<PAGE>
AMERICAN SOFTWARE, INC.
401(K) PROFIT SHARING PLAN
Financial Statements and Supplemental Schedule
December 31, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
AMERICAN SOFTWARE, INC.
401(K) PROFIT SHARING PLAN
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits as of December 31,
1999 and 1998 2
Statements of Changes in Net Assets Available for Plan Benefits -
Years ended December 31, 1999 and 1998 3
Notes to Financial Statements 4
Schedule of Assets Held for Investment Purposes as
of December 31, 1999 8
</TABLE>
<PAGE>
Independent Auditors' Report
The Plan Administrator and Trustee
American Software, Inc.
401(k) Profit Sharing Plan:
We have audited the accompanying statements of net assets available for plan
benefits of American Software, Inc. 401(k) Profit Sharing Plan (the "Plan") as
of December 31, 1999 and 1998, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1999 and 1998, and the changes in net assets available for plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes as of December 31, 1999 is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Atlanta, Georgia
June 20, 2000
<PAGE>
AMERICAN SOFTWARE, INC.
401(K) PROFIT SHARING PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Assets:
Investments:
American Software, Inc. common stock $ 348,250 72,409
Mutual funds (note 3) 41,340,266 32,006,157
Loans to participants 374,194 377,827
----------- ----------
Total investments 42,062,710 32,456,393
Employer contributions receivable 92,176 --
Employee contributions receivable 163,696 142,664
----------- ----------
Total assets 42,318,582 32,599,057
Liabilities - refundable excess contributions payable (57,198) (100,089)
----------- ----------
Net assets available for plan benefits $42,261,384 32,498,968
=========== ==========
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SOFTWARE, INC.
401(K) PROFIT SHARING PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1999 and 1998
<S> <C> <C>
1999 1998
----------- ---------
Additions to net assets attributed to:
Employer contributions $ 434,967 --
Employee contributions 2,961,214 2,601,690
Employee rollover contributions 483,906 285,706
Interest and dividends 2,345,809 1,590,661
Interest on loans to participants 30,490 23,336
Net appreciation in fair value of investments (note 6) 6,808,938 4,428,516
----------- ----------
Total additions 13,065,324 8,929,909
----------- ----------
Deductions from net assets attributed to:
Benefits paid to participants 3,297,222 1,504,717
Administrative expenses 5,686 2,910
----------- ----------
Total deductions 3,302,908 1,507,627
----------- ----------
Net change 9,762,416 7,422,282
Net assets available for plan benefits at beginning of year 32,498,968 25,076,686
----------- ----------
Net assets available for plan benefits at end of year $42,261,384 32,498,968
=========== ==========
See accompanying notes to financial statements.
</TABLE>
3
<PAGE>
(1) The Plan
The following description of the American Software, Inc. 401(k) Profit
Sharing Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement, as restated and amended, for a more
complete description of the Plan's provisions. The Company intends to
continue the Plan but reserves the right to amend, modify, or restate the
Plan from time to time and to suspend, terminate, or discontinue
contributions under the Plan. If the Plan is terminated, benefits will be
distributed in accordance with provisions of the Plan.
(a) General
The Plan is a defined contribution plan covering all full-time
employees of American Software, Inc. and its subsidiaries (the
"Company"). In December 1997, the Plan was amended by changing the
service requirement from one year of service to no service
requirement. It is subject to certain provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). The purpose of the
Plan is to provide eligible employees of the Company a qualified
retirement plan which meets the requirements of Section 401(k) of the
Internal Revenue Code with respect to which contributions will be
excluded from the employee's income.
(b) Contributions
Participants may elect to contribute 1% to 15% of their annual
compensation to the Plan (subject to the limitations of Section 401(k)
of the Internal Revenue Code). The Company's profit sharing
contribution to the Plan is determined at the discretion of the Board
of Directors. Effective January 1, 1999, the Plan was amended whereby
the Company makes matching contributions equal to 25% of the first 6%
of eligible compensation contributed by the participant. In no event
shall the annual contributions (i.e., participant and Company
contributions) made with respect to a participant under all defined
contribution plans maintained by the Company, together with
forfeitures allocated to that participant, exceed the lesser of
$30,000 or 25% of the participant's annual compensation. Participant
contributions may be invested in one or more of the investment options
available under the Plan.
(c) Participant Rollovers
Employees are allowed, under the provisions of the Plan, to transfer
to the Plan account balances from other eligible retirement plans with
the consent of the plan administrator and provided that the transfer
will not jeopardize the tax-exempt status of the Plan.
(d) Participant Accounts
Each participant's account is credited with the participant's
contribution, if any, and an allocation of (a) the Company's
contribution, if any, and (b) Plan earnings (loss). Allocations are
based on participant earnings or account balances, as defined.
Forfeitures of terminated participants' nonvested accounts are
retained in the Plan and used to reduce future Company contributions.
4
<PAGE>
(e) Vesting
Participants are immediately vested in their voluntary contributions
plus actual earnings thereon. Vesting in the remainder of their
accounts is based on years of continuous service. For employer
matching contributions, participants vest 25% per year after years
one, two, and three, and are 100% vested after four years of credited
service. For employer profit sharing contributions, participants vest
20% per year after years two, three, four, and five and are 100%
vested after six years of credited service.
Although it has not expressed any intent to do so, the Company has the
right to terminate the Plan at any time, subject to the provisions of
ERISA. In the event of Plan termination, participants become 100%
vested in their accounts.
(f) Payment of Benefits
Upon termination of service, retirement, or reaching age 59-1/2, a
participant may elect to receive either a lump-sum amount equal to the
value of his or her account or a series of approximately equal
installments for a specified period of time not exceeding the
participant's life expectancy if the account exceeds $5,000. The Plan
also provides for death benefits to the participant's beneficiary
equal to the amount in the participant's account and disability
benefits to the participant equal to the amount in the participant's
account if the participant becomes totally and permanently disabled.
In addition, the Plan provides for hardship withdrawals as defined in
the Plan.
(g) Participant Loans
The Plan provides for loans against a participant's account from
$1,000 to $50,000 but limited to 50% of the participant's account
balance. Participants can apply for one loan per year and are limited
to one loan outstanding. Loans bear interest at a rate determined by
the Plan. Loans are repayable over a five-year period unless for the
purchase of a principal residence which is repayable over a 10-year
period. Loans are repayable upon death, disability, or termination of
employment.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
The accounts are maintained, and the accompanying financial statements
are presented, on the accrual basis of accounting.
(b) Investment Valuation and Income Recognition
Investments in American Software, Inc. common stock and mutual funds
are carried at fair value as determined by the Trustee of the Plan
based primarily on the latest nationally quoted market prices. Loans to
participants are interest-bearing and stated at cost, which based on
discounted cash flows, approximates fair value. Purchases and sales of
securities are recorded on a trade-date basis. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-
dividend date.
5
<PAGE>
(c) Payment of Benefits
Benefits are recorded when paid.
(d) Use of Estimates
Management of the Plan has made a number of estimates and assumptions
relating to the reporting of assets, liabilities and changes therein,
and the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates
and assumptions.
(3) Investments
In September 1999, the American Institute of Certified Public Accountants
issued Statement of Position 99-3, Accounting for and Reporting of Certain
Defined Contribution Plan Investments and Other Disclosure Matters ("SOP
99-3"). SOP 99-3 simplifies the disclosure for certain investments and is
effective for plan years ending after December 15, 1999. The Plan adopted
SOP 99-3 during the Plan year ending December 31, 1999. Accordingly,
information previously required to be disclosed about participant-directed
fund investment programs is not presented in the Plan's 1999 financial
statements. The Plan's 1998 financial statements have been reclassified to
conform with the current year's presentation.
The fair values of investments that represent 5% or more of the Plan's net
assets are as follows:
<TABLE>
<CAPTION>
December 31, 1999:
Mutual Funds:
<S> <C>
Fidelity Retirement Government Money Market $ 3,653,561
Fidelity Blue Chip Growth 10,701,095
Fidelity Magellan 6,875,430
Fidelity Fund 5,690,244
Fidelity Capital Appreciation 2,674,714
Fidelity OTC Portfolio 5,187,869
Other 6,557,353
-----------
$41,340,266
===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998:
Mutual Funds:
<S> <C>
Fidelity Retirement Government Money Market $ 3,503,890
Fidelity Blue Chip Growth 9,105,322
Fidelity Magellan 5,305,083
Fidelity Fund 4,944,480
Fidelity Capital Appreciation 1,829,173
Fidelity OTC Portfolio 2,757,332
Fidelity Intermediate Bond 1,625,947
Other 2,934,930
-----------
$32,006,157
===========
</TABLE>
6
<PAGE>
(4) Income Tax Status
The Plan has obtained a determination letter from the Internal Revenue
Service stating that the Plan qualifies under the appropriate section of
the Internal Revenue Code ("IRC") and, therefore, is not subject to tax
under present income tax law. Once qualified, the Plan sponsor is required
to operate in conformity with the IRC to maintain its qualification. The
Plan sponsor believes that the Plan continues to qualify and to operate as
designed.
(5) Administrative Expenses
Substantially all legal, accounting, and administrative fees related to the
Plan are paid by the Company. Administrative expenses paid by the Plan
represent fees paid to the trustee for trust services.
(6) Net Appreciation in Fair Value of Investments
Investments held by the Plan had net appreciation (depreciation) in fair
value during the years ended December 31, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
American Software, Inc. common stock $ 276,176 (242,567)
Mutual funds 6,532,762 4,671,083
---------- ---------
$6,808,938 4,428,516
========== =========
</TABLE>
The change in fair value of American Software, Inc. common stock is
primarily attributable to net appreciation (depreciation).
7
<PAGE>
<TABLE>
<CAPTION>
AMERICAN SOFTWARE, INC.
401(K) PROFIT SHARING PLAN
Schedule of Assets Held for Investment Purposes
December 31, 1999
Description of Current
Identity of issue investment value
----------------------------------- -------------------- -----------
<S> <C> <C>
Common stock:
*American Software, Inc. 33,976 shares $ 348,250
-----------
Mutual funds:
*Fidelity Fund 133,542.446 units 5,690,244
*Fidelity Magellan 50,321.529 units 6,875,430
*Fidelity Intermediate Bond 113,466.284 units 1,107,431
*Fidelity OTC Portfolio 76,325.870 units 5,187,869
*Fidelity Overseas 23,627.673 units 1,134,365
*Fidelity Capital Appreciation 89,545.162 units 2,674,714
*Fidelity Blue Chip Growth 178,025.205 units 10,701,095
*Fidelity Asset Manager Portfolio 68,697.803 units 1,262,666
*Fidelity International Bond 28,725.142 units 249,047
*Fidelity Retirement Government
Money Market 3,653,561.050 units 3,653,561
*Fidelity Real Estate Investment
Trust 3,711.763 units 54,563
*Fidelity Contrafund 7,950.773 units 477,205
*Fidelity Small Capital Stock 13,913.292 units 223,865
*Fidelity Europe Capital
Appreciation 6,048.857 units 129,808
*Fidelity Latin American 733.826 units 11,675
*Fidelity Southeast Asia 30,963.889 units 508,737
*Fidelity Balanced 8,619.503 units 132,396
Morgan Stanley Emerging
Market Portfolio 3,310.205 units 63,655
*Fidelity Japan 35,287.815 units 962,652
Invesco High Yield 37,214.315 units 239,288
-----------
Total mutual funds 41,340,266
-----------
Loans to participants:
American Software Loan Fund Loans with terms of 5-10
years with interest rates
ranging from 9.75% to 10.00% 374,194
-----------
Total investments $42,062,710
===========
</TABLE>
*Party-in-interest to the Plan.
See accompanying independent auditors' report.
8
