GREAT PLAINS SOFTWARE INC, S-3, 1999-01-05

GREAT PLAINS SOFTWARE INC
S-3, 1999-01-05
PREPACKAGED SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 5, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
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GREAT PLAINS SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
MINNESOTA 45-0374871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>

1701 S.W. 38TH STREET
FARGO, NORTH DAKOTA 58103
(701) 281-0550

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

DOUGLAS J. BURGUM
GREAT PLAINS SOFTWARE, INC.
1701 S.W. 38TH STREET
FARGO, NORTH DAKOTA 58103
(701) 281-0550

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------

COPIES TO:

<TABLE>
<S> <C> <C>
JAY L. SWANSON DOUGLAS R. HERMAN MARK G. BORDEN
TIMOTHY S. HEARN Great Plains Software, Inc. JEFFREY A. STEIN
Dorsey & Whitney LLP 1701 S.W. 38th Street Hale and Dorr LLP
Pillsbury Center South Fargo, North Dakota 58103 60 State Street
220 South Sixth Street (701) 281-0550 Boston, Massachusetts 02109
Minneapolis, Minnesota 55402-1498 (617) 526-6000
(612) 340-2600
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE PROPOSED AMOUNT TO OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED BE REGISTERED SHARE (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value................ 2,300,000 shares $47.75 $109,825,000 $30,532
</TABLE>

(1) Calculated in accordance with Rule 457(c) based on the average of the high
and low sale prices of the Common Stock as reported on the Nasdaq National
Market on December 31, 1998.
----------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 5, 1999.
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
2,000,000 Shares

[LOGO]

Common Stock

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

Great Plains Software, Inc. is offering 1,035,000 of the shares to be sold
in the offering. Certain shareholders of Great Plains are offering 965,000 of
the shares to be sold in the offering. Great Plains will not receive any of the
proceeds from the shares sold by the shareholders. Great Plains' Common Stock is
traded on the Nasdaq National Market under the symbol "GPSI". On January 4,
1999, the last reported sale price for the Common Stock on the Nasdaq National
Market was $47.875 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF THE COMMON STOCK.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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

<TABLE>
<CAPTION>
Per Share Total
--------------- ---------------
<S> <C> <C>
Initial public offering price........................ $ $
Underwriting discount................................ $ $
Proceeds, before expenses, to Great Plains........... $ $
Proceeds, before expenses, to selling shareholders... $ $
</TABLE>

The underwriters may, under certain circumstances, purchase up to an
additional 300,000 shares from Great Plains at the public offering price less
the underwriting discount.

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

The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on , 1999.

GOLDMAN, SACHS & CO.

MERRILL LYNCH & CO.

HAMBRECHT & QUIST, LLC

PIPER JAFFRAY INC.

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Prospectus dated , 1999.
<PAGE>
FOR SOME, WHERE LAND MEETS SKY IS THE END. FOR US, IT'S THE BEGINNING.

[Photo of a road extending to the horizon surrounded by fields of grain at
sunset]

At Great Plains, we took our name from the land and our philosophy from the
view. Because there, on the horizon, we see opportunity.

That spirit of progress and possibility is part of our world. And how we work
with growing companies worldwide. Our solutions include financial, distribution,
manufacturing, human resources, payroll, service management and electronic
business applications.

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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at HTTP://WWW.SEC.GOV.

The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
update and supercede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our offering is
completed.

a. Annual Report on Form 10-K for the year ended May 31, 1998, filed August
31, 1998, including certain information in Great Plains' Definitive Proxy
Statement in connection with Great Plains' 1998 Annual Meeting of
Shareholders;

b. Quarterly Reports on Form 10-Q for the quarters ended August 31, 1998
and November 30, 1998, filed October 15, 1998 and January 5, 1999,
respectively;

c. Current Report on Form 8-K/A filed July 2, 1998; and

d. The description of Great Plains' Common Stock contained in our
registration statement on Form 8-A filed June 13, 1997, including any
amendments or reports filed for the purpose of updating such description.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and telephone number:

Great Plains Software, Inc.
1701 S.W. 38th Street
Fargo, North Dakota 58103
(701) 281-0550

You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of this prospectus.

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

Great Plains Software-Registered Trademark-, Dynamics C/S+-Registered
Trademark-, Great Plains Dynamics-Registered Trademark- and Dexterity-Registered
Trademark- are registered trademarks of Great Plains in the United States and
other countries. Great Plains Accounting, the Company's sun/wheat logo,
DynamicTools, Dynamics Continuum, Stampede, the trademarks for the Company's
Internet applications and various other word and logo marks are trademarks of
the Company and are the subject of pending trademark and service mark
applications in the United States and other countries. This prospectus also
includes names, trademarks, service marks and registered trademarks and service
marks of other companies.

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<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THOSE
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT GREAT PLAINS AND OUR
INDUSTRY. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISK AND UNCERTAINTIES. GREAT
PLAINS' ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, AS MORE FULLY
DESCRIBED IN THE "RISK FACTORS" SECTION AND ELSEWHERE IN THIS PROSPECTUS. GREAT
PLAINS UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING
STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER
EVENTS OCCUR IN THE FUTURE.

GREAT PLAINS SOFTWARE, INC.

Great Plains is a leading provider of business management software solutions
to Midmarket businesses (i.e., businesses with $1 million to $250 million in
revenues and 10 to 2,500 employees). Our award-winning products and services
automate essential business processes and enhance the strategic value of
business information. Our solutions are sold and implemented by a network of
independent organizations throughout the world -- our "Partners."

Over 17,000 customers worldwide use our Dynamics C/S+ and Dynamics
solutions. Dynamics C/S+ is designed for larger businesses in the Midmarket.
Dynamics is designed for smaller businesses in the Midmarket. These products
manage information flows involving the following business processes:

- Financial

- Enterprise Reporting

- Distribution

- Payroll

- Human Resources

- Manufacturing

- Service Management

- Electronic Commerce

Dynamics C/S+ and Dynamics, based on our Dynamics platform, are cost
effective, scalable, and easy to implement and use. Our platform's innovative
design and architecture allow customers to solve business problems through:

- Rapid system customization

- Extensive end-user personalization

- Seamless integration to existing systems

- Strategic use of industry-standard technologies

- Real-time electronic commerce

Our distribution network of independent Partners consists of value added
resellers (VARs), systems integrators, independent software vendors (ISVs),
national, regional and local accounting firms, and specialized software
consultants. Through our Partner network, we provide customers with trained
solution professionals who are available locally to implement and customize our
solutions as well as provide ongoing service.
In addition to product excellence and channel expertise, we believe
high-quality service and support are essential elements of any complete business
management solution. We strive to deliver

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timely, reliable and innovative service to our customers and Partners. Our
culture attracts outstanding team members and allows us to continually deliver
on our mission statement:

"TO IMPROVE THE LIVES AND BUSINESS SUCCESS OF PARTNERS AND CUSTOMERS"

Great Plains currently employs 877 team members at 10 locations worldwide.
We have received numerous awards and recognition for organizational excellence,
financial performance, management practices, products and customer service.
Since our first release of Dynamics in 1993 and Dynamics C/S+ in 1994, our
products have received more than 15 awards worldwide for their features and
functionality. Recent awards and recognition received by our company and
products include:

- Fortune Magazine "100 Best Companies to Work For in America" (1997 and
1998)

- Association of Support Professionals and Softletter's "Best Overall
Support Site of 1998"

- Arthur Andersen Global Best Practices Awards for "Exceeding Customer
Expectations" (1998)

- Arthur Andersen Global Best Practices Awards for "Motivating and Retaining
Employees" (1998)

- Forbes Magazine "200 Best Small Companies in America" (1998)

- Business Week Magazine "Hot 100 Small Companies" (1998)

- Visual Basic Programmers Journal "Readers Choice Award" (1997)

- Microsoft BackOffice Challenge "Best Functionality" (1997)

Great Plains was founded in 1981 and was incorporated as a Minnesota
corporation in 1983. Our offices are located at 1701 S.W. 38th Street, Fargo,
North Dakota 58103. Our telephone number is (701) 281-0550.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by Great Plains............... 1,035,000 shares

Common Stock offered by the selling shareholders... 965,000 shares

Common Stock to be outstanding after the
offering......................................... 14,878,309 shares(1)

Use of proceeds.................................... For general corporate purposes,
including working capital, product
development, capital expenditures and
possible acquisitions. See "Use of
Proceeds."

Nasdaq National Market symbol...................... "GPSI"
</TABLE>

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(1) This information is based on the number of shares of Common Stock
outstanding on December 16, 1998. It excludes (a) 1,108,531 shares of Common
Stock issuable upon exercise of stock options outstanding as of December 16,
1998, with a weighted average exercise price of $16.04 per share, of which
options to purchase 296,966 shares were then exercisable, and (b) 938,963
shares reserved for issuance under the Company's 1997 Stock Incentive Plan,
Outside Directors' Stock Option Plan and Employee Stock Purchase Plan as of
December 16, 1998. See "Capitalization."

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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------ ------------------------
1996 1997 1998 1997 1998
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total revenues..................... $ 42,271 $ 57,120 $ 85,659 $ 36,819 $ 58,936
Operating income................... 3,262 5,293 4,376 4,317 7,057
Income tax provision
(benefit)(1)..................... (4,099) 2,207 3,203 2,448 3,361
Net income(1)...................... 7,461 3,644 4,447 3,672 5,044
Basic net income per share(2)(3)... $ 0.58 $ (1.78) $ 0.33 $ 0.28 $ 0.37
Diluted net income per share(2).... $ 0.76 $ 0.36 $ 0.32 $ 0.27 $ 0.35
Shares used in computing income
per common share:
Basic(2)......................... 7,352,820 7,629,460 13,381,414 13,093,015 13,797,818
Diluted(2)....................... 9,764,924 10,003,349 14,089,092 13,820,984 14,455,749
</TABLE>

<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1998
--------------------------
ACTUAL AS ADJUSTED(4)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments.......................... $ 70,889 $ 117,572
Total assets.................................................... 111,588 158,271
Working capital................................................. 54,733 101,416
Deferred revenues............................................... 20,337 20,337
Total stockholders' equity...................................... 76,430 123,113
</TABLE>

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(1) Net income for the year ended May 31, 1996 includes an income tax benefit of
$4.1 million or $0.42 per diluted share primarily related to the reversal of
a valuation allowance. The reversal reflects the recognition of net
operating loss carryforwards and other deferred tax assets and was a result
of management's analysis of the Company's current levels of earnings and
future outlook, which increased the likelihood of the Company realizing its
deferred tax assets. For subsequent periods, the Company has provided for
income taxes utilizing federal and state statutory income tax rates. See
Note 10 of Notes to Consolidated Financial Statements.

(2) For an explanation of the determination of the number of shares used in
computing net income per share, see Note 1 of Notes to Consolidated
Financial Statements.

(3) For the fiscal years ending May 31, 1996 and 1997, basic net income per
share is lower than the diluted net income per share due to the fact that
net income available to common shareholders for the basic calculation is
reduced by the increase in carrying value of the mandatorily redeemable
preferred stock. Such increase in carrying value has a greater impact on the
basic calculation than does the inclusion of the preferred shares in the
diluted calculation. The mandatorily redeemable preferred stock was
converted into shares of Common Stock in June 1997 in connection with the
Company's initial public offering.

(4) Adjusted to reflect the sale of the 1,035,000 new shares of Common Stock
offered by the Company as part of this offering at an assumed offering price
of $47.875 per share after deducting the estimated underwriting discount and
offering expenses payable by the Company.

6
<PAGE>
RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY
OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY
RISKS FACING THE COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS WOULD LIKELY SUFFER. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON
STOCK COULD DECLINE AND YOU COULD LOSE ALL, OR PART, OF THE MONEY YOU PAID TO
BUY OUR COMMON STOCK.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS ABOUT GREAT PLAINS AND OUR INDUSTRY. THESE FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THESE EXPECTATIONS. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS FOR ANY REASON, EVEN IF NEW INFORMATION BECOMES
AVAILABLE OR OTHER FUTURE EVENTS OCCUR.

RELIANCE ON PARTNER DISTRIBUTION CHANNEL

We do not maintain a direct sales force; rather, we rely exclusively on our
Partner network to sell our solutions. We cannot assure you that our Partners
will aggressively market our products and services or will maintain their
relationship with us. Our failure to maintain these relationships and to develop
new Partner relationships in the future could have a material adverse effect on
our business.

Our ability to achieve significant future revenue growth will depend in
large part on adding new Partners, leveraging our relationships with existing
Partners and our Partners' ability to implement their growth plans. We cannot
assure you that either we or our Partners will be able to achieve these goals.
Our inability or our Partners' inability to do so could have a material adverse
effect on our business, results of operations and financial condition.

RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE

Our markets are characterized by rapidly changing technologies, evolving
industry standards, frequent new product and service introductions, and changing
customer and Partner demands. Our future success will depend on our ability to
adapt to these rapidly changing technologies, to enhance our existing solutions,
and to introduce new solutions to address our customers' and Partners' changing
demands. We may experience difficulties that could delay or prevent the
successful design, development, introduction or marketing of new solutions. In
addition, these new solutions and enhancements must meet the requirements of our
current and prospective customers and must achieve significant market
acceptance.

RELIANCE ON MICROSOFT TECHNOLOGY

Our software products are designed for Microsoft technologies, including
Windows NT and SQL Server. In addition, our products utilize other Microsoft
technologies, including Visual Basic for Applications and Site Server. Although
we believe that Microsoft technologies will continue to be widely utilized by
Midmarket businesses, we cannot assure you that Midmarket businesses will adopt
such technologies as anticipated or will not in the future migrate to other
computing platforms or technologies that we do not currently support. Moreover,
our strategy requires that our products and technologies continue to be
compatible with new developments in Microsoft's technologies.

THE NEED TO MANAGE GROWTH

Our growth has resulted in increased responsibilities placed upon our
management and has placed added pressures on our internal systems. Continued
growth will require us to implement additional systems and controls and to
expand, train and manage a larger workforce. We cannot assure you that the
systems and management skills currently in place will be adequate if we continue
to grow. In addition, from time to time we may acquire businesses, products,
services and technologies that are

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complementary to ours, or that allow us to enter into new markets. Such
acquisitions would place additional demands upon our management. See "Business
- -- Employees" and "Management -- Executive Officers and Directors."

COMPETITION

The market for business management solution software is highly competitive.
We expect this competition to intensify, particularly in the Midmarket.

In the United States, Dynamics C/S+ (our product for larger Midmarket
businesses) competes with products from Platinum Software and other companies,
and Dynamics (our product for smaller Midmarket businesses) competes with
products from Solomon Software, Sage (State of the Art), Macola and other
companies. In Canada, we face competition in the Midmarket from these companies
and from others including Computer Associates International. Outside North
America, we face a number of competitors, several of which have significant
market share in their home markets. We also face competition from providers of
industry-specific applications as well as indirect competition from in-house,
customer-developed financial management applications.

In the manufacturing market, we face a number of North American competitors,
including Symix, Fourth Shift, Platinum/Dataworks, QAD and J. D. Edwards.
Outside North America, we face these and other competitors, several of which
have extensive market share in their home markets.

In the human resources/payroll market, we face competition in North America
from Best Software, Opus Software, Ultimate Software, Spectrum Software and from
outsourced service providers such as ADP, Ceridian, PayChex and Powerpay.

In the field service and depot repair market, we face competition in North
America from Astea, Clarify and Vantive.

In addition, SAP, PeopleSoft, Baan, Oracle and J.D. Edwards, which generally
focus on companies with revenue above our target market, have announced
Midmarket strategies. Competition from these businesses will likely intensify in
the future.

Many of our competitors have greater financial, marketing and technical
resources than we do. We cannot assure you that we will continue to compete
successfully against these companies.

RELIANCE ON THIRD-PARTY SUPPLIERS

Some of our products utilize software licensed to us by independent,
third-party software developers. For example, we rely on third parties for our
primary reporting tool, for our Integration Manager, and for our Service
Management Series. Although we believe that there are alternatives for most of
these products, any significant interruption in the supply of such third-party
software could have a material adverse impact on our sales unless and until we
can replace the functionality provided by key third-party products. In addition,
we depend on these third parties to enhance their current products, to develop
new products on a timely and cost-effective basis, and to respond to emerging
industry standards and rapid technological change. We cannot assure you that we
would be able to replace the functionality provided by third-party software if
that software becomes obsolete or incompatible with future versions of our
products, or otherwise is not adequately maintained or updated. Any failure of
key third-party solutions could have a material adverse effect on our business,
results of operations and financial condition.

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS OR INVESTMENTS

We may acquire or make investments in complementary businesses, products,
services or technologies. We cannot assure you that we will be able to identify
suitable acquisitions or investment

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candidates. Even if we identify suitable candidates, we cannot assure you that
we will be able to make such acquisitions or investments on commercially
acceptable terms. If we acquire a company, we may have difficulty assimilating
its personnel and operations into our operations. In addition, its key personnel
may decide not to work for us. We may also have difficulty in assimilating
acquired businesses, products, services and technologies into our operations.
These difficulties could disrupt our ongoing business, distract our management
and workforce, increase our expenses and adversely affect our results of
operations. Furthermore, we may incur significant debt or be required to issue
equity securities to pay for future acquisitions or investments. The issuance of
equity securities could be dilutive to our shareholders.

QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATION

Our quarterly revenue and operating results have varied in the past and can
be expected to vary in the future. Most of our quarterly revenue results from
orders booked in that quarter. We establish expenditure levels based on our
expectation for future revenue. If revenue levels are below expectation,
expenses could be disproportionately high. As a result, a drop in near term
demand could significantly affect both revenue and profits in any quarter. In
the future, our operating results may fluctuate for this reason or as a result
of a number of other factors, including:

- increased expenses

- timing of product releases

- increased competition

- variations in the mix of sales

- announcements of new products by us or by our competitors

- capital spending patterns of our Partners and customers

As a result, we cannot assure you that we will be able to maintain profitability
on an annual or quarterly basis.

Our business has experienced and may continue to experience seasonality.
Specifically, we have traditionally recognized a greater percentage of our
revenue and operating income in the fourth fiscal quarter than in any of the
first three fiscal quarters and historically, to a lesser extent, reduced
license revenue in the first fiscal quarter. Although we have taken significant
steps to reduce revenue fluctuations, we expect some seasonality to continue.

We believe that period-to-period comparisons of our results of operations
are not necessarily meaningful and should not be relied upon as significant
indicators of future performance. It is possible that in some future quarters
our operating results will fall below our expectations or those of market
analysts and investors. In such event, the price of our Common Stock would
likely decrease.

DEPENDENCE ON KEY PERSONNEL

Our future success depends to a significant extent on our executive officers
and certain technical, managerial, sales, service and marketing personnel. The
loss of the services of any of these individuals or group of individuals could
have a material adverse effect on our business, results of operations and
financial condition.

Competition for qualified personnel in the software industry remains
intense. Our future success will depend in large part on our ability to attract
and retain qualified employees. We cannot assure you that we will be able to do
so.

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<PAGE>
CONTINUING DECLINE IN SALES OF DOS- AND MACINTOSH-BASED PRODUCTS

We have shifted our product focus from a DOS, Macintosh and local area
network (LAN) product, Great Plains Accounting, to our Dynamics C/S+ and
Dynamics products which are based on Windows NT and client/server technologies.
As a result of this shift and the decrease in general market demand for DOS- and
Macintosh-based solutions, our revenues from our Great Plains Accounting product
have declined and are expected to decline in the future. We cannot assure you
that the decline in revenues from sales of Great Plains Accounting will not have
a material adverse effect on the results of our operations and our financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS AND RISK OF INFRINGEMENT

We rely on a combination of trade secret, copyright and trademark laws,
nondisclosure agreements and other contractual provisions to protect our
intellectual property rights. We cannot assure you that these protections will
be adequate to prevent our competitors from copying or reverse-engineering our
products, or that our competitors will not independently develop technologies
that are substantially equivalent or superior to ours.

We have no patents. Existing copyright and trademark laws afford only
limited protection for our intellectual property rights and will not protect
such rights if competitors independently develop similar products. While we
license the Dynamics C/S+ product under signed license agreements, Dynamics and
Great Plains Accounting are licensed under "shrink wrap" licenses not signed by
the licensees. These shrink wrap licenses may be unenforceable under the laws of
certain jurisdictions. In addition, the laws of certain countries where we sell
products do not protect our products and intellectual property rights to the
same extent as the laws of the United States.

Although we have never been the subject of a material intellectual property
dispute, we cannot assure you that a third party will not assert that our
technology violates its intellectual property rights. As the number of software
products in our target markets increases and the functionality of these products
further overlap, we believe that all software developers may become increasingly
subject to infringement claims. Any such claims, whether with or without merit,
can be time consuming and expensive to defend. We cannot assure you that third
parties will not assert infringement claims against us in the future with
respect to our current or future products or that any such assertions will not
require us to enter into royalty arrangements that could be costly.

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

We have operations in a number of international markets. We intend to
continue to expand our international operations and our international sales and
marketing efforts.

Currently, we operate subsidiaries in Canada, the United Kingdom,
Scandinavia, South Africa, Singapore and Australia. We also maintain exclusive
distribution agreements with international distribution Partners in Germany,
Poland, the Czech Republic, the Benelux Countries, Portugal, Latin America and
the Middle East. As a result of the royalty structure for our international
Partner network, our gross margin on international sales through our
international distribution Partners is generally lower than our gross margin on
sales in the United States.

Our international business remains subject to many risks, including:

- local economic and market conditions

- political and economic instability

- difficulties in enforcing intellectual property and contract rights

- difficulties in tailoring our products to fit local accounting principles,
rules, regulations, language, tax codes and customs

10
<PAGE>
- fluctuations in currency exchange rates

- difficulties and costs of staffing and managing foreign operations

- the need for compliance with a wide variety of foreign and United States
export regulations

These risks may materially and adversely affect our business, results of
operations or financial condition.

YEAR 2000 RISKS

Many currently installed computer systems and software are coded to accept
only two-digit entries in the date code fields. These date code fields will need
to accept four-digit entries to distinguish 21st century dates from 20th century
dates. As a result, computer systems and software used by many businesses and
government agencies will need to be upgraded or replaced in order to comply with
Year 2000 requirements or risk system failure or miscalculations causing
disruptions of normal business activities.

Our current products are Year 2000 compliant. Even though our current
products are Year 2000 compliant, we cannot assure you that Midmarket businesses
will have sufficient resources available to acquire new systems such as ours
because they may be diverting resources to assess and fix internal systems that
may not be Year 2000 compliant.

We have reviewed our own information technology and other technology systems
to assess and remediate any Year 2000 problems. While the amount of remediation
work required to address Year 2000 problems is not expected to be extensive and
while we have received assurances from our major suppliers that they are
addressing the Year 2000 issue, we cannot assure you our internal systems will
function properly in the Year 2000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Year 2000."

VOLATILITY OF STOCK PRICE

The market price of our Common Stock has fluctuated in the past and is
likely to continue to be volatile and could be subject to wide fluctuation. The
stock market in general has experienced price and volume fluctuations and this
has been especially true of the technology sector. Investors may be unable to
sell their shares of our Common Stock at or above the offering price. In the
past, companies that have experienced volatility in the market price of their
stock have been the object of securities class action litigation. If we were
sued, we could incur substantial costs and our management's attention and
resources could be diverted. See "Price Range of Common Stock."

SUBSTANTIAL INFLUENCE BY OFFICERS AND DIRECTORS

We anticipate that the executive officers, directors and entities affiliated
with them will, in the aggregate, beneficially own approximately 33% of our
outstanding Common Stock following the completion of this offering. These
shareholders may be able to exercise substantial influence over all matters
requiring shareholder approval, including the election of directors and approval
of significant corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of Great Plains.
See "Management" and "Principal and Selling Shareholders."

BROAD DISCRETION IN USE OF PROCEEDS

Our management can spend or invest the proceeds from this offering in ways
with which the shareholders may not agree. See "Use of Proceeds."

ANTI-TAKEOVER PROVISIONS

Provisions of our articles of incorporation, amended by-laws and Minnesota
law could make it more difficult for a third-party to acquire us, even if doing
so would be beneficial to our shareholders.

11
<PAGE>
PRICE RANGE OF COMMON STOCK

Our Common Stock began trading on the Nasdaq National Market under the
symbol GPSI on June 20, 1997. Prior to such date, there was no established
public trading market for the Common Stock.

The following table sets forth, for the periods indicated, the high and low
closing sale prices of the Common Stock, as quoted on the Nasdaq National
Market.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
First Quarter Fiscal 1998
(from June 20, 1997 through August 31, 1997)................. $ 35.000 $ 23.750
Second Quarter Fiscal 1998..................................... 29.125 21.500
Third Quarter Fiscal 1998...................................... 33.625 20.500
Fourth Quarter Fiscal 1998..................................... 39.000 29.500

First Quarter Fiscal 1999...................................... 39.500 32.500
Second Quarter Fiscal 1999..................................... 48.250 30.125
Third Quarter Fiscal 1999 (through January 4, 1999)............ 49.000 39.562
</TABLE>

On January 4, 1999, the closing sale price per share of the Common Stock as
quoted on the Nasdaq National Market was $47.875. On January 4, 1999, there were
approximately 250 holders of record of the Common Stock, representing
approximately 2,800 shareholder accounts.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,035,000 shares of
Common Stock offered by the Company pursuant to this offering are estimated to
be approximately $46.7 million ($60.3 million if the underwriters'
over-allotment option is exercised in full) at an assumed public offering price
of $47.875 per share and after deducting the estimated underwriting discount and
offering expenses payable by the Company.

The Company expects to use the net proceeds from this offering for general
corporate purposes, including product development and the funding of working
capital and growth. In addition, we may acquire businesses, products and
technologies that are complementary to ours, and a portion of the net proceeds
may be used for such acquisitions. While we engage from time to time in
discussions with respect to potential acquisitions, we have no plans,
commitments or agreements with respect to any material acquisitions as of the
date of this prospectus. We cannot assure you that any such acquisitions will be
made.

Pending such uses, the Company intends to invest the net proceeds from this
offering in short-term, investment-grade, interest-bearing securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings to fund the development and growth of
our business.

12
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of November 30, 1998
and as adjusted to give effect to our receipt of the estimated net proceeds from
the sale of 1,035,000 shares of Common Stock offered hereby at an assumed public
offering price of $47.875 per share. See "Use of Proceeds." You should read this
information in conjunction with our Consolidated Financial Statements and the
Notes thereto appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF NOVEMBER 30, 1998
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, $.01 par value, 30,000,000 shares authorized,
none outstanding.............................................. -- --
Common Stock, $.01 par value, 100,000,000 shares authorized;
13,842,713 shares issued and outstanding; and 14,877,713
shares issued and outstanding, as adjusted (1)................ $ 138 $ 150
Additional paid-in capital...................................... 69,514 116,185
Accumulated translation adjustment.............................. 1 1
Retained earnings............................................... 6,777 6,777
--------- ------------
Total stockholders' equity.................................... 76,430 123,113
--------- ------------
Total capitalization...................................... $ 76,430 123,113
--------- ------------
--------- ------------
</TABLE>

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

(1) This information excludes (a) 596 shares of Common Stock issued pursuant to
the exercise of options between December 1, 1998 and December 16, 1998 with
a weighted average exercise price of $8.17 per share, (b) 1,108,531 shares
of Common Stock issuable pursuant to the exercise of options outstanding at
December 16, 1998 at a weighted average exercise price of $16.04 per share,
of which options to purchase 296,966 shares were then exercisable, and (c)
938,963 shares reserved for issuance under the Company's 1997 Stock
Incentive Plan, Outside Directors' Stock Option Plan and Employee Stock
Purchase Plan as of December 16, 1998.

13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the Notes thereto
included elsewhere in this prospectus. The selected consolidated statement of
income data set forth below for the years ended May 31, 1996, 1997 and 1998 and
the consolidated balance sheet data at May 31, 1997 and 1998 are derived from,
and are qualified by reference to, the audited financial statements included
elsewhere in this prospectus and should be read in conjunction with those
consolidated financial statements and notes thereto. The selected consolidated
statement of income data presented below for the years ended May 31, 1994 and
1995 and the consolidated balance sheet data at May 31, 1994, 1995 and 1996 are
derived from audited financial statements not included elsewhere in this
prospectus. The selected consolidated financial data as of and for the six
months ended November 30, 1997 and 1998 has been derived from unaudited
financial statements of the Company which, in the opinion of management, include
all adjustments, consisting solely of normal recurring adjustments, necessary
for a fair presentation of the financial information set forth therein. The
results for the six months ended November 30, 1998 are not necessarily
indicative of the results to be expected for the full year or for any future
period.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
---------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues:
License............................... $ 19,165 $ 25,050 $ 27,078 $ 35,919 $ 52,949 $ 22,617 $ 34,555
Service............................... 9,949 12,847 15,193 21,201 32,710 14,202 24,381
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues...................... 29,114 37,897 42,271 57,120 85,659 36,819 58,936

Cost of revenues:
License............................... 4,997 4,439 4,913 6,362 11,220 4,589 8,653
Service............................... 5,479 5,622 5,980 8,260 11,118 4,762 7,724
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total cost of revenues.............. 10,476 10,061 10,893 14,622 22,338 9,351 16,377
---------- ---------- ---------- ---------- ---------- ---------- ----------

Gross profit........................ 18,638 27,836 31,378 42,498 63,321 27,468 42,559

Operating expenses:
Sales and marketing................... 14,331 14,013 14,477 21,935 31,636 13,908 21,273
Research and development.............. 10,676 9,308 8,876 9,678 12,586 5,687 9,375
General and administrative............ 3,607 3,886 4,763 5,592 7,587 3,556 4,854
Acquired in-process research and
development......................... -- -- -- -- 7,136 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses............ 28,614 27,207 28,116 37,205 58,945 23,151 35,502
---------- ---------- ---------- ---------- ---------- ---------- ----------

Operating income (loss)................. (9,976) 629 3,262 5,293 4,376 4,317 7,057
Total other income (expense), net....... (381) (260) 100 558 3,274 1,803 1,348
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes... (10,357) 369 3,362 5,851 7,650 6,120 8,405
Income tax provision (benefit)(1)....... (27) 45 (4,099) 2,207 3,203 2,448 3,361
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative
effect of change in accounting
principle......................... (10,330) 324 7,461 3,644 4,447 3,672 5,044

Cumulative effect of a change in
accounting principle.................. -- (200) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)....................... $ (10,330) $ 124 $ 7,461 $ 3,644 $ 4,447 $ 3,672 $ 5,044
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic net income per share(2)(3)........ $ (1.52) $ 0.00 $ 0.58 $ (1.78) $ 0.33 $ 0.28 $ 0.37
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted net income per share(2)......... $ (1.52) $ 0.01 $ 0.76 $ 0.36 $ 0.32 $ 0.27 $ 0.35
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Number of shares for computing net
income per share:
Basic(2).............................. 6,776,906 7,158,950 7,352,820 7,629,460 13,381,414 13,093,015 13,797,818
Diluted(2)............................ 6,776,906 9,164,980 9,764,924 10,003,349 14,089,092 13,820,984 14,455,749
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
MAY 31,
----------------------------------------------------- NOVEMBER 30,
1994 1995 1996 1997 1998 1998
--------- --------- --------- --------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Assets:
Cash, cash equivalents and investments...... $ 119 $ 2,892 $ 8,256 $ 16,243 $ 66,918 $ 70,889
Total assets................................ 8,845 15,327 24,361 33,214 102,845 111,588

Working capital............................... (15,400) (4,992) 1,012 6,658 50,824 54,733

Liabilities and stockholders' equity:
Deferred revenues........................... 6,897 8,027 9,018 10,448 15,133 20,337
Long-term debt and capital lease
obligations, less current portion......... 1,281 750 20 -- -- --
Mandatorily redeemable convertible preferred
stock..................................... -- 8,300 11,502 28,698 -- --
Total stockholders' equity.................. (11,303) (9,066) (4,812) (16,277) 69,671 76,430
</TABLE>

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

(2) For an explanation of the determination of the number of shares used in
computing net income per share, see Note 1 of Notes to Consolidated
Financial Statements.

(3) For the fiscal years ending May 31, 1995, 1996 and 1997, basic net income
per share is lower than the diluted net income per share due to the fact
that net income available to common stockholders for the basic calculation
is reduced by the increase in carrying value of the mandatorily redeemable
preferred stock. Such increase in carrying value has a greater impact on the
basic calculation than does the inclusion of the preferred shares in the
diluted calculation. The mandatorily redeemable preferred stock was
converted into shares of Common Stock in June 1997 in connection with the
Company's initial public offering.

15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, and the other financial
information included elsewhere in this prospectus.

OVERVIEW

Great Plains is a leading provider of business management software solutions
to the Midmarket. The Company's award-winning products and services automate
essential business processes and enhance the strategic value of business
information. The Company's solutions are sold and implemented by a network of
independent Partners throughout the world.

The Company has been a leading provider of business software solutions since
1982 when it began selling Great Plains Accounting (the "heritage product"). In
the late 1980s, the Company anticipated the market shift towards Windows and
client/server business management solutions and, in February 1993, released
Dynamics. Dynamics is the Company's client/server product for smaller businesses
in the Midmarket. In July 1994, the Company released Dynamics C/S+. Dynamics
C/S+ is the Company's enterprise-wide solution for the larger businesses in the
Midmarket and is optimized for Windows NT and Microsoft SQL Server. The Company
recently expanded its enterprise-wide product offering with two acquisitions
that were completed in the fourth quarter of fiscal 1998. These acquisitions
provided manufacturing, human resources and enterprise reporting solutions,
which were in various stages of development.

The Company made significant investments in research and development in the
early 1990s to launch its client/server products. In addition, the Company has
made a significant investment in building an experienced and knowledgeable
network of independent Partners to market, implement and support its Dynamics
C/S+ and Dynamics products (together, the "client/server products"). Since the
release of the client/server products, the Company's principal source of
revenues has shifted from the heritage product to the client/server products.
Client/server products accounted for 61.4%, 77.4%, 87.3% and 92.9% of the
Company's total revenue for fiscal 1996, 1997 and 1998 and the six months ended
November 30, 1998, respectively.

The Company's revenues are derived from two principal sources: software
license fees ("license fees") and fees for maintenance, technical support,
training and consulting services (collectively, "service fees"). As required,
the Company recognizes revenue in accordance with Statement of Position (SOP)
97-2, Software Revenue Recognition, which the Company adopted beginning June 1,
1998. SOP 97-2 generally requires revenue earned on software products, upgrades
or enhancements, rights to exchange or return software, postcontract customer
support, or services, including elements deliverable only on a
when-and-if-available basis, to be allocated to the various elements of such
sale based on vendor-specific objective evidence of fair market values. If such
evidence does not exist, revenue from the sale would be deferred until
sufficient evidence exists, or until all elements have satisfied the
requirements for revenue recognition. Prior to its adoption of SOP 97-2, the
Company recognized revenue in accordance with SOP 91-1, Software Revenue
Recognition. This adoption did not have a material effect on the timing of the
Company's revenue recognition or cause changes to its revenue recognition
policies. See Note 1 of Notes to Consolidated Financial Statements.

License fee revenues are generally recognized upon shipment of the related
software product. Fees for the Company's maintenance and support plans are
recorded as deferred revenue when billed to the customer and recognized ratably
over the term of the maintenance and support agreement, which is typically one
year. Fees for the Company's training and consulting services are recognized at
the time the services are performed.

16
<PAGE>
The Company's Dynamics C/S+ and Dynamics customers are required to purchase
a one-year maintenance plan at the time the product is acquired. A majority of
these customers renew the maintenance plan after the initial term. Under the
maintenance plan, the Company provides these customers with product upgrades in
addition to on-line assistance and information. The maintenance program for the
Company's heritage product provides customers with product "updates," which are
less significant releases of the heritage product; however, heritage product
upgrades are not included in the heritage maintenance program. Heritage
customers can purchase product upgrades as they are released.

The Company currently sells products outside the United States through
subsidiaries located in Canada, the United Kingdom, Scandinavia, South Africa,
Singapore and Australia, as well as through international distribution Partners
located in Germany, Poland, the Czech Republic, the Benelux Countries, Portugal,
Latin America, and the Middle East. The Company's client/server products are
available in 8 languages and have been sold in approximately 92 countries.

For further discussion of recently issued accounting standards that may
impact the Company's future financial results, see Note 1 of Notes to
Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
total revenues represented by certain items reflected in the Company's
consolidated statement of income.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------- --------------------
1996 1997 1998 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:

Revenues:
License.................................... 64.1% 62.9% 61.8% 61.4% 58.6%
Service.................................... 35.9 37.1 38.2 38.6 41.4
--------- --------- --------- --------- ---------
Total revenues........................... 100.0 100.0 100.0 100.0 100.0

Cost of revenues:
License.................................... 11.6 11.1 13.1 12.5 14.7
Service.................................... 14.2 14.5 13.0 12.9 13.1
--------- --------- --------- --------- ---------
Total cost of revenues................... 25.8 25.6 26.1 25.4 27.8
--------- --------- --------- --------- ---------
Gross profit............................. 74.2 74.4 73.9 74.6 72.2

Operating expenses:
Sales and marketing........................ 34.2 38.4 36.9 37.8 36.1
Research and development................... 21.0 16.9 14.7 15.4 15.9
General and administrative................. 11.3 9.8 8.9 9.7 8.2
Acquired in-process research and
development.............................. -- -- 8.3 -- --
--------- --------- --------- --------- ---------
Total operating expenses................. 66.5 65.1 68.8 62.9 60.2
--------- --------- --------- --------- ---------
Operating income............................. 7.7 9.3 5.1 11.7 12.0
Other income, net............................ 0.2 1.0 3.8 4.9 2.3
--------- --------- --------- --------- ---------
Income before income taxes................... 7.9 10.3 8.9 16.6 14.3
Income tax provision (benefit)............... (9.7) 3.9 3.7 6.6 5.7
--------- --------- --------- --------- ---------
Net income................................... 17.6% 6.4% 5.2% 10.0% 8.6%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

17
<PAGE>
REVENUES

REVENUES. Revenues increased from $42.3 million in fiscal 1996 to $57.1
million in fiscal 1997 and to $85.7 million in fiscal 1998, representing
increases of 35.1% and 50.0%, respectively. Revenues increased from $36.8
million for the six months ended November 30, 1997 to $58.9 million for the six
months ended November 30, 1998, representing an increase of 60.1%. These
increases in revenues were primarily due to increased demand for the Company's
client/server products and related services.

The following table sets forth for the periods indicated client/server and
heritage product revenues, each as a percentage of total revenues:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------- ------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Client/server product revenues................. 61.4% 77.4% 87.3% 86.9% 92.9%
Heritage product revenues...................... 38.6 22.6 12.7 13.1 7.1
</TABLE>

Client/server product revenues, including license and service fees,
increased from $25.9 million in fiscal 1996 to $44.2 million in fiscal 1997 and
to $74.8 million in fiscal 1998, representing increases of 70.5% and 69.1%,
respectively. Client/server product revenues increased from $32.0 million for
the six months ended November 30, 1997 to $54.8 million for the six months ended
November 30, 1998, representing an increase of 71.1%.

The increase in client/server product revenues was offset, in part, by a
decrease in revenues from the Company's heritage product. Heritage product
revenues decreased from $16.4 million in fiscal 1996 to $12.9 million in fiscal
1997 and to $10.9 million in fiscal 1998, representing decreases of 21.1% and
15.6%, respectively. Heritage product revenues decreased from $4.8 million for
the six months ended November 30, 1997 to $4.1 million for the six months ended
November 30, 1998, representing a decrease of 13.3%. The decrease in heritage
product revenues was primarily due to a decrease in demand for DOS- and
Macintosh-based financial management software, which reflects the broader market
trend toward Windows and client/server computing. In addition, for the six
months ended November 30, 1998, the decrease can also be attributed to the
expected decline in the number of customers purchasing the Company's Version 9
heritage upgrade, which was initially released in February 1997. The Company
anticipates that heritage product revenues will decrease in future periods.

The Company's international revenues increased from $4.4 million in fiscal
1996 to $8.6 million in fiscal 1997 and to $13.4 million in fiscal 1998,
representing 10.4%, 15.0% and 15.6% of total revenues, respectively. In
addition, international revenues increased from $5.4 million for the six months
ended November 30, 1997 to $10.0 million for the six months ended November 30,
1998, representing 14.7% and 16.9% of total revenues, respectively. The increase
in fiscal 1997 resulted primarily from growth in the Company's subsidiary
operation in the United Kingdom and from increased sales to existing
international distribution Partners. The increases in fiscal 1998 and for the
six months ended November 30, 1998 resulted primarily from the addition of new
international subsidiaries in Singapore, South Africa and Scandinavia and growth
of subsidiary operations in existing international markets.

LICENSE. Total license fee revenues increased from $27.1 million in fiscal
1996 to $35.9 million in fiscal 1997 and to $53.0 million in fiscal 1998,
representing increases of 32.7% and 47.4%, respectively. Total license fee
revenues increased from $22.6 million for the six months ended November 30, 1997
to $34.5 million for the six months ended November 30, 1998, representing an
increase of 52.8%. These increases in total license fee revenues are largely
attributable to increased sales of the Company's client/ server products. The
Company added to its client/server product offerings with the release of a
Microsoft SQL Server edition of Dynamics C/S+ in April 1996 and the release of
additional functionality and applications for the SQL Server edition in November
1996. In September 1997, the Company added to

18
<PAGE>
its client/server product offerings with the release of a service management
solution licensed from a third party. In addition, the Company broadened its
client/server solutions with the addition of manufacturing, human resources and
enterprise reporting solutions through acquisitions completed in the Company's
fourth quarter of fiscal 1998. These acquisitions did not have a material impact
on revenue in fiscal 1998 but contributed to the increase in license fee revenue
for the six months ended November 30, 1998. Moreover, since the release of the
Company's client/server products, the Company has increased its sales, marketing
and service capacity and increased the number of Partners representing its
client/ server products. These factors have led to an increase in the number of
client/server software licenses and an increase in the average revenues derived
from individual client/server licenses.

The increase in client/server product license fee revenues was offset, in
part, by a decrease in heritage product license fee revenues. The decrease in
heritage product license fees is primarily a result of decreased demand for DOS-
and Macintosh-based financial management software. In addition, the Company has
historically released significant upgrades of its heritage product approximately
every two years, which had a positive impact on heritage product license fee
revenues in the quarters following release. Significant upgrades of the heritage
product were released in February 1997 and December 1997, which the Company
marketed principally to the Company's installed base of heritage product
customers. Notwithstanding the positive impact on revenues these upgrades had in
fiscal 1997 and fiscal 1998, overall heritage product license fee revenues
declined in fiscal 1997, fiscal 1998 and in the six months ended November 30,
1998. The Company anticipates that heritage product license fee revenues will
decrease in future periods.

SERVICE. Service revenues increased from $15.2 million in fiscal 1996 to
$21.2 million in fiscal 1997 and to $32.7 million in fiscal 1998, representing
increases of 39.5% and 54.3%, respectively. In addition, service revenues
increased from $14.2 million for the six months ended November 30, 1997 to $24.4
million for the six months ended November 30, 1998, representing an increase of
71.7%. Service revenues as a percentage of total revenues were 35.9%, 37.1% and
38.2% for fiscal 1996, 1997 and 1998, respectively. Similarly, service revenues
as a percentage of total revenues were 38.6% and 41.4% for the six months ended
November 30, 1997 and November 30, 1998, respectively. These increases in
service revenues were largely a result of the service revenues associated with
new client/server licenses as well as renewals of existing maintenance and
support contracts from the growing installed base of client/server customers.

COSTS AND EXPENSES

COST OF LICENSE FEES. Cost of license fees consists primarily of the costs
of product manuals, media, shipping and royalties paid to third parties. Cost of
license fees increased from $4.9 million in fiscal 1996 to $6.4 million in
fiscal 1997 and to $11.2 million in fiscal 1998, representing 18.1%, 17.7% and
21.2% of total license fee revenues in fiscal 1996, 1997 and 1998, respectively.
In addition, cost of license fees increased from $4.6 million for the six months
ended November 30, 1997 to $8.7 million for the six months ended November 30,
1998, representing 20.3% and 25.0% of total license fee revenues for such
periods, respectively. The increase in cost of license fees is primarily
attributable to the overall growth in license fee revenues and an increase in
the sale of products for which the Company is obligated to pay royalties to
third party vendors. The Company anticipates that cost of license fees will
increase in dollar amount as license fee revenues increase. Cost of license fees
as a percentage of total license fee revenues may increase if the Company enters
into additional royalty arrangements or if the sale of products which carry a
royalty obligation increase as a percentage of total license fee revenues.

COST OF SERVICES. Cost of services consists of the costs of providing
telephone support, training and consulting services to customers and Partners.
Cost of services increased from $6.0 million in fiscal 1996 to $8.3 million in
fiscal 1997 and to $11.1 million in fiscal 1998, representing 39.4%, 39.0% and
34.0% of total service revenues, respectively. In addition, cost of services
increased from $4.8 million for the six months ended November 30, 1997 to $7.7
million for the six months ended November 30, 1998, representing 33.5% and 31.7%
of total service revenues, respectively. The increase in cost of services is

19
<PAGE>
primarily due to the expansion of the Company's customer and Partner service
resources. Cost of services as a percentage of service revenues has decreased as
a result of improved efficiency in operations and continued strong customer
enrollment in maintenance plans and support contracts. The Company anticipates
that cost of services will increase in dollar amount as service revenues
increase, but will remain relatively constant as a percentage of service
revenues.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and travel and promotional expenses. Sales and marketing
expenses have increased from $14.5 million in fiscal 1996 to $21.9 million in
fiscal 1997 and $31.6 million in fiscal 1998, representing 34.2%, 38.4% and
36.9% of total revenues, respectively. Sales and marketing expenses increased
from $13.9 million for the six months ended November 30, 1997 to $21.3 million
for the six months ended November 30, 1998, representing 37.8% and 36.1% of
total revenues, respectively. Since the beginning of fiscal 1997, the Company
has increased spending on sales and marketing to promote the Microsoft SQL
Server edition of its Dynamics C/S+ product. The increase in sales and marketing
expenses and sales and marketing expenses as a percentage of total revenues
reflects the hiring of additional sales and marketing personnel, expanded
promotional activities and increased commissions relating to the increase in
client/server product revenues. In addition, the Company has increased sales and
marketing expenses related to the operation of its international subsidiaries in
the United Kingdom, Australia, Singapore, South Africa and Scandinavia. The
decrease in sales and marketing as a percentage of total revenues in fiscal 1998
and for the six months ended November 30, 1998 reflects an increase in sales and
marketing productivity and a corresponding increase in revenues derived from the
Company's client/server products. The Company anticipates that sales and
marketing expenses will increase in dollar amount as total revenues increase;
however, the Company does not anticipate significant changes in sales and
marketing expenses as a percentage of total revenues.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of compensation of development personnel and depreciation of
equipment. The Company has made significant investments in research and
development with total expenses increasing from $8.9 million in fiscal 1996 to
$9.7 million in fiscal 1997 and $12.6 million in fiscal 1998, representing
21.0%, 16.9%, and 14.7% of total revenues, respectively. Research and
development expenses were $5.7 million for the six months ended November 30,
1997 and $9.4 million for the six months ended November 30, 1998, representing
15.4% and 15.9% of total revenues, respectively. Research and development
expenses in fiscal 1996 and fiscal 1997 were primarily related to the Company's
efforts to release additional applications for its client/server products and
the Microsoft SQL Server edition of Dynamics C/S+. In fiscal 1998, the Company's
development efforts were primarily focused on the delivery of substantial new
versions of its client/server products and the release of an electronic commerce
solution. For the six months ended November 30, 1998, increases in the Company's
research and development expenses can, in part, be attributed to additional
development resources added as a result of two acquisitions in the fourth
quarter of fiscal 1998. These two acquisitions added product development
resources in the solution areas of manufacturing, human resources, and
consolidations and budgeting. Research and development expenses decreased as a
percentage of total revenues in fiscal 1997 and fiscal 1998 due to efficiencies
gained through greater experience levels among development personnel, greater
automation in the Company's development testing processes and an increased focus
on Microsoft technologies. Research and development expenses increased as a
percentage of total revenues in the first half of fiscal 1999 primarily due to
additional research and development resources added with the acquisitions in the
fourth quarter of fiscal 1998. The Company anticipates that it will continue to
devote substantial resources to its research and development efforts and that
research and development expenses will increase in dollar amount in future
periods and may increase as a percentage of total revenues.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries of executive, financial, human resource and information
services personnel as well as outside professional fees. General and
administrative expenses increased from $4.8 million in fiscal 1996 to $5.6

20
<PAGE>
million in fiscal 1997 and to $7.6 million in fiscal 1998, representing 11.3%,
9.8% and 8.9% of total revenues, respectively. General and administrative
expenses increased from $3.6 million for the six months ended November 30, 1997
to $4.9 million for the six months ended November 30, 1998, representing 9.7%
and 8.2% of total revenues, respectively. These increases in dollar amounts were
primarily due to increased staffing and related expenses necessary to manage and
support the expansion of the Company's operations. In addition, the Company's
general and administrative expenses increased in fiscal 1998 due to increased
expenses as a result of being a publicly held company. The Company believes that
its general and administrative expenses will increase in dollar amount in the
future to support the expansion of its operations.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. The Company completed two
acquisitions in the fourth quarter of fiscal 1998, both of which were accounted
for using the purchase method of accounting. The first acquisition provided a
manufacturing series and a human resources management system while the second
acquisition provided a multinational enterprise reporting solution. The purchase
price for these acquisitions was $7.5 million for the manufacturing and human
resource applications and $4.4 million for the enterprise reporting solution.

Valuations of the intangible assets acquired were determined by an
independent third party appraisal company and consisted of in-process research
and development (IPR&D), current technology, and assembled workforce. The
following table shows the amount related to IPR&D, as determined by the
independent third party appraisal company, that was charged against income in
fiscal 1998 because the underlying research and development projects had not yet
reached technological feasibility and had no alternative future uses:

<TABLE>
<CAPTION>
IPR&D
---------------
(IN THOUSANDS)
<S> <C>
Manufacturing.............................................. $ 3,211
Human resources............................................ 2,245
Enterprise reporting....................................... 1,680
-------
$ 7,136
</TABLE>

The Company is using the acquired in-process research and development to
complete new products in the areas of manufacturing, human resources, and
enterprise reporting, which will become part of the Company's product lines over
the next several years. The Company anticipates the initial products developed
from the acquired in-process research and development to be released in the
period of fiscal 1999 to fiscal 2001. The Company expects that all the acquired
in-process research and development will reach technological feasibility, but
there can be no assurance that the commercial viability of these products will
actually be achieved. If commercial viability is not achieved, the Company would
look to other alternatives to provide these solutions.

The nature of the efforts required to complete development of the acquired
in-process research and development into commercially viable products
principally relates to the completion of all designing, prototyping,
verification and testing activities necessary to establish that the products can
be produced to meet design specifications, including functions, features, and
technical performance

21
<PAGE>
requirements. The estimated costs to be incurred to complete the purchased
in-process technology into commercially viable products are as follows:

<TABLE>
<CAPTION>
HUMAN ENTERPRISE
MANUFACTURING RESOURCES REPORTING
--------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Fiscal 1999........................ $ 1,875 $ 750 $ 720
Fiscal 2000........................ 1,958 840 765
Fiscal 2001........................ 2,220 810 630
Fiscal 2002........................ 1,688 540 375
Fiscal 2003........................ 825 450 225
------- ------------- -----------
Total.............................. $ 8,566 $ 3,390 $ 2,715
</TABLE>

The value assigned to purchased in-process research and development was
determined by an independent third party appraiser, which projected cash flows
related to future products expected to be derived once technological feasibility
is achieved, including costs to complete the development of technology and the
future revenues and costs which are expected to result from commercialization of
the products. Cash flows recognized the contribution of core technology and
other supporting assets and were discounted back to their present value at a
rate of 35%. The resulting net cash flows from such projects are based on
estimates made by the Company's management of revenues, cost of sales, research
and development costs, selling, general and administrative costs, and income
taxes resulting from such projects. These management estimates are based on
expected trends in technology and the nature and expected timing of completion
of acquired in-process research and development. Nothing has come to
management's attention which would lead management to believe substantial
changes need to be made to the underlying assumptions.

The Company did not have any write-off of acquired in-process research and
development in fiscal 1997 or fiscal 1996.

See Note 2 of Notes to Consolidated Financial Statements.

OTHER INCOME, NET

Other income, net consists primarily of earnings from investments and gains
or losses from disposal of fixed assets, net of any interest expense. Other
income, net increased from $0.1 million in fiscal 1996 to $0.6 million in fiscal
1997 and to $3.3 million in fiscal 1998. Other income, net decreased from $1.8
million for the six months ended November 30, 1997 to $1.3 million for the six
months ended November 30, 1998. The increase in other income, net in fiscal 1997
can be attributed to additional cash resulting from the Company's increased
profitability. The increase in other income, net in fiscal 1998 was primarily a
result of increased investment earnings due to increased investments as a result
of the more than $50 million received from the Company's initial public offering
of common stock in June 1997. The increase in fiscal 1998 can also be
attributed, in part, to additional cash resulting from the Company's increased
profitability. The decrease in other income, net for the six months ended
November 30, 1998 was, in part, a result of a one-time gain recognized from the
sale of the Company's Profit accounting software product in the six months ended
November 30, 1997. In addition, the Company recognized lower investment earnings
in the six months ended November 30, 1998 due to a lower cash position at the
start of the period and a lower interest rate for a portion of the period.

PROVISION (BENEFIT) FOR INCOME TAXES

Provision (benefit) for income taxes was $(4.1) million, $2.2 million, and
$3.2 million in fiscal 1996, 1997 and 1998, respectively. For the six months
ended November 30, 1997 and November 30, 1998, the Company's provision for
income taxes was $2.5 million and $3.4 million, respectively. Prior to May 1996,

22
<PAGE>
the Company determined that the realization of the net operating loss
carryforward and other deferred tax assets did not meet the recognition criteria
under Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," and, accordingly, a valuation allowance was established to
reserve the net operating loss carryforward and other deferred tax assets. For
fiscal 1996, the Company recorded a $4.1 million tax benefit primarily related
to the reversal of the valuation allowance. This reversal was based on
management's analysis of current levels of earnings and its future outlook,
which increased the likelihood of the Company realizing its deferred tax assets;
thus the valuation allowance was no longer deemed necessary. In fiscal 1997, the
Company recorded an income tax provision of 38%, consistent with federal and
state statutory income tax rates. In fiscal 1998 and for the six months ended
November 30, 1998, the provision for income taxes was 40% of income before
income taxes, which represents a 2% increase from the fiscal 1997 annual
effective income tax rate of 38% as a result of full state statutory tax rates.
The Company expects that the income tax provision will continue to reflect the
statutory tax rates. See Note 10 of Notes to Consolidated Financial Statements.

23
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth certain unaudited consolidated financial
information for each of the four quarters in the Company's fiscal year ended May
31, 1998 and for the first two quarters in the Company's fiscal year ending May
31, 1999. In management's opinion, this unaudited quarterly information has been
prepared on the same basis as the audited consolidated financial statements and
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information for the quarters presented,
when read in conjunction with the audited consolidated financial statements and
notes thereto included elsewhere in this prospectus. The Company believes that
quarter-to-quarter comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.

<TABLE>
<CAPTION>
AUGUST 31, NOVEMBER 30, FEBRUARY 28, MAY 31, AUGUST 31, NOVEMBER 30,
1997 1997 1998 1998 1998 1998
----------- -------------- ------------ --------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License................... $ 10,335 $ 12,282 $ 13,816 $ 16,516 $ 16,114 $ 18,441
Service................... 6,439 7,763 8,791 9,716 11,015 13,366
----------- -------------- ------------ --------- ----------- --------------
Total revenues.......... 16,774 20,045 22,607 26,232 27,129 31,807

Cost of revenues:
License................... 1,935 2,654 3,266 3,364 3,996 4,657
Service................... 2,251 2,511 2,723 3,635 3,576 4,148
----------- -------------- ------------ --------- ----------- --------------
Total cost of
revenues.............. 4,186 5,165 5,989 6,999 7,572 8,805
----------- -------------- ------------ --------- ----------- --------------

Gross profit............ 12,588 14,880 16,618 19,233 19,557 23,002

Operating expenses:
Sales and marketing....... 6,199 7,709 8,416 9,311 9,533 11,740
Research and
development............. 2,676 3,011 3,030 3,868 4,517 4,858
General and
administrative.......... 1,894 1,662 2,086 1,946 2,518 2,336
Acquired in-process
research and
development............. -- -- -- 7,136 -- --
----------- -------------- ------------ --------- ----------- --------------
Total operating
expenses.............. 10,769 12,382 13,532 22,261 16,568 18,934
----------- -------------- ------------ --------- ----------- --------------

Operating income (loss)..... 1,819 2,498 3,086 (3,028) 2,989 4,068
Other income, net........... 736 1,067 878 593 649 699
----------- -------------- ------------ --------- ----------- --------------
Income (loss) before
income taxes.......... 2,555 3,565 3,964 (2,435) 3,638 4,767
Income tax provision
(benefit)................. 1,022 1,426 1,587 (832) 1,454 1,907
----------- -------------- ------------ --------- ----------- --------------
Net income (loss)........... $ 1,533 $ 2,139 $ 2,377 $ (1,603) $ 2,184 $ 2,860
----------- -------------- ------------ --------- ----------- --------------
----------- -------------- ------------ --------- ----------- --------------
</TABLE>

The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Such fluctuations may result in volatility in the price
of the Common Stock. The Company establishes expenditure levels based on its

24
<PAGE>
expectations as to future revenue, and, if revenue levels are below
expectations, expenses can be disproportionately high. As a result, a drop in
near term demand for the Company's products could significantly affect both
revenues and profits in any quarter. In the future, the Company's operating
results may fluctuate for this reason or as a result of a number of other
factors, including increased expenses, timing of product releases, increased
competition, variations in the mix of sales, announcements of new products by
the Company or its competitors and capital spending patterns of the Company's
customers.

The Company has experienced and may continue to experience seasonality. In
recent years, due to a number of factors, including the timing of product
releases and sales incentive programs, the Company has recognized a greater
percentage of its revenue and operating income in its fourth fiscal quarter than
in any of the first three quarters. Moreover, due to fiscal year-end sales
incentive programs, the Company has historically recognized less license fee
revenue and operating income in its first fiscal quarter than in the other
quarters.

As a result of these factors, there can be no assurance that the Company
will be able to maintain profitability on a quarterly basis.

LIQUIDITY AND CAPITAL RESOURCES

Great Plains has historically funded operations primarily through cash
provided by operations and the sale of equity securities. Currently, the Company
meets its working capital needs and capital equipment needs with cash provided
by operations.

Cash provided by operating activities increased from $8.3 million in fiscal
1996 to $10.3 million in fiscal 1997 and to $17.6 million for fiscal 1998. Cash
provided by operating activities increased from $5.0 million for the six months
ended November 30, 1997 to $7.7 million for the six months ended November 30,
1998. The increase in cash from operations for fiscal 1998 was due primarily to
cash provided by the following: improved profitability of the Company's
operations, the $7.1 million noncash charge for acquired in-process research and
development, an increase in accounts payable and accrued expenses of $4.4
million, an increase in deferred revenues of $3.9 million, and an increase in
income taxes payable of $3.8 million. Cash from operations was reduced primarily
by a $5.2 million increase in deferred tax assets and a $2.6 million increase in
accounts receivable. The increase in cash from operations for the six months
ended November 30, 1998 relative to the six months ended November 30, 1997 was
due primarily to improved profitability of the Company's operations and an
increase in deferred revenues of $5.2 million offset by a $3.3 million reduction
in income taxes payable.

The Company's investing activities used cash of $2.1 million, $7.1 million
and $63.8 million in fiscal 1996, 1997 and 1998, respectively. For the six
months ended November 30, 1997 and November 30, 1998, cash used for investing
activities was $54.8 million and $4.7 million, respectively. In fiscal 1996 and
fiscal 1997, the principal use of cash in investing activities was for capital
expenditures related to the acquisition of computer equipment and furniture
required to support expansion of the Company's operations. Fiscal 1997 also
included the purchase of $4.9 million of investments. The principal use of cash
in investing activities in fiscal 1998 was approximately $50 million for the
purchase of investments following the Company's initial public offering of
common stock. Investing activities in fiscal 1998 also included cash used of
approximately $11.9 million for two acquisitions completed in the Company's
fourth quarter. In addition, investing activities for fiscal 1998 included
increased capital expenditures related to the acquisition of computer equipment
and furniture required to support expansion of the Company's operations and
investments for minority interest positions in certain international operations.
The primary use of cash for investing activities for the six months ended
November 30, 1998 was for capital expenditures related to the acquisition of
computer equipment and furniture required to support expansion of the Company's
operations. In addition, cash used for investing activities for the six months

25
<PAGE>
ended November 30, 1998 included additional investment in minority interest
positions in certain international operations.

The Company's financing activities provided (used) cash of $(0.8) million,
$0.7 million and $52.2 million during fiscal 1996, 1997 and 1998 respectively.
For the six months ended November 30, 1997 and November 30, 1998, the Company's
financing activities provided cash of $50.5 million and $1.4 million,
respectively. For fiscal 1996, financing activities used cash primarily for
payments on capital lease obligations and notes payable. For fiscal 1997, cash
of $0.7 million was provided from financing activities which consisted primarily
of proceeds received from the exercise of stock options offset in part by
payments on capital lease obligations and notes payable. For fiscal 1998, cash
of $52.2 million was provided from financing activities primarily from $50.2
million from the sale of the Company's common stock in an initial public
offering and proceeds received from the exercise of stock options. For the six
months ended November 30, 1998, cash provided by financing activities consisted
of proceeds received from the exercise of stock options.

The Company's sources of liquidity at November 30, 1998 consisted
principally of cash, cash equivalents and investments of $70.9 million. The
Company also has a $10.0 million revolving line of credit with a bank. The line
of credit expires in November 1999 and borrowings made thereunder are subject to
certain covenants. No amounts were outstanding under the line of credit at
December 31, 1998. See Note 8 of Notes to Consolidated Financial Statements.

The Company believes that cash generated from operations, its existing cash,
cash equivalents and investments, and cash generated from this offering will be
sufficient to fund operations for the foreseeable future.

YEAR 2000

Many currently installed computer systems and software are coded to accept
only two-digit entries in the date code fields. These date code fields will need
to accept four-digit entries to distinguish 21st century dates from 20th century
dates. This problem could result in system failures or miscalculations causing
disruptions of business operations (including, among other things, a temporary
inability to process transactions, send invoices or engage in other similar
business activities). As a result, many companies' computer systems and software
will need to be upgraded or replaced in order to comply with Year 2000
requirements. The potential global impact of the Year 2000 problem is not known.
If Year 2000 problems are not corrected in a timely manner, they could affect
the Company and the U.S. and world economy generally.

All of the Company's current products are Year 2000 compliant. The Company's
client/server products have been Year 2000 compliant since their initial
introduction, as are Versions 8 and 9 of the heritage product. The Company is
currently offering its heritage product customers a free Year 2000 compliant
upgrade for prior versions of the heritage product. Even though the Company's
current products are Year 2000 compliant, there can be no assurance that
Midmarket businesses will have sufficient resources available for the
acquisition of new systems from the Company because they may be diverting
resources to assess and fix internal systems that may not be Year 2000
compliant.

The Company has formed a project team (consisting of representatives from
its information technology, finance, manufacturing, product development, sales,
marketing and legal departments) to address other internal and external Year
2000 issues. The Company's internal financial, manufacturing and other computer
systems are being reviewed to assess and remediate Year 2000 problems. The
Company's assessment of internal systems includes its information technology
("IT") as well as non-IT systems (which systems contain embedded technology in
manufacturing or process control equipment containing microprocessors or other
similar circuitry). The Company's Year 2000 compliance program includes the
following phases: (i) identifying systems that need to be modified or replaced;
(ii) carrying out remediation work to modify existing systems or convert to new
systems; and (iii) conducting

26
<PAGE>
validation testing of systems and applications to ensure compliance. The Company
is currently completing the second phase of this program.

The amount of remediation work required to address Year 2000 problems is not
expected to be extensive. The Company has replaced certain of its financial and
operational systems in the last several years, and management believes that the
new equipment and software substantially addresses Year 2000 issues. However,
the Company will be required to modify some of its existing hardware and
software in order for its computer systems to function properly in the year 2000
and thereafter. The Company estimates that it will complete its Year 2000
compliance program for all of its significant internal systems no later than May
1, 1999.

In addition, the Company has received assurances from its major suppliers
that they are addressing the Year 2000 issue and that products purchased by the
Company from such suppliers will function properly in the year 2000. However, it
is impossible to fully assess the potential consequences in the event service
interruptions from suppliers occur or in the event that there are disruptions in
such infrastructure areas as utilities, communications, transportation, banking
or government. The Company is currently assessing the Year 2000 readiness of its
Partners.

The total estimated cost for resolving the Company's Year 2000 issues is
$100,000, of which approximately $65,000 has been spent through November 30,
1998. The total cost estimate includes the cost of replacing of non-compliant
systems as a remediation cost in cases where the Company has accelerated plans
to replace such systems. Estimates of Year 2000 costs are based on numerous
assumptions, and there can be no assurance that the estimates are correct or
that actual costs will not be materially greater than anticipated.

Based on its assessments to date, the Company believes it will not
experience any material disruption as a result of Year 2000 problems in internal
manufacturing processes, information processing or interface with major
customers, or with processing orders and billing. However, if certain critical
third-party providers, such as those providers supplying electricity, water or
telephone service, experience difficulties resulting in disruption of service to
the Company, a shutdown of the Company's operations at individual facilities
could occur for the duration of the disruption. The Company has not yet
developed a contingency plan to provide for continuity of processing in the
event of various problem scenarios, but it will assess the need to develop such
a plan based on the outcome of its validation phase of its Year 2000 compliance
program and the results of surveying its major suppliers and customers. Assuming
no major disruption in service from utility companies or other critical
third-party providers, the Company believes that it will be able to manage its
total Year 2000 transition without any material effect on the Company's results
of operations or financial condition.

27
<PAGE>
BUSINESS

Great Plains is a leading provider of business management solutions to the
Midmarket. Our award-winning products and services automate essential business
processes and enhance the strategic value of business information. Our solutions
are sold and implemented by a network of independent Partners throughout the
world.

INDUSTRY BACKGROUND

Throughout the 1990s, businesses of all sizes have increasingly deployed
client/server business applications to improve their competitive position.
Client/server business applications enable greater access to information and
allow for more efficiency in a company's operations than do traditional
mainframe, minicomputer or stand-alone PC solutions. Greater access to business
information allows for better and faster decision making and higher levels of
customer service. More efficient operations result in lower costs, higher
employee satisfaction, and expanded growth opportunities.

Businesses employing client/server business solutions can generally be
grouped into two market segments: (1) the "Midmarket," which generally consists
of businesses with $1 million to $250 million in revenues and 10 to 2,500
employees and (2) the "Enterprise Market," which generally consists of
businesses with revenues in excess of $250 million and more than 2,500
employees.

Businesses in the Enterprise Market were the first to adopt client/server
architecture as the standard for new implementations of enterprise-wide business
management solutions. More recently, businesses in the Midmarket also began to
demand fully integrated enterprise-wide business management solutions based on
client/server technology. However, client/server solutions designed for the
Enterprise Market are often too complex and generally require too much time and
money for Midmarket companies to implement. Furthermore, implementation of
traditional Enterprise Market solutions often require significant business
process re-engineering that is unduly burdensome for Midmarket businesses.

MIDMARKET BUSINESS MANAGEMENT SYSTEM NEEDS

Midmarket businesses have a number of key business requirements that are
different from those of Enterprise Market businesses. We believe that Midmarket
businesses require a client/server enterprise-wide business solution that is
cost effective, scalable, and easy to implement and use. Our Dynamics platform's
innovative design and architecture allow customers to solve business problems
through:

- Rapid system customization

- Extensive end-user personalization

- Seamless integration to existing systems

- Strategic use of industry-standard technologies

- Real-time electronic commerce

Midmarket businesses generally have fewer IT resources than Enterprise
Market businesses. As a result, Midmarket businesses require cost-effective
software solutions from vendors that can provide a substantial amount of
assistance during the software system selection and implementation process, as
well as ongoing local support and service. Midmarket businesses also require
systems that can be rapidly implemented and are easy to learn, use and modify.

In order to ensure ongoing compatibility, supportability and ease of
maintenance, many Midmarket businesses are standardizing on Microsoft
technologies, most notably Windows NT and SQL Server as well as other Microsoft
BackOffice components. As a result, Midmarket businesses are demanding business
solutions that are native to Windows and optimized for Windows NT and Microsoft
SQL Server.

28
<PAGE>
Many Midmarket businesses experience rapid growth and have evolving business
models. These businesses require business solutions that can be customized
quickly and cost-effectively to accommodate the constantly changing nature of
their business systems and procedures. We believe that client/server business
solutions must allow Midmarket businesses to easily modify windows and reports,
to integrate third-party solutions and to quickly write and seamlessly integrate
custom applications.

Midmarket companies require business management solutions that can be scaled
up as their businesses grow. This requirement is best met by products that offer
broad functionality and scalable processing capabilities and that have an open
and flexible architecture that can easily incorporate additional technologies.

Midmarket companies are increasingly seeking Internet and electronic
commerce technologies that can extend the availability of information to
employees across the enterprise and allow them to effectively conduct business
over the Internet.

GREAT PLAINS STRATEGY

Our general strategy is to extend our position as a leading Midmarket
provider of business management solutions. To meet the needs of businesses in
the Midmarket, we have deployed the following specific strategies:

DELIVER FULLY INTEGRATED ENTERPRISE-WIDE BUSINESS MANAGEMENT
SOLUTION. Businesses in the upper-tier of the Midmarket are increasingly
demanding a fully integrated enterprise-wide business management solution. In
addition, Midmarket customers are looking for solutions that allow them to
leverage the Internet and electronic commerce trends for future business growth.
Great Plains, through its own internal development efforts and recent strategic
product acquisitions, provides a fully integrated enterprise-wide solution whose
components share the same platform, architecture and user interface. This
enterprise-wide solution consists of financial, enterprise reporting,
distribution, payroll and human resources, manufacturing, service management and
electronic commerce solutions. In addition, independent software vendors (ISVs)
offer more than 200 vertical and horizontal applications that further extend our
solutions.

EXTEND TECHNOLOGY LEADERSHIP. We have built a strong record of technical
leadership and continue to invest in developing new technologies and products.
Dynamics C/S+ and Dynamics provide award-winning functionality including
navigation, customization, information access, scalability and integration. With
Release 5.0, the power and functionality of Dynamics C/S+ and Dynamics are
further enhanced with new modules including Bill of Materials, the latest in
information access and navigation, additional intercompany processing
capabilities and more than 100 feature enhancements to improve ease of
installation, implementation and overall business management capabilities.
Furthermore, we use innovations in Microsoft technologies to continually improve
our products. Dynamics C/S+ and Dynamics were among the first business
management solutions in the Midmarket to support Windows 98 and among the first
to receive Microsoft Windows 95 (Dynamics C/S+ and Dynamics) and Microsoft
BackOffice (Dynamics C/S+) logo compliance (recognition from Microsoft that our
Dynamics C/S+ and Dynamics products meet the development criteria for Windows 95
as well as Microsoft BackOffice technologies, including Windows NT and Microsoft
SQL Server). In addition, Dynamics C/S+ was the first enterprise-wide business
management solution to fully integrate and leverage Microsoft Site Server,
Commerce Edition, enabling Midmarket businesses to integrate their web
storefront with financial and distribution applications. Our Dynamics C/S+ and
Dynamics products have received more than 15 industry awards, including "Best
Functionality" in the Microsoft BackOffice Challenge, an Editors' Choice Award
from PC Magazine and a Reviewers' Choice Award from Personal Computing Magazine
in the United Kingdom. We believe that our product architecture is well-suited
for ongoing integration of new technologies. We maintain a research team
dedicated to assessing new and emerging

29
<PAGE>
technologies. In addition, we intend to maintain our leadership in providing
customization capabilities that are essential to businesses in the Midmarket.

EXPAND AND STRENGTHEN PARTNER NETWORK. We believe that our Partner network has
been able to penetrate the Midmarket by providing high-quality, cost-effective
marketing and pre-sales, sales, and local service and consulting. Through our
channel development and recruiting efforts, as well as our training,
certification and performance recognition programs, we continue to strengthen
this network. We offer extensive programs that provide Partners training,
service and support to help them develop and expand their businesses, including
a program that assists Partners in recruiting additional personnel. We also have
programs to provide product and curricula offerings to colleges and universities
designed to increase the number of graduates familiar with our products. We host
a number of business and technology conferences each year, including "Stampede,"
an annual Partner conference in Fargo. More than 1,400 participants attended
Stampede 1998.

CONTINUE AWARD-WINNING SERVICE AND SUPPORT. We believe that high-quality
service and technical support are essential elements of a complete
enterprise-wide business solution and are vital to maintaining customer and
Partner satisfaction. We have received numerous industry awards for our customer
and Partner service and continue to invest in our support infrastructure. For
example, we expanded our Internet-based technical support to customers and
Partners and, in fiscal 1998, received industry recognition and awards for these
offerings. We believe that our initiatives will further increase the timeliness
and effectiveness of our service and technical support. In addition to offering
award-winning support on our Dynamics C/S+ and Dynamics products, we intend to
continue to support customers who use our DOS-based product, Great Plains
Accounting.

EXPAND GLOBAL PRODUCT OFFERING AND INFRASTRUCTURE. We currently sell our
products in the United States and through subsidiaries located in Canada, the
United Kingdom, Scandinavia, South Africa, Singapore and Australia. In addition,
we sell our products through international distribution Partners in Germany,
Poland, the Czech Republic, the Benelux Countries, Portugal, Latin America and
the Middle East. Our Dynamics C/S+ and Dynamics solutions have been sold in
approximately 92 countries. We intend to expand our global infrastructure by
expanding our existing subsidiary and international Partner operations, entering
new markets, and extending the global functionality of our Dynamics C/S+ and
Dynamics products.

COMMITMENT TO PARTNERS, CUSTOMERS, AND EMPLOYEES. We are deeply committed to
developing and sustaining long-term relationships with our Partners, customers,
and employees. The Great Plains Mission Statement: TO IMPROVE THE LIFE AND
BUSINESS SUCCESS OF PARTNERS AND CUSTOMERS, expresses this commitment. Great
Plains has been recognized throughout the industry for its high levels of
customer and Partner service and its commitment to its employees. In December
1997 and again in December 1998, Great Plains was named to the FORTUNE list of
the "100 Best Companies to Work For in America." Most recently, we received two
1998 Global Best Practices Awards-SM- from Arthur Andersen in the categories of
"Motivating and Retaining Employees" and "Exceeding Customer Expectations."
These relationships allow us to achieve overall cost savings through an
exceptionally low turnover rate and high rate of employee job satisfaction.

GREAT PLAINS TECHNOLOGY

Our Dynamics platform leverages key Microsoft technologies and provides the
following:

NATIVE WINDOWS AND WINDOWS NT IMPLEMENTATION. Our Dynamics platform is designed
to take full advantage of Microsoft Windows and Windows NT capabilities. Our
design philosophy has resulted in products that are easier to use and more
intuitive because they adhere closely to the same interface standards as Windows
desktop applications. Moreover, as native Windows applications,

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Dynamics C/S+ and Dynamics require less memory and enable more efficient
multi-tasking than screen-scraper products.

STANDARDS-BASED C++ DEVELOPMENT ARCHITECTURE. The development architecture of
our Dynamics platform is standards-based C++. This robust and flexible
development environment has enabled us to build our products to leverage
important technology advancements including 32-bit technologies, Windows NT,
Microsoft SQL Server, and Visual Basic for Applications. Most recently, we have
leveraged and embedded Visual Basic for Applications into our Dynamics platform,
allowing our customers and Partners to customize their solutions with a familiar
tool. The use of standards-based C++ as our development architecture provides us
flexibility in continuing to deliver solutions on the latest technologies and
platforms.

MICROSOFT SQL SERVER OPTIMIZATION. Dynamics C/S+ is optimized for the latest
releases of Microsoft SQL Server and includes stored procedures to enhance
distributed processing, overall performance and data integrity. Our
implementation of Microsoft SQL Server and Windows NT also enhances data
accessibility and system scalability.

INTEGRATION WITH MICROSOFT SITE SERVER, COMMERCE EDITION. We believe that
businesses that sell products or services, or takes orders via phone or fax
today, will increasingly seek to develop electronic commerce capabilities in the
very near future to ensure their ongoing success. Dynamics C/S+ was the first
Midmarket business management solution to fully integrate with Microsoft's Site
Server, Commerce Edition, enabling businesses to integrate their web storefront
with their financial and distribution applications. This integration is key to
our customers' ability to conduct business over the Internet, providing new
revenue opportunities and new markets, while also increasing order processing
efficiency.

COMPONENT-BASED ARCHITECTURE. The business rules, or financial logic, of our
products have been designed and developed into "logic components." This
component-based architecture or "object orientation" of our products allows us
to use software code multiple times within a product and from product to
product, increasing the speed with which new applications and product extensions
can be developed. The architecture of our products also allows our applications
and third-party applications to share a common user interface thereby creating a
seamless and easy to use environment for customers. Moreover, we make components
available to solution developer Partners, which facilitates their ability to
integrate companion products into our Dynamics platform.

COMPREHENSIVE COMPANION PRODUCT OFFERING. Because of its flexibility,
comprehensive development environment and standards-based architecture, the
Dynamics platform has attracted more than 200 independent solution developers.
These developers have built hundreds of vertical market products for the
Dynamics platform, in industries such as construction, financial services,
healthcare, legal and retail.

GREAT PLAINS SOLUTIONS

Our offering for larger Midmarket businesses, Dynamics C/S+, is a fully
integrated enterprise-wide business management solution consisting of financial,
enterprise reporting, distribution, payroll and human resources management,
manufacturing, service management, and electronic commerce solutions. Dynamics
C/S+ also delivers electronic commerce and Internet self-service solutions to
customers to help reduce costs, provide new revenue opportunities and increase
organizational efficiency. Our solution for smaller Midmarket businesses,
Dynamics, is a broad business management solution consisting of financial,
distribution, payroll and human resources solutions. Dynamics C/S+ and Dynamics
also provide reporting, customization, integration and development tools. In
addition, we offer a DOS- and Macintosh-based product, Great Plains Accounting.

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The following table provides selected information relating to the Dynamics
C/S+ and Dynamics product lines:

<TABLE>
<CAPTION>
DYNAMICS C/S+ DYNAMICS
---------------------------------- ----------------------------------
<S> <C> <C>
INITIAL RELEASE
DATE July 1994 February 1993

CURRENT VERSION/
RELEASE DATE Release 5.0/September 1998 Release 5.0/September 1998

REVENUE OF TARGET
CUSTOMERS: $10 to $250 million $1 to $10 million

DATABASE Microsoft SQL Server Btrieve from Pervasive Software

TYPICAL SYSTEM
PRICE RANGE* $20,000 to $75,000 $5,000 to $20,000

SOLUTION Financial, Enterprise Reporting, Financial, Distribution, Payroll,
Distribution, Payroll, Human and Human Resources
Resources, Manufacturing, Service
Management, and Electronic
Commerce
</TABLE>

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

* The Dynamics C/S+ typical system price range is based on systems with six to
20 users and three to six modules. A Dynamics C/S+ system that includes our
manufacturing solution typically costs more than $75,000. The Dynamics
typical system price range is based on systems with one to seven users and
four to six modules. The system price is the price paid by the customer to a
Partner and does not represent sale proceeds to Great Plains.

DYNAMICS C/S+

Currently in Release 5.0, Dynamics C/S+ is our enterprise-wide solution for
Midmarket businesses that have high volume processing requirements, complex
enterprise-wide business management needs and formal IT departments. Dynamics
C/S+ was one of the first enterprise solutions to receive Microsoft Windows 95
and BackOffice logo compliance, and was the first enterprise-wide solution to
fully integrate with Microsoft Site Server, Commerce Edition. The Dynamics C/S+
solution consists of the following series of modules:

FINANCIAL. The Dynamics C/S+ Financial Series consists of General Ledger,
Fixed Assets, Accounts Receivable, and Accounts Payable. The Financial Series
is designed to meet the needs of businesses requiring a solution that removes
the complexity of comprehensive financial analysis, multicurrency management,
euro currency and intercompany processing requirements. The Financial Series
shares the same platform, architecture and user interface as all Dynamics
C/S+ solution components and is designed to meet the needs of businesses
across all industries.

ENTERPRISE REPORTING. The Enterprise Reporting Series is designed for
sophisticated group reporting and consolidation needs, and includes advanced
multi-dimensional consolidation and eliminations with complete multicurrency
capabilities. Enterprise Reporting couples solid information control with a
high degree of flexibility to mold the reporting processes around evolving
business practices.

DISTRIBUTION. The Dynamics C/S+ Distribution Series consists of Inventory,
Bill of Materials, Sales Order Processing and Purchase Order Processing and
an Internet self-service application, Dynamics.Requisition, that allows
customers to automate the purchase requisition and approval

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process. The Distribution Series is designed to meet the needs of wholesale
distribution and manufacturing businesses in the Midmarket and is integrated
with the Dynamics C/S+ Manufacturing and Financial Series. In addition, the
Distribution Series is a key component in our two electronic commerce
solutions, Dynamics.Commerce and Dynamics.Order.

PAYROLL AND HUMAN RESOURCES. The Dynamics C/S+ Payroll and Human Resources
management solution consists of Payroll, Human Resources and Direct Deposit.
The Payroll and Human Resources solution is designed to meet the needs of
Midmarket businesses across all industries and is integrated with the
Dynamics C/S+ Financial Series. In addition, for Midmarket manufacturing
businesses, the Dynamics C/S+ Payroll and Human Resources solution integrates
with the Dynamics C/S+ Manufacturing Series, allowing more accurate cost
accounting for Midmarket discrete manufacturing firms.

MANUFACTURING. The Dynamics C/S+ Manufacturing Series consists of Bill of
Materials, Materials Requirements Planning, Capacity Requirements Planning,
Master Production Scheduling, Sales Forecasting, Sales Configuration, Job
Costing, Manufacturing Orders and Engineering Change Management. The
Manufacturing Series is designed to meet the needs of discrete manufacturing
businesses in the Midmarket and is integrated with the Dynamics C/S+
Financial Series, Distribution Series, and Payroll and Human Resources
solution. In addition, the Manufacturing Series shares the same platform,
architecture and user interface with all Dynamics C/S+ solution components.

SERVICE MANAGEMENT. The Dynamics C/S+ Service Management Series consists of
Service Call Management, Depot Management, Contract Administration,
Preventive Maintenance and Returns Management. In addition, the solution
consists of an Internet self-service application, Dynamics.Service Center,
that allows customers to schedule a service technician visit over the
Internet. The Service Management Series is designed for service businesses in
the Midmarket who deliver fee, contract, or warranty-based services either at
a customer's site or at a depot location. The Service Management Series is
integrated with the Dynamics C/S+ Financial Series and Distribution Series.
In addition, the Service Management Series can be utilized by Manufacturing
Series customers who service the products they manufacture. The Dynamics C/S+
Service Management Series shares the same platform, architecture and user
interface with all Dynamics C/S+ solution components.

ELECTRONIC COMMERCE. The drive to a virtual economy is changing the way
businesses collaborate around the world. The Company believes that to survive
and thrive, businesses need to look past traditional geographic boundaries,
sales channels and business porcesses, and adopt a forward-looking approach
to business on the World Wide Web. Our two Dynamics C/S+ electronic commerce
solutions, Dynamics.Commerce and Dynamics.Order, help customers meet these
challenges. Dynamics.Commerce is fully integrated with Microsoft Site Server,
Commerce Edition and allows Midmarket businesses to integrate their web
storefront with their Dynamics C/S+ Financial Series and Distribution Series.
Dynamics.Commerce provides a fully-configurable solution for
consumer-to-business web-based order processing. The Company believes that
businesses using Dynamics.Commerce experience improved sales efficiency and
reduced order entry errors and achieve the ability to expand into new
markets. Dynamics.Order provides a business-to-business order processing
solution for Midmarket businesses who need a web page presence without an
elaborate web storefront.

DYNAMICS

Currently in Release 5.0, Dynamics is our business management solution for
Midmarket businesses that need a Windows solution that is highly flexible,
feature-rich and cost-effective, but does not require IT personnel dedicated to
database administration. Dynamics is designed for industry

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<PAGE>
standard technologies, including Microsoft Windows 98, Windows NT and Visual
Basic for Applications. Dynamics has received several industry awards and was
one of the first business applications to receive Windows 95 logo compliance.
The Dynamics solution consists of the following modules:

FINANCIAL. The Dynamics Financial Series consists of General Ledger,
Accounts Receivable, and Accounts Payable. The Dynamics Financial Series is
designed to meet the needs of smaller businesses in the Midmarket and is
fully integrated with all other components of the Dynamics solution.

DISTRIBUTION. The Distribution Series consists of Inventory, Sales Order
Processing, Purchase Order Processing and Bill of Materials. The Distribution
Series is designed to meet the distribution needs of wholesale distribution
and light manufacturing businesses in the Midmarket and is integrated with
the Dynamics Financial Series.

PAYROLL AND HUMAN RESOURCES. The Dynamics Payroll and Human Resources
solution consists of Payroll, Human Resources and Direct Deposit. The
Dynamics Payroll and Human Resources solution is designed to meet the needs
of smaller Midmarket businesses across all industries and is integrated with
the Dynamics Financial Series.

In addition to the Dynamics Financial Series, Distribution Series, and Payroll
and Human Resources solution, numerous independent software developers provide
vertical solutions on the same platform with the same architecture and interface
as the Dynamics solution, allowing Dynamics customers and Partners to deploy a
fully integrated business management solution.

DYNAMICS PLATFORM BUSINESS TOOLS

The Dynamics products are enhanced by reporting tools, consisting of the
Dynamics Report Writer, Crystal Reports, Dynamics.View and FRx, a financial
report writer. The Dynamics Report Writer and Crystal Reports enable our
Dynamics C/S+ and Dynamics customers and Partners to meet their specialized
reporting needs. Dynamics.View, an Intranet-based application, allows employees
across a customer's enterprise to gain secure access to business information via
a web browser. The financial report writer provided by FRx software delivers a
spreadsheet-like interface to deliver flexible financial report design. In
addition, for Dynamics C/S+ customers, we offer a Dynamics C/S+ edition of
Cognos PowerPlay, which includes specialized reporting templates for
sophisticated reporting and analysis.

DYNAMICTOOLS: CUSTOMIZATION AND INTEGRATION

Our series of customization and development tools, DynamicTools, allows
customers and Partners to customize and extend the functionality of Dynamics
C/S+ and Dynamics. Key tools in the DynamicTools series are Dexterity, Modifier
with Visual Basic for Applications, Integration Manager, Continuum for Visual
Basic, and Continuum for Excel. Dexterity enables customers and third party
developers to create applications that seamlessly integrate with, and have the
same look and feel as, our Dynamics platform. Modifier with Visual Basic for
Applications can be used to customize any Dynamics or Dynamics C/S+ window,
report, control or business logic component. The Company believes that
Integration Manager allows customers or Partners to quickly integrate Dynamics
C/S+ or Dynamics with any external system, such as spreadsheets, databases,
payroll systems, fixed asset systems, corporate mainframes or any other "legacy"
system. Continuum for Visual Basic facilitates integration between our Dynamics
platform and Microsoft Visual Basic applications through the use of wizards
(on-line instruction guides) and point-and-click operations. Continuum for
Microsoft Excel facilitates integration between our Dynamics platform and
Microsoft Excel spreadsheets through the use of wizards and point-and-click
operations.

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<PAGE>
GREAT PLAINS ACCOUNTING

Our Great Plains Accounting product is available for DOS and Macintosh
operating systems in LAN and single user environments. Great Plains Accounting
includes a series of financial and distribution applications that provide
customers with a broad range of features and functions. The most recent versions
of Great Plains Accounting, Version 9 and Great Plains Accounting for Windows,
were released in February 1997 and December 1997, respectively. Both releases
were marketed primarily to existing Great Plains Accounting customers. We are
actively promoting the migration of our Great Plains Accounting customers to our
Dynamics platform. Revenues from our Great Plains Accounting product have been
declining, and we expect that these revenues will continue to decline in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Revenues."

SALES AND MARKETING

SALES. We sell, implement and support our products exclusively through our
Partner network consisting of VARs, systems integrators, ISVs, national,
regional and local accounting firms, and specialized software consultants. Our
Partners are independent organizations that perform some or all of the following
functions: sales and marketing; systems implementation and integration; software
development and customization; and ongoing consulting, training, service and
technical support. In many instances, a Partner's primary source of income is
derived from selling, implementing and supporting our products.

We believe that our Partners have a significant influence over product choices
by customers and that our relationship with our Partners is an essential element
in our marketing, sales and implementation efforts. Through our Partner network,
we are able to provide customers with trained and knowledgeable solution
professionals who are available locally to implement our systems as well as
provide ongoing service and support. Many of our Partners customize our systems
to fit individual business needs and develop industry-specific software
applications that integrate with and extend the functionality of our products.

We actively recruit VARs through channel development groups.

More importantly, we continue to assist our Partners in growing their businesses
through:

- Management strategy consulting

- Employee recruitment and placement

- Comprehensive training and support

- Cooperative marketing programs

- Annual professional conferences

We also have specialized strategies aimed at recruiting and supporting ISVs
and accounting firms. All Partners are required to undergo training and
certification procedures before being authorized to sell and implement our
products and must maintain certain standards and sales volumes to retain such
authorization.

We have subsidiaries located in Canada, the United Kingdom, Scandinavia, South
Africa, Singapore and Australia. In addition, we have established distribution
relationships with international Partners in Western and Eastern Europe, the
Middle East, and Latin America to further the international distribution of our
products. These international distribution Partners typically localize and
translate our products, locate and train qualified Partners, market our products
and provide ongoing customer service and technical support. International
Partners typically pay localization and translation costs for our software in
exchange for exclusive distribution rights, while we retain ownership of the
localized version of the software. Together with our international distributors,
we have developed localized language versions of

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<PAGE>
our Dynamics C/S+ and Dynamics products including Arabic, German, Polish,
Portuguese, Russian and Spanish. In addition, we have developed localized
versions for the United Kingdom, Australia, New Zealand, South Africa and
French-speaking Canada. Our product architecture is designed to facilitate the
translation, localization and maintenance of multilingual, multinational
versions. Moreover, we have euro-compatible product shipping in the third
quarter of fiscal 1999.

Our international business may be affected by such factors as local economic and
market conditions, political and economic instability, difficulties in enforcing
intellectual property and contract rights, difficulties in tailoring our
products to fit local accounting principles, rules, regulations, language, tax
codes and customs, fluctuations in currency exchange rates, difficulties and
costs of staffing and managing foreign operations, and the need for compliance
with a wide variety of foreign and United States export regulations.

MARKETING. We are focused on building market awareness and acceptance of
the Great Plains name and products, as well as on generating qualified customer
and Partner leads. Customer leads are pursued by Partners with assistance from
our sales personnel. We have a comprehensive marketing strategy with several key
components: corporate and product image and awareness building, direct marketing
to both prospective and existing customers, a strong Web presence, broad-scale
events with strategic partners and local marketing with Partners. Our corporate
image strategy primarily includes national advertising in key financial,
business and technology publications as well as public relations activities. Our
direct marketing activities include ongoing direct mail efforts to existing and
prospective customers. For prospective customers, we offer seminars and
self-qualifying tools to assist them in selecting business management solutions.
Seminars are offered in conjunction with Partners in their local or
industry-specific markets. We increase product awareness by sponsoring
large-scale events and seminars for prospective customers with key industry
partners, such as Microsoft, Compaq, and IBM. Finally, our marketing strategy is
designed to take advantage of our Partner network by including cooperative
marketing programs designed for Partners' local markets.

CUSTOMERS

Our Dynamics C/S+ and Dynamics products offer functionality and scalability
to suit a wide range of Midmarket businesses, from fast-growing entrepreneurial
businesses to divisions of large enterprises. Our products, implemented alone or
with an industry-specific third party application, have been purchased by
companies in a wide variety of industry types, such as:

<TABLE>
<CAPTION>
<S> <C> <C>
Advertising Healthcare Professional Sports
Broadcasting Hospitality Publishing
Computer Software Information Services Retail
Construction Insurance and Financial Services Service Management
Distribution Internet Software and Services Telecommunications
Education Manufacturing Transportation
</TABLE>

As of November 30, 1998, our products had been purchased by more than 17,000
Midmarket businesses.

CUSTOMER AND PARTNER SERVICE

We believe that high-quality service and technical support is an important
component of a complete business management solution and is critical to the
long-term satisfaction of our customers and Partners. We have received numerous
awards for our Partner and customer service, including the 1996 Positive
Performer Grand National Award for excellence in customer service from Inc.
magazine and MCI Communications.

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<PAGE>
Great Plains was one of the first personal computer software providers to
introduce fee-based support plans and guaranteed telephone response times. We
also maintain profiles and detailed call histories on each of our customers and
Partners. These profiles enable our support personnel to respond more
effectively to service inquiries, allowing us to better forecast which customers
are likely to purchase new products or upgraded versions of existing products
and assisting us in developing new applications and features that accurately
address the needs of the marketplace.

We provide service and technical support through a service organization
consisting of 246 employees as of November 30, 1998. We provide a variety of
training, technical support and service programs for customers that supplement
the primary support provided by Partners. We offer video, teleconference and
classroom training as well as technical support through a toll-free number, our
Web site and on-site consultations. Telephone support calls are handled by
professional support personnel and have various guaranteed response times,
depending on the type of support plan purchased. Response times as short as 30
minutes are offered. In addition to our technical support programs, customers
are offered software maintenance programs for an annual fee. These programs
provide customers with product upgrades and on-line information and assistance
through our award-winning CustomerSource web site. We also offer comprehensive
training and product support to our Partners including an award-winning web
site, PartnerSource, to ensure that they provide the necessary levels of
technical support and assistance to customers. Finally, we offer our Partners a
variety of consulting resources for resale to customers, including strategic
implementation planning, project management and product customization.

RESEARCH AND DEVELOPMENT

Since its inception, Great Plains has made substantial investments in
research and development. During the fiscal years 1996, 1997, and 1998, software
development expenses were $8.9 million, $9.7 million and $12.6 million,
respectively. As of November 30, 1998, we had 245 employees engaged in research
and development.

Our research and development efforts employ a standard development process
to guide software development through stages of product concept, market
requirements analysis, product definition, design specification, coding, testing
and release. These efforts are also focused on identifying, developing and
integrating leading technologies into our products to better meet customer
needs.

Our software products are designed for Microsoft technologies, including
Windows NT, Windows 98, and SQL Server. In addition, our products utilize other
Microsoft technologies, including Site Server and Visual Basic for Applications.
Accordingly, our strategy requires that our products and technology are
compatible with new developments in Microsoft's technology.

INTELLECTUAL PROPERTY RIGHTS AND LICENSES

We regard certain features of our internal operations, software and
documentation as our intellectual property. We rely on a combination of
contract, copyright, trademark and trade secret laws, a mandatory software
registration mechanism and other measures to protect our intellectual property.
We have no patents. We believe that, because of the rapid pace of technological
change in the computer software industry, trade secret and copyright protection
are less significant than factors such as the knowledge, ability and experience
of our employees, frequent product enhancements and the timeliness and quality
of support services. It is our policy to file for protection of our basic
trademarks and service marks in countries in which we sell our products either
directly or through our international Partners and in countries in which
protection is advisable. Despite these measures there can be no assurance that
we will be able to fully protect our intellectual property.

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We provide products to customers on a "right-to-use" basis under
non-exclusive licenses, which generally are nontransferable and have a perpetual
term. We typically license our products solely for the customer's internal
operations.

COMPETITION

The market for our products is highly competitive and rapidly changing. Our
primary market consists of businesses in the Midmarket. Our current and
prospective competitors offer a variety of solutions for this market. We
experience significant competition and expect substantial additional competition
from established and emerging software companies. We compete on the basis of:

- product features, functionality, performance and price

- the capacity and capabilities of Partners

- the quality of customer and Partner service and technical support

- sales and marketing efforts

- new product and technology introductions

- company image and stability

We believe we compete effectively on each of these factors.

In the United States, Dynamics C/S+ (our product for larger Midmarket
businesses) competes with products from Platinum Software and other companies,
and Dynamics (our product for smaller Midmarket businesses) competes with
products from Solomon Software, Sage (State of the Art), Macola and other
companies. In Canada, we face competition from those companies and others
including Computer Associates International. Outside North America, we face a
number of competitors, several of which have significant market share in their
home markets. We also face competition from providers of industry-specific
applications as well as indirect competition from in-house, customer-developed
financial management applications.

In the field service and depot repair market, we face competition in North
America from Astea, Clarify and Vantive.

Many of our competitors have greater financial, marketing and technical
resources than we do. We cannot assure you that we will continue to compete
successfully against these companies.

FACILITIES

Our principal administrative, marketing, production and product development
facilities consist of an aggregate of approximately 86,000 square feet at three
locations in Fargo, North Dakota. In addition, we have research and development
offices in a suburb of Minneapolis, Minnesota, a suburb of Seattle, Washington,
and Watertown, South Dakota. We also have leased office space in each of our
subsidiary office locations. We occupy the Fargo and research and development
sites under lease agreements that expire at various times through June 2002.
Total rent expense during fiscal 1996, 1997, and 1998 was

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<PAGE>
$871,000, $866,000 and $1,054,000, respectively. We plan to move into a larger
leased facility in Fargo, North Dakota in the first quarter of fiscal 2000. The
move to this new facility is expected to approximately double our annual rent
expense.

PRODUCTION

The principal physical components of our software products are computer
media and manuals. We prepare master software disks, manuals and packaging
materials that are then duplicated by us and third party vendors. To date, we
have not experienced any material difficulties or delays in the manufacture and
assembly of our products or material returns due to product defects.

EMPLOYEES

As of November 30, 1998, the Company had a total of 877 full time equivalent
employees ("FTEs"), including 539 FTEs in sales, marketing, technical support
and consulting services, 245 FTEs in research and development and 93 FTEs in
administration. None of our employees are represented by a labor union.
Management believes that its relations with the employees are good.

LEGAL PROCEEDINGS

From time to time, we are involved in litigation arising out of operations
in the normal course of business. As of the date of this prospectus, we are not
a party to any legal proceedings the adverse outcome of which, individually or
in the aggregate, could reasonably be expected to have a material adverse effect
on our results of operations or financial position.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages and
positions, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- ----------- --------------------------------------------------------
<S> <C> <C>
Chairman of the Board, President and Chief Executive
Douglas J. Burgum........... 42 Officer
Terri F. Zimmerman.......... 35 Chief Financial Officer and Executive Vice President
Steven K. Sydness........... 43 Executive Vice President
Jodi A. Uecker-Rust......... 37 Executive Vice President
Brian R. Carey.............. 40 Executive Vice President
Darren C. Laybourn.......... 36 Vice President, Global Development
Bradley J. Burgum........... 46 Director and Secretary
Frederick W. Burgum......... 52 Director
William V. Campbell......... 58 Director
Raymond F. Good............. 70 Director
J.A. Heidi Roizen........... 40 Director
Joseph S. Tibbetts, Jr...... 46 Director
</TABLE>

DOUGLAS J. BURGUM has served as President of the Company since March 1984,
Chief Executive Officer since September 1991 and Chairman of the Board since
January 1996. Mr. Burgum was an early investor in the Company, and he initially
served as Vice President and a director from March 1983 to March 1984. Before
joining the Company, Mr. Burgum was a management consultant in the Chicago
office of McKinsey & Company, Inc. Mr. Burgum holds a B.U.S. from North Dakota
State University and an M.B.A. from the Stanford University Graduate School of
Business.

TERRI F. ZIMMERMAN has served as an Executive Vice President since October
1998 and as the Company's Chief Financial Officer since February 1997. She also
held the title of Group Vice President, Finance and Operations prior to her
appointment as Executive Vice President. She held the position of Vice President
of Finance and Operations from June 1995 to June 1996. Ms. Zimmerman joined the
Company as Director of Finance in September 1994. She was previously employed by
Deloitte & Touche LLP in Minneapolis as a Senior Manager. Ms. Zimmerman holds a
B.A. in Business Administration from the University of North Dakota. Ms.
Zimmerman is a Certified Public Accountant.

STEVE K. SYDNESS has served as an Executive Vice President since October
1998 and Vice President, International Operations since June 1997. Mr. Sydness
was Vice President, Dynamics since July 1996 and Vice President, Business
Development from June 1995 to June 1996, Vice President of Sales from June 1994
to June 1995 and Vice President of Strategic Planning June 1993 to June 1994.
Prior to joining Great Plains Software in January 1987, he was employed by Dr.
Henry Kissinger Associates and the management consulting firm McKinsey &
Company, Inc. in their New York and Tokyo offices. Mr. Sydness holds a B.A. from
Principia College and an M.B.A. from Harvard Business School.

BRIAN R. CAREY has served as an Executive Vice President since October 1998
and Vice President of Business Development since July 1996. Mr. Carey was Vice
President of Product Development from June 1995 to June 1996. He was General
Manager and later Vice President and General Manager of the Small Business
Systems Unit of the Company from August 1992 to June 1995. Mr. Carey joined the
Company in June 1989. Before such time, he was employed by First Interstate
Bancorp, where he was Senior Vice President and Manager of the Retail Banking
Division. Previously, Mr. Carey was employed by Xerox Corporation in Minneapolis
as a Sales Executive. He holds a B.S. in Marketing from Moorhead State
University.

JODI A. UECKER-RUST has served as an Executive Vice President since October
1998 and Vice President, Center for Organizational Excellence (CORE) and
Heritage Business since June 1996.

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Ms. Uecker-Rust served a Vice President of Employee Services for the Company
from August 1994 through May 1996 and as Vice President of Operations and
Customer Service from June 1993 through August 1994. Ms. Uecker-Rust has been
with Great Plains Software for over 13 years. Prior to 1984 she was with
Honeywell, Inc.

DARREN C. LAYBOURN has served as Vice President, Global Development since
July 1998. From June 1997 to July 1998, Mr. Laybourn served as General Manager,
Global Development and from June 1994 to June 1997 he was General Manager,
Dynamics Tools. Mr. Laybourn joined the Company in 1994 and prior to that time
was employed by The Boeing Company in Seattle, where he led development efforts
supporting manufacturing and corporate computing infrastructure. He holds a B.
S. in Computer Science and Mathematics from the University of Washington.

BRADLEY J. BURGUM has served as a director of the Company since 1984 and as
Secretary since January 1996. Mr. Burgum has practiced law in Casselton, North
Dakota for 21 years and is currently a shareholder and President of the Burgum &
Irby Law Firm, P.C. He has served on the Board of Directors for the Arthur
Companies, Inc., a privately-held diversified agribusiness corporation, since
1974. Mr. Burgum holds a B.S. in Business Economics from North Dakota State
University and a J.D. from the University of North Dakota School of Law. Mr.
Burgum is a Certified Public Accountant.

FREDERICK W. BURGUM has served as a director of the Company since 1988. Mr.
Burgum has been Chairman of the Board of the Arthur Companies, Inc. since 1984
and has served as its Chief Executive Officer since June 1992. He has served as
Senior Vice President and a director of the First State Bank of North Dakota
since 1972. Mr. Burgum is veteran of the United States Army and holds a B.Ph.
from the University of North Dakota.

WILLIAM V. CAMPBELL has served as a director of the Company since March
1997. Mr. Campbell is Chairman of the Board of Intuit, Inc., a publicly held
company based in Palo Alto, California. Mr. Campbell served as both President
and Chief Executive Officer of Intuit Inc. from April 1994 to June 1998. Prior
to joining Intuit Inc., Mr. Campbell was President and Chief Executive Officer
of GO Corporation, a pen-based computing software company, from January 1991 to
December 1993. He was the founder, President and Chief Executive Officer of
Claris Corporation, a software subsidiary of Apple Computer, Inc., from 1987 to
January 1991. Mr. Campbell has also held senior executive positions at Apple
Computer, Inc. and senior management positions at Kodak and J. Walter Thompson,
an advertising agency in New York. Mr. Campbell is also a director of Apple
Computer, Inc. and SanDisk, Inc. Mr. Campbell holds both a B.S. and a M.S. in
Economics from Columbia University. He is presently a director of the National
Football Foundation and Hall of Fame.

RAYMOND F. GOOD has served as a director of the Company since 1988. He is an
independent executive consultant. From 1986 to 1992, he was a partner of Regis
McKenna. Mr. Good has also served as Vice President of Marketing Strategy for
Control Data Corporation, President of Heinz USA, Chief Executive Officer of The
Pillsbury Consumer Group, and Chairman of the Board and Chief Executive Officer
of Munsingwear, Inc. Earlier in his career, he served as a management consultant
in the New York office of McKinsey & Company, Inc. Mr. Good is a veteran of the
United States Marine Corps. He holds a B.S. from the University of Connecticut
and an M.B.A. from Harvard Business School.

J.A. HEIDI ROIZEN has served as a director of the Company since February
1997. Ms. Roizen consults to a number of clients in the technology sector in the
areas of strategy, business development, partnering and marketing. Ms. Roizen is
also currently a director of Be, Inc., Preview Systems, and Softbook Press, and
is a board advisor to Personic Software, Inc., WhoWhere, Inc. and the Software
Forum. Ms. Roizen is also a member of the Stanford Board of Trustees Nominating
Committee. Ms. Roizen served as Vice President of World Wide Developer Relations
for Apple Computer from 1996 to 1997 and as Chief Executive Officer of T/Maker
Company from 1983 to 1996. Ms. Roizen is a past president of the Software
Publishers Association and has served as a Public Governor of the Pacific

41
<PAGE>
Exchange. Ms. Roizen holds a B.A. in English from Stanford University and an
M.B.A. from the Stanford Graduate School of Business.

JOSEPH S. TIBBETTS, JR. has served as a director of the Company since
October 1996. He has served as Senior Vice President, Finance and Administration
and Chief Financial Officer of Lightbridge, Inc., a publicly-held company based
in Burlington, Massachusetts, since May 1998. He served as Vice President,
Finance and Administration, Chief Financial Officer and Treasurer of SeaChange
International, Inc., a publicly-held company based in Maynard, Massachusetts,
from June 1996 to March 1998. From November 1976 to June 1996, Mr. Tibbetts was
employed as a Certified Public Accountant by Price Waterhouse LLP. He became a
Partner of the firm in 1986 and the National Director of its Software Services
Group in 1991. Mr. Tibbetts holds a B.S. in Business Administration from the
University of New Hampshire and is a graduate of the Stanford Business School
Executive Program for Growing Companies.

Douglas J. Burgum and Bradley J. Burgum are brothers, and Frederick W.
Burgum is their cousin.

42
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 16, 1998 and as adjusted
to reflect the sale of the Common Stock offered hereby by (i) each shareholder
known by the Company to be the owner of more than 5% of the outstanding Common
Stock (ii) each executive officer of the Company, (iii) each director of the
Company (iv) all directors and executive officers as a group and (v) each
selling shareholder. Except as otherwise noted, the persons or entities named
have sole voting and investment power with respect to all shares shown as
beneficially owned by them.

<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) OFFERING
---------------------- SHARES TO ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT BE SOLD NUMBER PERCENT
- ---------------------------------------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Frederick W. Burgum(2).................. 2,453,665 17.7% -- 2,453,665 16.5%
Douglas J. Burgum(3).................... 1,912,017 13.8 200,000 1,712,017 11.5
The Goldman Sachs Group, L.P.
and affiliated entities(4)............ 1,207,627 8.7 700,000 507,627 3.4
Essex Investment Management(5).......... 883,088 6.4 -- 883,088 5.9
Bradley J. Burgum(6).................... 543,325 3.9 25,000 518,325 3.7
Barbara K. Burgum....................... 408,585 3.0 40,000 368,585 2.5
Steven K. Sydness(7).................... 93,639 * -- 93,639 *
Jodi A. Uecker-Rust(8).................. 51,522 * -- 51,522 *
Terri F. Zimmerman(9)................... 49,930 * -- 49,930 *
Brian R. Carey.......................... 35,506 * -- 35,506 *
Darren C. Laybourn(10).................. 29,956 * -- 29,956 *
Raymond F. Good(11)..................... 24,000 * -- 24,000 *
J.A. Heidi Roizen(12)................... 15,000 * -- 15,000 *
William V. Campbell(13)................. 14,000 * -- 14,000 *
Joseph S. Tibbetts, Jr.(14)............. 14,000 * -- 14,000 *
All directors and executive officers
as a group (12 persons)(15)........... 5,243,361 37.4 225,000 5,018,361 33.3
</TABLE>

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

* Less than one percent.

(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission (the "Commission"), and includes
generally voting power and/or investment power with respect to securities.
Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days of December 16, 1998 ("Currently Exercisable
Options") are deemed outstanding for purposes of computing the percentage
beneficially owned by the person holding such options but are not deemed
outstanding for purposes of computing the percentage beneficially owned by
any other person.

(2) Includes 9,000 shares issuable pursuant to Currently Exercisable Options
and shares held by certain members of Frederick W. Burgum's household that
are beneficially owned by Mr. Burgum. His address is 1701 S.W. 38th Street,
Fargo, North Dakota 58103. Douglas J. Burgum, Bradley J. Burgum and Barbara
K. Burgum are siblings, and Frederick W. Burgum is their cousin.

(3) Includes 37,566 shares issuable pursuant to Currently Exercisable Options
and shares held by certain members of Douglas J. Burgum's household that
are beneficially owned by Mr. Burgum. His address is 1701 S.W. 38th Street,
Fargo, North Dakota 58103.

43
<PAGE>
(4) Includes shares owned by certain investment partnerships (the "GS
Partnerships"), of which affiliates of The Goldman Sachs Group, L.P. are
the general partner, managing general partner or investment manager, as
follows (prior to the offering of shares hereby): GS Capital Partners,
L.P.: 1,060,368 shares; Bridge Street Fund 1994 L.P.: 73,872 shares; and
Stone Street Fund 1994 L.P.: 71,387 shares, of which 615,661 shares, 42,891
shares and 41,448 shares, respectively, are offered to be sold in the
offering contemplated hereby. The Goldman Sachs Group, L.P. disclaims
beneficial ownership of the shares owned by the GS Partnerships to the
extent attributable to partnership interests therein held by persons other
than The Goldman Sachs Group, L.P. and its affiliates. Each of the GS
Partnerships shares voting and investment power with certain of its
respective affiliates. The address of The Goldman Sachs Group, L.P. is 85
Broad Street, New York, New York 10004. Does not include 2,000 shares
issuable pursuant to Currently Exercisable Options held for the benefit of
the Goldman Sachs Group, L.P. in the name of Sanjeev K. Mehra, a former
Director of the Company and a Managing Director in the Principal Investment
Area of Goldman, Sachs & Co. Also does not include shares of Common Stock
which may be deemed to be beneficially owned by Goldman, Sachs & Co. as a
result of ordinary course trading activities from time to time or shares of
Common Stock held in client accounts ("Managed Accounts") with respect to
which Goldman, Sachs & Co. or its employees have voting or investment
discretion, or both. Goldman, Sachs & Co. disclaims beneficial ownership of
the shares of Common Stock held in Managed Accounts. Also does not include
shares of Common Stock held by Greene Street 1998 Exchange Fund, L.P.
Goldman, Sachs & Co. is the investment manager, and an affiliate of
Goldman, Sachs & Co. is the general partner, of Greene Street 1998 Exchange
Fund, L.P. Goldman, Sachs & Co. disclaims beneficial ownership of the
shares of Common Stock held by Greene Street 1998 Exchange Fund, L.P.
except to the extent of its pecuniary interest therein.

(5) Essex Investment Management Company ("Essex") reported on Schedule 13G,
dated January 16, 1998, filed with the Securities and Exchange Commission,
that it had sole voting power with respect to 671,918 shares, no shared
voting power with respect to such shares, and sole dispositive power with
respect to 883,088 shares. Essex reported that its filing was made in its
capacity as an investment advisor. The address of Essex is 125 High Street,
29(th) Floor, Boston, MA 02110-2702.

(6) Includes 9,000 shares issuable pursuant to Currently Exercisable Options
and shares held by certain members of Bradley J. Burgum's household that
are beneficially owned by Mr. Burgum.

(7) Includes 16,334 shares issuable pursuant to Currently Exercisable Options
and shares held by certain members of Steven K. Sydness's household that
are beneficially owned by Mr. Sydness.

(8) Includes 8,666 shares issuable pursuant to Currently Exercisable Options.

(9) Includes 37,998 shares issuable pursuant to Currently Exercisable Options.

(10) Includes 12,166 shares issuable pursuant to Currently Exercisable Options.

(11) Includes 9,000 shares issuable pursuant to Currently Exercisable Options.

(12) Includes 14,000 shares issuable pursuant to Currently Exercisable Options.

(13) Includes 14,000 shares issuable pursuant to Currently Exercisable Options.

(14) Includes 13,000 shares issuable pursuant to Currently Exercisable Options.

(15) Includes 188,730 shares issuable pursuant to Currently Exercisable
Options.

44
<PAGE>
LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain
legal matters in connection with the offering will be passed upon for the
Underwriters by Hale and Dorr LLP, Boston, Massachusetts.

EXPERTS

The consolidated balance sheet and the related consolidated statements of
income, of stockholders' equity, and of cash flows of the Company at May 31,
1996, 1997 and 1998, and for each of the three years then ended included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

45
<PAGE>
GREAT PLAINS SOFTWARE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of PricewaterhouseCoopers LLP...................................... F-2

Consolidated Balance Sheet as of May 31, 1997 and 1998 and as of November
30, 1998 (unaudited).................................................... F-3

Consolidated Statement of Income for the years ended May 31, 1996, 1997
and 1998 and for the six months ended November 30, 1997 and 1998
(unaudited)............................................................. F-4

Consolidated Statement of Stockholders' Equity for the years ended May 31,
1996, 1997 and 1998 and for the six months ended November 30, 1998
(unaudited)............................................................. F-5

Consolidated Statement of Cash Flows for the years ended May 31, 1996,
1997 and 1998 and for the six months ended November 30, 1997 and 1998
(unaudited)............................................................. F-6

Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholders of
Great Plains Software, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity (deficit) and of cash
flows present fairly, in all material respects, the financial position of Great
Plains Software, Inc. and its subsidiaries at May 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended May 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP

Minneapolis, Minnesota
June 19, 1998

F-2
<PAGE>
GREAT PLAINS SOFTWARE, INC.

CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
MAY 31,
----------------- NOVEMBER
1997 1998 30, 1998
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $12,101 $ 18,197 $ 22,563
Investments........................... 4,142 48,721 48,326
Accounts receivable, net.............. 5,452 8,790 9,927
Inventories........................... 567 542 854
Prepaid expenses and other assets..... 1,164 2,914 3,013
Deferred income tax assets............ 3,279 4,630 5,004
------- -------- -----------
Total current assets................ 26,705 83,794 89,687
Property and equipment, net............. 5,821 8,501 10,542
Goodwill and other intangibles, net..... 438 4,946 4,371
Deferred income tax assets.............. -- 3,318 3,318
Other assets............................ 250 2,286 3,670
------- -------- -----------
Total assets........................ $33,214 $102,845 $111,588
------- -------- -----------
------- -------- -----------

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable...................... $ 1,788 $ 4,135 $ 3,256
Accrued expenses...................... 4,698 6,941 8,897
Income tax payable.................... -- 3,257 --
Salaries and wages payable............ 510 836 1,064
Commissions payable................... 2,603 2,668 1,400
Deferred revenues..................... 10,448 15,133 20,337
------- -------- -----------
Total current liabilities........... 20,047 32,970 34,954
Deferred income tax liabilities......... 746 204 204
------- -------- -----------
Total liabilities................... 20,793 33,174 35,158

Commitments and contingencies (Note 9)

Mandatorily redeemable convertible
preferred stock: 10,000,000 authorized
preferred shares, Series B, 1,345,220
shares issued and outstanding at May
31, 1997.............................. 28,698 -- --
Stockholders' equity (deficit):
Convertible preferred stock:
30,000,000 authorized preferred
shares; Series A, par value $.01,
225,000 shares issued and
outstanding at May 31, 1997......... 199 -- --
Common stock, par value $.01 per
share: 100,000,000 shares
authorized, issued and outstanding
shares 8,080,335, 13,720,920,
13,842,713, respectively............ 81 137 138
Additional paid-in capital............ (13,843) 67,801 69,514
Accumulated translation adjustment.... -- -- 1
Retained earnings (deficit)........... (2,714) 1,733 6,777
------- -------- -----------
Total stockholders' equity
(deficit)......................... (16,277) 69,671 76,430
------- -------- -----------
Total liabilities and stockholders'
equity............................ $33,214 $102,845 $111,588
------- -------- -----------
------- -------- -----------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-3
<PAGE>
GREAT PLAINS SOFTWARE, INC.

CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------ ------------------------
1996 1997 1998 1997 1998
---------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
License......................... $ 27,078 $ 35,919 $ 52,949 $ 22,617 $ 34,555
Service......................... 15,193 21,201 32,710 14,202 24,381
---------- ----------- ----------- ----------- -----------
Total revenues................ 42,271 57,120 85,659 36,819 58,936

Cost of revenues:
License......................... 4,913 6,362 11,220 4,589 8,653
Service......................... 5,980 8,260 11,118 4,762 7,724
---------- ----------- ----------- ----------- -----------
Total cost of revenues........ 10,893 14,622 22,338 9,351 16,377
---------- ----------- ----------- ----------- -----------

Gross profit.................. 31,378 42,498 63,321 27,468 42,559

Operating expenses:
Sales and marketing............. 14,477 21,935 31,636 13,908 21,273
Research and development........ 8,876 9,678 12,586 5,687 9,375
General and administrative...... 4,763 5,592 7,587 3,556 4,854
Acquired in-process research and
development................... -- -- 7,136 -- --
---------- ----------- ----------- ----------- -----------
Total operating expenses...... 28,116 37,205 58,945 23,151 35,502
---------- ----------- ----------- ----------- -----------

Operating income.................. 3,262 5,293 4,376 4,317 7,057
Interest expense.................. (197) (98) (2) (2) (2)
Other income, net................. 297 656 3,276 1,805 1,350
---------- ----------- ----------- ----------- -----------
Income before income taxes.... 3,362 5,851 7,650 6,120 8,405
Income tax provision (benefit).... (4,099) 2,207 3,203 2,448 3,361
---------- ----------- ----------- ----------- -----------
Net income.................... $ 7,461 $ 3,644 $ 4,447 $ 3,672 $ 5,044
---------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- -----------

Income (loss) per common share:
Basic........................... $ 0.58 $ (1.78) $ 0.33 $ 0.28 $ 0.37
Diluted......................... $ 0.76 $ 0.36 $ 0.32 $ 0.27 $ 0.35

Shares used in computing net
income (loss) per share:
Basic........................... 7,352,820 7,629,460 13,381,414 13,093,015 13,797,818
Diluted......................... 9,764,924 10,003,349 14,089,092 13,820,984 14,455,749
</TABLE>

See accompanying notes to the consolidated financial statements.

F-4
<PAGE>
GREAT PLAINS SOFTWARE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
SERIES A
PREFERRED COMMON STOCK ADDITIONAL ACCUMULATED RETAINED
---------------- ------------------ PAID-IN TRANSLATION EARNINGS
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT (DEFICIT) TOTAL
-------- ------ ---------- ------ ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance May 31, 1995.................... 225,000 $ 199 7,346,552 $ 74 $ 4,480 -- $(13,819) $ (9,066)
Exercise of stock options............. -- -- 32,013 -- 73 -- -- 73
Repurchase and retirement of common
stock............................... -- -- (18,800) -- (78) -- -- (78)
Increase in carrying value of
mandatorily redeemable preferred
stock............................... -- -- -- -- (3,202) -- -- (3,202)
Net income............................ -- -- -- -- -- -- 7,461 7,461
-------- ------ ---------- ------ ---------- --- -------- --------
Balance May 31, 1996.................... 225,000 199 7,359,765 74 1,273 -- (6,358 ) (4,812)
Exercise of stock options............. -- -- 732,447 7 1,544 -- -- 1,551
Repurchase and retirement of common
stock............................... -- -- (11,877) -- (54) -- -- (54)
Increase in carrying value of
mandatorily redeemable preferred
stock............................... -- -- -- -- (17,196) -- -- (17,196)
Tax benefit from stockholder
transaction......................... -- -- -- -- 590 -- -- 590
Net income............................ -- -- -- -- -- -- 3,644 3,644
-------- ------ ---------- ------ ---------- --- -------- --------
Balance May 31, 1997.................... 225,000 199 8,080,335 81 (13,843) -- (2,714 ) (16,277)
Sale of common stock, net............. -- -- 3,450,000 34 50,209 -- -- 50,243
Exercise of stock options............. -- -- 286,708 3 1,900 -- -- 1,903
Conversion of preferred stock to
common stock........................ (225,000) (199) 1,847,627 18 28,878 -- -- 28,697
Tax benefit from stockholder
transactions........................ -- -- -- -- 586 -- -- 586
Stock issued for business
combination......................... -- -- 56,250 1 71 -- -- 72
Net income............................ -- -- -- -- -- -- 4,447 4,447
-------- ------ ---------- ------ ---------- --- -------- --------
Balance May 31, 1998.................... -- -- 13,720,920 137 67,801 -- 1,733 69,671
Exercise of stock options
(unaudited)......................... -- -- 121,793 1 1,352 -- -- 1,353
Tax benefit from stockholder
transactions (unaudited)............ -- -- -- -- 361 -- -- 361
Translation adjustment (unaudited).... -- -- -- -- -- 1 -- --
Net income (unaudited)................ 5,044 5,044
-------- ------ ---------- ------ ---------- --- -------- --------
Balance November 30, 1998 (unaudited)... -- $ -- 13,842,713 $138 $ 69,514 $ 1 $ 6,777 $ 76,430
-------- ------ ---------- ------ ---------- --- -------- --------
-------- ------ ---------- ------ ---------- --- -------- --------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE>
GREAT PLAINS SOFTWARE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
--------------------------------- --------------------------
1996 1997 1998 1997 1998
--------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net income........................................... $ 7,461 $ 3,644 $ 4,447 $ 3,672 $ 5,044
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 1,921 2,155 2,863 1,295 2,280
Acquired in-process research and development....... -- -- 7,136 -- --
Deferred income tax expense........................ (4,150) 2,207 (5,211) 511 (374)
Changes in operating assets and liabilities
excluding effect of business combinations
Accounts receivable.............................. 526 (256) (2,603) (1,226) (1,137)
Inventories...................................... 342 (113) 25 (58) (312)
Prepaid expenses and other assets................ 335 (557) (1,601) (497) (99)
Accounts payable and accrued expenses............ 499 (141) 4,391 1,641 1,438
Income taxes payable............................. (45) -- 3,843 (65) (3,257)
Salaries, wages and commissions payable.......... 388 1,933 391 (1,900) (1,040)
Deferred revenue................................. 990 1,430 3,947 1,587 5,204
--------- --------- ----------- ------------ ------------
Net cash provided by operating activities...... 8,267 10,302 17,628 4,960 7,747

Cash flows from investing activities:
Purchases of property and equipment.................. (1,990) (2,778) (5,265) (2,591) (3,745)
Purchases of businesses.............................. (123) -- (11,870) -- --
Purchase of investments.............................. -- (4,892) (714,104) (639,581) (71,997)
Proceeds from investments............................ -- 750 669,525 589,295 72,392
Purchase of other assets............................. -- (188) (2,036) (1,953) (1,384)
--------- --------- ----------- ------------ ------------
Net cash used by investment activities......... (2,113) (7,108) (63,750) (54,830) (4,734)

Cash flows from financing activities:
Principal payments on notes payable and long term
debt............................................... (197) (599) -- -- --
Exercise of stock options............................ 73 1,551 1,903 230 1,352
Principal payments on capital lease obligations...... (588) (247) -- -- --
Repurchases of common stock.......................... (78) (54) -- -- --
Proceeds from issuance of common stock, net.......... -- -- 50,315 50,315 0
--------- --------- ----------- ------------ ------------
Net cash (used) provided by financing
activities................................... (790) 651 52,218 50,545 1,352

Effect of exchange rate changes on cash................ -- -- -- -- 1
Increase in cash....................................... 5,364 3,845 6,096 675 4,366
Cash and cash equivalents at beginning of period....... 2,892 8,256 12,101 12,101 18,197
--------- --------- ----------- ------------ ------------
Cash and cash equivalents at end of period............. $ 8,256 $ 12,101 $ 18,197 $ 12,776 $ 22,563
--------- --------- ----------- ------------ ------------
--------- --------- ----------- ------------ ------------

Schedule of noncash investing and financing activities:
Property and equipment acquired under capital lease
agreements......................................... 19 -- -- -- --
Interest paid........................................ 197 68 2 2 2
Tax benefit from stockholder transaction............. -- 590 586 250 361
</TABLE>

See accompanying notes to the consolidated financial statements.

F-6
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

1. BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS INFORMATION

Great Plains Software, Inc. (NASDAQ: GPSI) is a leading provider of business
management software solutions to Midmarket businesses. The Company's
award-winning products and services automate essential business processes and
enhance the strategic value of business information. The Company's solutions are
sold and implemented by a network of independent Partner organizations
throughout the world.

SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION POLICY AND FOREIGN CURRENCY TRANSLATIONS

The consolidated financial statements include the accounts of the Company
and its subsidiaries in the United Kingdom, Australia, Singapore, South Africa
and Scandinavia. All significant intercompany accounts and transactions have
been eliminated in consolidation. The functional currency of the subsidiaries
except for the Scandinavian subsidiary has been determined to be the U.S.
dollar. Therefore, all transaction gains and losses resulting from fluctuations
in currency exchange rates of these subsidiaries are included in operating
results. For the Scandinavian subsidiary, the functional currency is the local
currency.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, investments, short-term
receivables and payables for which their current carrying amounts approximate
fair market value.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to credit risk
consist primarily of cash, cash equivalents, investments and accounts
receivable. The Company grants credit to customers in the ordinary course of
business. No single customer or region represents a significant concentration of
credit risk. The Company invests its cash with high quality financial
institutions.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments with
original maturities of three months or less and which are readily convertible to
cash.

F-7
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

1. BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS

Investments in debt securities that are not cash equivalents have been
designated as available for sale. Those securities, which consist of various
highly rated government securities and corporate commercial paper, are reported
at fair value, with net unrealized gains and losses included in equity. However,
as of May 31, 1998, investments were carried at cost because unrealized gains
were immaterial. The maturities of the debt securities range from 1999 to 2000.

INVENTORIES

Inventories consisting of media, training materials and packaging supplies
are stated at lower of cost or market, with cost determined on a first-in,
first-out ("FIFO") basis.

INCOME TAXES

Income taxes are accounted for under the liability method in accordance with
Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes." Under the liability method, deferred tax assets
and liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Major improvements are
capitalized while maintenance and repairs are expensed currently. Depreciation
is computed using the straight-line method based on the estimated useful lives
of three to five years for computer equipment and five to ten years for
furniture, fixtures and equipment. Leasehold improvements are amortized over the
lesser of the terms of the related leases or estimated useful life. Purchased
computer software, which is used internally, is amortized over a period of three
to five years using the straight-line method. Amortization expense is included
with depreciation expense in the consolidated statement of cash flows.

INTANGIBLE ASSETS AND GOODWILL

Amortization of intangible assets and goodwill is recorded on a straight
line basis over their estimated useful lives ranging from four to seven years.
The recoverability of unamortized intangible assets and goodwill is assessed on
an ongoing basis by comparing anticipated undiscounted cash flows to net book
value.

REVENUE RECOGNITION AND DEFERRED REVENUE

Software license fees are recognized upon shipment less a reserve for
estimated future returns. Revenues from support and maintenance service
contracts are recorded as deferred revenue when billed and recognized ratably
over the contract period. Other service revenues such as training and consulting
services are recognized as the services are performed. The Company, in its
discretion, may allow customers to return products for a short period of time
following the sale. The Company provides an allowance for these anticipated
returns based upon its historical experience of returns for similar products.
These amounts are recorded as an offset to license revenues. Statement of
Position (SOP) 97-2, "Software Revenue Recognition," is effective in fiscal 1999
and was adopted by the

F-8
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

1. BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company on June 1, 1998. The adoption of SOP 97-2 did not have a material effect
on the timing of the Company's revenue recognition or cause changes to its
revenue recognition policies.

INTERNATIONAL REVENUES

International revenues represent 10.4%, 15.0% and 15.6% of total revenues
for the years ended May 31, 1996, 1997 and 1998, respectively. All international
revenues are denominated in US dollars. Total revenues by geographic region are
as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED MAY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
North America.................................. $ 40,370 $ 53,477 $ 77,441
Europe......................................... 840 2,195 4,552
Asia and Australia............................. 462 645 2,096
Other.......................................... 599 803 1,570
--------- --------- ---------
$ 42,271 $ 57,120 $ 85,659
--------- --------- ---------
--------- --------- ---------
</TABLE>

ADVERTISING

The Company accrues, at the time of sale, an estimated liability for
qualified advertising expenses incurred by Partner organizations for which the
Company has agreed to reimburse such parties as part of a cooperative
advertising program. Other advertising costs are expensed as incurred.
Advertising expense was approximately $1,487,000, $1,990,000 and $3,731,000 for
the years ended May 31, 1996, 1997 and 1998, respectively.

RESEARCH AND DEVELOPMENT

Expenditures for software development costs and research are expensed as
incurred. Such costs are required to be expensed until the point that
technological feasibility is established. The period between achieving
technological feasibility and the general availability of such software has been
short. Consequently, costs otherwise capitalizable after technological
feasibility is achieved are generally expensed because they are insignificant to
both total assets and pre-tax results of operations.

EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No.
128"). SFAS No. 128 applies to entities with publicly held common stock or
potential common stock and is effective for financial statements issued for
periods ending after December 15, 1997. Under SAFS No. 128, the presentation of
primary earnings per share is replaced with a presentation of basic earnings per
share. SFAS No. 128 requires dual presentation of basic and diluted earnings per
share for entities with complex capital structures. Basic earnings per share
includes no dilution and is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted

F-9
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

1. BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully diluted earnings per share.
All earnings per share amounts for all periods have been presented, and where
necessary, restated to conform with the provisions of SFAS No. 128.

The following table sets forth the computation of basic and diluted net
income per share:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MAY 31,
---------------------------------
1996 1997 1998
--------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE COMPUTATION:
Net income............................................ $ 7,461 $ 3,644 $ 4,447
Increase to carrying value of mandatorily redeemable
preferred stock..................................... (3,202) (17,196) --
--------- ---------- ----------
Net income available to common stockholders........... $ 4,259 $ (13,552) $ 4,447
--------- ---------- ----------
--------- ---------- ----------
Weighted average common shares........................ 7,352,820 7,629,460 13,381,414
--------- ---------- ----------
--------- ---------- ----------
Basic net income (loss) per share..................... $ 0.58 $ (1.78) $ 0.33
--------- ---------- ----------
--------- ---------- ----------
DILUTED EARNINGS PER SHARE COMPUTATION:
Net income............................................ $ 7,461 $ 3,644 $ 4,447
Shares calculation:
Weighted average number of common shares.............. 7,352,820 7,629,460 13,381,414
Weighted average of assumed conversion of mandatorily
redeemable preferred stock.......................... 1,847,627 1,847,627 --
Other common equivalents.............................. 564,477 526,262 707,678
--------- ---------- ----------
9,764,924 10,003,349 14,089,092
--------- ---------- ----------
--------- ---------- ----------
Diluted net income per share.......................... $ 0.76 $ 0.36 $ 0.32
--------- ---------- ----------
--------- ---------- ----------
</TABLE>

INTERIM FINANCIAL DATA (UNAUDITED)

The financial information presented as of November 30, 1998 and for each of
the six-month periods ended November 30, 1997 and 1998, including related
information set forth in the notes to financial statements, is unaudited. In the
opinion of management, this financial information reflects the adjustments
necessary for a fair presentation of the financial information for such periods.
These adjustments consist of normal, recurring items. The results of operations
for the six-month period ended November 30, 1998 should not necessarily be taken
as indicative of the results of operations that may be expected for the entire
year.

RECLASSIFICATIONS

Certain prior year amounts in the financial statements have been
reclassified in order to conform with the current year's presentation.

F-10
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

1. BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board also issued Statement
No. 131, "Disclosures about segments of an Enterprise and Related Information"
(SFAS No. 131). SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. SFAS No. 131 establishes standards for
disclosures about operating segments, products and services, geographic areas
and major customers. Management believes the adoption of SFAS No. 131 will not
have a material effect on the Company's financial statements.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This standard
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company must adopt this standard no later than June 1,
2000. Management believes the adoption of SFAS No. 133 will not have a material
effect on the Company's financial statements.

2. BUSINESS COMBINATIONS

On April 20, 1998, the Company acquired certain assets and assumed certain
liabilities of ICONtrol, Inc., a software provider of manufacturing and human
resources solutions. The purchase price was paid in cash and totaled $7,536,000.

The acquisition was accounted for as a purchase and accordingly, the net
assets acquired were recorded at their estimated fair values at the effective
date of the acquisition. The following table presents the allocation of the
purchase price:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------
<S> <C>
In-process research and development................. $ 5,456
Other intangibles................................... 1,935
Net assets.......................................... 145
</TABLE>

The $5,456,000 related to acquired in-process research and development, as
determined by an independent third party appraisal, was charged against income
in fiscal 1998 as the underlying research and development projects had not yet
reached technological feasibility. The Company's consolidated financial
statements include the results of ICONtrol since the date of acquisition.

F-11
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

2. BUSINESS COMBINATIONS (CONTINUED)
The following table presents the consolidated results of operations on an
unaudited pro forma basis as if the acquisition of ICONtrol had taken place at
the beginning of each year:

<TABLE>
<CAPTION>
MAY 31,
--------------------------------
1997 1998
--------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE INFORMATION)
<S> <C> <C>
Net revenues............................... $ 59,405 $ 88,060
Net income................................. 138 7,367
Pro forma net income per share (diluted)... 0.01 0.53
Reported net income per share before
acquisition related charges.............. 0.36 0.63
</TABLE>

The one-time charge for acquired in-process research and development is not
reflected in the pro forma results presented above. The unaudited pro forma
results of operations are for comparative purposes only and do not necessarily
reflect the results that would have occurred had the acquisition occurred at the
beginning of the periods presented or the results which may occur in the future.

On May 1, 1998, the Company acquired certain assets and assumed certain
liabilities of Telenor Financial Systems, a software provider of sophisticated
multinational consolidations and budgeting solutions. The purchase price was
paid in cash and totaled $4,406,000. The acquisition was accounted for as a
purchase and accordingly, the net assets acquired were recorded at their
estimated fair values at the effective date of the acquisition. The following
table presents the allocation of the purchase price:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
-----------------------
<S> <C>
In-process research and development................. $ 1,680
Other intangibles................................... 990
Goodwill............................................ 1,681
Net assets.......................................... 55
</TABLE>

The $1,680,000 related to acquired in-process research and development, as
determined by an independent third party appraisal, was charged against income
in fiscal 1998 as the underlying research and development projects had not yet
reached technological feasibility. The Company's consolidated financial
statements include the results of Telenor Financial Systems from May 1, 1998.
The results of operations prior to May 1, 1998 were not material to the
consolidated financial statements; accordingly, pro forma financial disclosures
are not presented.

The application of purchase accounting to the acquisitions described above
was based on independent third-party appraisals using valuation techniques
commonly applied to attribute fair value to acquired assets. The appraisals
incorporated management's best estimates for future revenue and profitability
from products in the process of development at the time of acquisition. As is
the case with all projections of future events, actual results could differ.
Additionally, the SEC has challenged valuations incorporating in-process
research and development. If the assumptions or valuation methods used were
changed, the Company's financial statements would be affected because
allocations to in-process

F-12
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

2. BUSINESS COMBINATIONS (CONTINUED)
research and development which have been expensed would be reallocated to
intangible assets which require amortization against income in future periods.

In September 1997, the Company received all of the outstanding capital stock
of its Singapore distributor in a transaction that was accounted for as a
pooling of interests. To affect the business combination, the Company issued
56,250 shares of the Company's common stock. Financial data for the periods
prior to the closing of this transaction has not been restated because neither
the net assets nor operating results were material to the Company's consolidated
financial statements. The Company's consolidated financial statements include
the results of the Singapore distributor since September 1, 1997.

3. ACCOUNTS RECEIVABLE

Accounts receivable, net of allowances, consist of the following:

<TABLE>
<CAPTION>
MAY 31,
------------------------
1997 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Gross accounts receivable......................... $ 8,059 $ 13,472
Less allowance for returns and doubtful
accounts........................................ (2,607) (4,682)
----------- -----------
$ 5,452 $ 8,790
----------- -----------
----------- -----------
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
MAY 31,
------------------------
1997 1998
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Furniture and fixtures............................ $ 1,702 $ 2,416
Computers and equipment........................... 12,564 15,685
Leasehold improvements............................ 369 369
Purchased software for internal use............... 1,444 1,675
----------- -----------
16,079 20,145
Less accumulated depreciation and amortization.... (10,258) (11,644)
----------- -----------
$ 5,821 $ 8,501
----------- -----------
----------- -----------
</TABLE>

Depreciation expense for the years ended May 31, 1996, 1997, 1998, was
$1,892,000, $2,038,000 and $2,676,000, respectively.

F-13
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

5. GOODWILL AND OTHER INTANGIBLES

Goodwill and other intangibles consist of the following:

<TABLE>
<CAPTION>
MAY 31,
----------------------------
1997 1998
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Goodwill.......................................... $ 584 $ 2,354
Other intangibles................................. -- 2,925
------ -------------
584 5,279
Less accumulated amortization..................... (146) (333)
------ -------------
$ 438 $ 4,946
------ -------------
------ -------------
</TABLE>

Amortization expense for the years ended May 31, 1996, 1997, 1998 was
$29,000, $117,000 and $187,000, respectively.

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
MAY 31,
----------------------------
1997 1998
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued vacation payable.......................... $ 1,058 $ 1,882
Coop advertising accrual.......................... 1,058 1,390
Other............................................. 2,582 3,669
------------- -------------
$ 4,698 $ 6,941
------------- -------------
------------- -------------
</TABLE>

7. OTHER INCOME, NET.

Other income, net consists of the following:

<TABLE>
<CAPTION>
MAY 31,
-----------------------------------
1996 1997 1998
----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income.................................. $ 267 $ 540 $ 3,508
Other............................................ 30 116 (232)
----- ----- ---------
$ 297 $ 656 $ 3,276
----- ----- ---------
----- ----- ---------
</TABLE>

8. LINE OF CREDIT

The Company has a $10,000,000 revolving line of credit facility with a bank
that provides for interest at prime. Substantially all of the Company's assets
are pledged as collateral on the line of credit, which

F-14
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

8. LINE OF CREDIT (CONTINUED)
expires in November 1999 and is subject to certain covenants, all of which had
been complied with at May 31, 1998. There were no amounts outstanding at May 31,
1997 or 1998.

9. COMMITMENTS AND CONTINGENCIES

LEASE OBLIGATIONS

Rental expense incurred for operating leases of office facilities and office
equipment was approximately $871,000 in 1996, $866,000 in 1997, and $1,054,000
in 1998. Future minimum rental payments as of May 31, 1998 for noncancelable
operating leases with initial or remaining terms in excess of one year are
payable as follows: fiscal 1999 -- $1,660,000, fiscal 2000 -- $2,623,000, fiscal
2001 -- $2,469,000, fiscal 2002 -- $2,197,000 and fiscal 2003 -- $2,187,000.

LITIGATION

The Company is, from time to time, a party to litigation arising in the
normal course of business. Management believes that none of this litigation will
have a materially adverse effect on the financial position or results of
operations or cash flows of the Company.

F-15
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

10. INCOME TAXES

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
MAY 31,
----------------------------
1997 1998
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of financial
reporting..................................... $ 746 $ 204
------------- -------------
Total deferred tax liabilities.............. 746 204
------------- -------------
Deferred tax assets:
Current:
Accounts receivable allowances................ 909 1,925
Deferred revenue.............................. 617 507
Research and development credit............... 651 --
Alternative minimum tax credit................ 133 --
Accruals and other............................ 969 2,198
------------- -------------
Total current deferred income tax assets.... $ 3,279 $ 4,630
------------- -------------
Long-Term:
Net operating loss of foreign subsidiaries.... -- $ 606
Acquired in-process research and
development................................. -- 2,712
------------- -------------
Total long-term deferred income tax
assets.................................... -- 3,318
------------- -------------
Total net deferred income taxes................... $ 2,533 $ 7,744
------------- -------------
------------- -------------
</TABLE>

F-16
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

10. INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes is summarized as follows:

<TABLE>
<CAPTION>
MAY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current income taxes:
Federal................................... $ 595 $ 1,502 $ 6,954
State..................................... 48 38 1,460
Net operating loss carryforward........... (592) (950) --
--------- --------- ---------
51 590 8,414

Deferred income taxes:
Federal................................... $ 1,233 $ 1,471 $ (4,560)
State..................................... 109 146 (651)
--------- --------- ---------
1,342 1,617 (5,211)

Decrease in valuation allowance............. (5,492) -- --
--------- --------- ---------
$ (4,099) $ 2,207 $ 3,203
--------- --------- ---------
--------- --------- ---------
</TABLE>

The differences between the expected tax provision based on the federal
income tax statutory rate and the actual provision for the years presented are
summarized as follows:

<TABLE>
<CAPTION>
MAY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Expected tax provision at statutory rate..... $ 1,143 $ 1,981 $ 2,678
State income taxes, net of federal tax
effect..................................... 111 175 575
Change in valuation allowance................ (5,492) -- --
Other........................................ 139 51 (50)
--------- --------- ---------
Total...................................... $ (4,099) $ 2,207 $ 3,203
--------- --------- ---------
--------- --------- ---------
</TABLE>

At the time of adoption of SFAS No.109, the Company had determined that the
realization of the net operating loss carryforward and other deferred tax assets
did not meet the recognition criteria under SFAS No. 109, and, accordingly, a
valuation allowance was established for the tax benefit of these items. The
valuation allowance was reversed during 1996 due primarily to the utilization of
a portion of the net operating loss carryforwards, and on the basis of an
analysis performed by management that considered all available evidence, both
positive and negative, as well as the weight and importance of such evidence. As
a result of this analysis, management believed it was more likely than not that
these tax benefits would be realized in the future, and, accordingly, reversed
the remaining valuation allowance in the fourth quarter of fiscal 1996.

F-17
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

11. INCENTIVE STOCK OPTION PLAN

At May 31, 1998, 2,066,667 shares of common stock had been reserved for
issuance or grant under the Employee Incentive Stock Option plan. The options
are granted to employees at 100% of the fair market value on the date of grant.
The fair market value, rate of exercisability and expiration dates of the
options granted are determined by the Board of Directors at the time of grant.
Options generally vest ratably over five years from date of grant and expire ten
years after grant. Options issued prior to fiscal 1998 vest ratably over five
years from date of grant and expire six years after grant.

The following summary of outstanding options and shares reserved under the
Plan is as follows:

<TABLE>
<CAPTION>
EXPIRATION WEIGHTED
DATE AVERAGE
OPTIONS OPTION PRICE (FISCAL EXERCISE PRICE
OUTSTANDING RANGE PER SHARE YEAR) PER SHARE
------------ ---------------- ------------ ---------------
<S> <C> <C> <C> <C>
Outstanding at May 31, 1995... 1,063,647 $ 1.96 to $ 4.16 1997 - 2001 $ 2.48
Granted..................... 619,333 5.20 to 6.41 5.42
Exercised................... (32,013) 1.96 to 2.57 2.30
Canceled/expired............ (321,320) 2.57 to 5.20 4.89

Outstanding at May 31, 1996... 1,329,647 $ 1.96 to $ 6.41 1997 - 2002 $ 3.27
Granted..................... 361,000 6.41 to 7.71 6.65
Exercised................... (732,447) 1.96 to 6.41 2.12
Canceled/expired............ (88,667) 4.16 to 6.41 5.36

Outstanding at May 31, 1997... 869,533 $ 2.42 to $ 7.71 1998 - 2003 $ 5.43
Granted..................... 370,110 16.00 to 37.25 19.46
Exercised................... (200,641) 2.42 to 6.41 4.06
Canceled/expired............ (42,087) 3.41 to 37.25 6.58

Outstanding at May 31, 1998... 996,915 $ 2.42 to $37.25 1999 - 2008 $ 10.85
</TABLE>

As of May 31, 1998 there were currently exercisable options outstanding
covering 188,571 shares, exercisable at prices ranging from $2.42 to $27.13 per
share.

In fiscal 1997, the Company adopted Statement of Financial Accounting
Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation."
As permitted by SFAS No. 123, the Company has elected to continue following the
guidance of APB 25 for measurement and recognition of stock-based transactions
with employees and adopt the disclosure only provisions of SFAS No. 123. As a
result, no compensation expense has been recognized for the awards made in the
form of stock options. If the Company had elected to recognize compensation
costs for stock-based compensation plans based on the fair value at the grant
dates for awards under those plans consistent with the method

F-18
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

11. INCENTIVE STOCK OPTION PLAN (CONTINUED)
prescribed by SFAS No. 123, net income and earnings per share would have been
changed to the pro forma amounts shown as follows:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net income:
As reported................................. $ 7,461 $ 3,644 $ 4,447
Pro forma................................... 7,397 3,508 2,826

Earnings per share (diluted):
As reported................................. $ 0.76 $ 0.36 $ 0.32
Pro forma................................... 0.76 0.35 0.20
</TABLE>

The fair value of the stock options used to compute pro forma net income and
earnings per share disclosures is the present value at grant date using the
Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Expected dividend level....................... 0 0 0
Expected stock price volatility............... 44.5% 53.8% 58.8%
Risk free interest rates...................... 6.5% 6.5% 6.0%
Expected life of options...................... 6 years 6 years 5-10 years
</TABLE>

The following table summarizes the status of the Company's stock options
outstanding as of May 31, 1998:

<TABLE>
<CAPTION>
STOCK OPTIONS STOCK OPTIONS
OUTSTANDING EXERCISABLE
--------------------------------- --------------------------
WEIGHTED WEIGHTED
WEIGHTED AVERAGE AVERAGE AVERAGE
RANGE OF REMAINING EXERCISE PRICE EXERCISE PRICE
EXERCISE PRICE SHARES CONTRACTUAL LIFE PER SHARE SHARES PER SHARE
- ---------------- --------- ---------------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
$ 2.42 to $ 3.41 25,736 0.6 years $ 2.61 21,736 $ 2.46
4.16 to 5.44 241,990 3.1 4.96 75,436 4.87
6.41 to 7.71 362,779 4.2 6.65 67,399 6.72
16.00 to 23.88 323,370 7.7 18.23 10,000 16.00
26.38 to 37.25 43,040 6.1 28.86 14,000 27.13
--------- ---------
996,915 188,571
--------- ---------
--------- ---------
</TABLE>

F-19
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

12. COMPREHENSIVE INCOME

On June 1, 1998, the Company adopted SFAS No. 130, "Reporting of
Comprehensive Income." The standard requires the display and reporting of
comprehensive income, which includes all changes in stockholders' equity with
the exception of additional investments by stockholders or distributions to
stockholders. Comprehensive income for the Company includes net income and the
effects of translation which are charged or credited to the cumulative
translation adjustments account within stockholders' equity. Comprehensive
income for the years ended May 31, 1996, 1997 and 1998 and for the six months
ended November 30, 1997 and 1998 was as follows:

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED ENDED
MAY 31, NOVEMBER 30,
------------------------------- --------------------
1996 1997 1998 1997 1998
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net income...................................... $ 7,461 $ 3,644 $ 4,447 $ 3,672 $ 5,044
Changes in cumulative translation adjustments... -- -- -- -- 1
--------- --------- --------- --------- ---------
Comprehensive income............................ $ 7,461 $ 3,644 $ 4,447 $ 3,672 $ 5,045
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

13. EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution 401(k) Profit Sharing Plan
covering substantially all employees. The Company currently matches 25% of each
participant's contribution up to 8% of their annual salary and can make
discretionary profit sharing contributions to the plan. The Company's
contribution to this plan for the years ended May 31, 1996, 1997 and 1998, was
approximately $257,000, $310,000 and $389,000, respectively.

14. STOCKHOLDERS' EQUITY

The Board of Directors met on February 20, 1997, and took the following
actions in connection with the initial public offering of shares of the
Company's common stock: (a) authorized a four-for-three stock split of the
issued and outstanding common stock of the Company, in the form of a stock
dividend, to be effective immediately prior to the public offering (all
references to common stock amounts, shares, per share data and preferred stock
conversion rights included in the financial statements and these notes have been
adjusted to give retroactive effect to the stock split); (b) authorized an
increase in capital stock to 100,000,000 shares of $0.01 par value common stock
and 30,000,000 shares of $0.01 par value preferred stock to be both contingent
and effective upon stockholder approval and the first closing of the initial
public offering of common stock; (c) waived, subject to the closing of an
initial public offering, the Company's contractual rights to repurchase shares
of common stock from employees of the Company; and (d) authorized certain
incentive stock plans contingent and effective upon stockholder approval and
consummation of the initial public offering. These incentive plans include (i)
the 1997 Employee Stock Purchase Plan providing for the purchase of common stock
at a discounted price, (ii) the 1997 Stock Incentive Plan providing for the
grant of stock-based compensation to eligible persons and (iii) the Outside
Directors' Stock Option Plan providing for the grant of nonqualified stock
options to nonemployee directors of the Company.

F-20
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

14. STOCKHOLDERS' EQUITY (CONTINUED)
SERIES A CONVERTIBLE PREFERRED STOCK

In June 1994, the Company sold 225,000 shares of $.01 par value Series A
Convertible Preferred Stock (the "Series A Preferred Stock") at $1.00 per share
to an officer/director who may convert these shares into 54,000 shares of common
stock at any time after June 15, 1997, at a rate of .24 shares of common stock
for each share of Series A Preferred Stock. The Series A Preferred Stock were
converted to shares of common stock upon completion of the initial public
offering on June 19, 1997.

SERIES B MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

Also in June 1994, the Company entered into an agreement for the sale of
Series B Mandatorily Redeemable Convertible Preferred Stock (the "Series B
Preferred Stock") and warrants. On June 24, 1994, at the first closing, the
Company sold 888,576 of $.01 par value Series B Preferred Stock and contingent
warrants to purchase an additional 752,234 shares of Series B Preferred Stock
for an aggregate purchase price of $6,300,000. On September 22, 1994, the second
closing, the Company sold an additional 282,088 shares of Series B Preferred
Stock for an aggregate purchase price of $2,000,000.

During May 1995, the Company and the holders of the Series B Preferred Stock
agreed to reprice the previously issued shares of Series B Preferred Stock and
eliminate the warrants. The Company issued an additional 174,556 shares of
Series B Preferred Stock in return for the cancellation of the warrants. Thus,
the total Series B Preferred Stock sold in the three transactions was 1,345,220
shares at an average price of $6.17.

Holders of the Series B Preferred Stock converted their shares into
1,793,627 shares of common stock upon completion of the Company's initial public
offering on June 19, 1997. Prior to the conversion to common stock, the Company
carried this Series B Preferred Stock at fair value which management considered
to equal $21.33 and $8.55 per share at May 31, 1997 and 1996, respectively. The
increase in carrying value of Series B Preferred Stock is reflected as a
reduction to Additional Paid-in Capital.

F-21
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(FOOTNOTE INFORMATION SUBSEQUENT TO MAY 31, 1998 IS UNAUDITED)

15. QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL
QUARTER QUARTER QUARTER QUARTER YEAR
----------- ----------- ----------- ----------- ---------
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net Revenues
Fiscal 1998...................... $ 16,774 $ 20,045 $ 22,607 $ 26,232 $ 85,659
Fiscal 1997...................... 11,068 13,686 14,699 17,668 57,120

Gross Profit
Fiscal 1998...................... 12,588 14,880 16,618 19,233 63,321
Fiscal 1997...................... 8,262 10,124 10,817 13,296 42,498

Net income (loss)
Fiscal 1998...................... 1,533 2,139 2,377 (1,603) 4,447
Fiscal 1997...................... 551 650 794 1,648 3,644

Basic earnings (loss) per share
Fiscal 1998...................... 0.12 0.16 0.17 (0.12) 0.33
Fiscal 1997...................... 0.03 0.04 0.06 (1.80) (1.78)

Diluted earnings (loss) per share
Fiscal 1998...................... 0.11 0.15 0.17 (0.12) 0.32
Fiscal 1997...................... 0.06 0.07 0.08 0.16 0.36
</TABLE>

Quarterly and annual earnings per share are calculated independently based
on the weighted-average number of shares outstanding during the period.

F-22
<PAGE>
UNDERWRITING

Great Plains, the selling shareholders and the underwriters for the offering
(the "Underwriters") named below, for whom Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Hambrecht & Quist, LLC and Piper Jaffray
Inc. are acting as representatives (collectively, the "Representatives"), have
entered into an underwriting agreement with respect to the shares being offered.
Subject to certain conditions, each Underwriter has severally agreed to purchase
the number of shares indicated in the following table:

<TABLE>
<CAPTION>
Underwriter Number of Shares
- --------------------------------------------------------- -----------------
<S> <C>
Goldman, Sachs & Co......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......
Hambrecht & Quist, LLC...................................
Piper Jaffray Inc........................................
-----------------
Total.................................................. 2,000,000
-----------------
-----------------
</TABLE>

If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 300,000
shares from Great Plains to cover such sales. They may exercise that option for
30 days after the date of this prospectus. If any shares are purchased pursuant
to this option, the Underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.

The following tables show the per share and total underwriting discounts and
commissions to be paid to the Underwriters by Great Plains and the selling
shareholders. Such amounts are shown assuming both no exercise and full exercise
of the Underwriters' option to purchase additional shares.

PAID BY THE COMPANY

<TABLE>
<CAPTION>
Full
No Exercise Exercise
----------- ------------
<S> <C> <C>
Per Share........................................ $ $
Total............................................ $ $
</TABLE>

PAID BY THE SELLING SHAREHOLDERS

<TABLE>
<CAPTION>
Full
No Exercise Exercise
----------- ------------
<S> <C> <C>
Per Share........................................ $ $
Total............................................ $ $
</TABLE>

Shares sold by the Underwriters to the public will initially be offered at
the public offering price set forth on the cover of this prospectus. Any shares
sold by the Underwriters to securities dealers may be sold at a discount of up
to $ per share from the public offering price. Any such securities dealers
may resell any shares purchased from the Underwriters to certain other brokers
or dealers at a discount of up to $ per share from the public offering price.
If all the shares are not sold at the offering price, the Representatives may
change the offering price and the other selling terms.

Great Plains, its directors and executive officers and the selling
shareholders have agreed with the Underwriters not to dispose of or hedge any of
their Common Stock or securities convertible into or exchangeable for shares of
Common Stock during the period from the date of this prospectus continuing
through the date 90 days after the date of this prospectus, except with the
prior written consent of the Representatives. This agreement does not apply to
any existing employee benefit plans.

U-1
<PAGE>
In connection with the offering, the Underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Common Stock while
the offering is in progress.

The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the Representatives have purchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.

These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Common Stock. As a result, the price of the
Common Stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

In connection with this offering, certain Underwriters and selling group
members (if any) who are qualified market makers on the Nasdaq National Market
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934 during the business day prior to the pricing of
the offering before the commencement of offers or sales of the Common Stock.
Passive market makers must comply with applicable volume and price limitations
and must be identified as such. In general, a passive market maker must display
its bid at a price not in excess of the highest independent bid of such
security; if all independent bids are lowered below the passive market makers'
bid, however, such bid must then be lowered when certain purchase limits are
exceeded.

Great Plains estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$390,000.

The GS Partnerships are entitled to certain rights with respect to the
registration under the Securities Act of shares of Common Stock held by them.
See "Principal and Selling Shareholders." Under the terms of the agreement
between the Company and the GS Partnerships, the GS Partnerships have the right,
subject to certain conditions and limitations, to require the Company to file a
registration statement covering all or part of their shares of Common Stock and
to include their shares of Common Stock in any other proposed registration of
Company securities. Generally, the Company is required to bear the expense of
any such registration.

Great Plains and the selling shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

U-2
<PAGE>
ALL HORIZONS HOLD OPPORTUNITY. EVEN THE ONES YOU CAN'T SEE.

[Photo of green forest scape]

A good Midmarket software solution can help companies with existing
opportunities. A great solution can help create new ones.

Great Plains prepares businesses for the unseen horizons ahead. We help growing
companies take advantage of the emerging opportunities within electronic
commerce. Our solution increases the efficiency and reduces the costs of
knowledge management and raises customer service to new levels of quality.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesperson or other person has been authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More Information....................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 7
Price Range of Common Stock............................................... 12
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Capitalization............................................................ 13
Selected Consolidated Financial Data...................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 16
Business.................................................................. 28
Management................................................................ 40
Principal and Selling Shareholders........................................ 43
Legal Matters............................................................. 45
Experts................................................................... 45
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

2,000,000 Shares

GREAT PLAINS
SOFTWARE, INC.

Common Stock

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

[LOGO]

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

GOLDMAN, SACHS & CO.

MERRILL LYNCH & CO.

HAMBRECHT & QUIST

PIPER JAFFRAY INC.

REPRESENTATIVES OF THE UNDERWRITERS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Except as set forth below the following fees and expenses will be paid by
the Company in connection with the issuance and distribution of the securities
registered hereby and do not include underwriting commissions and discounts. All
such expenses, except for the SEC registration, NASD filing and Nasdaq listing
fees, are estimated.

<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................................. $ 30,532
NASD filing fee.................................................................. $ 11,483
Nasdaq National Market listing fee............................................... $ 17,500
Legal fees and expenses.......................................................... $ 100,000
Accounting fees and expenses..................................................... $ 75,000
Transfer Agent's and Registrar's fees............................................ $ 10,000
Printing and engraving expenses.................................................. $ 100,000
Miscellaneous.................................................................... $ 55,485
-----------
Total.......................................................................... $ 400,000
-----------
-----------
</TABLE>

The selling shareholders, other than the GS Partnerships, will pay $10,000
of the expenses shown above in the aggregate. The expenses of the GS
Partnerships will be paid by the Company pursuant to a pre-existing agreement.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 302A.521 of the Minnesota Statutes provides that a corporation shall
indemnify any person made or threatened to be made a party to a proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines (including, without limitation, excise taxes
assessed against such person with respect to any employee benefit plan),
settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person (1) has not been indemnified therefor by another
organization or employee benefit plan for the same judgments, penalties or
fines; (2) acted in good faith; (3) received no improper personal benefit and
Section 302A.255 (with respect to director conflicts of interest), if
applicable, has been satisfied; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in certain
instances. A decision as to required indemnification is made by a disinterested
majority of the Board of Directors present at a meeting at which a disinterested
quorum is present, or by a designated committee of the Board, by special legal
counsel, by the shareholders or by a court.

Provisions regarding indemnification of officers and directors of the
Company to the extent permitted by Section 302A.521 are contained in the
Company's Bylaws.

II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Underwriting Agreement
5.1* Opinion of Dorsey & Whitney LLP
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Deloitte & Touche LLP
23.3* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Powers of Attorney
</TABLE>

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

* To be filed by amendment.

(b) Financial Statement Schedules

SCHEDULE II -- SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

(1) It will provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.

(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all if the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fargo, State of North Dakota, on January 4, 1999.

<TABLE>
<S> <C> <C>
GREAT PLAINS SOFTWARE, INC.

By: /s/ DOUGLAS J. BURGUM
------------------------------------------
Douglas J. Burgum
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities indicated on January 4, 1999.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------- --------------------------------------------------------

<S> <C>
/s/ DOUGLAS J. BURGUM Chairman of the Board, President and Chief Executive
- --------------------------------- Officer
Douglas J. Burgum (principal executive officer)

/s/ TERRI F. ZIMMERMAN Chief Financial Officer and Executive Vice President
- --------------------------------- (principal financial officer and principal accounting
Terri F. Zimmerman officer)

BRADLEY J. BURGUM* Director

FREDERICK W. BURGUM* Director

WILLIAM V. CAMPBELL* Director

RAYMOND F. GOOD* Director

J. A. HEIDI ROIZEN* Director

JOSEPH S. TIBBETTS, JR.* Director
</TABLE>

*By:

/s/ DOUGLAS J. BURGUM

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

Douglas J. Burgum

ATTORNEY-IN-FACT

II-3
<PAGE>
GREAT PLAINS SOFTWARE, INC.
SCHEDULE II -- SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
YEAR EXPENSES DEDUCTIONS END OF YEAR
--------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended May 31,
1996.............................. $ 255 $ 529 $ 117 $ 667
1997.............................. 667 408 84 991
1998.............................. 991 766 126 1,631
For Six months ended November 30,
1998 (unaudited).................. 1,631 515 639 1,507

Allowance for returns
Year ended May 31,
1996.............................. $ 1,096 $ 3,349 $ 3,232 $ 1,213
1997.............................. 1,213 4,007 3,604 1,616
1998.............................. 1,616 6,726 5,291 3,051
For Six months ended November 30,
1998 (unaudited).................. 3,051 4,832 4,232 3,651
</TABLE>

S-1
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Underwriting Agreement

5.1* Opinion of Dorsey & Whitney LLP

23.1 Consent of PricewaterhouseCoopers LLP

23.2 Consent of Deloitte & Touche LLP

23.3* Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)

24.1 Powers of Attorney
</TABLE>

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

* To be filed by amendment.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated June 19, 1998 appearing on page 23 of Great Plains Software, Inc.'s
Annual Report on Form 10-K for the year ended May 31, 1998. We also consent
to the reference to us under the heading "Experts" in such Prospectus.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

Minneapolis, Minnesota
January 4, 1999

<PAGE>

Exhibit 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Great Plains Software, Inc.'s
(Great Plains) Registration Statement on Form S-3 of our report dated April
15, 1998 (April 20, 1998 as to Note 7) (which expresses an unqualified opinion
and includes explanatory paragraphs (1) relating to the preparation of the
financial statements of ICONtrol, Inc. (ICONtrol) from the separate records
maintained by ICONtrol that may not necessarily be indicative of the
conditions that would have existed or the results of operations if ICONtrol
had been operated as an unaffiliated company and that portions of certain
income and expenses represent allocations made from Holien, Inc., and (2)
ICONtrol's sale of substantially all of its assets to Great Plains for total
consideration of approximately $7.5 million on April 20, 1998) on the
ICONtrol financial statements as of January 30, 1998 and January 31, 1997 and
for each of the three years in the period ended January 30, 1998 appearing in
the Current Report on Form 8-K/A of Great Plains dated April 20, 1998,
which is incorporated by reference in this Registration Statement on Form S-3
of Great Plains.

/s/ Deloitte & Touche LLP

Minneapolis, Minnesota
January 4, 1999

<PAGE>

EXHIBIT 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Douglas J. Burgum, Terri F.
Zimmerman and Douglas R. Herman, and each of them, his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on
Form S-3 of Great Plains Software, Inc. and any additional Registration
Statement pursuant to Rule 462(b) under the Securities Act of 1993, as
amended, and any and all amendments (including post-effective amendments) to
the Registration Statement (or Registration Statements, if an additional
Registration Statement is filed pursuant to Rule 462(b)), and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to
do and perform each and every act and thing requisite or necessary to be done
in and about the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or the substitutes for such
attorneys-in fact and agents, may lawfully do or cause to be done by virtue
hereof.

NAME DATE
---- ----

--------------------------- ----------------
Douglas J. Burgum

/s/ Terri F. Zimmerman January 4, 1999
--------------------------- ----------------
Terri F. Zimmerman

/s/ Bradley J. Burgum January 3, 1999
--------------------------- ----------------
Bradley J. Burgum

/s/ Frederick W. Burgum January 3, 1999
--------------------------- ----------------
Frederick W. Burgum

/s/ William V. Campbell January 4, 1999
--------------------------- ----------------
William V. Campbell

/s/ Raymond F. Good January 2, 1999
--------------------------- ----------------
Raymond F. Good

/s/ J.A. Heidi Roizen January 2, 1999
--------------------------- ----------------
J.A. Heidi Roizen

/s/ Joseph S. Tibbetts, Jr. January 2, 1999
--------------------------- ----------------
Joseph S. Tibbetts, Jr.