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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                          ----------------------------
 
                                   FORM 10-K
 
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[X]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED MARCH 31, 1997
                                      OR
 
[ ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER: 0-26970
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
             (Exact name of registrant as specified in its charter)
 
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                       DELAWARE                                      36-4069408
           (State or other jurisdiction of                        (I.R.S. Employer
            incorporation or organization)                      Identification No.)
 
          875 N. MICHIGAN AVENUE, SUITE 3000                           60611
                  CHICAGO, ILLINOIS                                  (Zip Code)
       (Address of Principal Executive Offices)
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       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 255-5000
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                CLASS A COMMON STOCK, PAR VALUE $.001 PER SHARE
 
     Indicate by check mark whether the Registrant (i) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  [X]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     As of June 1, 1997, there were 6,669,179 shares of Class A Common Stock and
4,917,622 shares of Class B Common Stock of the Registrant outstanding. The
aggregate market value on such date of the voting stock of the Registrant held
by non-affiliates was an estimated $70 million based upon the closing price of
$10.75 per share on May 31, 1997.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Part III of this Annual Report on Form 10-K is incorporated by reference to
portions of the Registrants definitive proxy statement, to be filed with the
Securities and Exchange Commission not later than 120 days after the close of
its fiscal year; provided that if such proxy statement is not filed with the
Commission in such 120-day period, an amendment to this Form 10-K shall be filed
no later than the end of the 120-day period.
 
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                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
              ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
                                 MARCH 31, 1997
 
                               TABLE OF CONTENTS
 
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PART I
Item 1.         Business....................................................      3
Item 2.         Properties..................................................      9
Item 3.         Legal Proceedings...........................................      9
Item 4.         Submission of Matters to a Vote of Security Holders.........      9
Item 4A.        Executive Officers of the Registrant........................     10
PART II
Item 5.         Market for Registrant's Common Equity and Related
                Stockholder Matters.........................................     11
Item 6.         Selected Financial Data.....................................     12
Item 7.         Management's Discussion and Analysis of Financial Condition
                and Results of Operations...................................     12
Item 8.         Financial Statements and Supplementary Data.................     17
Item 9.         Changes in and Disagreements with Accountants on Accounting
                and Financial Disclosure....................................     17
PART III
Item 10.        Directors and Executive Officers of the Registrant..........     18
Item 11.        Executive Compensation......................................     18
Item 12.        Security Ownership of Certain Beneficial Owners and
                Management..................................................     18
Item 13.        Certain Relationships and Related Transactions..............     18
PART IV
Item 14.        Exhibits, Financial Statement Schedules and Reports on Form
                8-K.........................................................     19
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                                     PART I
 
ITEM 1. BUSINESS
 
     Diamond Technology Partners Incorporated ("Diamond" or the "Company") is a
management consulting firm that devises and implements strategies enabled by
information technology ("IT") to improve its clients' competitive positions.
Diamond was founded upon, and continues to stress, a business culture in which
strategic consulting and IT expertise are integrated to provide client
solutions. The Company believes that the distinguishing qualities of its
consulting process are its ability to synthesize strategy with technology,
deliver solutions with measurable results, deliver services through small
multidisciplinary project teams and maintain objectivity in solution
recommendations.
 
     The Company leads its clients through a process which broadens their
understanding of the ways that IT can be incorporated into their businesses to
gain competitive advantage in their markets. Diamond's professionals, working
closely with client personnel, perform analyses of the client's current business
with a focus on alternative IT-driven business strategies. When an appropriate
strategy has been developed, Diamond's professionals provide important
management oversight of the strategy implementation process, which generally
includes design, deployment and integration of IT solutions together with
modification of business processes and organizational structure. Diamond manages
the deployment phase by utilizing the client's internal resources or third-party
resources selected by Diamond for their particular expertise. Throughout the
entire process, Diamond transfers relevant knowledge to the client organization.
 
     Diamond differentiates itself from other management consultants primarily
by its in-depth knowledge of IT and its broader scope of services, including
implementation management. The Company differentiates itself from systems
integrators primarily by its ability to devise business strategies, its focus on
knowledge transfer and program management during implementation, and its
objectivity in recommending solutions. Finally, in comparison to firms that
offer both management-consulting and systems-integration services through
separate business units, Diamond differentiates itself by its ability to offer
integrated strategy and IT services simultaneously through a single
multidisciplinary team and by its objectivity.
 
     Diamond was founded in January 1994 by executives with extensive experience
with both major consulting firms and emerging growth technology businesses.
Diamond has grown rapidly since its inception, serving clients in a variety of
industries ranging in size from Fortune 500 companies to smaller private
companies. The Diamond solution is defined by the ability to (i) consult with
clients to synthesize strategy with technology, (ii) deliver an operating
solution with measurable results, (iii) deliver services through small
multidisciplinary project teams and (iv) maintain solution objectivity.
 
     Consult with Clients to Synthesize Strategy with Technology. Diamond
simultaneously provides expertise in strategy consulting, business processes and
IT. This enables the Company to identify strategic opportunities that might not
otherwise be considered by a management consulting firm or a systems integration
firm.
 
     Deliver a Solution with Measurable Results. Diamond is accountable for
delivering a solution with measurable results for its clients that is supported
by a cost/benefit analysis. Because the solution is delivered to the client by
the same multidisciplinary team that created the strategy, the time-to-market
and risk associated with these projects is reduced.
 
     Utilize Small, Multidisciplinary Project Teams. The Company's services are
delivered through small, experienced and multidisciplinary teams that work
collaboratively with a client. The Company refers to its project staffing model
as a "diamond," which contemplates a team configuration of highly skilled
professionals representing multiple areas of expertise. The size and composition
of a "diamond" is determined based upon the needs of a given project. Diamond
consultants, working closely with the client, create an environment in which
knowledge and skills are constantly shared. This transfer of knowledge is of
significant value to the client.
 
     Maintain Solution Objectivity. Diamond has intentionally refrained from
entering into alliances that might influence, or be perceived to influence, the
strategy that it recommends to a client. Furthermore, the Company does not offer
systems integration programming services that might bias its recommendation.
Diamond believes this objectivity is critical to its ability to address
strategic issues and earn its clients' trust.
 
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DIAMOND'S SERVICES
 
     The Company devises and implements business strategies enabled by IT.
Diamond leads a client through a process combining creative and analytical
thinking with an in-depth understanding of IT to enable the client to
conceptualize its business differently, and then develop and implement a
business strategy that more effectively incorporates IT. This is fundamentally
different than the traditional, sequential approach that addresses strategy
first, followed by development of new or revised IT solutions.
 
     While Diamond manages the implementation of IT-driven strategies, it does
not provide programming services. The Company's collaborative approach utilizes
the client's IT staff for programming functions. In the event that a client's
organization is unable to provide such functions internally, Diamond
subcontracts to third-party software programmers or systems integrators selected
for their expertise.
 
     A small project team of Diamond consultants with expertise in strategy,
business processes and IT works closely with the client throughout this process.
The phases which are included on any given client project, and the amount of
time spent on each phase vary greatly depending upon the scope of work and the
readiness of the client organization to change. The Company's Service Delivery
Process is generally outlined in the following diagram:
 
                     [DIAMOND SERVICE DELIVERY PROCESS GRAPH]
 
EXECUTIVE ALIGNMENT SEGMENT
 
     The executive alignment segment of the process is designed to help the
client explore the new strategic possibilities of technology before determining
a strategy. This segment consists of three phases: learning, collaboration and
prototyping. Learning helps clients explore and understand the new strategic
possibilities of technology in order to set preliminary goals, collaboration
gains consensus within the client's organization on these preliminary goals and
prototyping tests the goals to ensure they are realistic and prioritizes them
based on desired results. This segment leads to the development of an IT-driven
business strategy to achieve a client's objectives.
 
     Learning -- The objective of the learning phase is to help the client
evaluate the strategic possibilities of IT for its business and explore an
appropriate range of potential goals. During the learning phase, all aspects of
the attendant business issues (e.g., shrinking margins, heightened competition,
reduced market share, etc.) are examined in order to identify and understand new
alternatives based on relationships between emerging technologies and the
marketplace.
 
     Collaboration -- The collaboration phase is an extension of the learning
phase in which specific alternatives are shared with key members of the client
organization. During the collaboration phase, Diamond works with the client to
gain consensus on the goals that were preliminarily established in the learning
phase.
 
     Prototyping -- During the prototyping phase, the goals agreed upon in the
collaboration phase are translated into potential strategies. These strategies
are then modeled in a number of ways, including using computer simulation
technology or conducting a small market test. Prototyping helps to prioritize
and determine which strategies are realistic by understanding their effect on
the client's customers, processes, organization and technology.
 
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STRATEGY SEGMENT
 
     Based on the results of the executive alignment segment, an IT-driven
business strategy is then determined by the Company and the client. The strategy
is a blueprint to help the client reach its goal. When determining the strategy,
the team further evaluates the dynamics of the client's competitive and
financial environments. Importantly, specific performance goals and detailed
deployment plans for the new strategy are created, which constitute milestones
by which the client can readily measure results during the deployment phase. The
deployment plans developed in this phase correspond to the requirements of the
project, but generally include an organizational strategy, a process redesign
strategy and an IT strategy.
 
PROGRAM MANAGEMENT SEGMENT
 
     The objective of the program management segment is to keep client and/or
third-party resources focused on the business value of the project throughout
the implementation of the strategy. Diamond's program management services
provide the leadership and management needed to implement adjustments to the
deployment plan as needed to deliver a solution on time and within budget. Key
variables managed throughout this segment include project content,
constituencies affected by the project, knowledge transferred, risk associated
with the project and resources utilized.
 
     Program management services are delivered either as part of the
implementation of a strategy, or as a service by itself. As part of the
implementation of a strategy, program management consists primarily of three
phases: architecture, development and deployment. When delivered as a separate
service, program management services are used to manage very large,
enterprise-wide initiatives, or to help a client regain control of a project
that has materially deviated from plan.
 
     Architecture -- The architecture phase of the process defines how the new
strategy will be implemented. During this phase, the team examines and defines
the business and technical components of the solution. Examples of business
components include new/renovated buildings, new/redesigned business processes,
personnel training, or organizational redesign. Technical architectures address
tools, methodologies, procedures and controls to build and support new and
existing IT systems; physical networks; and hardware and software standards.
 
     Development -- The processes and systems to realize the benefits of the new
strategy are put into place during the development phase. Diamond's program
management services are most prominent in this phase. During development,
Diamond teaches, coaches and manages the implementation team comprised primarily
of client IT staff. Specific knowledge about new technologies and processes are
transferred more broadly to the client organization during this phase, as the
team aligns the people, processes and technologies required for a successful
deployment.
 
     Deployment -- The strategy becomes operational during the deployment phase.
Diamond manages the implementation of the strategy using the client's IT
management and programming resources and, if needed, third-party programmers or
systems integrators. Diamond measures results against the performance goals
defined in the strategy phase.
 
INTELLECTUAL CAPITAL
 
     Consulting firms are notably knowledge-intensive organizations. In the
past, the existence of accumulated experience within a consulting firm was
enough to attract and retain clients. Today, information is more readily
accessible and the useful life of new knowledge is shortening. In recognition of
this trend, Diamond has developed programs to identify, capture and disseminate
intellectual capital from individuals both within and outside the Company.
 
     Diamond Network -- The Diamond Network is a group of recognized business
and technology leaders associated with the Company. Members of the Diamond
Network provide Diamond with a set of skills which augment and enhance the value
which Diamond can provide to its clients. Diamond Network members provide a
source of intellectual capital, introduce the Company to prospective clients,
participate in joint-marketing initiatives, participate in client projects and
participate in the Diamond Exchange. Members are contractually committed to a
certain number of days dedicated to Diamond to support marketing, sales, and
client work. Diamond Network relationships are generally non-exclusive, two-year
contracts. Network members may work for other employers, however, the members
must be able to continue working with
 
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Diamond in their designated roles. Members are compensated with a combination of
stock options and per diem payments for services actually provided to clients of
the Company on the Company's behalf.
 
     Diamond Exchange -- The Diamond Exchange is an executive learning forum for
senior executives ranging from CEOs to CIOs that the Company launched in
February 1997. The Company provides its paid-subscription members with
innovative, leading edge research to explore and understand the strategic risks
and opportunities of emerging technologies. Diamond Exchange members meet three
times a year to discuss research findings and their business implications.
During these meetings, Diamond provides the members of the Diamond Exchange with
the opportunity to discuss their issues with Diamond Network members and other
business leaders. The Diamond Exchange also has a number of smaller working
sessions throughout the year. The objectives of this program are threefold: (i)
to help clients and prospects learn and research the strategic possibilities of
technology, (ii) to maintain and develop relationships with clients, and (iii)
to build intellectual capital and integrate it into the Company.
 
     Knowledge Leaders -- The Company has created a career path for certain of
its professionals who desire to specialize in a particular area, such as
technical architecture, electronic commerce or supply-chain operations. Diamond
refers to these professionals as "knowledge leaders" within its organization.
Knowledge leaders are responsible for identifying new developments within their
respective areas of expertise and capabilities, and applying that knowledge on
client projects. Diamond currently has four Partner-level knowledge leaders and
anticipates that more knowledge leaders will be added in the future.
 
     The intellectual capital gathered through these various programs is shared
throughout the Company in both formal and informal ways. Some formal venues
include frequent all-hands meetings, an interactive case-based training system
called ASK Diamond, and the Company's training and development programs.
 
SALES, MARKETING AND CLIENTS
 
     The Company primarily markets its services to senior executives of large,
national and multinational corporations. The Company markets its services both
directly and on a collaborative basis with members of the Diamond Network and
through relationships with certain third-party industry sector specialists. To
date, Diamond has focused its efforts primarily in four industries:
telecommunications, insurance, financial services, and consumer products and
services. The Company expects this list of industries to change and grow as
Diamond's expertise and market demands evolve. As of March 31, 1997, Diamond had
eight dedicated marketing personnel, including four full-time Partners
responsible for managing overall marketing, the Diamond Exchange, the Diamond
Network, lead identification and follow up. The majority of Diamond's sales
activities are pursued by its Partners.
 
     Personal referrals and relationships have historically been among the most
successful methods of gaining new business. The Company has initiated a number
of relationship marketing programs designed to encourage and accelerate personal
relationships. The Diamond Network and the Diamond Exchange are two such
relationship marketing programs currently underway. The Company employs a
variety of other business development and marketing techniques to communicate
directly with current and prospective clients, including authoring articles,
maintaining media and industry analyst relations, conducting direct marketing,
participating in conferences as speakers and panelists, and providing a home
page on the World Wide Web.
 
     Although every client relationship is unique, the Company's client
relationships to date generally have included multiple projects for a client.
Fees generated from each of these projects generally ranged from less than
$100,000 to more than $3.0 million, and have spanned from one month to more than
20 months. Diamond's objective is to develop longterm relationships with its
clients in several different areas of the client organization, as appropriate,
over a period of time. While it is a goal of the Company to have less than 10%
of its net revenues from any given client, the Company had one such client
during fiscal 1997 that individually accounted for 14% of its net revenues.
 
COMPETITION
 
     While the Company believes that no one firm competes with it in all service
areas, several firms compete with it in one or more areas. The Company's primary
competitors include management consulting firms, systems integrators and firms
that provide both management-consulting and systems-integration services. The
Company believes that it competes favorably with these firms. In addition,
Diamond believes that competition
 
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will also come from new entrants into the market. Against these new entrants,
the Company will compete based on its early entry in the market and the
reputation and awareness it is currently developing. The Company believes that
the principal criteria considered by prospective clients when selecting a
consulting firm to develop and implement business strategies that incorporate IT
include: scope of services, service delivery approach, technical and industry
expertise, perceived value, objectivity and accountability for results. Many of
the Company's competitors are substantially larger than the Company and have
significantly greater financial, technical and marketing resources, greater name
recognition and generate greater revenues than the Company.
 
     The recent growth in the IT services market has attracted many new
competitors and has afforded traditional competitors significant growth
opportunities. Diamond believes that a new and growing portion of this market in
the future is for consulting firms that are able to help clients synthesize
strategy with technology in an objective manner, while being held accountable
for the delivery of measurable results. While the Company believes that there
will be a market for general management consulting firms, it believes that firms
that deliver management consulting based on an in-depth understanding of
technology will have the greatest opportunity to grow. Furthermore, the Company
believes that the firms that will be sustainable will also be able to maintain
solution objectivity and to deliver an operating solution with measurable
results.
 
PERSONNEL
 
     As of March 31, 1997, Diamond had 180 employees, comprised of 146
client-serving professionals and 34 management and administrative personnel.
 
     Recruiting -- The Company intends to grow primarily from within to maintain
a strong culture. The Company's success will depend on its ability to continue
to attract, retain and motivate highly skilled employees to support current
operations and future growth. The Company attributes its success in hiring these
people to its ability to provide individuals with competitive compensation,
multidisciplinary training and career development, attractive long-term career
advancement opportunities, small teams and a collaborative approach to
consulting.
 
     Although a significant number of the Company's current employees were hired
directly from other firms, a growing number of associates are being hired
annually from graduate business programs at many of the country's leading
universities. The Company also has a summer associate program that provides an
additional source of graduate business program hires. Over time, the Company
expects to hire a majority of its employees from these programs and, as a
result, more senior levels will be filled from internal promotions.
 
     Training and Development -- The Company's training and professional
development programs help it to deliver high-quality services to its clients, as
well as to attract and retain highly skilled professionals. The Company has
developed programs that ensure all individuals have the opportunity to develop
consulting, business and IT skills throughout their careers. These programs
reinforce Diamond's culture by exposing all professionals to the various
services Diamond provides while further developing deep skills in each
professional's principal area of expertise.
 
     Diamond utilizes innovative, case-based training to simulate real client
projects with real client issues. This approach creates a "learn-by-doing"
environment supported by Diamond Partners and outside professionals who provide
coaching and feedback to participants. Industry executives are brought in to
simulate the role of the client executive during Diamond's training courses.
Because training is conducted in teams structured similarly to an actual
engagement, participants learn in an environment which resembles their work
environment. As a result, consultants are able to successfully transfer what
they learn to their projects.
 
FORWARD-LOOKING STATEMENTS
 
     Statements contained anywhere in this report that are not historical facts
contain forward-looking statements including such statements identified by the
words "anticipate", "believe", "estimate", "expect" and similar terminology used
with respect to the Company and its management. These forward-looking statements
are subject to risks and uncertainties which could cause the Company's actual
results, performance and prospects to differ materially from those expressed in,
or implied by, the forward-looking statements. The forward-looking statements
speak only as of the date hereof and the Company undertakes no obligation to
 
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revise or update them to reflect events or circumstances that arise in the
future. Readers are cautioned not to place undue reliance on forward-looking
statements.
 
     Among the risks and uncertainties affecting the forward looking statements
are the following:
 
     Variability Of Quarterly Operating Results. The Company has experienced and
may in the future continue to experience fluctuations in its quarterly operating
results. Factors that may cause the Company's quarterly operating results to
vary include the number of active client projects, the requirements of client
projects, the termination of major client projects, the loss of major clients,
the timing of new client engagements and the timing of personnel cost increases.
Certain of these factors may also affect the Company's personnel utilization
rates which may cause further variation in quarterly operating results. The
timing of revenues is difficult to forecast because the Company's sales cycle is
relatively long and the Company's services are impacted by general economic
conditions. Because a high percentage of the Company's expenses are relatively
fixed and the Company's general policy is to not adjust its staffing levels
based upon what it views as short-term circumstances, a variation in the timing
of the initiation or the completion of client assignments, particularly at or
near the end of any quarter, can cause significant variations in operating
results from quarter to quarter and could result in losses for any particular
fiscal period. In addition, a termination of a major project could require the
Company to maintain under-utilized employees, resulting in a higher than
expected percentage of unassigned professionals or to terminate the employment
of excess personnel.
 
     Concentration Of Revenues. The Company has in the past derived, and may in
the future derive, a significant portion of its revenues from a relatively
limited number of major projects. There are no long-term commitments by any of
the Company's clients for the Company's services and many of the Company's
engagements are, and may be in the future, terminable by clients without
penalty. The Company experienced the cancellation of significant projects at its
then two largest clients in the last quarter of fiscal 1996 and the first
quarter of fiscal 1997. The cancellation of these projects resulted from each
client's cancellation of the business initiative for which the Company had been
retained. As a result of the cancellation of these two projects and the increase
in the Company's operating expenses caused by the Company's expansion, the
Company experienced a net loss of approximately $1.1 million during the first
six months of fiscal 1997.
 
     Control By Chief Executive Officer; Election Of Future Chief Executive
Officers. Each employee-stockholder of the Company has granted a proxy to vote
their shares of Common Stock to the Chief Executive Officer of the Company.
Accordingly the Company's Chief Executive Officer controls approximately 80.0%
of the voting rights of the outstanding Common Stock of the Company and will
have the voting power to elect the Company's entire Board of Directors and to
approve all matters requiring stockholder approval. In addition, an agreement
among the Company and certain officers requires that the Company's Chief
Executive Officer be selected from among such officers. This significantly
limits the number of qualified persons that may be considered for such office.
 
     Reliance On Key Personnel. The Company's success depends upon the continued
service of its key executive officers and its ability to attract, retain and
motivate highly skilled professionals, particularly Partners and senior
principals. Qualified client-serving professionals are in particularly great
demand and are likely to remain a limited resource for the foreseeable future.
The loss for any reason of some or all of the Company's professionals or key
executive officers could have a material adverse effect on the Company and its
prospects.
 
     Management Of Growth. The Company has been experiencing a period of
substantial growth which has placed, and is anticipated to continue to place, a
strain on the Company's financial and other resources. The Company's ability to
manage its staff growth effectively will require it to continue to improve its
operational, financial and other internal systems, and to train, motivate and
manage its employees. If the Company's management is unable to manage growth
effectively and new employees are unable to achieve anticipated performance
levels, the Company's results of operations could be adversely affected.
 
     Project Risks. Because many of the Company's projects are critical to its
clients, a failure or inability to meet a client's expectations could damage the
Company's reputation and adversely affect its ability to attract new business.
In addition, the failure of a project or the failure of the Company to collect a
large account receivable could also result in significant financial exposure to
the Company, which could have a material adverse effect on the Company's
financial condition.
 
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     Technological Advances. The Company's success will depend in part on its
ability to develop strategic business and IT solutions which keep pace with
continuing changes in evolving industry standards, IT and changing client
preferences. There can be no assurance that the Company will be successful in
addressing these developments on a timely basis or that, if addressed, the
Company will be successful in the marketplace. The Company's delay in addressing
or failure to address these developments could have a material adverse effect on
the Company's business.
 
     Competition. The management consulting and systems integration markets
include a large number of participants, are subject to rapid changes and are
highly competitive. The Company competes with and faces potential competition
for client assignments and experienced personnel from a number of companies that
have significantly greater financial, technical and marketing resources,
generate greater revenues than does the Company and have greater name
recognition.
 
     Investment Market Factors. Several factors affecting the market for the
Company's Common Stock may affect an investment in the Company. These include
(i) the Company's ability to maintain the standards for continued listing on the
NASDAQ National Market; (ii) factors such as announcements of technological
innovations, announcements of new products by the Company's competitors or third
parties, and market conditions in the IT industry or the public markets in
general; (iii) the eligibility for future sale in the public markets of a
substantial number of outstanding shares of Common Stock and shares of Common
Stock issuable upon exercise of outstanding stock options and warrants; and (iv)
certain anti-takeover provisions in the Company's charter and bylaws.
 
     No Dividends. To date, the Company has not paid any cash dividends on its
Common Stock, and does not expect to declare or pay any cash or other dividends
in the foreseeable future. Further, the secured credit agreement with the
Company's commercial lender prohibits payment of dividends or other
distributions on the Company's Common Stock.
 
     Additional information regarding factors that could affect the Company's
results, performance and prospects are set forth under the heading, "Risk
Factors" in the final Prospectus filed on February 24, 1997 pursuant to Rule
424(b) in connection with the Company's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission (File Number 333-17785) and,
although the Company undertakes no obligation to revise or update, may be
contained in other documents the Company files from time to time with the
Securities and Exchange Commission. Readers should carefully review such
additional information.
 
ITEM 2. PROPERTIES
 
     The Company's headquarters and principal administrative, information
systems, financial accounting, marketing and human resources operations are
located in approximately 24,000 square feet of leased space in Chicago,
Illinois. This lease expires in 2002, but permits an extension of five years
with notice. Diamond has also leased approximately 7,000 square feet of office
space in Cleveland, Ohio. This lease expires in 2001, but permits an extension
of three years with notice.
 
     The Company anticipates that additional office space will be required as
business expands and believes that it will be able to obtain suitable space as
needed.
 
ITEM 3. LEGAL PROCEEDINGS
 
     In the opinion of management, there are no claims or actions against the
Company the ultimate disposition of which will have a material effect on the
Company's results of operations or financial position.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of fiscal 1997.
 
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The executive officers of the Company are as follows:
 
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                 NAME                      AGE                         POSITION(S)
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<S>                                        <C>    <C>
Melvyn E. Bergstein....................    55     Chairman of the Board of Directors, Chief Executive
                                                  Officer and President
Christopher J. Moffitt.................    42     Senior Vice President, Secretary and Director
Michael E. Mikolajczyk.................    45     Senior Vice President, Chief Financial and
                                                  Administrative Officer, Treasurer and Director
James C. Spira.........................    54     Senior Vice President and Director
</TABLE>
 
     Melvyn E. Bergstein co-founded the Company in January 1994 and has served
as its Chairman, Chief Executive Officer and President since that time. From
1991 to 1993, Mr. Bergstein at various times served as vice chairman, executive
vice president, president and co-chief executive officer, and a member of the
board of directors of Technology Solutions Company, a publicly traded,
Chicago-based systems integrator. From 1989 to 1991, he was senior vice
president -- systems integration for Computer Sciences Corporation. From 1968 to
1989, Mr. Bergstein held a number of positions with Arthur Andersen & Co.'s
consulting division (now Andersen Consulting). While with Andersen Consulting,
Mr. Bergstein served as partner from 1977 to 1989 and managing director of
worldwide technology from 1985 to 1989. Mr. Bergstein served on Arthur
Andersen's Board during the 1985 to 1989 period, and as chairman of Arthur
Andersen's Consulting Oversight Committee during 1989. Mr. Bergstein received
his bachelors degree from the University of Pennsylvania. Mr. Bergstein is also
a member of the board of directors of Integrated Systems Consulting Group, Inc.,
a publicly traded company and a Safeguard partnership company.
 
     Christopher J. Moffitt co-founded the Company in January 1994 and has
served as Senior Vice President, Secretary and a member of the Board of
Directors of the Company since that time. From 1988 to 1993, he served as senior
vice president of Technology Solutions Company. From 1986 to 1988, Mr. Moffitt
was a principal in the Management Consulting Group of Arthur Young (now Ernst &
Young) where he became partner in 1988. From 1981 to 1986, Mr. Moffitt served as
director of information systems for Neiman Marcus. Mr. Moffitt began his career
in 1974 with Electronic Data Systems as a systems engineer and account manager.
Mr. Moffitt received his bachelors degree from the University of Miami.
 
     Michael E. Mikolajczyk joined the Company in April 1994 and has served as
Senior Vice President, Chief Financial and Administrative Officer and a member
of its Board of Directors since that time. From 1993 to 1994, he served as
senior vice president of finance and administration and chief financial officer
for Technology Solutions Company. From 1981 to 1993, Mr. Mikolajczyk was with
MCI Telecommunications Corporation where he served at various times as vice
president of finance and administration for both its Business Services Division
and its Central Division, vice president of corporate development and analysis,
vice president of business analysis, tariffs and contracts, and vice president
of marketing and finance for MCI's Digital Information Services Company. Mr.
Mikolajczyk received his bachelors degree from Wayne State University and his
M.B.A. from Harvard Business School.
 
     James C. Spira joined the Company in November 1995 and has served as Senior
Vice President since that time. He became a member of its Board of Directors in
February 1996. From 1991 to 1995, Mr. Spira was a group vice president of the
Tranzonic Companies, Inc., a $200 million public corporation specializing in the
manufacture and distribution of quality paper, cloth and vinyl products. Prior
to that time, Mr. Spira co-founded Cleveland Consulting Associates in 1974,
where he served as the firm's president and chief executive officer. Mr. Spira
serves on the board of directors of CIBER, Inc., and the Tranzonic Companies,
Inc. Mr. Spira holds an M.B.A. from the University of Pennsylvania's Wharton
School and a B.A. in history from Hobart College.
 
                                       10
<PAGE>   11
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     The Company's Class A Common Stock is listed on the National Market System
of Nasdaq under the symbol "DTPI." There is no established trading market for
the Company's Class B Common Stock.
 
     Since trading in the Class A Common Stock began on February 25, 1997, the
high and low sale prices of the Class A Common Stock in the quarter ended March
31, 1997, were $10.50 and $5.875, respectively. These quotations reported by
Nasdaq represent prices between dealers and do not include retail mark-ups,
mark-downs or commissions. Such quotations may not represent actual
transactions.
 
     As of March 31, 1997, the Company had outstanding 11,316,301 shares of
Class A and Class B Common Stock held by approximately 709 shareholders of
record.
 
     Holders of Class A and Class B Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding Preferred Stock. To date, the Company has not paid any cash
dividends on its Class A or Class B Common Stock and does not expect to declare
or pay any cash or other dividends in the foreseeable future. The Company's
financing arrangements currently do not prohibit the Company from declaring or
paying dividends or making other distributions on the Class A or Class B Common
Stock.
 
     The Company has issued the following securities that were not registered
under the Act:
 
     Since its inception on January 28, 1994 and through March 31, 1997, the
Company has sold to its Partners, certain of its other employees, certain
persons who are not employees and certain non-employee members of the Board of
Directors, 5,436,300 shares of its Common Stock. The initial price per share was
$0.91 and has since increased, in several increments, to $4.24. All such sales
were made under the exemption from registration provided under Section 4(2) of
the Securities Act of 1933 (the "Act").
 
     In a series of three connected sales occurring in March, May and July,
1994, the Company sold 1,512,501 shares of its Common Stock to Safeguard
Scientifics, Inc. ("Safeguard"), 706,187 shares of its Common Stock to
Technology Leaders, L.P., 806,314 shares of its Common Stock to Technology
Leaders Offshore C.V., and 274, 999 shares of its Common Stock to CIP, L.P., for
a total 3,300,001 shares. The shares were sold at $0.91 per share under the
exemption from registration provided by Section 4(2) of the Act.
 
     Coincident with its sales to Safeguard of 1,512,501 shares in 1994, the
Company issued to Safeguard a warrant for the purchase of 825,000 shares of
Common Stock for $1.21 per share. Safeguard subsequently transferred to
CompuCom, Inc. its right to purchase 165,000 shares pursuant to the warrant and
transferred to Cambridge Technology Partners (Massachusetts), Inc. its right to
purchase 165,000 shares pursuant to the warrant. Safeguard, CompuCom and
Cambridge each exercised its respective warrant in May, 1996, and the Company
sold to them 495,000 shares, 165,000 shares and 165,000 shares, respectively at
the exercise price $1.21 per share. These sales were made under the exemption
from registration provided under Section 4(2) of the Act.
 
     On November 8, 1996, the Company issued to Safeguard a warrant to purchase
526,598 shares of Common Stock at an exercise price of $5.50 per share. In
addition, on November 18, 1996, the Company issued to Gordon & Glickson P.C. an
option to purchase 13,035 shares of Common Stock at an exercise price of $3.18
per share. In issuing such warrant and option and selling the underlying
securities upon exercise, the Company is relying on an exemption from
registration under Section 4(2) of the Act.
 
     Pursuant to the Company's Stock Option Plan, Registrant has granted options
to purchase a total of 3,168,137 shares of Common Stock to its employees and
directors since inception at exercise prices ranging from $1.21 to $5.50 per
share. In granting the options and selling the underlying securities upon option
exercise, the Company relied on exemptions from registration set forth in rule
701 under, and Section 4(2) of, the Act.
 
                                       11
<PAGE>   12
 
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
 
     The selected consolidated financial data presented below has been derived
from the Company's consolidated financial statements. The data presented below
should be read in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," the Consolidated Financial
Statements and the notes thereto and other financial information appearing
elsewhere (amounts in thousands, except per share amounts).
 
<TABLE>
<CAPTION>
                                                          INCEPTION TO        YEAR ENDED MARCH 31,
                                                           MARCH 31,      -----------------------------
                                                              1994         1995       1996       1997
                                                              ----         ----       ----       ----
<S>                                                       <C>             <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..........................................       $ 261        $12,843    $26,339    $37,557
                                                             -----        -------    -------    -------
OPERATING EXPENSES:
  Project personnel and related expenses..............         633          8,351     15,312     21,863
  Professional development and recruiting.............         106          1,395      4,587      6,272
  Marketing and sales.................................          94            451        606      1,928
  Management and administrative support...............         317          3,108      4,460      6,348
                                                             -----        -------    -------    -------
       Total operating expenses.......................       1,150         13,305     24,965     36,411
                                                             -----        -------    -------    -------
Income (loss) from operations.........................        (889)          (462)     1,374      1,146
Interest income, net..................................           3             85        164        172
                                                             -----        -------    -------    -------
Income (loss) before taxes............................        (886)          (377)     1,538      1,318
Income taxes..........................................          --             --       (302)      (685)
                                                             -----        -------    -------    -------
Net income (loss).....................................       $(886)       $  (377)   $ 1,236    $   633
                                                             =====        =======    =======    =======
 
Net income (loss) per share of Common Stock(1)........       $(.35)       $ (0.05)   $  0.13    $   .06
Shares used in computing net income (loss) per
  share(1)............................................       2,511          8,272      9,824     10,886
</TABLE>
 
<TABLE>
<CAPTION>
                                                                            MARCH 31,
                                                              --------------------------------------
                                                               1994      1995      1996       1997
                                                               ----      ----      ----       ----
<S>                                                           <C>       <C>       <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................................    $1,148    $4,690    $ 4,635    $17,547
Working capital...........................................       558     4,345      4,397     15,725
Total assets..............................................     1,456     7,513     11,615     25,494
Long-term debt, including current portion.................        --       256        125         --
Total stockholders' equity................................       767     5,187      6,568     18,300
</TABLE>
 
-------------------------
(1) Net income (loss) per share is computed using the weighted average number of
    shares of common stock and common stock equivalent shares (stock options and
    warrants) outstanding unless anti-dilutive. As required by Staff Accounting
    Bulletin No. 83 issued by the Securities and Exchange Commission, common
    stock and common stock equivalent shares issued by the Company during the
    twelve-month period preceding the company's Initial Public Offering have
    been included in the calculation as if they were outstanding for all periods
    presented regardless of the dilutive effect (using the treasury stock method
    and the initial public offering price).
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The following information should be read in connection with the information
contained in the Consolidated Financial Statements and notes thereto appearing
elsewhere in this Annual Report on Form 10-K. This Annual Report on Form 10-K
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from the results discussed in the
forward looking statements.
 
OVERVIEW
 
     Diamond is a management consulting firm that devises and implements
business strategies enabled by information technology ("IT") to improve its
clients' competitive positions. Diamond was founded upon, and
 
                                       12
<PAGE>   13
 
continues to stress, a business culture in which strategic consulting and IT
expertise are integrated to provide client solutions. The Company has
experienced substantial revenue growth as its net revenues have increased from
$12.8 million in its first full fiscal year of operations ended March 31, 1995
to $37.6 million in fiscal 1997 while growing its client base from 16 clients
served in fiscal 1995, to 24 clients in fiscal 1996 and 45 clients in fiscal
1997. The number of the Company's client-serving professionals has also grown
during this three-year period from 69 to 115 and 146 at the end of fiscal 1995,
1996 and 1997, respectively.
 
     The Company's revenues are comprised of professional fees for services
rendered to clients which are billed either monthly or semi-monthly in
accordance with the terms of the client engagement. Prior to the commencement of
a client engagement, the Company and its client agree on fees for services based
upon the scope of the project, Diamond staffing requirements and the level of
client involvement. The Company recognizes revenues as services are performed in
accordance with the terms of the client engagement. Out-of-pocket expenses are
reimbursed by clients and offset against expenses incurred and are not included
in recognized revenues. Provisions are made for estimated uncollectible amounts
based on the Company's experience. Although the Company from time to time has
been required to make revisions to its clients' estimated deliverables, to date
none of such revisions has had a material adverse effect on the Company's
operating or financial results.
 
     The largest portion of the Company's costs consist primarily of
employee-related expenses for its client-serving professionals and other direct
costs, such as third-party vendor costs and unbilled travel costs associated
with the delivery of services to clients. The remainder of the Company's costs
are comprised of the expenses associated with the development of the business
and the support of its client-serving professionals, such as professional
development and recruiting, marketing and sales, and management and
administrative support. Professional development and recruiting expenses consist
primarily of recruiting and training costs. Marketing and sales expenses consist
primarily of the costs associated with the Company's development and maintenance
of its marketing materials and programs, in addition to other marketing
programs. Management and administrative support expenses consist primarily of
the costs associated with operations, finance, information systems, facilities
and other administrative support for project personnel.
 
     The Company regularly reviews its fees for services, professional
compensation and overhead costs to ensure that its services and compensation are
competitive within the industry. In addition, Diamond monitors the progress of
client projects with client senior management on a periodic basis. The Company
manages activities of its professionals by closely monitoring engagement
schedules and staffing requirements for new engagements. Because most of the
Company's client engagements are, and may be in the future, terminable by the
client without penalty, an unanticipated termination of a client project could
require the Company to maintain underutilized employees, resulting in a higher
than expected percentage and number of inactive professionals. While
professional staff must be adjusted to reflect active engagements, the Company
must maintain a sufficient number of senior professionals to oversee existing
client engagements and participate in the Company's sales efforts to secure new
client assignments.
 
RECENT DEVELOPMENTS
 
     The Company completed its offering of 3,675,000 shares of Class A Common
Stock on March 31, 1997 (the "Initial Public Offering"). In connection with this
offering, holders of Safeguard Scientifics, Inc., ("Safeguard") Common Stock and
certain other direct purchasers had subscribed for the purchase of 1,755,000
shares of Class A Common Stock from the Company as of March 31, 1997.
Additionally, the underwriters elected to exercise their option to purchase
320,000 shares of Class A Common Stock from the Company at the closing on April
8, 1997, to cover over-allotments. The remaining 1,600,000 shares of the
Company's Class A Common Stock were sold by Safeguard and certain other
companies affiliated with Safeguard. The net proceeds for the subscribed shares
totaling $8.5 million were realized on March 31, 1997. The Company also realized
$1.6 million of net proceeds from the Underwriters, pursuant to their exercise
of the overallotment option on April 8, 1997.
 
                                       13
<PAGE>   14
 
RESULTS OF OPERATIONS
 
     The following table sets forth for the periods indicated, selected
statements of operations data as a percentage of net revenues:
 
<TABLE>
<CAPTION>
                                                                       YEAR ENDED MARCH 31,
                                                                   -----------------------------
                                                                   1995        1996        1997
                                                                   ----        ----        ----
<S>                                                                <C>         <C>         <C>
Net Revenues................................................       100.0%      100.0%      100.0%
                                                                   -----       -----       -----
Operating Expenses:
  Project personnel and related expenses....................        65.0        58.1        58.2
  Professional development and recruiting...................        10.9        17.4        16.7
  Marketing and sales.......................................         3.5         2.3         5.1
  Management and administrative support.....................        24.2        17.0        16.9
                                                                   -----       -----       -----
       Total operating expenses.............................       103.6        94.8        96.9
                                                                   -----       -----       -----
Income (loss) from operations...............................        (3.6)        5.2         3.1
Interest income, net........................................         0.7         0.6         0.4
                                                                   -----       -----       -----
Income (loss) before taxes..................................        (2.9)        5.8         3.5
Income taxes................................................          --        (1.1)       (1.8)
                                                                   -----       -----       -----
Net income (loss)...........................................        (2.9)%       4.7%        1.7%
                                                                   =====       =====       =====
</TABLE>
 
FISCAL 1997 COMPARED TO FISCAL 1996
 
     The Company's net income decreased $603,000 during fiscal 1997
fundamentally because of a net loss incurred during the six months ended
September 30, 1996 totaling $1.1 million. This net loss was more than offset by
net income of $1.7 million during the subsequent six months ended March 31,
1997. The Company's net income improvement during the last half of fiscal 1997
resulted from increased revenues, combined with the impact of cost reductions
implemented during the year.
 
     The Company's net revenues continued to grow during each of the quarters in
fiscal 1997, despite the cancellation of two significant projects during the
last quarter of fiscal 1996 and the first quarter of fiscal 1997. The
cancellation of these projects resulted from (a) one client's acquisition of an
existing business which eliminated its need for Diamond's continued services in
assisting the client in the establishment of a similar business and (b) the
other client's cancellation of the business initiative for which the Company had
been retained. The revenues from these two clients represented approximately
$3.8 million in the quarter ended March 31, 1996 and, after such cancellations,
represented approximately $1.5 million in the quarter ended June 30, 1996,
$300,000 in the quarter ended September 30, 1996 and zero in the quarter ended
December 31, 1996. At the time of these project cancellations, the Company was
in the process of increasing the number of its client-serving professionals to
support anticipated revenue growth. Accordingly, the lost revenue associated
with these projects, together with the expanded capacity for future anticipated
revenue growth, resulted in a higher than expected percentage of unassigned
professionals during each of the quarters ended June 30, 1996 and September 30,
1996 and net losses in these quarters of $714,000 and $385,000, respectively.
The Company responded to the impact of this lost revenue and reduced utilization
of its client-serving professionals by evaluating its cost structure and
eliminating, or deferring, certain planned spending and terminating certain
non-client-serving professionals. At the same time, the Company elected to
retain existing client-serving professionals so that it could be in a position
to respond to anticipated future growth. Finally, the following compensation
reductions were implemented to help the Company recover from the situation.
 
     - The Company eliminated employee bonuses for the year ending March 31,
       1997.
 
     - The Partners agreed to a temporary 8.3% reduction in compensation for one
       year commencing with the quarter ending December 31, 1996.
 
     - Certain of the Partners forgave prior years' deferred compensation
       totaling approximately $485,000 during each of the quarters ended
       December 31, 1996 and March 31, 1997, which were recognized as a
       reduction in operating expenses in the respective periods.
 
     The Company's response to these project cancellations and the resulting
business circumstances effectively reduced spending levels, while maintaining
the consulting capacity required to support future
 
                                       14
<PAGE>   15
 
growth. In the aggregate the Company reduced, or will reduce, its expense levels
by approximately $800,000 in the quarter ended September 30, 1996, approximately
$1.1 million in each of the quarters ended December 31, 1996, and March 31,
1997, and $200,000 in each quarter ending June 30, 1997 and September 30, 1997
as compared to the expense levels included in the quarter ended June 30, 1996.
 
     The Company's net revenues increased 42.6% to $37.6 million in 1997. The
increase in the Company's net revenues reflects an increase in the volume of
services delivered to new clients, as well as the leveraging of the Company's
existing client base by undertaking additional projects for these clients. For
the year ended March 31, 1997, $18.3 million of revenue was derived from
services delivered to new clients and $19.3 million related to the completion of
projects or undertaking additional projects from the Company's client base of
the previous fiscal year. The Company served 45 clients during 1997 (of which 16
were clients during the prior fiscal year) as compared to 24 clients during
1996.
 
     Project personnel and related expenses increased $6.6 million to $21.9
million during 1997. In aggregate, project personnel and related expenses
increased 42.8% from the prior year due to the increase in the number of its
client-serving professionals hired during the period to respond to anticipated
future growth. The Company increased its client-serving professional staff from
115 at March 31, 1996 to 146 at March 31, 1997. As a percentage of net revenues,
project personnel and related expenses increased slightly from 58.1% to 58.2%
during fiscal 1997.
 
     Professional development and recruiting expenses increased from $4.6
million to $6.3 million or 36.7%, during fiscal 1997 due to the increase in
recruiting and the training of a higher number of professional consultants. The
increase also reflects the Company's continued emphasis on its investment in
recruiting and training to support the growth of its business as partially
offset by certain cost containment initiatives undertaken in response to the
previously described project cancellations. As a percentage of net revenues,
professional development and recruiting expenses decreased to 16.7% as compared
to 17.4% during fiscal 1996.
 
     Marketing and sales expenses increased from $606,000 to $1.9 million during
fiscal 1997. As a percentage of net revenues, these expenses increased from 2.3%
to 5.1%, reflecting the Company's expanded investment in its marketing and sales
programs.
 
     Management and administrative support expenses increased from $4.5 million
to $6.3 million during fiscal 1997, or 42.3% as a result of the additional
facilities, equipment and personnel necessary to support the company's growth
and increased consulting capacity. As a percentage of net revenues, these
expenses decreased slightly from 17.0% to 16.9%.
 
FISCAL 1996 COMPARED TO FISCAL 1995
 
     The Company's net revenues increased 105.1% to $26.3 million in 1996, as
compared to $12.8 million in 1995. The increase in the Company's net revenues
reflects an increase in the volume of services delivered to new clients, as well
as the leveraging of the Company's existing client base by undertaking
additional projects for these clients. For the year ended March 31, 1996, $6.9
million of revenue was derived from services delivered to new clients and $19.4
million related to the completion of projects or undertaking additional projects
from the Company's client base of the previous fiscal year. The Company served
24 clients during 1996 (of which 12 were clients during the prior fiscal year)
as compared to 16 clients during the same period in the prior year.
 
     Project personnel and related expenses increased from $8.4 million to $15.3
million or 83.4%. This reflects the increase in the number of professional
consultants required to support the Company's growth during the period and to
respond to anticipated future growth. In response to the Company's requirements
for additional project personnel, the Company increased its number of
client-serving professionals from 69 at March 31, 1995 to 115 at March 31, 1996.
As a percentage of net revenues, these expenses decreased from 65.0% to 58.1%
during 1996, reflecting the Company's improved utilization of its client-serving
professionals relative to the preceding year.
 
     Professional development and recruiting expenses increased from $1.4
million to $4.6 million during 1996. As a percentage of net revenues, these
expenses increased from 10.9% to 17.4% in 1996. This increase reflects the
Company's emphasis on its investment in recruiting and training to support the
growth of the business and to conduct internal training to support the
assimilation and development of its highly skilled employee base.
 
                                       15
<PAGE>   16
 
     Marketing and sales expenses increased from $451,000 to $606,000, or 34.4%
as a result of the Company's expanded investment in its marketing and sales
programs. As a percentage of net revenues, these expenses decreased from 3.5% in
1995 to 2.3% in 1996.
 
     Management and administrative support expenses increased from $3.1 million
to $4.5 million, or 43.5%, as a result of the additional facilities, equipment
and personnel necessary to support the Company's growth and increased consulting
capacity. As a percentage of net revenues, these expenses decreased from 24.2%
to 17.0% as a result of the Company's improved operating leverage resulting from
the Company's net revenue growth.
 
     The Company's effective tax rate of 19.6% in 1996 was lower than the
federal statutory rate primarily due to the recognition of benefits not
recognized during fiscal 1994 and 1995. The Company did not recognize these
benefits in 1994 and 1995 because of its operating losses during those years,
its limited operating history and the likelihood of their realization at the end
of each of those fiscal years.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company finalized the Initial Public Offering on April 8, 1997, as
previously noted. In connection with the Initial Public Offering, the Company
sold 2,075,000 shares of Class A Common Stock generating net proceeds totaling
approximately $10.1 million, of which $8.5 million was realized as of March 31,
1997. The remaining 1,600,000 shares of Class A Common Stock were sold by
Safeguard and companies affiliated with Safeguard. The Company used $2.0 million
of the proceeds from the Initial Public Offering to repay a loan from Safeguard.
The remaining $8.1 million of these proceeds will be used for working capital,
general corporate purposes and capital expenditures.
 
     Historically, the Company has used proceeds from the private sales of
common stock and cash from operations to fund its operating and capital
requirements. The Company expects that cash from operations and the proceeds
from the Initial Public Offering will provide the principal sources of future
liquidity for the Company. Variations in the Company's operating results have
occurred in the past and any significant decreases in net income could adversely
affect liquidity.
 
     The Company is currently experiencing a period of growth which could place
a strain on the Company's financial resources. The Company expects to increase
its client-serving professional staff in excess of 20% during the next 12
months. Although the Company's plans to hire personnel are driven in response to
increased demand for the Company's consulting services, a portion of these
expenses may be incurred in anticipation of increased demand. Operating results
and liquidity may be adversely affected if market demand and revenues do not
increase as anticipated. Capital expenditures for computer equipment,
telecommunications equipment, and furniture and fixtures and leasehold
improvements totaled $1.2 million during fiscal 1997 and $1.8 million during
fiscal 1996. The Company anticipates that its capital expenditures for fiscal
1998 will approximate $1.5 million.
 
     The Company entered into a $2.0 million subordinated loan agreement with
Safeguard on November 8, 1996 for general working capital purposes. In
connection with this loan, the Company issued warrants to Safeguard for the
purchase of 526,597 shares of the Company's Common Stock at $5.50 per share. The
loan has a maturity date of November 1, 2001 but must be repaid in full upon the
consummation of the Initial Public Offering and bears interest at rates which
escalate 1.0% annually, starting at 6.0% in the initial year. The Company repaid
this loan on April 11, 1997 with proceeds from the Initial Public Offering.
 
     The Company also obtained a revolving line of credit pursuant to the terms
of a secured credit agreement from a commercial bank under which the Company may
borrow up to $3.0 million at an annual interest rate based on the prime rate or
based on the LIBOR rate plus 2.5%, at the Company's discretion. As of March 31,
1997, the Company had approximately $2.8 million available under this line of
credit.
 
     The Company's billings for the year and quarter ended March 31, 1997
totaled $46.2 million and $14.6 million, respectively. These amounts include
billings to clients for out-of-pocket expenses that are reimbursed by clients
which are not included in recognized revenues. The Company's gross accounts
receivable of $5.1 million at March 31, 1997, represents 31 days of billings for
the quarter ended March 31, 1997.
 
     The Company may expand its capabilities through the acquisition of other
businesses that are complementary to the Company's business. A portion of the
net proceeds from the Initial Public Offering may
 
                                       16
<PAGE>   17
 
be used in the future for such acquisitions, although the Company is not
currently engaged in active discussions with respect to any acquisition.
 
     The Company currently anticipates that the net proceeds received by the
Company from the Initial Public Offering, together with amounts available under
its current revolving line of credit, cash generated from operations and
existing cash balances will be sufficient to satisfy its operating cash needs
for fiscal 1998. Should the Company's business expand more rapidly than
expected, the Company believes that additional bank credit would be available to
fund such operating and capital requirements. In addition, the Company could
consider seeking additional public or private debt or equity financing to fund
future growth opportunities.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     The information required by this item is contained in the financial
statements and schedules set forth in Item 14(a) under the captions
"Consolidated Financial Statements" and "Financial Statements Schedule" as a
part of this report.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
 
     None.
 
                                       17
<PAGE>   18
 
                                    PART III
 
     Part III of this Annual Report on Form 10-K is incorporated by reference to
portions of the Registrants definitive proxy statement, to be filed with the
Securities and Exchange Commission not later than 120 days after the close of
its fiscal year; provided that if such proxy statement is not filed with the
Commission in such 120-day period, an amendment to this Form 10-K shall be filed
no later than the end of the 120-day period.
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Information with respect to Directors of the Company will be set forth in
the forthcoming Proxy Statement under the heading "Election of Directors," which
information is incorporated herein by reference or in an amendment to this Form
10-K. Information regarding the executive officers of the Company is included as
Item 4A of Part I of this Form 10-K as permitted by Instruction 3 to Item 401(b)
of Regulation S-K. Information required by Item 405 of Regulation S-K will be
set forth in the forthcoming Proxy Statement under the heading "Compliance with
Section 16(a) of the Securities Exchange Act of 1934," which information is
incorporated herein by reference.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     Information with respect to executive compensation will be set forth in the
Proxy Statement under the heading "Compensation of Executive Officers," which
information is incorporated herein by reference (except for the Compensation
Committee report on Executive Compensation and the Performance Graph), or in an
amendment to this Form 10-K.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Information with respect to security ownership of certain beneficial owners
and management will be set forth in the forthcoming Proxy Statement under the
heading "Beneficial Ownership of Common Stock," which information is
incorporated herein by reference, or in an amendment to this Form 10-K.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information with respect to certain relationships and transactions will be
set forth in the forthcoming Proxy Statement, under the heading "Compliance with
Section 16(a) of the Securities Exchange Act of 1934," which information is
incorporated herein by reference, or in an amendment to this Form 10-K.
 
                                       18
<PAGE>   19
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
(a) Financial Statements and Schedules
 
     The financial statements and schedule listed in the index on page F-1 are
filed as part of this Form 10-K on pages F-2 to F-13.
 
     All information for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission is either included in the
financial statements or is not required under the related instructions or are
inapplicable, and therefore have been omitted.
 
(b) Reports on Form 8-K
 
     No reports on Form 8-K were filed by the Company during the quarter ended
March 31, 1997.
 
(c) Exhibits
 
     The following is a list of exhibits required by Item 601 of Regulation S-K
filed as part of this Form 10-K. Where so indicated by footnote, exhibits which
were previously filed are incorporated by reference. For exhibits incorporated
by reference, the location of the exhibit in the previous filing is indicated in
parentheses.
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
</TABLE>
 
 3.1**     Form of Restated Certificate of Incorporation of the
           Company.
 3.2**     Form of Amended and Restated By-laws of the Company.
10.1**     Amended and Restated Diamond Technology Partners
           Incorporated 1994 Stock Option Plan, as amended.
10.2**     Employment Agreement between Melvyn E. Bergstein and the
           Company, dated February 1, 1994, as amended.
10.3**     Employment Agreement between Michael E. Mikolajczyk and the
           Company, dated April 18, 1994, as amended.
10.4**     Employment Agreement between James C. Spira and the Company,
           dated November 1, 1995, as amended.
10.5**     Employment Agreement between Christopher J. Moffitt and the
           Company, dated February 1, 1994, as amended.
10.6**     Stock Purchase Agreement dated as of March 22, 1994 among
           the Company, Melvyn E. Bergstein, Christopher J. Moffitt,
           Safeguard Scientifics, Inc. and certain other investors, as
           amended.
10.7**     Amended and Restated Voting and Stock Restriction Agreement
           dated as of April 1, 1996 among the Company, Technology
           Leaders L.P., Technology Leaders Offshore C. V., CIP Capital
           L.P., Safeguard Scientifics (Delaware), Inc. and certain of
           the shareholders of the Company.
10.8**     Amended and Restated Partners Operating Agreement dated as
           of April 1, 1996 among the Company and the Partners of the
           Company.
10.9**     Loan Agreement dated as of November 8, 1996 among the
           Company and Safeguard Scientifics (Delaware), Inc.
10.10**    Amended and Restated Warrant Certificates to Purchase Common
           Stock dated as of November 8, 1996 among the Company and
           Safeguard Scientifics (Delaware), Inc.
10.11**    Rights Agent Agreement among the Company, Safeguard
           Scientifics, Inc., Technology Leaders, CIP Capital L.P.,
           Cambridge Technology Partners (Massachusetts), Inc.,
           CompuCom Systems, Inc., Chase/Mellon Shareholder Services,
           L.L.C. and Mellon Bank, N.A.
10.12**    Warrant Certificate to Purchase Common Stock dated as of
           January 31, 1997 between Safeguard Scientifics (Delaware),
           Inc. and the Company (Supersedes Exhibit 10.10)
 
                                       19
<PAGE>   20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
10.13**    Warrant Certificate to Purchase Common Stock dated as of
           January 31, 1997 between Capital, L.P. and the Company.
10.14**    Warrant Certificate to Purchase Common Stock dated as of
           January 31, 1997 between Technology Leaders FR Corp. and the
           Company.
10.15**    Warrant Certificate to Purchase Common Stock dated as of
           January 31, 1997 between Technology Leaders, L.P. and the
           Company.
11.1*      Statement Regarding Computation of Earnings Per Share.
21.1**     Subsidiaries of the Registrant.
27.1*      Financial Data Schedule.
</TABLE>
 
-------------------------
 * Filed herewith
** Incorporated by reference to the corresponding exhibits filed with the
   Company's Registration Statement of Form S-1 (No. 333-17785)
 
                                       20
<PAGE>   21
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                  DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                                  BY:
                                  ----------------------------------------------
                                                 Melvyn E. Bergstein
                                         Chairman, Chief Executive Officer,
                                                      President
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
 
<TABLE>
<CAPTION>
                   SIGNATURE                                      TITLE(S)                       DATE
                   ---------                                      --------                       ----
<C>                                                 <S>                                      <C>
 
                                                    Chief Executive Officer, President       June 30, 1997
------------------------------------------------    (Principal Executive Officer),
              Melvyn E. Bergstein                   Chairman and Director
 
                                                    Senior Vice President, Chief             June 30, 1997
------------------------------------------------    Financial Officer and Treasurer
             Michael E. Mikolajczyk                 (Principal Financial and Accounting
                                                    Officer) and Director
 
                                                    Director                                 June 30, 1997
------------------------------------------------
             Christopher J. Moffit
 
                                                    Director                                 June 30, 1997
------------------------------------------------
               Donald R. Caldwell
 
                                                    Director                                 June 30, 1997
------------------------------------------------
               Edward R. Anderson
 
                                                    Director                                 June 30, 1997
------------------------------------------------
                    Alan Kay
 
                                                    Director                                 June 30, 1997
------------------------------------------------
                 James C. Spira
 
                                                    Director                                 June 30, 1997
------------------------------------------------
               John D. Loewenberg
</TABLE>
 
                                       21
<PAGE>   22
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                             <C>
Consolidated Financial Statements:
     Independent Auditors' Report...........................    F-2
     Consolidated Balance Sheets as of March 31, 1997 and
      1996..................................................    F-3
     Consolidated Statements of Operations for the Years
      Ended March 31, 1997, 1996 and 1995...................    F-4
     Consolidated Statements of Stockholders' Equity for the
      Years Ended March 31, 1997, 1996 and 1995.............    F-5
     Consolidated Statements of Cash Flows for the Years
      Ended March 31, 1997, 1996
       and 1995.............................................    F-6
     Notes to Consolidated Financial Statements.............    F-7
Financial Statements Schedule:
     Independent Auditors' Report...........................    S-1
     Schedule II -- Valuation and Qualifying Accounts.......    S-2
</TABLE>
 
                                       F-1
<PAGE>   23
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Diamond Technology Partners Incorporated:
 
     We have audited the accompanying consolidated balance sheets of Diamond
Technology Partners Incorporated and subsidiary as of March 31, 1996 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three year period ended March 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Diamond
Technology Partners Incorporated and subsidiary as of March 31, 1996 and 1997,
and the results of its operations and its cash flows for each of the years in
the three year period ended March 31, 1997 in conformity with generally accepted
accounting principles.
 
                                          KPMG Peat Marwick LLP
 
Chicago, Illinois
April 18, 1997
 
                                       F-2
<PAGE>   24
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                          CONSOLIDATED BALANCE SHEETS
                            MARCH 31, 1996 AND 1997
                    (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                 1996       1997
                                                                 ----       ----
<S>                                                             <C>        <C>
                           ASSETS
Current assets:
  Cash and cash equivalents.................................    $ 4,635    $ 8,184
  Cash in escrow from subscribed stock......................         --      9,363
  Accounts receivable, net of allowance of $270 and $566 as
     of March 31, 1996 and 1997, respectively...............      3,304      4,496
  Prepaid expenses..........................................      1,180        564
  Notes receivable from stockholder.........................        226         --
  Deferred income taxes.....................................         99        312
                                                                -------    -------
Total current assets........................................      9,444     22,919
Computers, equipment, and training software, net............      2,010      1,989
Other assets................................................         --        476
Deferred organization costs, net............................        161        110
                                                                -------    -------
Total assets................................................    $11,615    $25,494
                                                                =======    =======
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Notes payable.............................................    $   125    $ 2,000
  Accounts payable..........................................      1,155      1,609
  Accrued compensation......................................      1,089         --
  Deferred compensation.....................................      1,452         --
  Income taxes payable......................................         83        562
  Deferred revenue..........................................         --        710
  Accrued stock issuance costs..............................         --        609
  Other accrued liabilities.................................      1,143      1,704
                                                                -------    -------
Total current liabilities...................................      5,047      7,194
                                                                -------    -------
Stockholders' equity:
  Preferred Stock, $1.00 par value, 2,000 shares authorized,
     no shares issued.......................................         --         --
  Class A common stock, $.001 par value, 40,000 shares
     authorized, 3,370 issued in 1996 and 4,594 issued in
     1997...................................................          3          5
  Class B common stock, $.001 par value, 20,000 shares
     authorized, 4,505 issued in 1996 and 4,967 issued in
     1997...................................................          4          5
  Class A common stock subscribed, 1,755 shares.............         --      8,476
  Additional paid-in capital................................      6,844      9,329
  Notes receivable from sale of common stock................       (257)      (122)
  Retained earnings (deficit)...............................        (26)       607
                                                                -------    -------
Total stockholders' equity..................................      6,568     18,300
                                                                -------    -------
Total liabilities and stockholders' equity..................    $11,615    $25,494
                                                                =======    =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-3
<PAGE>   25
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                FISCAL YEARS ENDED MARCH 31, 1995, 1996 AND 1997
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 1995       1996       1997
                                                                 ----       ----       ----
<S>                                                             <C>        <C>        <C>
Net revenues................................................    $12,843    $26,339    $37,557
                                                                -------    -------    -------
Operating expenses:
  Project personnel and related expenses....................      8,351     15,312     21,863
  Professional development and recruiting...................      1,395      4,587      6,272
  Marketing and sales.......................................        451        606      1,928
  Management and administrative support.....................      3,108      4,460      6,348
                                                                -------    -------    -------
Total operating expenses....................................     13,305     24,965     36,411
                                                                -------    -------    -------
Income (loss) from operations...............................       (462)     1,374      1,146
Interest income.............................................        136        251        183
Interest expense............................................        (51)       (87)       (11)
                                                                -------    -------    -------
Income (loss) before taxes..................................       (377)     1,538      1,318
Income taxes................................................         --       (302)      (685)
                                                                -------    -------    -------
Net income (loss)...........................................    $  (377)   $ 1,236    $   633
                                                                =======    =======    =======
Net income (loss) per share of common stock.................    $ (0.05)   $  0.13    $  0.06
Shares used in computing net (income) loss per share of
  common stock..............................................      8,272      9,824     10,886
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-4
<PAGE>   26
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                FISCAL YEARS ENDED MARCH 31, 1995, 1996 AND 1997
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                    NOTES
                                                                                                  RECEIVABLE
                                                   CLASS A   CLASS B    CLASS A     ADDITIONAL   FROM SALE OF   RETAINED
                               CLASS A   CLASS B   COMMON    COMMON      STOCK       PAID-IN        COMMON      EARNINGS
                               SHARES    SHARES     STOCK     STOCK    SUBSCRIBED    CAPITAL        STOCK       (DEFICIT)
                               -------   -------   -------   -------   ----------   ----------   ------------   ---------
<S>                            <C>       <C>       <C>       <C>       <C>          <C>          <C>            <C>
Balance at March 31, 1994...    1,100       825      $ 1       $ 1       $   --       $1,650        $  --        $  (885)
Issuance of stock...........    2,221     3,608        2         3           --        4,920          (91)            --
Purchase of stock...........       --       (41)      --        --           --          (37)          --             --
Net loss....................       --        --       --        --           --           --           --           (377)
                                -----     -----      ---       ---       ------       ------        -----        -------
Balance at March 31, 1995...    3,321     4,392        3         4           --        6,533          (91)        (1,262)
Issuance of stock...........       --       746       --         1           --          866         (257)            --
Purchase of stock...........       --      (584)      --        (1)          --         (555)          --             --
Conversion to Class A.......       49       (49)      --        --           --           --           --             --
Repayment of notes..........       --        --       --        --           --           --           91             --
Net income..................       --        --       --        --           --           --           --          1,236
                                -----     -----      ---       ---       ------       ------        -----        -------
Balance at March 31, 1996...    3,370     4,505        3         4           --        6,844         (257)           (26)
Stock issued and
  subscribed................      843       846        2         1        8,476        2,488         (120)            --
Purchase of stock...........       --        (3)      --        --           --           (3)          --             --
Conversion to Class A.......      381      (381)      --        --           --           --           --             --
Repayment of notes..........       --        --       --        --           --           --          255             --
Net income..................       --        --       --        --           --           --           --            633
                                -----     -----      ---       ---       ------       ------        -----        -------
Balance at March 31, 1997...    4,594     4,967      $ 5       $ 5       $8,476       $9,329        $(122)       $   607
                                =====     =====      ===       ===       ======       ======        =====        =======
 
<CAPTION>
 
                                 TOTAL
                              STOCKHOLDERS
                                 EQUITY
                              ------------
<S>                           <C>
Balance at March 31, 1994...     $   767
Issuance of stock...........       4,834
Purchase of stock...........         (37)
Net loss....................        (377)
                                 -------
Balance at March 31, 1995...       5,187
Issuance of stock...........         610
Purchase of stock...........        (556)
Conversion to Class A.......          --
Repayment of notes..........          91
Net income..................       1,236
                                 -------
Balance at March 31, 1996...       6,568
Stock issued and
  subscribed................      10,847
Purchase of stock...........          (3)
Conversion to Class A.......          --
Repayment of notes..........         255
Net income..................         633
                                 -------
Balance at March 31, 1997...     $18,300
                                 =======
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-5
<PAGE>   27
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                FISCAL YEARS ENDED MARCH 31, 1995, 1996 AND 1997
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 1995       1996       1997
                                                                 ----       ----       ----
<S>                                                             <C>        <C>        <C>
Cash flows from operating activities
  Net income (loss).........................................    $  (377)   $ 1,236    $   633
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
     Depreciation and amortization..........................         74        367      1,290
     Deferred compensation (forgiven).......................      1,704        830       (967)
     Cancellation of notes receivable.......................         --         --        226
     Deferred income taxes..................................       (119)        21       (213)
     Changes in assets and liabilities:
       Accounts receivable..................................     (1,367)    (1,869)    (1,192)
       Prepaid expenses and other...........................       (289)      (860)       617
       Accounts payable.....................................        117        598        454
       Deferred compensation................................         --         --       (248)
       Accrued compensation.................................        137        929     (1,089)
       Deferred revenue.....................................         --         --        710
       Income taxes payable.................................        119        (37)       480
       Other accrued liabilities............................        322        532        603
                                                                -------    -------    -------
Net cash provided by operating activities...................        321      1,747      1,304
                                                                -------    -------    -------
Cash flows from investing activities:
     Capital expenditures, net..............................       (600)    (1,753)    (1,218)
     Organization costs.....................................        (51)        --         --
     Other assets...........................................         --         --       (476)
     Notes receivable.......................................       (163)       (63)        --
                                                                -------    -------    -------
Cash flows used in investing activities.....................       (814)    (1,816)    (1,694)
                                                                -------    -------    -------
Cash flows from financing activities:
     Proceeds from notes payable............................        300        175      2,250
     Repayment of notes payable.............................        (44)      (306)      (375)
     Stock issuance costs...................................       (173)        --       (403)
     Common stock issued and subscribed.....................      3,990        701     11,833
     Repurchase of common stock.............................        (38)      (556)        (3)
                                                                -------    -------    -------
Net cash provided by financing activities...................      4,035         14     13,302
                                                                -------    -------    -------
Net increase (decrease) in cash and cash equivalents........      3,542        (55)    12,912
Cash and cash equivalents at beginning of year..............      1,148      4,690      4,635
                                                                -------    -------    -------
Cash and cash equivalents at end of year....................    $ 4,690    $ 4,635    $17,547
                                                                =======    =======    =======
Supplemental disclosure of cash flow information:
  Cash paid during the year for interest....................    $    51    $    55    $    44
  Cash paid during the year for income taxes................         --        318        418
Supplemental disclosure for noncash investing and financing
  activities:
     Issuance of common stock for notes.....................    $    91    $   257    $   120
     Stock issuance costs accrued but not paid..............         --         --        609
     Deferred and incentive compensation applied to payment
       for common stock.....................................      1,218         --        155
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                       F-6
<PAGE>   28
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) DESCRIPTION OF BUSINESS
 
     Diamond is a management consulting firm that devises and implements
business strategies enabled by information technology ("IT") to improve its
clients' competitive positions. The Company's clients are generally located
throughout the United States.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation
 
     The accompanying consolidated financial statements include the accounts of
the company and its wholly owned subsidiary. All intercompany accounts and
balances have been eliminated in consolidation. Certain prior period amounts
have been reclassified to conform with current period presentation.
 
  Revenue Recognition
 
     The Company recognizes revenues on contracts as work is performed, net of
provisions for estimated uncollectible amounts. Actual uncollectible amounts are
charged against this reserve when they become known. Out-of-pocket expenses are
reimbursed by clients and are offset against expenses incurred.
 
  Computers, Equipment and Training Software
 
     Computers, equipment and training software are stated at cost less
accumulated depreciation. Depreciation is based on the estimated useful lives of
the assets (generally three years) and is computed using the straight-line
method. Costs capitalized for internally developed software include external
consulting fees and employee salaries. Depreciation and amortization expense was
$40,576, $316,692 and $1,239,571 for the years ended March 31, 1995, 1996, and
1997, respectively.
 
  Organization Costs
 
     Organization costs consist of legal fees related to the start-up of the
Company. They are being amortized using the straight-line method over five
years. Accumulated amortization at March 31, 1995, 1996 and 1997 was $39,740,
$90,413 and $141,199 respectively.
 
  Cash and Cash Equivalents
 
     Cash equivalents are highly liquid investments with original maturities of
three months or less and are stated at cost, which approximates fair value. Cash
equivalents consist of money market funds and demand deposits.
 
  Significant Customers
 
     The Company had four customers which individually accounted for more than
10% of revenues for the year ended March 31, 1995. Collectively, these customers
accounted for approximately 65% of revenues for the year ended March 31, 1995.
The Company had three customers which individually accounted for more than 10%
of accounts receivable and revenues as of and for the year ended March 31, 1996.
Collectively, these customers accounted for 56% of accounts receivable and 51%
of revenues as of and for the year ended March 31, 1996. The Company had two
customers which individually accounted for more than 10% of accounts receivable
and one which accounted for more than 10% of revenues as of and for the year
ended March 31, 1997. Collectively, the two customers accounted for 38% of
accounts receivable and the one customer accounted for 14% of revenues as of and
for the year ended March 31, 1997.
 
  Income Taxes
 
     The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires the use of the liability method in accounting for income taxes.
Deferred tax assets and liabilities are recognized for the future tax
consequences
 
                                       F-7
<PAGE>   29
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be reversed or settled.
 
  Net Income (Loss) Per Share
 
     Net income (loss) per share is computed using the weighted average number
of shares of common and common equivalent shares (stock options and warrants)
outstanding unless anti-dilutive. As required by Staff Accounting Bulletin No.
83 issued by the Securities and Exchange Commission, common and common
equivalent shares issued by the Company during the twelve-month period preceding
the initial filing of the Registration Statement for the Company's Initial
Public Offering have been included in the calculation as if they were
outstanding for all periods presented (using the treasury stock method and
assuming the Initial Public Offering price).
 
  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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  Financial Instruments
 
     The fair value of the Company's financial instruments approximates their
carrying value.
 
(3) COMPUTERS, EQUIPMENT AND TRAINING SOFTWARE
 
     Computers, equipment and training software at March 31, 1996, and 1997 are
summarized as follows ($ in thousands):
 
<TABLE>
<CAPTION>
                                                                 1996      1997
                                                                 ----      ----
<S>                                                             <C>       <C>
Computers and equipment.....................................    $1,131    $ 1,943
Training software...........................................     1,238      1,431
                                                                ------    -------
                                                                 2,369      3,374
Less accumulated depreciation and amortization..............      (359)    (1,385)
                                                                ------    -------
                                                                $2,010    $ 1,989
                                                                ======    =======
</TABLE>
 
(4) NOTE RECEIVABLE FROM STOCKHOLDER
 
     The Company advanced money to an officer under a note arrangement that
allowed for advances up to $500,000 bearing interest at a floating rate based on
the applicable federal rate under the Internal Revenue Code of 1986. The note
and accumulated interest totaled $225,819 at March 31, 1996. The Company
canceled the full amount of the note during September of 1996.
 
                                       F-8
<PAGE>   30
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(5) COMMITMENTS
 
     The Company leases office space and equipment under various operating
leases. As of March 31, 1997, the minimum future lease payments under operating
leases with noncancelable terms in excess of one year are as follows (in
thousands):
 
<TABLE>
<CAPTION>
                   YEAR ENDING MARCH 31,
                   ---------------------
<S>                                                             <C>
       1998.................................................    $1,251
       1999.................................................     1,002
       2000.................................................       881
       2001.................................................       760
       2002.................................................       524
       Thereafter...........................................        92
                                                                ------
                                                                $4,510
                                                                ======
</TABLE>
 
     Rent expense under operating leases amounted to $140,426, $477,930 and
$980,440 for the years ended March 31, 1995, 1996, and 1997 respectively.
 
     The Company is party to a standby letter of credit with a bank in support
of the minimum future lease payments under the lease for permanent office space
dated in the amount of $734,326 as of March 31, 1997, declining annually during
the lease term. This letter is guaranteed as of March 31, 1997 by Safeguard
Scientific, Inc. ("Safeguard") until the closing date of the Registration
Statement filed in connection with the Initial Public Offering of the shares of
the Company.
 
(6) NOTES PAYABLE AND LINE OF CREDIT
 
     Notes payable at March 31, 1996 consisted of an 8.4% term loan in the
amount of $125,000 payable in monthly installments, including interest, that
matured on December 31, 1996. Notes payable at March 31, 1997 consisted of a
$2,000,000 loan from Safeguard. Interest on the outstanding principal balance of
the loan accrues during the first year at an interest rate of 6%, payable
quarterly. The Company is required to repay the loan from Safeguard upon the
closing of the Initial Public Offering.
 
     The Company has an available line of credit of $3,000,000 with a commercial
bank, which has been reduced by $210,181 to account for letters of credit and
other contingent obligations of the Company currently outstanding. At March 31,
1997, all remaining amounts under this line of credit were available to the
Company at the bank's prime rate. Any borrowings against this line will be
secured by all the assets of the Company. The line of credit expires July 31,
1997 unless renewed.
 
(7) STOCKHOLDERS' EQUITY
 
  Stock Split, Stock Recapitalization and Initial Public Offering
 
     The Board of Directors authorized a 1.65 to 1 stock split in the form of a
stock dividend effective February 18, 1997. All references in the financial
statements to share and per share data have been adjusted to effect this stock
split. Additionally, on February 18, 1997 the Company amended its certificate of
incorporation to divide its common stock into two classes, Class A and Class B,
and authorized 2,000,000 shares of Preferred Stock, par value $1.00 per share,
the terms of which may be determined by the Board. Class A common stock is
entitled to one vote per share and Class B common stock is entitled to five
votes per share on all matters submitted to the vote of holders of Common Stock.
Class B common stock may be owned beneficially or of record by employees of the
Company or by the Company.
 
     On March 31, 1997, the Company completed its Initial Public Offering and
sold 1,755,000 of its common shares at the price of $5.50 per share. The company
realized $8,476,404 in connection with the sale after the payment of the
underwriters commissions and other expenses of the offering. $2,000,000 of the
net proceeds were used to repay a loan from Safeguard. In the offering an
additional 1,600,000 shares were sold by
 
                                       F-9
<PAGE>   31
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
selling stockholders. Subsequent to year end, on April 8, 1997, the
underwriters, pursuant to their exercise of the overallotment option, purchased
an additional 320,000 shares of the Company's common stock at $5.50 per share.
The Company's proceeds of these additional shares, net of expenses was
$1,594,968.
 
  Warrants and Stock Options
 
     In March 1994, the Company granted warrants to Safeguard. The warrants
allowed the holder to purchase up to 825,000 shares of stock at an exercise
price of $1.21 per share. Safeguard subsequently transferred 330,000 of these
warrants to certain of its affiliates. The Company had the right to require the
warrant holders to exercise the warrants at any time following the completion of
the Company's first full fiscal year of profitability. The Company satisfied
this requirement during the fiscal year ended March 31, 1996 and issued 825,000
shares of Class A common stock in exchange for $1,000,000 pursuant to the
provision of the warrants.
 
     In November 1996, the Company granted additional warrants to Safeguard. The
warrants permit the holder to purchase up to 526,597 shares of stock at an
exercise price of $5.50 per share and expire on November 1, 2001. On January 31,
1997, Safeguard transferred 285,415 of these warrants to certain of its
affiliates.
 
     Under the Company's 1994 Stock Option Plan (the Plan), the Company may
grant qualified incentive stock options to officers and employees of the
Company. The Plan provides that options may not be granted at less than the fair
market value of the Company's common stock at the date of grant. Options have
been granted to officers which vest incrementally with 10%, 15%, 25%, 25% and
25% of the option vesting on the first through fifth anniversaries of the date
of grant, respectively, and expire on the seventh anniversary of the date of
grant. Options have been granted to employees which fully vest upon the third
anniversary of the date of grant and expire on the fifth anniversary of the date
of grant. Options have also been granted to employees which fully vest six
months following the Initial Public Offering and expire on the fifth anniversary
of the date of grant. The Company's Board of Directors has also granted
non-qualified stock options to certain persons who were not employees on the
date of grant and certain non-employee members of the Board of Directors, these
non-qualified stock options vest over periods ranging from immediate to five
years.
 
     The following table summarizes the transactions, both incentive and
nonqualified, pursuant to the Plan.
 
<TABLE>
<CAPTION>
                                                                                         WEIGHTED-AVERAGE
                                                       SHARES UNDER       RANGE OF        EXERCISE PRICE
                                                          OPTION           PRICES           PER SHARE
                                                       ------------       --------       ----------------
<S>                                                    <C>             <C>               <C>
Balances, March 31, 1994...........................       138,600               $1.21         $1.21
  Granted..........................................       371,250                1.21          1.21
  Exercised........................................                                --            --
  Canceled.........................................            --                  --            --
                                                        ---------      --------------        ------
Balances, March 31, 1995...........................       509,850                1.21          1.21
  Granted..........................................       723,525        1.21 to 1.82          1.69
  Exercised........................................            --                  --            --
  Canceled.........................................      (117,150)               1.21          1.63
                                                        ---------      --------------        ------
Balances, March 31, 1996...........................     1,116,225        1.21 to 1.82          1.48
  Granted..........................................     2,204,042        1.82 to 5.50          3.22
  Exercised........................................            --                  --            --
  Canceled.........................................      (152,130)       1.21 to 5.45          2.02
                                                        ---------      --------------        ------
Balances, March 31, 1997...........................     3,168,137      $1.21 to $5.50         $2.66
                                                        =========      ==============        ======
</TABLE>
 
     At March 31, 1997, 1996 and 1995, 198,249, 8,250 and 0 options were
exercisable, respectively, under the Plan.
 
                                      F-10
<PAGE>   32
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table summarizes information about stock options under the
Plan at March 31, 1997:
 
<TABLE>
<CAPTION>
                          OPTIONS OUTSTANDING                                  OPTIONS EXERCISABLE
  -------------------------------------------------------------------   ----------------------------------
                      OPTIONS     WEIGHTED AVERAGE                      WEIGHTED NUMBER
     RANGE OF       OUTSTANDING      REMAINING       WEIGHTED AVERAGE   EXERCISABLE AT    WEIGHTED AVERAGE
  EXERCISE PRICE    AT 3/31/97    CONTRACTUAL LIFE    EXERCISE PRICE        3/31/97        EXERCISE PRICE
  --------------    -----------   ----------------   ----------------   ---------------   ----------------
  <C>               <C>           <C>                <C>                <C>               <C>
           $1.21       590,700          3.11              $1.21             168,301            $1.21
            1.82     1,224,576          5.08               1.82              13,613             1.82
            2.27       111,706          6.59               2.27                  --             2.27
            3.18       672,570          5.50               3.18              16,335             3.18
            5.45       477,835          5.18               5.45                  --             5.45
            5.50        90,750          6.89               5.50                  --             5.50
  --------------     ---------         -----             ------             -------           ------
  $1.21 to $5.50     3,168,137          4.92              $2.66             198,249            $1.41
  ==============     =========         =====             ======             =======           ======
</TABLE>
 
     The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its option plan. Accordingly, no compensation expense has been recognized. Had
compensation expense for the Company's stock option plan been determined based
on the fair value at the grant date for awards under this plan consistent with
the methodology prescribed under Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," the Company's net income and net
income per share would have been reduced by $229,000 or $.02 per share in 1997
and $10,000 in 1996. The weighted average fair value of the options granted
under the stock option plan in 1997 and 1996, calculated using the Black-Scholes
pricing model, was $.70 and $.24, respectively. The following assumptions were
used in the Black-Scholes pricing model for options granted in 1997 and 1996:
risk-free interest rate ranging from 5.5% to 6.3%, estimated volatility of 35%,
expected dividend yield 0% and an expected life of 1 to 5 years.
 
(8) INCOME TAXES
 
     The provision for income taxes consists of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                            1995     1996    1997
                                                            ----     ----    ----
<S>                                                         <C>      <C>     <C>
Current:
  Federal...............................................    $  79    $156    $ 656
  Foreign...............................................       --      52      131
  State.................................................       40      73      111
                                                            -----    ----    -----
                                                              119     281      898
Deferred taxes..........................................     (119)     21     (213)
                                                            -----    ----    -----
                                                            $  --    $302    $ 685
                                                            =====    ====    =====
</TABLE>
 
     The total tax provision differs form the amount computed by applying the
Federal income tax rate of 34 percent to income (loss) before income taxes for
the following reasons:
 
<TABLE>
<CAPTION>
                                                            1995     1996     1997
                                                            ----     ----     ----
<S>                                                         <C>      <C>      <C>
Federal income taxes at statutory rate..................    $(128)   $ 523    $448
Effect of permanent differences.........................       64       91     185
State income taxes, net of federal benefit..............       26       48      52
Effect of deferred tax benefits.........................       74     (371)     --
Other...................................................      (36)      11      --
                                                            -----    -----    ----
                                                            $  --    $ 302    $685
                                                            =====    =====    ====
</TABLE>
 
                                      F-11
<PAGE>   33
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The tax effects of the temporary differences that give rise to the deferred
tax assets and liabilities at March 31, 1996 and 1997 are presented below (in
thousands):
 
<TABLE>
<CAPTION>
                                                                1996    1997
                                                                ----    ----
<S>                                                             <C>     <C>
Deferred tax assets:
  Deferred compensation.....................................    $581    $ 33
  Other accruals............................................     372     748
                                                                ----    ----
Total gross deferred tax assets.............................     953     781
  Less valuation allowance..................................      --      --
                                                                ----    ----
Deferred tax assets, net of valuation allowance.............     953     781
                                                                ----    ----
Deferred tax liabilities:
  Accelerated depreciation..................................      45      70
  Capitalized assets........................................     412     239
  Accrued bonuses...........................................     341     128
  Other accruals............................................      56      32
                                                                ----    ----
Total deferred tax liabilities..............................     854     469
                                                                ----    ----
Net deferred income taxes...................................    $ 99    $312
                                                                ====    ====
</TABLE>
 
     Management believes it is more likely than not that the deferred tax assets
will be realized in the future.
 
(9) BENEFIT PLANS
 
  Deferred Compensation
 
     Certain officers of the Company previously agreed to defer a portion of
their annual compensation under a deferred compensation program. The program
provided that amounts deferred cannot be distributed prior to March 31, 1996
without approval by the Board of Directors. Amounts deferred under this program
accrued interest at rates available to the Company from its bank and were
immediately vested. Effective April 1, 1996, the Board of Directors elected to
discontinue this program. Pursuant to an agreement entered into by all officers
who had deferred compensation, approximately $967,000 was forgiven during the
year ended March 31, 1997.
 
  401(k) Plan
 
     The Company has a noncontributory defined contribution plan covering
substantially all of its employees. This plan is qualified under Section 401(k)
of the Internal Revenue Code of 1986. The Company may elect to make
contributions to this plan but to date has not done so.
 
                                      F-12
<PAGE>   34
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(10) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
     The following table presents the unaudited quarterly financial information
for fiscal 1997 and 1996 (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                                           QUARTER ENDED
                                                             ------------------------------------------
                                                             JUNE 30    SEPT. 30    DEC. 31    MARCH 31
                                                             -------    --------    -------    --------
<S>                                                          <C>        <C>         <C>        <C>
1997
---------------------------------------------------------
Revenues.................................................    $ 7,753     $8,336     $10,156    $11,312
Income (loss) from operations............................     (1,215)      (589)      1,235      1,715
Income (loss) before taxes...............................     (1,193)      (600)      1,306      1,805
Net income (loss)........................................       (714)      (385)        719      1,013
Net income (loss) per share..............................      (0.07)     (0.04)        .07        .09
1996
---------------------------------------------------------
Revenues.................................................    $ 5,863     $5,975     $ 6,918    $ 7,583
Income from operations...................................        363        149         433        429
Income before taxes......................................        388        199         476        475
Net income...............................................        312        159         383        382
Net income per share.....................................        .03        .02         .04        .04
</TABLE>
 
                                      F-13
<PAGE>   35
 
                          INDEPENDENT AUDITORS' REPORT
 
The Board of Directors
Diamond Technology Partners Incorporated
 
     We have audited the accompanying consolidated balance sheets of Diamond
Technology Partners Incorporated and subsidiary as of March 31, 1996 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three year period ended March 31, 1997.
In connection with our audits of the aforementioned consolidated financial
statements, we also audited the related financial statement schedule. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the schedule based on our audits.
 
     In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects, the information set forth therein.
 
                                          KPMG Peat Marwick LLP
 
Chicago, Illinois
April 18, 1997
 
                                       S-1
<PAGE>   36
 
                    DIAMOND TECHNOLOGY PARTNERS INCORPORATED
 
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                      COLUMN A                           COLUMN B      COLUMN C     COLUMN D      COLUMN E
                      --------                          ----------    ----------    ---------     --------
                                                        BALANCE AT    CHARGED TO                 BALANCE AT
                                                        BEGINNING     COSTS AND                    END OF
          ALLOWANCES FOR DOUBTFUL ACCOUNTS              OF PERIOD      EXPENSES     DEDUCTION      PERIOD
          --------------------------------              ----------    ----------    ---------    ----------
<S>                                                     <C>           <C>           <C>          <C>
For the Year Ended March 31, 1997...................     $269,812      $488,056      $192,227     $565,641
 
For the Year Ended March 31, 1996...................      512,000       654,840       897,028      269,812
 
For the Year Ended March 31, 1995...................           --       512,000            --      512,000
</TABLE>
 
                                       S-2
<PAGE>   37
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                       SEQUENTIALLY
EXHIBIT                                                                  NUMBERED
NUMBER                           DESCRIPTION                               PAGE
-------                          -----------                           ------------
<C>      <S>                                                           <C>
</TABLE>
 
 3.1**   Form of Restated Certificate of Incorporation of the
         Company.....................................................
 3.2**   Form of Amended and Restated By-laws of the Company.........
10.1**   Amended and Restated Diamond Technology Partners
         Incorporated 1994 Stock Option Plan, as amended.............
10.2**   Employment Agreement between Melvyn E. Bergstein and the
         Company, dated February 1, 1994, as amended.................
10.3**   Employment Agreement between Michael E. Mikolajczyk and the
         Company, dated April 18, 1994, as amended...................
10.4**   Employment Agreement between James C. Spira and the Company,
         dated November 1, 1995, as amended..........................
10.5**   Employment Agreement between Christopher J. Moffitt and the
         Company, dated February 1, 1994, as amended.................
10.6**   Stock Purchase Agreement dated as of March 22, 1994 among
         the Company, Melvyn E. Bergstein, Christopher J. Moffitt,
         Safeguard Scientifics, Inc. and certain other investors, as
         amended.....................................................
10.7**   Amended and Restated Voting and Stock Restriction Agreement
         dated as of April 1, 1996 among the Company, Technology
         Leaders L.P., Technology Leaders Offshore C. V., CIP Capital
         L.P., Safeguard Scientifics (Delaware), Inc. and certain of
         the shareholders of the Company.............................
10.8**   Amended and Restated Partners Operating Agreement dated as
         of April 1, 1996 among the Company and the Partners of the
         Company.....................................................
10.9**   Loan Agreement dated as of November 8, 1996 among the
         Company and Safeguard Scientifics (Delaware), Inc...........
10.10**  Amended and Restated Warrant Certificates to Purchase Common
         Stock dated as of November 8, 1996 among the Company and
         Safeguard Scientifics (Delaware), Inc.......................
10.11**  Rights Agent Agreement among the Company, Safeguard
         Scientifics, Inc., Technology Leaders, CIP Capital L.P.,
         Cambridge Technology Partners (Massachusetts), Inc.,
         CompuCom Systems, Inc., Chase/Mellon Shareholder Services,
         L.L.C. and Mellon Bank, N.A.................................
10.12**  Warrant Certificate to Purchase Common Stock dated as of
         January 31, 1997 between Safeguard Scientifics (Delaware),
         Inc. and the Company (Supersedes Exhibit 10.10).............
10.13**  Warrant Certificate to Purchase Common Stock dated as of
         January 31, 1997 between Capital, L.P. and the Company......
10.14**  Warrant Certificate to Purchase Common Stock dated as of
         January 31, 1997 between Technology Leaders FR Corp. and the
         Company.....................................................
10.15**  Warrant Certificate to Purchase Common Stock dated as of
         January 31, 1997 between Technology Leaders, L.P. and the
         Company.....................................................
11.1*    Statement Regarding Computation of Earnings Per Share.......
21.1**   Subsidiaries of the Registrant..............................
27.1*    Financial Data Schedule.....................................
 
-------------------------
 
 * Filed herewith
** Incorporated by reference to the corresponding exhibits filed with the
   Company's Registration Statement of Form S-1 (No. 333-17785)