenditures.  As of May 31, 1999,  the balance  outstanding  under the
         Credit  Facility  was $4.5 million and the  weighted  average  floating
         interest  rate as of that date was 5.8%.  At May 31, 1999,  the Company
         was  contingently  liable for letters of credit of $10.7  million which
         reduces the  Company's  borrowing  capacity  under the  current  credit
         facility.  The Company had $15.5  million in similar  letters of credit
         outstanding at May 31, 1998 under the Company's credit facility then in
         effect.

         The Company is required to comply with various financial covenants such


                                      F-8
<PAGE>

         as leverage,  fixed charge coverage and current ratios within its other
         credit agreements,  many of which include cross default provisions tied
         to the Credit Facility.


         Information  regarding the Company's activity in the Credit Facility is
         as follows:
<TABLE>

                                                                                    For the Year Ended May 31,
                                                                        ----------------------------------------------------
                                                                        --
                                                                               1999             1998                 1997
                                                                        -- -----------     -------------         -----------
<S>                                                                     <C>            <C>                   <C>
          Maximum amount outstanding during period                      $      25,500  $         41,000      $      55,120
          Average amount outstanding during period                      $       7,316  $         20,184      $      29,669
          Weighted average interest rate during period                            6.0%              6.7%                5.8%

</TABLE>


         Note 4 - INCOME TAXES

         The current and deferred components of income tax expense (benefit) are
         as follows:
<TABLE>

                                                                                   For the Year Ended May 31,
                                                                       -----------------------------------------------------
                                                                         1999                  1998                1997
                                                                       ------------         -------------       ------------
         Current
<S>                                                                <C>                  <C>                 <C>
           Federal                                                 $          ---       $         2,022     $        (5,674)
           State                                                              ---                 2,334                (338)
           Foreign                                                         15,810                10,514             11,183
                                                                       ------------         -------------       ------------
              Total current                                                15,810                14,870              5,171
                                                                       ------------         -------------       ------------
         Deferred
           Federal                                                         (9,231)               (4,237)             (5,446)
           State                                                           (1,438)               (2,662)               (363)
           Foreign                                                          1,190                   541                 804
                                                                       ------------         -------------       ------------
             Total deferred                                                (9,479)               (6,358)             (5,005)
                                                                       ------------         -------------       ------------
         Total                                                     $        6,331       $         8,512     $           166
                                                                       ============         =============       ============


</TABLE>


         Sources of income (loss) before income taxes are as follows:
<TABLE>

                                                                    For the Year Ended May 31,
                                                  -----------------------------------------------------------------
                                                         1999                   1998                     1997
                                                      -------------         ---------------          --------------
<S>                                               <C>                   <C>                      <C>
                   United States                  $       (28,839)      $          (7,944)       $        (33,768)
                   Foreign                                 48,622                  34,546                  34,242
                                                      -------------         --------------           -------------
                     Total                        $        19,783       $          26,602        $            474
                                                      =============         ===============          ==============


</TABLE>




                                      F-9
<PAGE>






         The following provides a reconciliation of the statutory federal income
         tax rate and provision to the effective income tax rate and provision:

<TABLE>

                                                                            For the Year Ended May 31,
                                                 ---------------------------------------------------------------------------------
                                                    1999         %             1998          %               1997           %
                                                 --------     --------       ---------    ---------        ----------    ---------

   Statutory federal income
<S>                                           <C>                 <C>     <C>                 <C>       <C>                  <C>
       tax expense                            $    6,924          35.0    $     9,311         35.0      $        166         35.0
   Increases (decreases) resulted from:
       Difference  between foreign tax rate
       and federal rate                               60          0.3          (1,147)        (4.3)             (540)      (113.9)
       State taxes benefit,  net of federal
       income tax effect                          (1,516)        (7.7)           (328)        (1.2)             (159)       (33.5)
   Amortization of  Goodwill
   (Non-Section           338)                       309          1.6             280          1.1               275          58.1

   Meals and Entertainment                           219          1.1             197          0.7               273          57.4

   Others                                            335          1.7             199          0.7               151          31.9

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

   Total                                      $    6,331          32.0    $     8,512         32.0      $        166         35.0
                                                 ========     ========       =========    =========        ==========    =========

</TABLE>

         The  significant  components  of net deferred  income tax assets are as
         follows:

<TABLE>

                                                                                               May31,
                                                                              -------------------------------------
                                                                                   1999                     1998
                                                                              -- -----------        --- -----------
                  Deferred income tax assets:
                  Current:                                                         <C>                    <C>
                       Compensated absences                                         2,361                  1,913
                       Net operating loss carryforward                               ----                  1,721
                       Foreign tax credits and other tax credits                    2,201                  2,511
                       Capital loss carryforward                                      595                    600
                       Allowance for doubtful accounts                              6,354                  7,186
                       Write-off of duplicate information
                               systems and facilities                                  53                    308
                       Other reserves and accruals                                  5,841                  3,983
                                                                              -- -----------        --- -----------
                       Subtotal                                                    17,405                 18,222
                  Less: valuation allowance                                         (944)                 (1,244)
                                                                              -- -----------        --- -----------
<S>
                           Total current deferred income tax assets                16,461                 16,978
                                                                              -- -----------        --- -----------

                  Noncurrent:
                         Net operating loss carryforward                            9,735                  ----
                       Deferred compensation                                        2,866                  2,117
                       Other reserves and accruals                                  3,143                  2,867
                                                                              -- -----------        --- -----------
                           Subtotal                                                15,744                  4,984
                                                                              -- -----------        --- -----------
                           Total deferred income tax assets                        32,205                 21,962
                                                                              -- -----------        --- -----------

                  Deferred noncurrent income tax liabilities:
                       Depreciation and amortization                              (1,234)                 (1,585)
                       Other deferred tax liabilities                             (1,115)                   ----
                                                                              -- -----------        --- -----------
                           Subtotal                                               (2,349)                 (1,585)
                                                                              -------------         --- -----------
                       Net deferred income tax assets                              29,856                 20,377
                                                                              ============          === ===========
</TABLE>

        The valuation  allowance for current  deferred  income tax assets as of
         May 31, 1999 and 1998,  results  from capital  loss  carryforwards  and
         foreign tax credits.  The Company has evaluated the long-term  deferred
         tax assets  and  determined  no  valuation  allowance  is  required  as
         management  believes it is more likely than not the long-term  deferred
         income tax assets will be realized in the future.

                                      F-10
<PAGE>

         During  the  years  ended May 31,  1999,  1998 and  1997,  the  Company
         maintained its policy to reinvest the earnings of the non-United States
         subsidiaries as a long-term commitment.  Accordingly,  the "Accumulated
         other  comprehensive  income"  included  in the  equity  section of the
         balance  sheets have not been  adjusted  for the effect of U.S.  taxes.
         Undistributed  earnings of the Company's foreign subsidiaries  amounted
         to approximately $197 million at May 31, 1999. Additional United States
         income  taxes  may be due upon  remittance  of those  earnings  (net of
         foreign  tax).  If all earnings  were  distributed,  approximately  $32
         million would be payable at May 31,1999.

         Note 5 - RELATED PARTY TRANSACTIONS

         The Company  has  previously  leased  office  space from the  Company's
         Chairman and Chief Executive  Officer (the  Chairman).  The Company did
         not rent any  property  from the  Chairman  during  the  current  year;
         however,  rental expense applicable to previous leases was $263 for the
         year ended May 31, 1997.  No leases with the Chairman were in effect as
         of May 31, 1998 or May 31, 1999.

         In connection  with the Company's U.S.  customs  brokerage  operations,
         customers are required to obtain surety bonds.  The Company places such
         customs  bonds  with  Intercargo  Corporation  (Intercargo)  and  other
         underwriters of customs bonds. The Chairman owned approximately 3.1% of
         the  outstanding  common stock of Intercargo in prior years.  As of May
         31, 1999 all Intercargo shares owned by the Chairman have been sold. In
         1999, 1998 and 1997 the Company placed  approximately  $4,558;  $4,343;
         and $4,400,  respectively,  of insurance  business with  Intercargo and
         received  approximately  $573; $589; $373,  respectively,  in insurance
         commissions and fees from Intercargo.  The Company believes the amounts
         paid and received are  substantially the same as the Company would have
         incurred and realized from other third parties.

         The Company paid premiums until 1992 on life insurance  policies on the
         Chairman  though the Company is not the  beneficiary.  Such  cumulative
         premium payments,  which approximate  surrender value, of $1,400 at May
         31, 1999 and 1998,  are included in other assets.  The premiums will be
         refunded by the  beneficiary  upon death of the insured or cancellation
         of the  policies,  whichever  comes  first.  The  Company has no future
         obligation to pay premiums on these policies.

         Note 6 - COMMITMENTS

         The Company  leases office and  warehouse  space and computer and other
         office equipment from third parties, including certain operating leases
         financed by special purpose  entities,  under operating leases expiring
         through 2013.  Minimum future rental  payments by the Company as of May
         31, 1999 are as follows:

<TABLE>

                                                                 Rental                 Sublease                Net Rental
                                                               Payments                   Income                  Payments
                                                          ---------------           --------------           ---------------
         Year ending May 31,
         --------------------------------------------
<S>          <C>                                                 <C>                       <C>                      <C>
             2000                                                40,011                    1,211                    38,800
             2001                                                30,433                      812                    29,621
             2002                                                20,408                      286                    20,122
             2003                                                16,504                      226                    16,278
             2004                                                13,268                      173                    13,095
             2005 and thereafter                                 45,194                      130                    45,064
                                                          ---------------           -------------            ---------------
               Total                                            165,818                    2,838                   162,980
                                                          ===============           ==============           ===============
</TABLE>


                                      F-11
<PAGE>




         Net rental expense from these leases was as follows:
<TABLE>

                                                                              For the Year Ended May 31,
                                                                 -----------------------------------------------------
                                                                      1999                 1998               1997
                                                                 -- ----------          -----------        -----------

<S>                                                                     <C>          <C>                <C>
                   Gross lease expense                                  59,226       $       54,453     $      42,834
                   Less sublease rental income                          (4,083)              (2,603)           (2,336)

                                                                    ---------           -----------        -----------
                   Net rental expense                                   55,143        $      51,850      $     40,498

                                                                    ==========          ===========        ===========
</TABLE>


         Note 7 - ACQUISITIONS

         Purchases:

         In 1999, the Company  acquired the remaining  interests in five freight
         forwarding companies and one third of the remaining interest in another
         for $2,593 in cash and $74 in debt.  Intangible  assets of $1,307  were
         recorded in connection with the acquisitions.

         In  1998,  the  Company  acquired  the  equity  interest  of a  freight
         forwarding  company for an aggregate  purchase  price of  approximately
         $1,552 through the issuance of 120 shares of the Company's  stock.  The
         acquired company included current assets of approximately $6,413; fixed
         assets  of  approximately  $342;  and  assumed  liabilities,  which are
         primarily  current in nature,  of approximately  $6,659.  An intangible
         asset  of  approximately  $526  was  recorded  in  connection  with the
         acquisition.


         In 1997, the Company acquired assets and remaining interests in several
         freight  forwarding  companies  for  an  aggregate  purchase  price  of
         approximately   $10,000  consisting  of  cash  of  $8,600  and  payable
         obligations of $1,400. Relative to total 1997 acquisitions, the Company
         acquired  current  assets  of  approximately  $2,300;  fixed  assets of
         approximately  $1,300  and  assumed  liabilities,  which are  primarily
         current  in  nature,  of  approximately  $2,200.  Intangible  assets of
         approximately   $8,200   were   recorded  in   connection   with  those
         acquisitions  which  are  amortized  on  a  straight-line   basis.  The
         remainder  was recorded to eliminate the  Company's  minority  interest
         payable.

         The Company  entered into  certain  acquisition  agreements  which have
         provisions  regarding  contingent future payments.  As of May 31, 1999,
         approximately  $1,588 of such future  contingent  payments  exist which
         have not been  recorded  by the  Company  and are  dependent  upon full
         achievement of specified net revenue or pretax income levels.


         Intangible  assets,  including  goodwill and  covenants not to compete,
         totaling  approximately  $4,130 and $2,936  were  recorded  in 1999 and
         1998,   respectively,   in   connection   with   current  and  previous
         acquisitions.  Cash  payments  made  during  1999 of  $6,421  represent
         payments to reduce  acquisition  debt payable and  payments  related to
         contingent purchase price.  Amortization  expense for intangible assets
         was  approximately  $4,331,  $4,474 and $4,700 in 1999, 1998, and 1997,
         respectively.

         The purchase method of accounting was used for all acquisitions made in
         fiscal years presented herein. The operations of acquired companies are
         reflected in the Company's consolidated financial statements from their
         respective dates of acquisition.


                                      F-12
<PAGE>





         Note 8 - CONTINGENCIES

         The Company is party to routine  litigation  incident to its  business,
         primarily  claims for goods  lost or  damaged in transit or  improperly
         shipped. Most of the lawsuits in which the Company is the defendant are
         covered by insurance and are being defended by the Company's  insurance
         carriers.

         In 1996, a total of six  complaints  were filed (three in federal court
         and three in state court of California) against the Company and certain
         of its then officers and directors,  purporting to be brought on behalf
         of a class of  purchasers  or holders of the  Company's  stock  between
         August  28,  1995 and July 23,  1996.  The  complaints  allege  various
         violations  of  Federal   Securities  law  and   California   Corporate
         Securities law in connection with prior disclosures made by the Company
         and seek unspecified damages.

         The three class action  suits filed  against the Company in state court
         were  dismissed  with prejudice by the Superior Court of California for
         the County of San  Francisco on grounds the claims  asserted  under the
         California  Corporate  Securities  law and  common  law fraud  were not
         legally  tenable.  One  of  the  dismissals  was  reversed  on  appeal,
         permitting  the  plaintiff to file an amended  complaint.  That amended
         complaint  was  dismissed  with  leave  to  amend.  A  further  amended
         complaint  was filed and was  dismissed  without  leave to amend.  That
         dismissal is on appeal.

         The three class action suits filed against the Company in federal court
         were  consolidated  into one suit which was dismissed  with  prejudice,
         finding that  plaintiffs  had not alleged any statement  that was false
         and misleading in violation of the federal securities laws.  Plaintiffs
         have filed an appeal with the Ninth Circuit Court of Appeals.
         That appeal is pending.

         The  Company is unable to predict the  ultimate  outcome of these suits
         and it is possible the outcome could have a significant  adverse impact
         on the Company's future  consolidated  results of operations.  However,
         the Company  believes  the ultimate  outcome of these  matters will not
         have  a  significant  adverse  impact  on  the  Company's  consolidated
         financial position.


         Note 9 - SEGMENT DISCLOSURE AND GEOGRAPHIC AREA INFORMATION

         The Company operates in the international  freight forwarding industry,
         which  encompasses  customs  brokerage,  airfreight  and ocean  freight
         forwarding, and material management and distribution. No single
         customer accounted for ten percent or more of consolidated revenue.

         The Company  manages its operations in two segments,  United States and
         Foreign.  The  Company's  Chief  Operating  Officer  reviews  operating
         results and creates  operating  plans based on these two segments.  The
         Company's  two key  operations  executives  represent  these  segments.
         Bonuses  and other  incentives  are  distributed  based on the  segment
         results.



                                      F-13
<PAGE>





         Certain  information  regarding the Company's principal logistics
         services and operations by geographic areas is summarized below:
<TABLE>

                                                                                        Year Ended May 31,
                                                                     -------------- ---- --------------- --- ---------------
                                                                         1999                 1998                1997
                                                                     --------------      ---------------     ---------------
          Net Revenue:
<S>                                                               <C>                 <C>                 <C>
             Customs Brokerage                                    $        163,701    $         165,055   $         152,257
             Ocean Freight Forwarding                                      126,060              120,497             107,480
             Airfreight Forwarding                                         166,832              158,514             149,333
             Material Manaagement & Distribution                           121,384              114,199             100,301
                                                                     --------------      ---------------     ---------------
             Total Net Revenue                                    $        577,977    $         558,265    $        509,371
                                                                     ==============      ===============     ===============

        Net Revenue
             United States                                        $        307,025    $         292,367   $         268,780
                                                                     --------------      ---------------     ---------------
             Canada                                                         45,349               42,939              38,048
             Other North America                                             2,103                1,985               1,774
             Europe                                                         96,755               96,157              87,957
             China                                                          37,071               34,431              35,018
             Singapore                                                      10,199               10,888              11,015
             Other Asia                                                     38,579               39,282              36,150
             Latin America                                                  40,896               40,216              30,629
                                                                     --------------      ---------------     ---------------
                Total Foreign                                              270,952              265,898             240,591
                                                                     --------------      ---------------     ---------------
             Total Net Revenue                                    $        577,977    $         558,265   $         509,371
                                                                     ==============      ===============     ===============

        Income From Operations
             United States                                        $         12,195    $          14,511   $           1,029
                                                                     --------------      ---------------     ---------------
             Canada                                                          1,180                (489)                   9
             Other North America                                                17                  376                 440
             Europe                                                            562                5,028                 826
             China                                                           8,007                4,436               6,424
             Singapore                                                       1,349                  617                (56)
             Other Asia                                                      2,582                2,835                 146
             Latin America                                                  ( 841)              (1,501)              (5,960)
                                                                     --------------      ---------------     ---------------
                Total Foreign                                               12,856               11,302               1,829
                                                                     --------------      ---------------     ---------------
             Total Income from Operations                         $         25,051    $          25,813   $           2,858
                                                                     ==============      ===============     ===============

        Long-lived Assets
             United States                                                 148,817    $         139,800   $         142,521
                                                                     --------------      ---------------     ---------------
             Canada                                                         36,997               39,112              37,211
             Other North America                                               575                  695                 762
             Europe                                                         48,340               49,116              49,156
             China                                                          68,883               59,520              61,829
             Singapore                                                      14,240               14,505              17,342
             Other Asia                                                      6,416                5,621               6,581
             Latin America                                                  20,506               22,478              17,351
                                                                     --------------      ---------------     ---------------
                Total Foreign                                              195,957              191,047             190,232
                                                                     --------------      ---------------     ---------------
             Total Long-lived Assets                              $        344,774    $         330,847   $         332,753
                                                                     ==============      ===============     ===============

</TABLE>


                                      F-14
<PAGE>





         Note 10 COMMON STOCK (In thousands, except share and per share amounts)

         In October  1992,  the  Company  established  the 1992  Omnibus  Equity
         Incentive  Plan  ("1992  Plan"),  pursuant  to  which an  aggregate  of
         1,520,000  shares of common  stock was  reserved  for  issuance  to key
         employees  of the  Company.  The 1992 Plan was amended to increase  the
         number of shares of common stock  available  for award by an additional
         1,520,000  shares in May 1994,  1,500,000  shares in  October  1996 and
         1,500,000  shares in September  1998.  The 1992 Plan permits  awards of
         non-qualified  stock  options and incentive  stock  options  within the
         meaning of Section 422 of the Internal  Revenue  Code, as well as stock
         appreciation rights, restricted stock, and performance awards entitling
         the  recipient to receive cash or common stock in the future  following
         attainment   of   performance   goals   determined   by  the  committee
         administering the 1992 Plan.

         The  majority  of options  granted  under the  Company's  1992 Plan are
         exercisable one-third each on the day after the first, second and third
         anniversary  of the original  grant.  The majority of restricted  stock
         vests  100% on the day  after  the fifth  anniversary  of the  original
         grant.  Both  options  and stock were  granted at a price equal to fair
         market value on the respective dates of grant except for 240,000 shares
         of options  which were  granted at 90% of fair market  value at date of
         grant. Total stock-based  compensation expense of approximately $2,590;
         $3,520; and $3,300 was recorded in 1999, 1998, and 1997, respectively.

         Each  employee  stock  option  assumed by the Company  under a previous
         merger  agreement  will  continue  to have and be subject  to, the same
         terms and conditions set forth in the relevant stock option plans.  The
         plans required stock options granted to key employees be at a price not
         less than the stock's  fair  market  value on the  respective  dates of
         grant. The majority of options granted are exercisable  one-third after
         first anniversary date of the grant, two-thirds after two years and are
         fully  exercisable three years from date of grant. No options have been
         granted under this plan since the merger on May 30, 1995.

         Effective February 1993, the Company adopted the Non-Employee  Director
         Restricted  Stock  Plan  (Director  Plan) with an  aggregate  of 50,000
         shares of common stock for  issuance to outside  directors as a portion
         of their annual compensation, which vest six months from date of grant.
         Shares issued to outside  directors under the Director Plan were 4,844,
         4,468 and 2,490 during 1999, 1998 and 1997,  respectively.  Separately,
         1,200 restricted shares were granted in 1996 to non-employee  directors
         under the 1992 Plan and vest three years from date of grant.

         The  Company   adopted  SFAS  No.123,   "Accounting   for   Stock-Based
         Compensation,"  and  exercised  the  election  to continue to apply the
         provisions of APB No. 25,  "Accounting  for Stock Issued to Employees,"
         to its stock option plans.  Accordingly,  compensation expense has only
         been  recognized  in  the  Consolidated  Statements  of  Operations  in
         connection  with the shares  related to options  granted at 90% of fair
         market value on the respective dates of grant. Compensation expense was
         $134;  $161;  and $161 in  1999,  1998,  and  1997,  respectively.  Had
         compensation  expense of the Company's  stock-based  compensation plans
         been determined using the fair value based method described in SFAS 123
         in 1999, 1998 and 1997, the Company's pro forma net income and earnings
         per share would have been:




                                      F-15
<PAGE>


<TABLE>


                                                                                           Year Ended May 31,
                                                                         -------------- --- --------------- --- ---------------
                                                                             1999               1998                1997
                                                                         --------------     ---------------     ---------------
                      Net Income:
<S>                                                                   <C>                <C>                 <C>
                           As reported                                $        13,452    $         18,090    $             308
                           Pro forma                                  $        12,231    $         17,180    $            (192)
                                                                         --------------     ---------------     ---------------

                      Earnings per share:
                         Basic-
                           As reported                                $           .37    $            .51    $             .01
                           Pro forma                                  $           .34    $            .48    $            (.01)
                                                                         --------------     ---------------     ---------------

                         Diluted-
                           As reported                                $           .37    $            .50    $             .01
                           Pro forma                                  $           .34   $             .48    $            (.01)
                                                                         --------------     ---------------     ---------------
</TABLE>

         The fair value of each option grant is  estimated  based on the date of
         grant using the Black-Scholes  option-pricing  model with the following
         weighted-average assumptions:
<TABLE>

                                                                                        Year Ended May 31,
                                                                       ------------------------------------------------------
                                                                            1999                1998               1997
                                                                        --------------      --------------     --------------
<S>                                                                           <C>                 <C>                 <C>
                      Expected volatility                                     40.00%              40.00%              40.00%
                      Risk-free interest rates for terms of:
                         2 years                                               5.64%               5.71%               6.45%
                         3 years                                               5.72%               5.81%               6.60%
                         4 years                                               5.79%               5.86%               6.66%
                      Dividend yield                                                0                   0                   0
                      Expected option life in years                                 4                   4                   4
</TABLE>

         Stock option activity was as follows:
<TABLE>

                                                                                           Year  Ended May 31,
                                                                           ------------- --- -------------- ---- --------------
                                                                              1999               1998                1997
                                                                           -------------     --------------      --------------

<S>                                                                          <C>                <C>                  <C>
                    Outstanding, beginning of period                         1,960,000           1,509,000            2,135,000

                    Granted                                                    496,000             660,000             300,000
                    Canceled                                                   (31,000)           (158,000)           (761,000)
                    Exercised                                                  (16,000)            (51,000)           (165,000)

                                                                           -------------     --------------      --------------
                    Outstanding, end of period                               2,409,000           1,960,000           1,509,000
                                                                           =============     ==============      ==============

                    Options exercisable                                      1,447,000           1,115,000           1,137,000
                                                                           =============     ==============      ==============

                    Restricted stock activity
                    Outstanding, beginning of period                           539,000             372,000             320,000

                    Granted                                                    263,000             187,000              69,000
                    Canceled                                                   (34,000)            (20,000)            (17,000)
                                                                           -------------     --------------      --------------
                    Outstanding, end of period                                 768,000             539,000             372,000
                                                                           =============     ==============      ==============

                    Restricted stock exercisable                                222,000            184,000              67,000
                                                                           =============     ==============      ==============

                    Weighted Average Exercise Price:
                         Outstanding, beginning of period             $           12.04   $          13.25    $          16.96
                         Granted                                                   9.62              10.39                8.86
                         Canceled                                                 12.65              14.74               21.68
                         Exercised                                                 7.80               7.90               14.21
                         Outstanding, end of period                               11.47              12.04               13.25

                    Weighted average fair value of options granted    $            3.31  $            3.60  $             3.17
                                                                           =============     ==============      ==============
</TABLE>

                                      F-16
<PAGE>

         The relevant information regarding stock options outstanding at May 31,
         1999:
<TABLE>

                                                   Options Outstanding                           Options Exercisable
        ------------------------- ------------------------------------------------------- ----------------------------------
                                       Number          Weighted            Weighted          Number       Weighted Average
                Range of            Outstanding         Average            Average      Exercisable May    Exercise Price
             Exercise Price         May 31, 1999       Remaining        Exercise Price      31, 1999
                                                      Contractual
                                                         Life
        ------------------------- ----------------- ----------------    --------------- ----------------- ------------------

<S>       <C>             <C>              <C>           <C>          <C>                        <C>            <C>
          $     6.0625 to 8.1250           444,536       5.71 years   $         7.8034           360,121        $    7.7477
                8.5000 to 8.9041            21,650       6.16 years             8.7028             8,783             8.8614
                9.3125 to 9.3125           455,000       9.16 years             9.3125            30,000             9.3125
               9.7500 to 10.0620            18,082       5.51 years             9.9792             9,082             9.9315
              10.1250 to 10.1250           526,999       8.15 years            10.1250           198,930            10.1250
              10.1875 to 11.8750            99,330       7.68 years            11.1428            42,853            11.2478
              12.0375 to 12.0375           420,000       4.59 years            12.0375           420,000            12.0375
              12.3750 to 15.0000           263,260       5.49 years            14.5940           219,603            14.7869
              15.0685 to 23.4375            51,703       5.56 years            21.7276            49,403            21.6480
              28.6250 to 28.6250           108,333       5.75 years            28.6250           108,333            28.6250
                                     --------------                                        --------------

          $    6.0625 to 28.6250         2,408,893       6.76 years   $        11.4741         1,447,108         $   12.5818
             ====================    ==============    =============     ==============    ==============    ===============
</TABLE>

         The number of shares  available for issuance  under the 1992 Plan as of
         May 31, 1999 was 1,757,947 shares.

         On April 25,  1997,  the Company  conducted a  discretionary  repricing
         exchange  program for all options  issued under the 1992 Omnibus Equity
         Incentive  Plan,  other than those issued to certain  senior  officers.
         Under the terms of the program,  option holders could elect to exchange
         outstanding  options  for half of that  number of  options at an option
         price equal to fair market value on April 25,  1997.  Fair market value
         as of that date was  $8.125 per  share.  A total of 482,000  previously
         issued  options  were  exchanged  for  241,000  new  options  issued in
         connection with the program.

         The Company initiated a three-year  employee  retention program whereby
         selected managers and administrative  personnel were awarded a total of
         33,192 shares effective September 1, 1996, 27,036 shares effective July
         31, 1997, and 24,226 shares  effective July 31, 1998, at no cost to the
         employee.

         Effective July 1, 1996, the Company  adopted an Employee Stock Purchase
         Plan (ESPP).  A maximum of 200,000  shares of common stock is available
         for issuance pursuant to the ESPP. To be eligible to participate in the
         Plan an employee must have  completed one year of service and have been
         scheduled  to work more than  twenty  hours  per week.  Certain  highly
         compensated  employees  may  be  excluded  from  participation  at  the
         discretion of the Compensation Committee of the Board of Directors.

         The ESPP purchases  stock based on the lower of 100% of market value on
         the  business day  preceding  the first day of the quarter in which the
         stock is purchased or 90% of the average  closing price on the pre-set,
         quarterly purchase date.  Approximately 8.7% of eligible employees have
         participated  in the Plan in the past year.  During  1999,  the Company
         sold shares at a weighted average issue price of $8.4306.

         Under SFAS 123,  compensation  expense is recognized for the fair value
         of the employees'  purchase rights if the discount from market price is
         greater   than  5%.  This  was   estimated   using  the   Black-Scholes
         option-pricing model with the following  assumptions for 1999: expected
         volatility -- 40%;  weighted average  risk-free  interest rate - 4.67%;
         dividend  yield -- zero;  and purchase  term -- 3 months.  The weighted


                                      F-17
<PAGE>

         average fair value of those  purchase  rights  granted in 1999 was $62.
         This  compensation  cost has been included in calculating the pro forma
         net income and earnings per share.

         On  September  16,  1998,  the  Company  announced  that  its  Board of
         Directors  authorized  the  purchase  of up to $5,000 of the  Company's
         common  stock.  As of May 31,  1999,  the  Company  has made  purchases
         totaling $174, at an average price of $6.45 per share.

         NOTE 11.     RETIREMENT PLAN

         The Company has a 401(k)  retirement  plan covering  substantially  all
         U.S. employees.  The Company has recorded matching contributions in the
         amount of $577; $689; and $594 in 1999, 1998, and 1997, respectively.


         NOTE 12.     QUARTERLY FINANCIAL DATA (Unaudited)

         The following  table sets forth selected  quarterly  financial data for
         the years ended May 31, 1999 and 1998:
<TABLE>

                                                                                Three Months Ended
                                                   -----------------------------------------------------------------------------
                                                       August 31,          November 30,        February 28,         May 31,
                                                          1998                 1998                1999              1999 *
                                                      --------------     -----------------   --------------    ---------------


<S>                                                <C>                <C>                   <C>               <C>
       Revenue                                     $        342,329   $           381,946   $        317,553  $         345,899
       Net revenue                                          145,146               153,716            134,914            144,201
       Income (loss) from operations                          9,831                15,003             (2,993)             3,210
       Net income (loss)                                      6,676                 8,552             (2,958)             1,182
       Net income (loss)  per share - Basic                     .19                   .24               (.08)               .03
       Net income (loss)  per share - Diluted                   .19                   .24               (.08)               .03

                                                                                Three Months Ended
                                                   -----------------------------------------------------------------------------
                                                       August 31,          November 30,        February 28,          May 31,
                                                          1997                 1997                1998               1998
                                                      --------------     -----------------     --------------     --------------

       Revenue                                     $        326,699   $           343,611   $        307,210   $        322,563
       Net Revenue                                          139,239               145,164            132,282            141,580
       Income from operations                                 6,723                10,546              1,672              6,872
       Net income (loss)                                      3,806                 6,885              2,636              4,763
       Net income (loss) per share - Basic                      .11                   .19                .07                .13
       Net income (loss) per share - Diluted                    .11                   .19                .07                .13


</TABLE>



         * As a result of the Company's improved collection performance over the
         past two years an adjustment  was made in the fourth quarter of 1999 to
         reduce bad debt reserves by $2.5 million which  resulted in an increase
         in earnings of
            $0.05 per share.



                                      F-18
<PAGE>








                          INDEPENDENT AUDITORS' REPORT

         Board of Directors and Stockholders
         Fritz Companies, Inc.:


              We have audited the  accompanying  consolidated  balance sheets of
         Fritz Companies, Inc. and subsidiaries as of May 31, 1999 and 1998, and
         the related consolidated statements of operations, stockholders' equity
         and  comprehensive  income  and cash flows for each of the years in the
         three-year  period ended May 31, 1999. In connection with our audits of
         the  consolidated  financial  statements,  we also  audited the related
         consolidated financial statement schedule as of and for the years ended
         May 31, 1999, 1998 and 1997. These  consolidated  financial  statements
         and  financial   statement  schedule  are  the  responsibility  of  the
         Company's  management.  Our  responsibility is to express an opinion on
         these  consolidated   financial   statements  and  financial  statement
         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, such consolidated financial statements referred to
         above present fairly, in all material respects,  the financial position
         of Fritz Companies,  Inc. and subsidiaries as of May 31, 1999 and 1998,
         and the  results of their  operations  and their cash flows for each of
         the years in the  three-year  period ended May 31, 1999,  in conformity
         with generally accepted accounting principles. Also in our opinion, the
         related financial  statement  schedule,  when considered in relation to
         the basic consolidated  financial statements taken as a whole, presents
         fairly, in all material respects, the information set forth therein.




                                                                    KPMG LLP

         San Francisco, California
         June 28, 1999



                                      F-19
<PAGE>




                 Schedule II - Valuation and Qualifying Accounts
                 For the Years Ended May 31, 1999, 1998 and 1997
                                 (In thousands)



<TABLE>

                                                                                                     Net
                                                             Balance                             Write-Offs
                                                            Beginning          Charges            Charged           Balance At
                                                            Of Period         To Income          to Reserves      End of Period
                                                                                                  and Other
                                                          --------------     --------------     ---------------    ---------------


       For the Year Ended May 31, 1999

<S>                                                              <C>                <C>     <C>                <C>
       Allowance for doubtful accounts                           23,232             4,005   $         (6,771)  $          20,466

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


       For the Year Ended May 31, 1998
       Allowance for doubtful accounts                           22,292             8,740   $         (7,800)  $          23,232
                                                          ==============    ==============     ===============    ===============


       For the Year Ended May 31, 1997
       Allowance for doubtful accounts                            6,401            23,786   $         (7,895)  $          22,292
                                                          ==============    ==============     ===============    ===============

</TABLE>





                                      F-20
<PAGE>




































                                  EXHIBIT INDEX

         EXHIBIT                                                          PAGE
         2.1      Agreement and Plan of Reorganization entered by and
                  among the Registrant, Fritz Air
                  Freight and Intertrans Corporation and Amendment No. 1
                  thereto dated as of April 12, 1995.  (Incorporated  by
                  reference  to Exhibit  2.1 to Form 8-K dated  February
                  14,  1995 filed on or about  February  21, 1995 and to
                  Appendix  A to the  Joint  Proxy  Statement/Prospectus
                  filed on or about April 13, 1995, respectively.).
         3.1      Registrant's Restated Certificate of Incorporation.
                  (Incorporated by reference to Exhibit 3.1 to
                  Registration Statement No 33-50808, filed on August
                  17, 1992.)
         3.2      Registrant's Restated Bylaws.                            F-23
         4.1      Specimen certificate of Registrant's Common Stock. (
                  Incorporated by reference to Exhibit 4.1 to
                  Registration Statement No. 33-50808, filed on August
                  17, 1992.)
         10.1     Fritz Companies, Inc. Salary Investment and Retiremen
                  Plan, and amendments thereto. (Incorporated by
                  reference to Exhibit 10.8 to Registration Statement No.
                  33-50808, filed on August 17, 1992.)*
         10.2     1992 Omnibus Equity Incentive Plan, as amended.
                  (Incorporated by reference to Exhibit 10.9 to
                  Registration Statement No. 33-50808, filed on August
                  17, 1992.)*
         10.3     Nonemployee Director Restricted Stock Plan.
                  (Incorporated by reference to Exhibit A to the
                  definitive proxy materials of Registrant, filed on or
                  about April 10, 1993.)*
         10.4     Employment Agreement between Registrant and Dennis
                  Pelino dated June 1, 1995. (Incorporated by reference
                  to Exhibit 10.21 to Form 10-Q for the quarter ended
                  August 31, 1995.)
         10.5     Purchase  Agreement  between  Registrant  and  Gestion
                  J.L.G., Inc. dated as of April 29, 1994. (Incorporated
                  by  reference  to Exhibit 1.2 to Form 8-K dated May 2,
                  1994 filed on or about May 16, 1994.)
         10.6     Addendum to the purchase agreements between the
                  Registrant and Gestion J.L.G., Inc. dated as of April
                  26, 1994. (Incorporated by reference to Exhibit 10.23
                  to Form 10-Q for the quarter ended September 30, 1994.)
         10.7     Note Purchase Agreement between the Registrant and
                  various other parties dated April 15, 1996 for
                  $75,000,000 of 6.43% notes due April 15, 2003.
                  (Incorporated by reference to Exhibit 10.24 to Form
                  10-K for the year ended May 31, 1996.)
         10.8     Fritz Companies, Inc. Employee Stock Purchase Plan.
                  (Incorporated by reference to Exhibit 10.26 to the
                  Registration Statement on Form S-8 No. 33-07639 filed
                  on July 3, 1996.)
         10.9     Employment  and   Performance   Based  Retention  Plan
                  between the  Registrant  and Dennis L. Pelino dated as
                  of October 31,  1996.  (Incorporated  by  reference to
                  Exhibit  10.28  to Form  10-Q  for the  quarter  ended
                  November 30, 1996.)**
         10.10    Term  Loan  Facility  agreement  dated  June 18,  1997
                  between  Standard  Chartered  Bank and the  Registrant
                  totaling  $13.9  million   (denominated  in  Singapore
                  dollars),   maturity   is  five  years  from  date  of
                  agreement,  payments are scheduled quarterly beginning
                  thirty-nine  months  from the  date of the  agreement,
                  interest rate  equivalent  to the Singapore  Interbank
                  Offer  Rate   (SIBOR)  plus  50  to  70  basis  points
                  depending   on   the   amount    borrowed,    and   is
                  collateralized   by  certain  property  owned  by  the
                  Company.
         10.11    Syndicated multi-currency credit facility agreement
                  dated March 27, 1998  for $100 million maturing on
                  March 27, 2001
         10.12    Extension of syndicated multi-currency credit facility
                  agreement dated March 27,1998 for $100 million
                  changing the maturing date to March 27, 2002, Dated
                  March 30, 1999                                           F-34



                                      F-21
<PAGE>




         EXHIBIT                                                           PAGE
       10.13    First Amendment Agreement dated March 1, 1998 to the
                Note Purchase Agreement dated April 15, 1996 for $75
                million of 6.43% senior notes due April 15, 2003
       10.14    U.S. Customs Brokerage service agreement between the
                Registrant and Federal Express Corporation dated
                August 25, 1998                                            F-41
       10.15    Employment and Non-Compete Agreement between
                Registrant and Brad Lee Skinner dated December 1,
                1998. *                                                    F-85
       10.16    Employment Offer Letter from the Registrant to Raymond
                L. Smith dated December 7, 1998. *                         F-90
       10.17    Guarantee Agreement between the Registrant and Joseph
                L. Carnes dated December 16, 1998.                         F-96
       10.18    Employment and Non-Compete Agreement between
                Registrant and Jan H. Raymond dated January 1, 1999. *     F-98
       10.19    Employment and Non-Compete Agreement between
                Registrant and Ronald F. Dutt dated April 30, 1999. *      F-104
       10.20    Amendment # 3 to Registrants Salary Investment and
                Retirement Plan dated May 12, 1998                         F-109
       21.1     Subsidiaries of the Registrant                             F-119
       23.1     Consent of KPMG LLP on Form S-8 Registration Statement
                No. 33-57238, 33-78472, 33-93070, 333-15921 and
                333-07639, and on Form S-4 Registration Statement No.
                33-70674                                                   F-124
       27       Financial Data Schedule                                    F-125



         *  Indicates, as required by Item 14(a)(3),  a management  contract of
            compensatory plan required to be filed as an exhibit to this Form
            10-K.

         ** Confidential Treatment has been requested for portions of this
            Exhibit.






                                      F-22
<PAGE>