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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

(Mark One)
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2000

                        Commission file number: 000-24769
                           Clark/Bardes Holdings, Inc.
             (Exact name of Registrant as specified in its charter)

            Delaware                                   52-2103926
(State of incorporation or organization)   (I.R.S. Employer Identification No.)


102 South Wynstone Park Drive,
North Barrington, Illinois                         60010
(Address of principal executive offices)         (Zip code)


       (Registrant's telephone number including area code): (847) 304-5800

           Securities Registered Pursuant to Section 12(b) of the Act:

                Title of Securities Exchanges on which Registered
                -------------------------------------------------
                                 not applicable
                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:

                     Common Stock, Par Value $.01 per share
                                (Title of class)

         Junior Participating Preferred Stock, Series A, Purchase Rights
                            Par value, $.01 per share
                                (Title of class)

   Indicate  by check mark  whether  the  registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

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

   As  of  March  5,  2001,  there  were  12,675,309   shares  of  common  stock
outstanding.

   As of March 5, 2001,  the  aggregate  market  value of common  equity held by
non-affiliates was $41,584,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

   The definitive  proxy  statement for the 2001 annual meeting is  incorporated
into Part III of this Form 10-K by reference.

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<PAGE>



                                TABLE OF CONTENTS

                                                                           Page
FORWARD-LOOKING STATEMENTS..............................................    1
PART I
  ITEM 1.   BUSINESS                                                        2
  ITEM 2.   PROPERTIES                                                     14
  ITEM 3.   LEGAL PROCEEDINGS                                              14
  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS            15
PART II
  ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS                                            16
  ITEM 6.   SELECTED FINANCIAL DATA                                        18
  ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS                                      19
  ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
            RISK                                                           42
  ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                    42
  ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE                                       42
PART III
  ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT             42
  ITEM 11.  EXECUTIVE COMPENSATION                                         42
  ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT                                                     42
  ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                 42
PART IV
  ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
            8-K                                                            43
SIGNATURES...................................................................


<PAGE>



                           FORWARD-LOOKING STATEMENTS

   This Form 10-K and the  documents  included or  incorporated  by reference in
this Form 10-K may  contain  forward-looking  statements  within the  meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange  Act of 1934.  Such  statements  may use  words  such as  "anticipate,"
"believe,"  "estimate," "expect," "intend," "predict," or "project," and similar
expressions,   as  they   relate  to  us  or  our   management.   When  we  make
forward-looking  statements,  we are basing them on our management's beliefs and
assumptions,  using information currently available to us. These forward-looking
statements are subject to risks,  uncertainties  and assumptions,  including but
not limited to the following:

   o changes in tax legislation;

   o income tax enforcement policies of the U.S. Treasury Department and the
     Internal Revenue Service;

   o federal and state regulations;

   o our dependence on a select group of insurance companies;

   o our dependence on key consultants and services of key personnel;

   o our dependence on information processing systems and the risk of errors or
     omissions;

   o our dependence on persistency of existing business;

   o risks associated with acquisitions;

   o significant intangible assets;

   o competitive factors and pricing pressures;

   o general economic conditions; and

   o outcome of certain litigation.

   If one or more of these or other risks or  uncertainties  materialize,  or if
our  underlying  assumptions  prove to be  incorrect,  actual  results  may vary
materially from what we may have projected.  Any forward-looking  statements you
read in this Form 10-K reflect our current  views with respect to future  events
and are  subject  to  these  and  other  risks,  uncertainties  and  assumptions
(including those risks and uncertainties  described herein under "Risk Factors")
relating  to  our  operations,   results  of  operations,  growth  strategy  and
liquidity.   All  subsequent   written  and  oral   forward-looking   statements
attributable  to us  or to  individuals  acting  on  our  behalf  are  expressly
qualified  in their  entirety  by this  paragraph.  We  disclaim  any  intent or
obligation to update or alter any of the forward looking  statements  whether in
response  to  new  information,  unforeseen  events,  changed  circumstances  or
otherwise.


<PAGE>



                                     PART I

ITEM 1. BUSINESS

Our Company

   Clark/Bardes  Holdings,  Inc. is a national  firm that  provides a variety of
compensation  and benefit  services to U.S.  corporations,  banks and healthcare
organizations.  Our mission is to aid out clients in  attracting,  retaining and
rewarding their top people.  Clark/Bardes  Consulting has over 3,000  corporate,
banking  and  healthcare  clients  and we are  unique  in  that  our  consulting
practices  provide the full spectrum of  compensation  and benefit  services for
executives.  Our services  include the evaluation,  design,  implementation  and
administration  of innovative  compensation and benefit programs for executives,
key employees and other professionals.  Our Corporate headquarters is located at
The  Clark/Bardes  Building,  102 South Wynstone Park Drive,  North  Barrington,
Illinois 60010, and our telephone number is (847) 304-5800.

   Generally, our revenue is earned from:

   o  consulting fees paid by our clients to evaluate and design executive
      compensation and benefit plans;

   o  first-year and renewal  commissions  paid by the insurance  companies that
      underwrite the insurance policies underlying our clients' compensation and
      benefit programs; and,

   o  fees paid by our clients for consultative and ongoing administrative
      services.

   We usually receive renewal commissions and service and administration fees as
long as the insurance policies underlying our clients' programs remain inforce.

   We have four operating divisions:

   o Clark/Bardes Consulting -- Compensation Resource Group

   o Clark/Bardes Consulting -- Banking Practice

   o Clark/Bardes Consulting -- Healthcare Group

   o Pearl Meyer & Partners

   Each of these divisions is focused on the evaluation,  design, implementation
and  administration  of innovative  compensation  and benefit programs that help
their  clients   attract  and  retain   executives,   key  employees  and  other
professionals.  Each  of our  divisions  operates  separately  from a  different
location  with its own  executive,  marketing  and  administrative  staffs.  The
divisions are independent  because of the specific  expertise  required to serve
their distinct markets and the established  reputation they enjoy. Through these
divisions,  we  are  able  to  tailor  compensation  and  benefit  programs  and
consulting services to the unique needs of our clients.

   Our operating  divisions  underwent some reorganization in 2000. On September
6, 2000,  we acquired  all of the stock and  business of  Compensation  Resource
Group,  Inc.  ("CRG"),   a  major,  Los  Angeles  based,   corporate   executive
compensation  and benefits  consulting  firm.  With the  acquisition  of CRG, we
reorganized our Clark/Bardes  division,  combining the large corporate  practice
with CRG and transferring all of the banking  insurance  programs to our Banking
Practice  division  in  Minneapolis.   Our  Clark/Bardes  division  was  renamed
Clark/Bardes  Consulting -- Compensation  Resource Group.  The division has over
300  large  corporate  clients  representing  a  variety  of  industries.   This
reorganization became effective on January 1, 2001.

   Our  Banking  Practice  division  provides  programs to over 30 of the top 50
national banks and a number of community  banks,  which typically have less than
$1 billion in assets.  We estimate that there are over 7,000  community banks in
the United  States and the Banking  Practice is a market  leader with over 1,400
community bank clients.  In addition to compensation and benefit  programs,  the
division also performs  compensation and incentive consulting as well the design
of ownership succession programs.

   Our  Healthcare  Group division  markets  primarily to large and medium sized
not-for-profit  healthcare  organizations and is a leader in its market with 300
clients that represent over 800 hospital and physician groups.

     On June 21,  2000,  we  acquired  Pearl  Meyer &  Partners,  Inc.  ("PMP").
becoming  our  fourth  operating  division.  PMP is a New York City  based  firm
specializing in compensation  plan  consultation and design primarily for senior
level executives and board of directors.

Recent Developments

   On March  23,  2001,  we  acquired  the  Knowledge  Management  and  Practice
Management segments of Partners First,  L.L.C. for $1.1 million.  Partners First
is a St. Louis,  Missouri based hospital and physician practice  consulting firm
and subsidiary of Ascension Health.

   On March 12, 2001,  we acquired the  business  along with certain  assets and
liabilities of Rich, Florin/ Solutions, Inc. ("RFSI"), a compensation consulting
company located in Boston,  Massachusetts.  The assets acquired include accounts
receivable,  copyrights and office equipment. The liabilities assumed were trade
payables and employee benefit obligations as of the acquisition date.

   The purchase price was $20.8 million, before acquisition expenses, consisting
of a cash  payment at closing of $11.3  million and $9.5  million of  contingent
payments,  over the next four  years,  based on the  attainment  of  established
financial  performance  criteria.  When earned,  the  contingent  payments  will
consist of 60% cash and 40% CBH common stock.

   The acquisition of RFSI marks our second significant acquisition in less than
one year in the executive compensation  consulting field. RFSI and Pearl Meyer &
Partners will operate independently.

   Since January 1, 2000, we have made seven other acquisitions:

   o  Forrest, Wagner & Associates, a regional firm specializing in corporate
      benefit programs;

   o  Compensation Resource Group, a company specializing in non-qualified
      deferred compensation plans;

   o  Pearl Meyer & Partners, an independent  executive  compensation firm which
      became our fourth operating segment -- compensation consulting;

   o  Insurance  Alliances Group, an estate planning firm, which has been
      renamed Clark/Bardes Partners; and,

   o The Christiansen  Group, the Watson Company and W. M. Sheehan & Company;
     three add-on acquisitions for our Banking Practice division.

   Concurrent with these acquisitions, we created the Clark/Bardes Consulting --
Compensation Resource Group division and the Pearl Meyer & Partners division.

   On September  11, 2000,  we sold  1,888,887  registered  shares of our common
stock to a group of investors for $25.1 million,  net of expenses,  in a private
placement transaction.  The proceeds from this sale were used for debt reduction
and acquisitions.

   On August 23, 2000,  we expanded our December 28, 1999 credit  facility  from
$100.0 million to $114.3 million and added another bank to the existing group of
bank  lenders.  The  principal  changes in the structure of the facility are the
increase of the working  capital limit from $5.0 million to $10.0 million and an
expansion of the borrowing base.

Acquisitions

   Our  acquisition  activity  has been  important  to our growth  over the last
several years, and has been important in the development of our existing markets
and for  expanding  into new business  areas such as  healthcare  and  executive
compensation consulting.

Clark/Bardes Consulting -- Compensation Resource Group Division

   The former Clark/Bardes  division,  our original core business,  was expanded
and  reorganized  with the  acquisition of  Compensation  Resource  Group,  Inc.
("CRG") in September  2000.  As a result,  the focus of this  division is on the
marketing  of  non-qualified  plans,  funded by corporate  owned life  insurance
("COLI"),  to major corporations  throughout the country.  The division was also
expanded by three other acquisitions, which were Schoenke & Associates, acquired
September  1998;  Wiedemann & Johnson,  acquired  November 1998: and The Wamberg
Organization,  acquired September 1999. With these  acquisitions,  we obtained a
substantial  book of business as well as a number of  talented  and  experienced
benefits professionals.

Banking Practice

   The September 1997 acquisition of Bank Compensation Strategies,  Inc. was our
first  acquisition  and expanded the  company's  products and services  into the
community and small regional banking market.  During 1999, we acquired  National
Institute for Community  Banking and Banking  Consultants of America,  expanding
the  division's  employee and client base with  companies  that could be readily
absorbed into Bank Compensation Strategies operating structure.  During 2000, we
acquired  Christiansen  &  Associates,  a former  independent  consultant in the
banking practice, along with the Watson Company and W. M. Sheehan & Company, two
strong regional compensation consulting firms in the banking market.

Healthcare Group

   During  1999,  we  purchased  Management  Compensation   Group/HealthCare  an
executive benefit consulting organization servicing the healthcare industry that
became  our  HealthCare  Compensation  Strategies  division,  now  known  as the
Healthcare Group.

Compensation Consulting

   On June 21,  2000,  we  acquired  all of the  capital  stock of Pearl Meyer &
Partners, Inc. Pearl Meyer is a New York City based consulting firm specializing
in executive  compensation and retention programs.  The Pearl Meyer organization
became our fourth operating division that is focused  predominantly on executive
compensation consulting for large corporations.

Past, Present and Future of Our Industry

   Over the past thirty years,  executive compensation and benefit programs have
become more complex and  sophisticated.  Competition  for  executives as well as
legislation  affecting  executive   compensation  and  retirement  planning  has
required that businesses offer new and innovative programs to attract and retain
talent.  The  implementation of successful  executive benefit programs places an
emphasis on our ability to custom design  programs to meet the needs of both the
client company and its executive staff in a rapidly changing environment.

   The financing of these  programs has also become very  specialized.  Creative
financial  techniques can help a company maintain a competitive  advantage.  For
example,  before the 1980's,  corporations  and banks did not  normally use life
insurance  to offset the costs of employee  benefit  liabilities.  Since then, a
number of large  insurers have committed  significant  resources in developing a
line of business  owned life  insurance  products for use in insurance  financed
employee   programs.   These  business   owned  life  insurance   programs  have
historically been affected by legislative  change. For example,  tax legislation
was enacted that disallowed  interest deductions on policy loans and essentially
eliminated a financing  technique for corporations known as "leveraged COLI." We
believe that income tax legislation could potentially affect our industry in the
future.

   The  prospects and clients of these  programs have become more  sophisticated
and  demanding.  Clients  now  perform  extensive  due  diligence  on the  firms
providing their executive benefit programs. Issues relating to the integrity and
technological  capability are now central to their  decision-making  process. In
addition, the client's expectation on the level of administrative services to be
provided has risen  substantially.  For example, in the early 1990's,  community
banks  went  through  a  consolidation   phase.  This  consolidation  gave  bank
executives a greater appreciation and need for expertise regarding the impact of
consolidation on their compensation and benefit programs.  This developed into a
stronger  demand  by  the  community  banking  industry  for  expert  advice  in
addressing estate and continuity planning. In addition, healthcare organizations
have been faced with growing  challenges to attract and retain  executives.  The
tax status of healthcare providers,  many of whom are not-for-profit  healthcare
organizations,  requires tailored compensation and benefits programs that comply
with the various not-for-profit compensation and benefit rules.

   In  compensation  consulting,  businesses  will continue to seek creative and
competitive  ways to compensate,  motivate and retain their key executives.  Our
continued success in this new operating division is depending, in large measure,
on our ability similarly motivate and retain our key consultants.

   We  believe  that  the   ever-changing   legislative,   economic  and  market
environments  require  product  development  systems and personnel that are more
sophisticated  and cost intensive  than most  producers and producer  groups are
able to justify  economically.  Management  believes this will continue to drive
consolidation  in the  industry  as  smaller  firms  respond  in  order  to stay
competitive.

Strategy and Opportunities for Growth

   Through our four operating  divisions,  our goal is to continue to strengthen
our role as a leading  provider of innovative  compensation and benefit programs
and solutions to corporations, banks and healthcare organizations throughout the
United States. To accomplish this goal, we intend to continue to:

   o  Leverage Our Market  Reputation.  Use our reputation as an industry leader
      to expand existing operations and enter into related businesses.

   o  Design Innovative  Programs.  Use our expertise in program development and
      our ability to closely monitor  legislative  change,  to create and market
      innovative,  customized  programs to penetrate new markets and satisfy the
      financial  needs of our  clients in a  changing  regulatory  and  economic
      environment.

   o  Diversify Our Business.  Identify and enter related businesses in which we
      can profitably employ our competencies.  Examples of recent expansion into
      related  businesses  include  compensation  and  benefit  consulting,  and
      benefit plan administrative services.

   o  Enhance Our Administrative  Capabilities and Efficiencies.  Distinguish us
      from  our   competitors  by  continuing  to  enhance  our   administrative
      capabilities, providing high quality administrative services and improving
      operating efficiencies.

   o  Pursue Acquisitions.  Implement our design, distribution and service model
      on  a  wide  scale  to  increase  market  share,  acquire  consultant  and
      management talent, enter new markets and improve operating margins through
      efficiencies achieved by acquisitions.

   o  Integrate  Sales Process.  Create a seamless  sales  approach  between our
      various lines of business to leverage  existing  relationships  within our
      client companies.

   Most importantly,  we plan to continue to provide  outstanding service to our
clients.

   We believe  our  industry  offers us  additional  growth  opportunities.  The
executive  compensation and benefits  marketplace is  under-penetrated,  and has
significant growth potential.  We estimate there are 15,000 corporations,  banks
and  healthcare  institutions  that can use our services,  in which we currently
have 3,000 as clients. In addition, the rising pay of executives and the nearing
of retirement of the baby-boom generation are significant  macro-trends that are
in our favor.

   Our   reputation,    comprehensive    in-house    expertise,    sophisticated
administrative  systems,  quality  consultants  and  strong  relationships  with
insurance companies,  provide us with distinct competitive advantages. We intend
to increase our market share by combining these strengths with our  competencies
in:

   o designing proprietary programs customized to meet clients' needs;

   o providing outstanding client service

   o responding  quickly to develop new products and services brought about by
     regulatory  and  legislative changes; and

   o leveraging  present and future investments in technology over an increasing
     client base.

   We are able to offer clients  expertise not available  elsewhere  through the
specialization of our four divisions.  Our internal growth efforts will focus on
the development of these divisions.

   The  Clark/Bardes  Consulting --  Compensation  Resource  Group  division has
designed and currently  administers over 300 client cases, covering over 114,000
policies  for  executives,  key  employees  and other  professionals.  The large
corporate  marketplace in which the Clark/Bardes division does business requires
a  significant  degree of  customization.  Growth in this division will focus on
further penetrating the corporate marketplace and providing additional executive
compensation and benefits services to corporations.

   The Banking Practice division, which as of January 1, 2001 includes our large
bank business, services over 1,400 community banks and 30 of the top 50 national
banks.  Changes in the banking  environment  present numerous  opportunities for
growth in this  division.  Banks are becoming  increasingly  sophisticated  with
their  compensation  and benefit  plans as they  recruit  effective  leadership.
Growth  opportunities  for  this  division  include  the  recent  addition  of a
compensation and benefit  consulting  service as well as new programs to address
estate planning and continuity  planning.  This division recently completed four
acquisitions of strong, regional firms in its industry.

   The Healthcare  Group division uses a  comprehensive  benefits  approach that
encompasses  a variety of  insurance  products,  ranging from  traditional  life
insurance policies to disability and long-term care coverage. With approximately
400 clients representing over 800 hospitals and physician groups, the Healthcare
Group division is the market leader for  compensation  and benefit  planning for
healthcare  executives  and  physicians.   The  healthcare  industry's  changing
environment and complex structure offer many challenges for the near future. The
industry  has  experienced  a great  deal of  contraction  with  changes  in our
national healthcare regulations and compensation structure.

   The acquisition of Pearl Meyer & Partners  represented a significant shift in
financial  focus.  Prior to  acquiring  this  business,  our revenue was derived
almost  exclusively from the sale of life insurance products and the commissions
this activity  produces.  Pearl Meyer & Partners derives its revenue solely from
fees for services in providing consultative service to major corporations on the
compensation, motivation and retention of senior executive and board of director
members. We feel Pearl Meyer & Partners offers an excellent opportunity to cross
utilize our  respective  abilities and benefit from this growing and  profitable
new segment of our company.

   Our organization has had significant  external  growth,  completing  thirteen
acquisitions  since its August 1998 initial public offering.  We continue to see
consolidation  opportunities  within the  executive  compensation  and  benefits
marketplace.  We  categorize  potential  acquisition  targets into the following
groups:

   o  smaller  companies  that  have  not  made  the  necessary   investment  in
      technology  and  personnel,  and are finding it  difficult to compete with
      larger, more developed firms;

   o  larger and more  sophisticated  firms with a solid client  base,  eager to
      affiliate with a more established organization; and

   o  firms offering products or services that we currently do not provide or to
      industry sectors we do not currently serve.

   In evaluating a potential acquisition target, we identify  organizations that
will:

   o increase our market penetration;

   o retain quality consultants after the acquisition is complete;

   o create cross-selling opportunities;

   o provide opportunities for administrative cost savings; and,

   o add to our earnings per share.

   Once we have  identified  such a target we look at factors  such as operating
results,  financial  condition,   growth  potential,  and  the  quality  of  its
management and  consultants.  Acquisitions may be financed through cash from our
operations, future equity offerings or debt proceeds or any combination thereof.

Programs and Products

   We provide  compensation and benefit consulting as well as evaluate,  design,
implement and administer a diverse array of  compensation  and benefit  programs
for executives, key employees and other professionals. Our programs are financed
by business owned life insurance and other  financial  products.  Business owned
life  insurance  refers to life insurance  policies  purchased by a company that
insures the lives of a number of its  employees.  The business pays the premiums
on,  and is the owner and  beneficiary  of such  policies.  Business  owned life
insurance  based  programs  are used  primarily  to  offset a  client's  cost of
providing   employee   benefits  and  to  supplement  and  secure  benefits  for
executives, key employees and other professionals. The cash flow characteristics
of business  owned life  insurance  policies are  designed to closely  match the
long-term cash flow  characteristics of a client's employee benefit liabilities.
Additionally, business owned life insurance offers three major advantages:

   o the cash value of the policies grows on a tax deferred basis;

   o the policies' death benefits are received tax free; and

   o the tax deferred nature of the policies provides an attractive return.

   We receive most of our revenue from selling  insurance  products used to fund
our proprietary  programs.  We maintain  strategic  relationships with insurance
companies  such as AEGON,  AXA/Equitable,  General  American,  Great-West,  Mass
Mutual, Nationwide, Phoenix Home Life and West Coast Life, in which both parties
are committed to developing  and delivering  creative  products with high client
value. We also work closely with clients to design custom products that meet the
specific  organizational  needs of the client and with  insurance  companies  to
develop unique policy features at competitive pricing.

   We have invested significant time and resources in cultivating  relationships
with selected  carriers.  However,  we do not consider our future  success to be
dependent on any  specific  insurance  carrier.  We limit the number of carriers
with which we do business in order to maximize our bargaining power and resource
utilization.  Substantially all of the policies  underlying the programs that we
market are underwritten by 20 life insurance companies, of which seven accounted
for approximate  revenue of 76.3% of our first year  commission for 1998,  53.6%
for 1999 and  66.3%  for  2000.  We  believe  that  there  are over 50  top-tier
insurance  companies  with the financial  strength and resources to  effectively
compete for large case programs,  each of which typically  generate in excess of
$5 million in premiums, and several hundred carriers suitable for our small case
business,  each of which typically generate between $1 million and $5 million in
premiums.

   In selling,  designing and implementing a compensation  benefit  program,  we
usually proceed in the following manner:

   (1) we evaluate a client's  existing  compensation  and benefit  programs and
       their effectiveness in meeting that particular  company's  organizational
       needs;

   (2) we design or improve the compensation and benefit program;

   (3) when needed, we perform the actuarial and insurable interest calculations
       necessary to determine the executive  benefit  liabilities  and amount of
       life insurance an organization should purchase to fund those liabilities;

   (4) we compare financing alternatives and present the financial strengths of
       each, to the client;

   (5) we  arrange  for  the  placement  of the  insurance  coverage,  or  other
       financial  instruments  underlying the program, with a financially stable
       insurance company; and

   (6) we provide the long-term administrative services associated with the
       program.

   Our  Clark/Bardes  Consulting  --  Compensation  Resource  Group and  Banking
Practice  divisions market a wide variety of business owned life insurance based
programs,   including  bank  owned  life   insurance,   deferred  income  plans,
supplemental  executive  retirement plans,  supplemental  offset plans and group
term carve out plans.

   Our  Healthcare  Group  markets  predominantly  to  large  and  medium  sized
healthcare  organizations.  The  unique  characteristics  and  concerns  of  our
Healthcare  Group  clients  determine  the  kinds of  compensation  and  benefit
products and programs we develop.  Many healthcare  organizations are tax exempt
and have special rules and regulations that affect the compensation and benefits
of their executives.

   The  following  table sets forth the  actual and pro forma  total  revenue by
division  for the  year  ended  December  31,  1999 and  2000,  as if all of our
acquisitions had occurred on January 1, 1999:

                                Year Ended December 31,
                                1999                2000
                          -----------------   ---------------
                           Actual  Pro forma  Actual   Pro forma
                                     (In millions)
 Compensation    Resource  $  73.5   $101.0  $  78.6    $100.0
 Group.................
 Banking...............       30.8     30.8     40.2      40.2
 HealthCare............       16.4     22.5     22.1      22.1
 Compensation Consulting       --      12.6      6.0      11.5
 Other.................        --       --        .7        .9
                           ------    -----   -------    ------
                           $ 120.7   $166.9  $ 147.6    $174.7
                           =======   ======  =======    ======

Our Products and Services

   Bank  Owned Life  Insurance.  Bank owned  life  insurance  is life  insurance
purchased  and owned by a bank on the lives of its  employees.  The insurance is
used to help finance the bank's employee benefit obligations.  The Office of the
Comptroller of the Currency  provides  guidelines  that tie the purchase of bank
owned  life  insurance  to the  costs  of  offsetting  employee  benefits  on an
aggregate  basis.  We were the first  organization  to implement large case bank
owned life  insurance  programs,  which are  designed  for banks with  assets in
excess of $5 billion.  We also  market  smaller  case bank owned life  insurance
programs, which are used to offset benefit costs for executives and directors of
regional and community banks that generally have assets of less than $5 billion.
We market a wide  variety of bank owned life  insurance,  including  fixed yield
policies, general account policies, variable yield policies and separate account
policies.  Effective  January 2, 2001,  all bank  owned life  insurance  will be
marketed by our Banking Practice division.

   Deferred Income Plans.  Deferred  income plans allow corporate  executives to
defer a portion of their current  income on a tax-deferred  basis.  The deferred
income and interest in a properly  designed  and  administered  deferred  income
plans  grows  on a  tax-deferred  basis  until  distributions  are  made  to the
executive, usually at retirement.  Corporations often purchase life insurance to
create  an asset in order to  offset  the costs of the  liability  created  by a
deferred  income plan.  Deferred  income plans can be structured in a variety of
ways; traditional deferred income plans, which credit the deferred income amount
with a fixed rate of  interest  and use fixed yield life  insurance  products to
offset the costs of the company's liability,  or variable deferred income plans,
which credit the deferred  income amount with interest based on a bond or equity
index and use variable yield life insurance  products to offset the costs of the
company's liability. In an effort to provide additional security for executives,
corporations usually create a trust to hold the related insurance policies.

   Because  deferred  income  plans  provide  executives  with a method to defer
income at little or no cost to the  corporation,  we believe that the demand for
these plans will continue to increase,  as  corporations  implement new plans or
expand the availability of existing plans.

   Supplemental  Executive Retirement Plans.  Supplemental  executive retirement
plans are specifically  designed to supplement the dollar limitation on benefits
paid from  qualified  pension plans.  The maximum dollar amount of  compensation
that can be used to determine the pension  benefits payable to an executive from
a  qualified  plan  is  $170,000.  Accordingly,   non-qualified  plans  such  as
supplemental  executive  retirement  plans,  which are not  subject  to the same
stringent  rule,  have  increased in  popularity.  Many  supplemental  executive
retirement plans are funded with the same insurance products and strategies used
to fund deferred income plans.

   Supplemental  Offset  Plans.   Supplemental  offset  plans  are  designed  to
supplement an executive's  income by restoring  retirement  benefits  previously
limited by  legislative  changes.  Supplemental  offset  plans are  funded  with
insurance policies using a technique commonly known as "split dollar." Ownership
rights to an  individual  policy  are shared  between  the  corporation  and the
executive.  The corporation  and the executive  share in the insurance  policy's
increasing cash value and death benefits. The corporation pays the premiums, but
recovers  these  expenditures  from its  share  of the  policy's  proceeds.  The
executive's  interest in such  policy is targeted to equal the present  value of
the retirement benefits due at the time of such executive's retirement.

   As originally structured, supplemental offset plans were owned exclusively by
the  employer  and not by the  individual.  The  sharing of the  ownership  is a
variation known as "equity split dollar." The recent initiatives by the Internal
Revenue  Service  to tax  the  incremental  equity  ownership  currently  to the
employees have raised a question as to the continued  viability of this program.
We will continue to monitor these developments.

   Group  Term  Carve Out  Plans.  Currently,  a  corporation  can  provide  its
employees with a group term life insurance policy death benefit of up to $50,000
on a tax-free basis.  The cost of providing a death benefit in excess of $50,000
is taxed to the  employee as ordinary  income.  Group term carve out plans allow
companies  to  provide  portable  coverage  in a  customized  program of amounts
greater than $50,000 and taxed at lower rates.  Group term carve out plans often
provide a greater amount of insurance and  post-retirement  death benefit to the
employee at a  competitive  overall cost.  The corporate  plan sponsor is not an
owner or beneficiary of the permanent life insurance policies.

   Compensation  Consulting.  With the acquisition of Pearl Meyer & Partners, we
have  entered  the market  for  senior  executive  and board of  director  level
executive  compensation  consulting.  Pearl  Meyer  is the  largest  independent
compensation consulting firm in the U.S. and with this acquisition, we expect to
enhance our  expertise in this area and offer  broader  services to our clients.
Our Healthcare Group and Banking Practice  divisions have developed  programs in
base salary,  incentives,  deferred compensation,  and other compensation design
plans.  The Clark/Bardes  Consulting -- Compensation  Resource Group division is
now initiating similar programs for its clients.

   Community Bankers  Scholarship  Program.  The Community  Bankers  Scholarship
Program is designed for community banks that wish to offer college  scholarships
for students in their communities.  This turnkey program utilizes life insurance
to  provide  a  cost-effective  method  of  financing  the  annual  cost  of the
scholarships.  The Community Bankers Scholarship Program is marketed through our
Banking Practice division.

   Disability  Income Plan.  Many  companies  provide  group  Disability  Income
Protection for their employees.  In many cases, these plans have limits that may
not be sufficient to provide reasonable income replacement for executives in the
event of a  disability.  Disability  Income Plans  marketed by our  Clark/Bardes
Consulting  --  Compensation  Resource  Group  and  Healthcare  Group  divisions
supplement the group plans currently in place, and provide additional income for
executives in the event of a disability.

   ExecuFLEX   Program.   Our  Healthcare   Group  division   provides  a  total
compensation  planning approach to the not-for-profit health care market through
its "ExecuFLEX" program. The program includes a base level of benefits,  such as
medical,  dental, vision,  long-term disability,  long-term care, and group term
life insurance.  In addition,  participants are provided an allowance made up of
company  contributions and voluntary personal  deferrals.  The flex allowance is
used to supplement  base coverage and to add to their  retirement  funding.  The
ExecuFLEX program is designed to provide maximum flexibility to the participants
at a minimal cost to the  organization.  The success of ExecuFLEX  has led us to
offer the program to  companies  serviced by all of our  operating  divisions as
well as additional market segments within the health care industry.

Administrative Services

   We believe  that we are an  industry  leader in  providing  high  quality and
unique   services  to  our  clients.   We  have  developed   state  of  the  art
administrative  capabilities  necessary  to service  the  executive  benefit and
insurance  programs we market.  As of December 31, 2000,  we  administered  over
200,000  policies for over 2,500  clients.  As of the same date,  the  insurance
policies  underlying  our  employee  benefit  programs  represented  a total  of
approximately $81 billion of inforce insurance coverage as follows:

                   Clark/ Bardes
                   Consulting --
                   Compensation
                   Resource Group   Banking  HealthCare
                     Division       Practice   Group     Total
                   ------------   ----------  -------   --------
Policies
administered....       174,000      14,000     12,000     200,000
Clients.........           300       1,400        800       2,500
Inforce coverage     $ 69 billion $ 7 billion $5 billion $ 81 billion

   We approach administrative services with a strategy that assures our clients'
unique  requirements  and  needs  are  served  through  customized,  value-added
services and  intensive  support,  creating  brand and client  loyalty and lower
sensitivity to price. We further differentiate  ourselves by employing a focused
strategy for a particular  buyer group through each of our four  divisions.  For
instance,  we service  clients  in the  banking  industry  through  our  Banking
Practice  division  and  not-for-profit  healthcare  organizations  through  our
Healthcare  Group  division with an insider's  view of each market  resulting in
providing high quality  administrative  services  customized to a client's needs
while achieving lower costs.

   We   offer   customized   enrollment   and   administrative    services   for
insurance-financed  employee  benefit  programs,  including  business owned life
insurance and non-qualified  benefit plans. Due to the many complex requirements
of the administrative process, each client is assigned an account team comprised
of specialists who are  responsible for servicing the needs of that client.  The
administrative  services provided by each of our divisions' account  specialists
include   coordinating  and  managing  the  enrollment   process,   distributing
communication  materials,  monitoring  financial,  tax and  regulatory  changes,
providing  accounting reports,  and periodic benefit statements to participants,
performing  annual reviews and reporting  historical and projected cash flow and
earnings.  Each  division's  account  specialists  are  supported by  actuarial,
financial and insurance experts.

   We build our client base by fostering long-term client relationships. To this
end,  the  training  and  focus  of each  account  team  centers  on our goal of
delivering  the  highest  quality  program   implementation  and  administrative
services  in  the  industry.   This  benefits  both  the  client,   through  top
professional  support,  and the  consultant,  who can focus more  closely on the
consulting  process.  To further emphasize  long-term client  relationships,  we
enter into administrative  agreements with each client, in most cases for a term
of five to ten years. Finally, our method of calculating the revenue splits with
our  consultants  ensures  that the  revenue  from new sales is not  required to
subsidize the administrative costs of existing cases.

   Our commitment to providing high quality client and  administrative  services
is one of the primary  reasons  that we have  achieved the success we enjoyed to
date. We believe that our continued  focus on, and  investment in, the personnel
and  technology  necessary to deliver this level of client  service will bolster
our reputation as an industry leader.

Distribution

   Each of our  divisions  markets its  employee  benefit  programs  and related
administrative and consulting services through an in-house sales organization as
well as consultants in independently  operated sales offices located  throughout
the United  States.  As of December 31, 2000,  we were  represented  by over 100
consultants  in 51 sales  offices  located  in 49 states  throughout  the United
States.  Consultants owned  approximately  10% of the outstanding  shares of our
common stock as of December 31, 2000.

   Our independent  consultants  enter into agency  agreements with us to market
programs  and  services  on our behalf on an  exclusive  basis.  Each  agreement
defines the duties of the consultant to solicit and sell covered  business,  the
revenue  splits   between  the   consultant   and  ourselves,   and  includes  a
confidentiality  agreement and operating standards. We pay a substantial portion
of the total sales revenue to the  independent  consultant,  usually from 50% to
65% of gross revenue.  Most of our  independent  consultants are responsible for
their own operating expenses.  Non-solicitation  clauses,  which prohibit either
party from  soliciting  the other party's  clients are normally three years with
respect to  separate  clients  and  usually  five  years  with  respect to joint
clients.  Some of our divisions,  such as the Healthcare Group and Pearl Meyer &
Partners,  generate  a  significant  portion  of  their  sales  revenue  through
employee-consultants  and we  bear  the  administrative  expense  of  the  sales
consultants in exchange for a lower commission and fee expense.

   Our top three consultants  collectively  accounted for approximately 32.0% of
1999  revenue  and  10.8%  of 2000  revenue.  We  recognize  the  importance  of
attracting and retaining qualified,  productive sales professionals. We actively
recruit and develop new sales  professionals in order to add to our distribution
capacity.  Further, our acquisition strategy focuses on retaining the productive
sales professionals of the entity being acquired.

   As our business has grown, externally and through acquisitions,  our reliance
on a select few high volume  consultants  has decreased  accordingly.  There are
still a large  number  of  strong  consultants  and as they  continue  in  their
success,  and we  continue  to acquire  other  organizations,  the base  expands
proportionally.

Employees

   As of December 31, 2000, we employed approximately 593 people as follows:

                                        Compensation   Resource
                                        Group.................  237
                                        Banking Practice......  131
                                        Healthcare Group......  161
                                        Pearl Meyer & Partners   33
                                        Holding Company.......   31
                                                                ---
                                                                593

   The majority of our  employees  have college  degrees,  with several  holding
advanced  degrees  in law,  accounting,  business  administration  or  actuarial
science.  Professional  development is a highly valued industry  characteristic,
and  insurance  and  financial  planning  designations  such as  Chartered  Life
Underwriter,  Fellow of the Life Management Institute,  Fellow of the Society of
Actuaries  and  Certified  Financial  Planner to name a few, are held by a large
number  of  our  employees.  We  actively  encourage  continuing  education  for
employees through expense reimbursement and reward plans. Due to the specialized
nature of the business,  we often  recruit  experienced  persons from  insurance
companies, consulting firms and related industries.

Marketing Support

   We have  made a  substantial  investment  in  establishing  highly  qualified
marketing  departments in each division.  Each  marketing  department's  primary
focus is to support our sales  efforts.  The marketing  departments  develop and
track  sales  leads for the  consultants  and provide  marketing  materials  and
research.  We distribute external newsletters and other program update pieces to
approximately  15,000 current and  prospective  clients  throughout the year and
sponsor  conferences  and meetings  featuring  industry  experts and  nationally
recognized  speakers.  Finally,  the public  relations and  corporate  marketing
functions  coordinate the  publication of articles  written by our employees and
consultants  and  ensure  that our  representatives  are  quoted as  information
sources  in major  national  publications.  We believe  that the  efforts of our
marketing  departments have helped make us a readily  identifiable leader in the
insurance-financed employee benefit industry.

   During  2000,  we  launched  two new and  innovative  marketing  tools  using
internet  technology.  BOLIauction.com  debuted  April 14, 2000 and  BOLInet.com
debuted August 14, 2000. Both sites are  patent-pending and are VeriSign secure.
BOLIauction.com -- is our new online bank-owned life insurance (BOLI) purchasing
system. Using  BOLIauction.com's  proprietary  interface,  banks access the best
carriers  and products  through  this  competitive  auction  environment.  After
clients  set   parameters   online  for  their  BOLI  program,   BOLIauction.com
distributes these  specifications to the participating  carriers.  Carriers then
submit their responses to BOLIauction.com, the auction begins, and a winning bid
is selected. The first auction, which involved two banks, ten carriers, and over
$150 million in underwriting,  occurred on June 16, 2000. To date, four auctions
have occurred on BOLIauction.com  totaling $500 million in BOLI assets. The five
participating  institutions  experienced an average 15 basis point increase from
initial  carrier bids.  This equates to an additional  $750,000 in annual income
for these banks.

   o  Thirty-four banks are registered users of BOLInet.com and expect we expect
      to enroll an additional  120 in 2001. A total of $6 billion in BOLI assets
      are managed on the site.

   o  BOLInet.com  allows  a client  bank to get  real-time  data on their  BOLI
      assets, and provides powerful data-mining and report writing tools.

Consultant Support

   Our  consultants  are  supported by a design and analysis  department in each
division. The primary responsibility of the design and analysis department is to
design customized compensation and benefit programs that will effectively offset
the costs of a client's employee benefit  liabilities.  The design analyst works
with  the  consultant  to  identify  the  needs  of  a  prospective  client  and
investigates  the  availability and pricing of products that are compatible with
that client's needs.  Finally,  the analyst  develops the financial  projections
necessary to evaluate the benefit costs and cost  recoveries for the prospective
client, together with an analysis of alternatives to assist the client in making
a decision.

Technology, Administration and Integration

   We have made a significant  investment in developing proprietary modeling and
administrative systems to support the unique characteristics of benefit programs
financed  life by insurance  and other  financial  instruments.  Reflecting  the
diversity of our four  divisions,  each has its own computer  based  information
system and  professional  support staff.  All the systems have been designed and
are  operated to support the special  processing  needs of a  particular  client
base. The systems use a relational database to facilitate easy access to client,
participant  and benefit  information.  In addition,  a  telephonic  application
allows  individual plan  participants  twenty-four hours a day access to account
balance and unit price information.

   Local area  networks  link all of our personal  computers.  Internet  mail is
utilized to communicate with clients and sales offices. We intend to continue to
invest  in  technology  and  system  development  in order  to offer  additional
services to clients, support new markets, integrate acquired operations, improve
productivity and reduce costs.

   We  maintain  a  disaster  recovery  plan for  local  area  network  and Unix
environments  in order  to  minimize  downtime  in the  event of a major  system
failure.  The local area  network  file  servers and Unix  database  servers are
located in  physically  secure areas and all systems are  password-protected  to
ensure access is limited to authorized  individuals.  We did not  experience any
year 2000 related difficulties directly or indirectly with clients,  carriers or
suppliers.

   When acquiring small businesses,  we integrate their  information  systems as
well as their staffs,  accounting and administrative systems. In this manner, we
are able to give them technical and  administrative  systems  support they could
not achieve as a stand-alone unit and, at the same time,  improve their level of
client service.

Persistency

   Over the last five  years,  we have  experienced  an overall  average  annual
persistency rate of 95% of the inforce  insurance  underlying our programs.  The
"persistency"  of an  insurance  policy  refers to the length of time it remains
continuously  in  force.  We  believe  that  this  high   persistency   rate  is
attributable to a number of factors.

   o  The  underlying  purpose of the  compensation  and benefit  programs is to
      offset the costs of employee  benefit  liabilities  and provide  long-term
      benefits to executives, key employees and other professionals.  Therefore,
      the policy is held by the  corporation to maturity,  regardless of whether
      any particular individual insured remains with the client.

   o  The clients of our Clark/Bardes  Consulting -- Compensation Resource Group
      or Banking  Practice  divisions would incur  unfavorable tax  consequences
      upon the surrender of an underlying  business owned life insurance policy.
      The cash value of the policy,  to the extent it represents  amounts beyond
      the cash  premiums  paid by the  allowable  charges  against the insurance
      account is taxed immediately at ordinary income rates upon surrender,  and
      an additional penalty tax applies in certain instances. A client often has
      the  option of making a tax-free  exchange  to  another  policy.  Upon the
      exchange,   however,   the  client  would  incur   substantial   insurance
      company-related costs, such as premium taxes.

   o  The  high  persistency  rates  of  all  of  our  divisions  are  partially
      attributable  to provisions in many interest rate sensitive  products that
      disallow a full-scale withdrawal or exchange.

   o  We provide a high degree of ongoing  client  service.  We believe that the
      quality of our services  provided  through each of our divisions  enhances
      persistency by distinguishing us from our competitors.

   As we continue  to  diversify  and  acquire  companies  in  different  market
segments, our persistency can begin to vary significantly. While we intend to do
all we can to retain  our  clients,  service  their  accounts  and  sustain  our
persistency, there can be no assurance our persistency rates will remain at this
level.

Competition

   The  executive   compensation  and  benefit   consulting   market  is  highly
competitive.   We  compete  with   consulting   firms,   brokers,   third  party
administrators,  producer  groups  and  insurance  companies.  A  number  of our
competitors offer attractive alternative programs. The direct competitors of our
Clark/Bardes   Consulting  --  Compensation  Resource  Group  division  include;
Management Compensation Group, Mullin Consulting,  Newport Group, TBG Financial,
and The Todd Organization.

   The competitors of our Banking Practice include The Benefit  Marketing Group;
Harris, Crouch, Miller, Scott, Long and Mann; and individual insurance agents in
the communities where the community banks are located. Additionally, the banking
industry is constantly  consolidating,  which may reduce the number of potential
bank clients.  In  competition  with our Healthcare  Group division are;  Hewitt
Associates,  Towers Perrin,  Mercer  Consulting Group and Hay Group,  Inc. These
firms, however, do not focus exclusively on healthcare and do not restrict their
practices to executive and physician compensation.

   Although Pearl Meyer & Partners is one of the best  established  firms in the
high level executive compensation consulting market, there are a number of firms
that offer this service.

   We compete for clients on the basis of reputation,  client  service,  program
and  product  offerings  and  the  ability  to  tailor  insurance  products  and
administrative  services to the  specific  needs of a client.  Although  certain
competitors may offer attractive  programs on pricing, we believe that we are in
a superior  competitive  position in most, if not all, of the meaningful aspects
of our business, because of our track record, name recognition,  industry focus,
specialization and industry expertise. We do not consider our direct competitors
to be our greatest competitive threat.  Rather, we believe that our most serious
competitive  threat will likely  come either from large,  diversified  financial
entities which are willing to expend significant  resources to gain market share
or from the larger  competitors  that  pursue an  acquisition  or  consolidation
strategy similar to ours.

Government Regulation

   State governments extensively regulate our life insurance activities. We sell
our insurance  products in all 50 states through licensed  insurance  producers.
Insurance  laws vary from  state to state and  states  have  broad  powers  over
licensing, payment of commissions,  business practices, policy forms and premium
rates. While we have not encountered  regulatory problems in the past, we cannot
assure you that we will always be in compliance  with all applicable  regulatory
requirements  of  each  state.  Additionally,  we  cannot  be  sure if we or our
consultants  will  encounter  regulatory  problems in the future,  including any
potential  sanctions or penalties  for operating in a state without all required
licenses.

   While the federal government does not directly regulate the marketing of most
insurance  products,  some products,  such as variable life  insurance,  must be
registered under the federal  securities laws. As a result,  our consultants and
entities with which we have administrative service agreements related to selling
those  products must be registered  with the National  Association of Securities
Dealers.  We market these insurance products through a registered  broker-dealer
with  which we have a network  agreement.  While we have not had any  regulatory
problems in the past related to these  products,  we cannot be sure if we or our
consultants will not have regulatory problems in the future.

ITEM 2. PROPERTIES

   The  following  table  sets forth  certain  information  with  respect to the
principal facilities used in our operations, all of which are leased.


                                         Monthly  Square   Current
          Division -- Location             Rent  Footage Lease Expires
 Clark/Bardes Consulting -- Compensation
   Resource Group --
   Dallas, Texas.....................   $48,294 35,619  April 2001
   Dallas, Texas.....................     1,913  3,507  August 2004
   Bethesda, Maryland................    14,295  8,519  July 2007
   Phoenix, Arizona..................     3,427  2,056  March 2004
   Los Angeles, California...........    55,970 37,313  June 2010
   Cleveland, Ohio...................     5,578  3,049  July 2002
   Atlanta, Georgia..................     4,680  2,399  November
                                                        2002
   Chicago, Illinois.................     5,193  4,734  June 2004
   New York, New York................    10,150  2,900  August 2001
 Banking Practice--
   Bloomington, Minnesota............    48,861 32,897  September
                                                        2005
   Dallas, Texas.....................    11,088  6,034  February
                                                        2005
   Regional Offices..................     8,949  2,903  Various
 Healthcare    Group  --   Minneapolis, 109,790 56,231  December
 Minnesota...........................                   2003
 Pearl  Meyer &  Partners -- New  York,  29,271 19,000  May 2010
 New York............................
 Clark/Bardes    Holdings    --    North
 Barrington,                             22,118 11,085  July 2007
   Illinois..........................
 Clark/Bardes Partners-- Stamford,
   Connecticut.......................    11,337  3,868  September
                                                        2004

ITEM 3. LEGAL PROCEEDINGS

   From time to time, we are involved in various claims and lawsuits  incidental
to our business,  including claims and lawsuits alleging breaches of contractual
obligations under agreements with our consultants. The following is a summary of
the current legal proceedings pending against us.

M Financial Holdings, Incorporated, et al. v. Clark/Bardes Holdings, Inc.

   On June 3, 2000, M Financial Holdings, Incorporated ("M") commenced an action
in the Circuit  Court of Multnomah  County,  Oregon,  seeking to enjoin a former
executive  from being  employed by us and other relief.  The  complaint  alleges
breach  of  fiduciary   duty,   unfair   competition,   civil   conspiracy   and
misappropriation of trade secrets, and charges us with intentional  interference
with contract.

   The complaint requests an injunction barring the executive's  employment with
the Company for two years, barring disclosure of M confidential information, and
requiring the return of all documents. In addition, M seeks a constructive trust
with respect to our gross profits from our reinsurance  operation for two years,
compensatory  damages,  punitive  damages of $1,500,000  plus attorneys fees and
costs.  Both we and the executive  deny any  wrongdoing and intend to vigorously
defend these claims.

Constellation Energy Group, Inc. and Baltimore Gas and Electric Company,
et al. v. Clark/Bardes, Inc.

   On July 25, 2000,  Constellation  Energy Group,  Inc.  ("Constellation")  and
related entities filed a civil action against us in the U.S.  District Court for
the  District of  Maryland.  Constellation  claims that we failed to take proper
action  in  connection  with the  administration  of an  employee  benefit  life
insurance program, resulting in claimed damages of $7.5 million and pre-judgment
interest, post-judgment interest, costs and expenses.

   Agreement has been reached with Plaintiffs to stay the matter until April 16,
2001 to facilitate ongoing discussions and a potential  nonbinding  mediation of
the issues. We believe we have meritorious  defenses to these claims,  intend to
deny all  allegations  and to  vigorously  defend these  claims.  Our  insurance
carrier  has  acknowledged  coverage  for this  action  and the  extent  of that
coverage  can only be  determined  at the outcome of the case in the event we do
not prevail.

Madge A.  Kunkel,  individually  and as Personal  Representative  of the Estate
of Donald B.  Kunkel,  M.D., deceased vs. Banner Health System, et al.

   On  February  2,  2001,  an action was  commenced  in the  Superior  Court of
Maricopa  County,  Oregon against  various  defendants  including our Healthcare
Group  Division  ("HCS").  Ms.  Kunkel  alleges  that her  deceased  husband was
entitled to a life insurance  policy in the face amount of $525,000 to be issued
by the  defendant  insurance  company under a split dollar life  insurance  plan
sponsored by his defendant  employer which was administered by HCS. According to
the  complaint,  Dr.  Kunkel  died  before the  initial  premium was paid by his
employer and before the policy was issued.  The matter has been submitted to our
insurance carriers. We believe we have meritorious defenses to this claim and we
intend to vigorously defend the matter.

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

   No  matters  were  submitted  during the  fourth  quarter of the fiscal  year
covered  by this  Form  10-K  to a vote of our  security  holders,  through  the
solicitation of proxies or otherwise.

                                     PART II

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

Price Range of Common Stock

   On August 19, 1998,  we completed  an initial  public  offering of the Common
Stock at a price of $9.00 per  share.  Our common  stock  trades on the over the
counter  market and is quoted on the  Nasdaq  National  Market  under the symbol
"CLKB." The  following  table sets forth the high and low closing sales price as
reported  by the Nasdaq  National  Market for our common  stock for the  periods
indicated.

                                             High    Low
                                    1999
                        First quarter..... $ 18.25 $ 13.06
                        Second quarter.... $ 20.50 $ 13.00
                        Third quarter..... $ 20.63 $ 16.00
                        Fourth quarter.... $ 20.63 $ 12.25
                                    2000
                        First quarter..... $ 17.88 $  3.13
                        Second quarter.... $ 16.88 $ 13.44
                        Third quarter..... $ 17.88 $  8.50
                        Fourth quarter.... $ 13.84 $  9.38
                                    2001
                        First quarter to
                         March 20......... $ 12.13 $  8.94

   As of March 5, 2001, the closing price of our common stock was $10.13,  there
were  12,675,309  shares  of  our  common  stock  outstanding,  and  there  were
approximately  514  holders of record and 802  beneficial  holders of our common
stock.

Dividend Policy

   Prior to our  reorganization  in July 1998, we conducted our business as an S
corporation  for federal income tax purposes.  Under this form of  organization,
all  earnings  were deemed to be passed  through  directly to our  shareholders,
whether  distributed  or not. In order for our  shareholders  to pay the federal
income taxes  imposed by this form of  organization,  we made  distributions  to
them.  These  distributions  are  shown as  dividends  in prior  periods  in our
financial statements.

   We intend to retain future earnings to fund growth and do not plan to pay any
cash dividends in the foreseeable future.  Under the terms of a credit agreement
with Bank One,  we cannot  declare  or pay  dividends  or return  capital to our
stockholders,  nor can we authorize or make any other  distribution,  payment or
delivery  of  property  or cash to our  stockholders,  unless Bank One gives its
prior written consent.

Recent Sales of Unregistered Securities

   On February 11, 2000,  we issued 43,714 shares of our common stock as part of
the purchase price for the acquisition of the Christiansen  Group. The issue was
exempt from  registration  under Section 4(2) of the Securities Act of 1933. The
total value of the shares issued was $694,000 and constituted 89.5% of the total
purchase price.

   On May 5, 2000,  we issued  49,143  shares of our common stock as part of the
purchase price for the acquisition of Insurance  Alliances Group, Inc. The issue
was exempt from  registration  under Section 4(2) of the Securities Act of 1933.
The total value of the shares issued was $713,000 and  constituted  20.0% of the
total purchase price.

   On June 21, 2000, we issued 250,000 shares of our common stock as part of the
purchase price for the acquisition of Pearl Meyer & Partners, Inc. The issue was
exempt from  registration  under Section 4(2) of the Securities Act of 1933. The
total value of the shares issued was $4.0 million and  constituted  15.4% of the
total purchase price.

   On September 6, 2000, we issued 596,463 shares of our common stock as part of
the purchase price for our acquisition of Compensation  Resource Group, Inc. The
issuance was exempt from  registration  under Section 4(2) of the Securities Act
of 1933.  The total value of the shares issued was $6.1 million and  constituted
20.0% of the purchase price.

   On September 11, 2000, we sold 1,888,887 shares of common stock to a group of
investors  for  $25.1  million,   net  of  expenses,   in  a  private  placement
transaction.  The  1,888,887  shares  have  been  registered  for  resale by the
investors if they deem it appropriate to resell them.

ITEM 6. SELECTED FINANCIAL DATA

   The  following  historical  information  of  Clark/Bardes  should  be read in
conjunction with information included elsewhere herein,  including the financial
statements and notes thereto and "Item 7.  Management's  Discussion and Analysis
of Financial  Condition  and Results of  Operations."  The results of operations
presented below are not necessarily indicative of the results of operations that
may be achieved in the future.

                                        Year Ended December 31,
                        ---------------------------------------
                           1996      1997(1)   1998(2)    1999(3)    2000(7)
                        ---------  -------------------- ---------- ---------
                                           (In thousands)
Statement of Operations
Total Revenue.........  $  33,242   $ 49,455  $ 74,766   $120,760  $  147,613
Commission    and   Fee    21,049     32,439    46,111     53,108      50,804
                        ---------   --------  --------   --------  ----------
Expense...............
          Gross Profit     12,193     17,016    28,655     67,652      96,809
                        ---------   --------  --------   --------  ----------
Operating Expenses
  General           and     8,579     11,504    19,616     45,153      68,189
Administrative........
  Amortization       of        --        295     1,232      4,370       7,138
Intangibles...........
  Non-recurring(4)(8).         --         --     4,800         --         518
                        ---------   --------  --------   --------  ----------
Income from Operations      3,614      5,217     3,007     18,129      20,964
Non-recurring Income(9)        --         --        --         --       1,001
Interest
  Income..............        121        189       565        329         278
  Expense.............         --     (1,112)   (3,166)    (3,548)     (4,970)
                        ---------   --------  --------   --------  ----------
Income Before Taxes...      3,735      4,294       406     14,910      17,273
Income Taxes(5).......        181         60       817      6,079       5,825
                        ---------   --------  --------   --------  ----------
          Net    Income $   3,554   $  4,234  $   (411)  $  8,831  $   11,448
                        =========   ========  ========   ========  ==========
(Loss)................
Basic    Net     Income
(Loss) per
  Common Share:
  Net Income (Loss)...  $     0.75  $    1.03 $   (0.08) $    0.97 $      1.07
  Weighted      Average 4,709,252  4,119,387 5,006,009  9,077,775  10,744,718
Shares................
Diluted    Net   Income
(Loss) per
  Common Share:
  Net Income (Loss)...  $     0.75  $    0.99 $   (0.08) $    0.95 $      1.05
  Weighted      Average 4,709,252  4,398,593 5,006,009  9,328,939  10,880,093
Shares................
Dividends   per  Common $     0.36  $    1.32 $     --   $     --  $       --
share.................
Balance Sheet
Cash      and      Cash $   4,882   $  3,783  $ 12,102   $  4,832  $    7,598
Equivalents...........
Intangible Assets-- Net        --     24,089    45,209     94,991     165,373
Total Assets..........      8,525     36,901    67,493    125,524     219,855
Debt:
  Current.............                 4,325     4,344      7,252      11,968
  Long Term...........                32,838    24,713     35,473      52,605
Total Liabilities.....      4,713     42,581    37,795     63,156     107,297
Stockholders' Equity
  (Deficit)(6)........      3,812     (5,680)   29,698     62,368     112,558
----------

(1) Includes the results of operations  attributable  to the acquisition of Bank
    Compensation  Strategies  for the period  beginning  September 1, 1997,  the
    effective date.

(2) Includes the results of operations attributable to the acquisition of:

   o Schoenke & Associates as of September 1, 1998

   o Wiedemann & Johnson as of November 1, 1998

(3) Includes the results of operations attributable to the acquisition of:

   o National Institute for Community Banking as of January 1, 1999

   o Management Compensation Group/HealthCare as of April 1, 1999

   o The Wamberg Organization as of September 1, 1999

   o Banking Consultants of America as of October 1, 1999

(4) We accrued  $4.8 million in July 1998 for the fair value of put warrants and
    these warrants representing 1,525,424 shares of common stock.

(5) For  periods  prior  to July 31,  1998,  income  tax  expense  reflects  the
    Clark/Bardes'  liability  for state  income  taxes only.  No  provision  for
    federal  income  taxes  had been made  prior to July 31,  1998  because  the
    Company had elected to be treated as an S corporation for federal income tax
    purposes.

(6) The decrease in  stockholders'  equity in 1997 resulted from our predecessor
    company's  repurchases  of 2.6 million  shares of its common stock for total
    consideration of approximately $14.0 million and distributions totaling $4.3
    million to stockholders.

(7) Includes the results of operations attributable to the acquisition of:

   o Christiansen & Associates as of January 1, 2000

   o The Watson Company as of February 1, 2000

   o Insurance Alliances Group as of May 5, 2000

   o W.M. Sheehan & Company, Inc. as of June 13, 2000

   o Pearl Meyer & Partners, Inc. as of June 21, 2000

   o Compensation Resource Group as of September 6, 2000

   o Forrest, Wagner & Associates as of October 23, 2000

(8) In 2000,  we  incurred a  non-recurring  operating  expense of  $518,000  in
    connection with the integration of our acquisition of Compensation  Resource
    Group.

(9) In 2000, we received $1.0 million of life  insurance  proceeds as the result
    of the death of a sales consultant.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Tables shown in thousands of dollars, except per share amounts)

   The following  discussion and analysis of our financial condition and results
of operations should be read in conjunction with our financial  statements,  the
notes thereto and other information appearing elsewhere in this Form 10-K.

Overview

   Our net income for 2000 of $11.4  million and $1.05 per diluted  common share
was the best in our history  representing a 29.6%  increase over  comparable net
income of $8.8 million and a 10.5%  improvement  over diluted earnings per share
of $.95 for the year 1999.

   In the fourth quarter of 2000, net income was $8.3 million;  $.65 per diluted
share  compared with $4.9 million and $.50 per diluted share for the 1999 fourth
quarter, an increase of 69.4% in net income and 30.0% in earnings per share.

   The year 2000 produced three unusual and  non-recurring  events. In the third
quarter, we sustained a $518,000 charge to integrate a new acquisition. Also, in
the third quarter, we recovered  approximately $500,000 of overpaid state income
taxes thus giving us an unusually low effective tax rate for the year and a $.05
per share  benefit.  In the fourth  quarter,  we received  $1.0  million of life
insurance  proceeds as the result of the death of a sales  consultant.  This one
time credit increased net income for 2000 by $1.0 million or $.09 per share.

Acquisitions

   As we stated in last year's report,  our acquisition  program remains broadly
focused on adding  new  markets or  expanding  those in which we already  have a
presence. We feel we furthered this objective in 2000 by acquiring:

   o  Pearl Meyer & Partners,  one of America's leading  executive  compensation
      consulting firms, during the second quarter; and,

   o  Compensation   Resource   Group,  a  leading   company  in  the  executive
      compensation and benefits market, in the third quarter.

   As we have said previously,  the companies we acquire are typically privately
owned and structured as S corporations for federal income tax purposes, with the
income passed on to the shareholders.  Our evaluation focus is on the quality of
the management  and future  earnings and growth  potential.  In the case of life
insurance sales acquisitions,  we also acquire the financial value embedded in a
book of  recurring  renewal  business  to be  realized  for many years after the
acquisition takes place. This raises two important financial issues:

   1) Our sellers want a majority of the purchase price in cash,  thus requiring
      a large pool of funds from equity or debt offerings, or both.

   2) We  acquire  little  in the  way  of  tangible  assets,  thus  creating  a
      substantial amount of intangible assets on our balance sheet.

   Up until now, our future  renewal  revenue  stream has been a major source of
collateral for continued acquisitions. As we acquire more businesses that do not
have this  attribute,  our cash flow  potential  from renewals will be less of a
factor to be considered as we seek to expand our borrowing availability.

Rich, Florin/Solutions, Inc.

   On March 12, 2001,  we acquired the  business  along with certain  assets and
liabilities  of  Rich,   Florin/  Solutions,   Inc.,  a  Boston,   Massachusetts
compensation   consulting   company.   The  assets  acquired   include  accounts
receivable,  copyrights and office equipment.  The liabilities  assumed were for
employee benefit obligations existing as of the acquisition date.

   The purchase price was $20.8 million;  before expenses,  consisting of a cash
payment at closing of $11.3 million and $9.5 million of contingent payments over
the next four years based on the attainment of established financial performance
criteria.  When earned, the contingent payments will consist of 60% cash and 40%
CBH common stock.

   The  transaction  was funded from CBH's existing line of credit.  The initial
goodwill of approximately $9.0 million will be amortized over twenty years.

Forrest, Wagner & Associates

   On October 23, 2000,  CBH acquired all of the  outstanding  stock of Forrest,
Wagner  &  Associates,  Inc.  ("FWA")  for a  purchase  price  of $4.2  million,
including expenses,  of which $3.5 million was paid in cash at the closing.  The
balance  of  $750,000  is payable  upon the  achievement  of  certain  financial
criteria by December 31, 2004.

   FWA  is  a  Phoenix,   Arizona  based  firm  specializing  in  marketing  and
administering  non-qualified executive benefit plans funded primarily by Company
owned life insurance. FWA was affiliated with Compensation Resource Group, Inc.

   The acquisition  will be accounted for as a purchase with $2.7 million of the
purchase  price  amortized  based on the net  present  value of  future  renewal
revenue over twenty years. The balance of the purchase price, when made, will be
accounted  for as  goodwill  and  amortized  over the  remainder  of the initial
twenty-year period.

Compensation Resource Group, Inc.

   On September  6, 2000,  we acquired  all the issued and  outstanding  capital
stock of Compensation Resource Group ("CRG") for a total purchase price of $30.5
million, excluding acquisition expenses, consisting of:

   o a cash payment to the CRG shareholder Sellers of $11.4 million;

   o  the issuance by CBH of 596,463 shares of its common stock,  par value $0.1
      per share (the "Common Stock"),  having an aggregate value of $6.1 million
      based on the closing price of the Common Stock on September 5, 2000;

   o the repayment of approximately $13.0 million of CRG's long-term debt.

   Acquisition expenses are estimated to be $735,000.

   For the periods prior to the  acquisition,  CRG had revenue and net income as
follows:

                                     Fiscal Years Ended    Six Months Ended
                                           June 30,           June 30,
                                       2000         1999        2000
                                   -----------  ----------- --------
                                           (Audited)         (Unaudited)
                   Revenue......      $26,286      $27,126     $19,711
                   Net      income    (3,268)          45       7,064
                   (loss).......

   CRG is an executive  compensation and benefits organization that provides the
design,  marketing,  funding and  administration of non-qualified  plans. CRG is
headquartered  in Los Angeles,  California and has  affiliated  offices in seven
other  cities.  Prior to the  acquisition,  there was no  material  relationship
between CRG and Clark/Bardes.

   The $25.1 million cash portion of the purchase  price was borrowed  under our
credit facility with Bank One.

   In connection with the acquisition,  we entered into a bonus  arrangement for
present and future key  executives and employees of CRG. This  arrangement  will
provide for the  payment of bonuses of up to $20  million if certain  stipulated
financial  objectives  are achieved  during the years ended December 31, 2003 to
2005.

   The  acquisition  of CRG has been  accounted  for as a  purchase  with  $26.7
million of the purchase price allocated to the present value of in-force revenue
and  amortized  over a period of thirty  years and $11.4  million  allocated  to
goodwill, which will be amortized over twenty years.

   The unaudited financial information below presents the results of CBH and CRG
as if the acquisition had occurred on January 1, 1999.

                                                           Twelve Months Ended
                                                              December 31,
                                                             2000      1999
                              Pro forma
                                Revenue................    $181,787  $148,487
                                Net income (loss)......      9,500     5,957
                                Diluted  earnings  (loss)       .84       .60
                              per share................

Pearl Meyer & Partners, Inc.

   On June 21,  2000,  we  acquired  all of the  capital  stock of Pearl Meyer &
Partners, Inc. for a total purchase price of $25.9 million,  excluding expenses.
The purchase price consisted of a cash payment of $21.9 million and the issuance
of 250,000 shares of our common stock with a value of $4.0 million.  Acquisition
expenses were $720,000. The $22.6 million cash portion of the purchase price was
borrowed under our line of credit.

   For the period prior to the  acquisition,  Pearl Meyer & Partners had revenue
and net income as follows:


                                      Years Ended      Three Months
                                      December 31,    Ended March 31,
                                     1999      1998       2000
                                  ------------------   ------------
                                        (Audited)      (Unaudited)
                      Revenue..     $12,579   $11,230    $3,176
                      Net income       757       232      1,346

   For  income  tax  purposes,  Pearl  Meyer &  Partners  was an S  corporation;
consequently the net income was passed on to the shareholders.

   Pearl  Meyer  is a New  York  City  based  consulting  firm  specializing  in
executive  compensation  and retention  programs.  The Pearl Meyer  organization
became our fourth operating  division.  Prior to the  acquisition,  there was no
material relationship between CBH and Pearl Meyer.

   The  acquisition  has been  accounted for as a purchase and goodwill of $23.5
million will be amortized over a twenty-year period.

   In addition to the initial  purchase  price,  $2.0 million of additional cash
consideration  will be paid in the first quarter of 2002 upon the achievement of
a defined  performance  objective  during the eighteen months  subsequent to the
purchase.  This  payment,  when  earned,  will be  accounted  for as  additional
purchase  price to be amortized  over the remainder of the original  twenty-year
period.

   The  unaudited  pro forma  information  below  presents the results of us and
Pearl Meyer & Partners as if the acquisition had occurred on January 1, 1999.

                                                          Twelve Months Ended
                                                             December 31,
                                                            2000       1999
                              Pro forma
                                Revenue................   $154,557   $133,339
                                Net income (loss)......    12,143      7,562
                                Diluted  earnings (loss)      1.10        .79
                              per share................

W.M. Sheehan & Company, Inc.

     On June 13,  2000,  we acquired  the working  capital  and  equipment,  and
assumed certain  liabilities of W.M. Sheehan & Company,  Inc.  ("Sheehan").  The
purchase price was $367,000 cash.  The  acquisition  has been accounted for as a
purchase and the goodwill will be amortized over twenty years.

   In addition to the purchase  price paid at closing,  an  additional  $650,000
will be paid upon the  achievement  of certain  revenue and earnings  objectives
during the years ended June 30, 2001 through 2004. The payments will be made 23%
in cash and 77% in our common  stock  based on values at time of  issuance.  The
additional  payments will be accounted  for as goodwill and  amortized  over the
remaining twenty-year period.

Insurance Alliances Group, Inc.

   On May 5, 2000, we acquired the business of Insurance  Alliances Group,  Inc.
("IAG").  There were no identifiable assets acquired or liabilities assumed. IAG
is a Stamford,  Connecticut  insurance  firm  specializing  in executive  estate
planning.

   The  purchase  price for the business  was $3.5  million  consisting  of $2.8
million  cash and 49,143  shares of our common stock having a value of $713,000.
The cash  portion of the purchase  price was borrowed  under our line of credit.
The  acquisition  will be accounted  for as a purchase  and the entire  purchase
price has been  allocated  to the net  present  value of  renewal  revenue  from
insurance in force at the time of the  acquisition  and will be amortized over a
period of thirty years.

Christiansen & Associates

   Effective  January 1, 2000 we acquired the stock and business of Christiansen
& Associates  for 43,714  shares of common stock at a value of $694,000 and cash
and  expenses  of  $128,913.  Christiansen  is a former  independent  consulting
organization  that sold  through  our BCS  division.  The  acquisition  has been
accounted for as a purchase and goodwill will be amortized over twenty years.

   In addition to the purchase  price,  $167,000 cash and 171,632  shares of our
common stock are issuable to the former  principals of Christiansen & Associates
on the  attainment of stipulated  financial  objectives.  These  payments,  when
earned,  will be accounted for as additional purchase price to be amortized over
the remainder of the original twenty year period.

The Watson Company

   On  February  1, 2000,  we  acquired  the assets of The  Watson  Company  for
$328,000,  cash and expenses,  as an expansion of the Banking Practice division.
The acquisition has been accounted for as a purchase and the goodwill  amortized
over twenty years.

   Upon reaching certain stipulated  financial goals, former shareholders of The
Watson Company will earn the right to receive up to $900,000 of our common stock
based on market values at the time of achievement.  These payments, when earned,
will be accounted  for as  additional  purchase  price to be amortized  over the
remainder of the original twenty-year period.

Other Developments

Private Placement

   On September  11,  2000,  we sold  1,888,887  shares of our common stock in a
registered  private  placement to a group of  unaffiliated  investors  for $25.1
million,  net of expenses.  The funds were used to complete the CRG  acquisition
and  retire  debt.  The  shares  have  been  registered  for  sale if any of the
investors wish to do so.

Tax Enforcement Policy

   Last  year we had  reported  that  the Tax  Court  had  found in favor of the
Internal Revenue Service in their efforts to disallow an interest deduction by a
company having purchased an executive benefit program funded by a life insurance
product known as leveraged  COLI.  Since then, the IRS has continued to litigate
the matter with other  companies and has prevailed on three more cases.  We have
not offered leveraged COLI in our product offerings since 1995. Consequently, we
do not expect any adverse  effects on our future new  business  revenue  stream.
However, because of the varied facts and circumstances surrounding each case, it
is  impossible  to determine  the effects of any case on a client's  decision to
continue  or  surrender  any  existing  policy.  Because  of the number of other
variables,  including adverse tax implications resulting from a surrender of the
insurance  contracts,  it is impossible to predict the ultimate effect,  if any,
this could have on our future renewal revenues.

   In January 2001,  the Treasury  Department and the Internal  Revenue  Service
served  notice on  taxpayers  of their  intent to  consider  taxing  the  equity
increase  in what are  known  as  "equity  split  dollar"  arrangements,  to the
individual  beneficiary  of the coverage.  Heretofore,  the  individual  did not
sustain a tax liability until the policy was closed and the equity  distributed.
The  implementation  of this notice may have a negative impact on our ability to
market  new  equity  split  dollar  arrangements  and could  potentially  affect
existing split dollar arrangements.

Earnings Guidance

   Since our  initial  public  offering  on August 19,  1998,  our  Company  has
increased in both size and  complexity  resulting  from both internal  growth as
well  as   acquisitions.   Assisting  the  reader  in  assessing  our  financial
performance and preparing statements enhance that understanding, has always been
one of our  goals.  In  furtherance  of this  goal,  we are  including  earnings
guidance in the form of a projection with this report.

                                        2001 Quarter Ending
                                                                      Full Year
                         March 31    June 30   September 30 December 31   2001
                        ---------- ----------  ------------------------------
Revenue
 First Year...........  $   29,100 $   24,200   $  25,700  $   38,500 $  117,500
 Renewal and Fees.....      28,000     18,100      17,900      24,300     88,300
                        ---------- ----------   ---------  ---------- ----------
         Total........      57,100     42,300      43,600      62,800    205,800
                        ---------- ----------   ---------  ---------- ----------
Gross profit..........      37,200     28,400      29,600      42,700    137,900
                        ---------- ----------   ---------  ---------- ----------
Earnings Before Interest,
Taxes and Amortization..    12,200      4,500       5,400      18,500     40,600
                        ---------- ----------   ---------  ---------- ----------

Net Income............. $    5,300 $      600   $   1,200  $    9,500 $   16,600
                        ========== ==========   =========  ========== ==========
Diluted Shares
Outstanding............ 13,034,000 13,218,000  13,325,000  13,401,000 13,244,000
Diluted Earnings Per
share.................. $     0.41 $     0.05   $    0.09  $     0.71 $     1.25
Contributions by
Division
  Revenue
     Corporate......... $   22,300 $   16,500   $  17,000  $   24,500 $   80,300
     Banking...........     24,500     18,100      18,700      27,000     88,300
     HealthCare........      6,300      4,700       4,800       6,900     22,700
     Compensation            4,000      3,000       3,100       4,400     14,500
                        ---------- ----------   ---------  ---------- ----------
Consulting.............
          Total........ $   57,100 $   42,300   $  43,600  $   62,800 $  205,800
                        ========== ==========   =========  ========== ==========

Earnings Before Interest,
Taxes and Amortization
     Corporate......... $    4,000 $    1,500   $   1,800  $    6,100 $   13,400
     Banking...........      8,700      3,200       3,800      13,100     28,800
     HealthCare........        600        200         300         900      2,000
     Compensation            1,700        600         800       2,600      5,700
Consulting.............
     Holding Company...    (2,800)    (1,000)     (1,300)     (4,200)    (9,300)
                        ---------- ----------   ---------  ---------- ----------
                        $   12,200 $    4,500   $   5,400  $   18,500 $   40,600
                        ========== ==========   =========  ========== ==========

   All of the data in this  schedule,  constitutes  forward-looking  statements.
They are based on the beliefs of management and information  currently available
and they are not a guarantee of future performance.  Actual results could differ
materially  from those shown in the  forward-looking  statement as a result of a
number  of  factors,  such as  changes  in tax  legislation,  dependence  on key
consultants,  persistency of existing business,  credit risk, acquisition risks,
competitive  factors  and  pricing  pressure,  dependence  on certain  insurance
companies,  changes  in legal  and  regulatory  requirements,  general  economic
conditions and other factors discussed under the caption "Risk Factors".

Revenue Sources and Recognition

   Our operating units derive their revenue primarily from:

   o  commissions paid by the insurance companies that underwrite the policies
      underlying the various benefit programs;

   o program design and administrative service fees paid by clients; and

   o executive compensation and benefit consulting fees.

   Our commission revenue is usually long term and recurring,  is typically paid
annually  and  extends  for a  period  of ten  years  or more  after  the  sale.
Commissions  paid by  insurance  companies  vary by policy  and by  program  and
usually represent a percentage of the premium or the cash surrender value of the
insurance policies underlying our program.

   o  First Year  Revenue.  First year  revenue  is derived  from two  principal
      sources;  (a) the  commission we earn when the client first  purchases the
      policies  underlying the program.  It is the financial result of our sales
      efforts.  First year revenue is recognized at the time the  application is
      substantially completed, the client is contractually committed to purchase
      the  insurance  policies and the  premiums are paid by the client,  to the
      insurance  company;  and (b) fees for the  services we perform in advising
      our clients on their executive compensation programs. These fees are based
      on a rate per hour arrangement and are earned when the service is rendered
      and billed to the client.

   o  Renewal  Commission  Revenue.  Renewal revenue is the commission we earned
      based on the premiums on the policies  underlying the benefit  programs we
      have sold in prior periods. Renewal revenue is recognized on the date that
      the renewal premium is due or paid to the insurance  company  depending on
      the type of  policy.  Renewal  revenue  in  future  periods,  which is not
      recorded on our balance  sheet,  is  estimated  to be  approximately  $297
      million over the next five years. However, renewal revenue can be affected
      by policy surrenders or exchanges, material contract changes, asset growth
      and case mortality rates.  Over the last five years, we have experienced a
      persistency rate of approximately 95% of the inforce insurance  underlying
      our programs. However, we can give no assurances that our persistency rate
      will  remain at this  level.  We  intend  to do all we can to  retain  our
      clients, service their accounts and sustain our persistency.

   o Other Revenue.  Other revenue consists of several sources of revenue
     associated with our operations, including:

   o  Various  consulting  fees we may charge incident to the studies we perform
      in the development of a specific benefit program;

   o Fees we charge our clients for the administration of their benefit program.

   Both of these fees are  recorded as revenue as they are earned in  accordance
with the governing agreement.

Quarterly Results

   The following table presents a summary of key revenue and expense  statistics
for the most recent eight calendar quarters. This information is not necessarily
indicative of results for any full year or for any subsequent period.

   Our operating results can fluctuate considerably, especially when compared on
a consecutive  quarterly  basis. We can experience large increases in revenue in
the fourth  quarter and  operating  results may be affected by a number of other
factors, including:

   o new or enhanced programs and services by us or our competitors  and client
     acceptance or rejection of these programs;

   o program development expenses;

   o competitive, legislative and regulatory changes; and

   o general economic conditions.

<TABLE>
<S>                      <C>       <C>    <C>        <C>     <C>       <C>      <C>      <C>

                       Mar.      June     Sept.     Dec.     Mar.     June      Sept.    Dec.
                       1999      1999     1999      1999     2000     2000      2000     2000
                     --------  -------- --------  -------- -------- --------  -------- ------
Revenue............  $24,057   $29,714  $25,655   $41,334  $31,147  $24,364   $34,645  $57,457
  % of annual......     19.9%     24.6%    21.2%     34.2%    21.1%    16.5%     23.5%    38.9%
Gross profit.......    9,874    16,681   15,199    25,898   20,263   16,336    22,888   37,322
  Ratio............     41.0%     56.1%    59.2%     62.7%    65.1%    67.0%     66.1%    65.0%
Operating expenses.    6,255    12,202   11,332    15,364   15,013   14,114    17,875   21,705
Amortization.......      620     1,152    1,237     1,361    1,335    1,329     1,933    2,540
Operating income...    2,999     3,327    2,630     9,173    3,915      893     3,080   13,076
  % of revenue.....     12.5%     11.2%    10.3%     22.2%    12.6%     3.7%      8.9%    22.8%
  % of gross profit     30.4%     19.9%    17.3%     35.4%    19.3%     5.5%     13.5%    35.0%
Non-operating income                                                                     1,001
Interest  expense --     496       918      790     1,015      851      847     1,407    1,587
net................
Income taxes.......    1,035       970      804     3,270    1,273     (113)      514    4,151
Net income.........  $ 1,468   $ 1,439  $ 1,036   $ 4,888  $ 1,791  $   159   $ 1,159  $ 8,339
Per  diluted  common $   0.17  $   0.16 $   0.11  $   0.50 $   0.18 $   0.02  $   0.11 $   0.65
share..............

</TABLE>

   Many of these factors are beyond our control. Sales cycles often take between
twelve to  eighteen  months,  with first year  revenue  coming  from a few large
cases. Our revenue is thus difficult to forecast,  and we believe that comparing
our consecutive  quarterly results of operations is not necessarily  meaningful,
nor does it indicate what results we will achieve for any subsequent period.

Results of Operations -- Combined

                                  Years Ended December 31,          % Change
                             ----------------------------------  --------------
                                 2000        1999        1998      00/99  99/98
                             -----------  ---------- ----------- ------- ------
Total revenue..............  $  147,613   $ 120,760  $  74,766      22.2   61.5
Commissions and fees expense    (50,804)    (53,108)   (46,111)     (4.3)  15.2
Gross profit...............      96,809      67,652     28,655      43.1  136.1
          % of total revenue       65.6%        56.0%      38.3%
General and administrative
  expenses.................      68,189      45,153     19,616      51.0  130.2
          % of total revenue       46.2%        37.4%      26.2%
Operating income, excluding
 amortization, and non-recurring
  expenses.................      28,620      22,499      9,039      27.2  148.9
          % of total revenue       19.4%        18.6%      12.1%
Interest-- net.............      (4,692)     (3,219)    (2,601)     45.8   23.8
          % of total revenue        3.2%         2.7%       3.5%
Income taxes...............       8,064       7,866     12,953
          Effective tax rate       33.7%        40.8%     201.2%    (2.5) (39.3)
Income  before  amortization
 and non-recurring   expenses
 and income.................     15,864      11,414     (6,515)     38.9   nmf
          % of total revenue       10.7%         9.5%      (8.7)%
Amortization,  non-recurring
expenses and  non-recurring
income--net of taxes........      4,416       2,583     (6,106)     70.9   nmf

Net income (loss)..........  $   11,448   $   8,831  $    (411)     29.6   nmf
          % of total revenue        7.8%         7.3%      (0.5)%
Per common share
 Basic
  Income before amortization
   and non-recurring items...$     1.48  $     1.26 $    (1.30)     17.4   nmf
  Amortization and non-recurring
   items.................... $     0.41  $     0.29 $    (1.22)     44.1   nmf
  Net income...............  $     1.07  $     0.97 $    (0.08)      9.5   nmf
  Weighted average shares...  10,744,719   9,077,775  5,006,009     18.4   nmf
 Diluted
  Income before amortization
   and non-recurring items.. $     1.46  $     1.22 $    (1.30)     19.1   nmf
  Amortization and non-recurring
  items......................$     0.41  $     0.28 $    (1.22)     46.3   nmf
  Net income...............  $     1.05  $     0.95 $    (0.08)     11.2   nmf
  Weighted average shares...  10,880,094   9,328,939  5,006,009     16.6   nmf


   The following analyses depict the results of each of our operating  divisions
on a stand-alone basis. No allocation of corporate overhead or interest has been
made.

Clark/Bardes Consulting -- Compensation Resource Group

                                  Year Ended December 31,
                                                         Variances-
                              Operating Results         Inc. (Dec.)
                        --------------------------- ---------------
                          2000     1999      1998     00/99    99/98
                        -------- --------  -------- -------- -------
Revenue
  First year.........   $31,660  $33,547   $13,379    (5.6)%  150.7%
  Renewal............    46,928   39,981    32,029    17.4%    24.8%
                        -------  -------   -------    ----     ----
          Total......    78,588   73,528    45,408     6.9%    61.9%
Commission expense...    30,486   36,158    26,350    (15.7)%  37.2%
                        -------  -------   -------    -----    ----
Gross profit.........    48,102   37,370    19,058    28.7%    96.1%
          % of revenue     61.2%    50.8%     42.0%   20.4%    21.1%
                        -------  -------   -------    ----     ----
Expenses
  General and
  administrative.......  22,766   15,525    12,924    46.6%    20.1%
          % of revenue     29.0%    21.1%     28.5%   37.2%   (25.8)%
  Amortization of
  intangibles..........   3,339    2,095       323    59.4%   548.6%
          % of revenue     4.2%     2.8%      0.7%   49.1%    300.6%
                        -------  -------   -------    ----     -----
          Total......    26,105   17,620    13,247    48.2%    33.0%
Operating income.....   $21,997  $19,750   $ 5,811    11.4%   239.9%
          % of revenue     28.0%    26.9%     12.8%    4.2%   109.9%

   Formerly our Clark/Bardes  division the division now consists of the original
core   business  as  well  as  the  Schoenke,   Wiedemann  &  Johnson,   Wamberg
Organization,  and Compensation  Resource Group  acquisitions.  The Division was
reorganized  with the  acquisition  of  Compensation  Resource Group and renamed
Clark/ Bardes Consulting -- Compensation Resource Group.

   In  order to  streamline  the  focus of the  division,  the bank  owned  life
insurance  business of this Division will be transferred to the Banking Practice
Division, effective January 1, 2001 and the Clark/Bardes Consulting Compensation
Resource Group Division will concentrate on non-qualified executive compensation
plans.

   Despite  a  disappointing  year for  first  year  revenue,  down 5.6% or $1.9
million  from 1999,  this  Division  still  managed to improve over 1999 by $2.2
million or 11.4% due primarily to a 20.4% increase in the gross profit ratio.

Banking Practice

                                   Year Ended December 31,
                                                        Variances-
                              Operating Results         Inc. (Dec.)
                        --------------------------- ---------------
                          2000     1999      1998     00/99    99/98
                        -------- --------  -------- -------- -------
Revenue
  First year.........   $28,551  $21,614   $23,462    32.1%    (7.9)%
  Renewal............    11,621    9,170     5,896     26.7%   55.5%
                        -------  -------   -------     ----    ----
          Total......    40,172   30,784    29,358    30.5%     4.9%
Commission expense...    17,453   15,057    19,761     15.9%   (23.8)%
                        -------  -------   -------     ----    -----
Gross profit.........    22,719   15,727     9,597    44.5%    63.9%
          % of revenue     56.6%    51.1%     32.7%    10.7%   56.3%
                        -------  -------   -------     ----    ----
Expenses
  General and
  administrative.......  15,293   11,192     4,650    36.6%   140.7%
          % of revenue     38.1%    36.4%     15.8%    4.7%   129.5%
  Amortization of
  intangibles..........   1,232      914       909    34.8%     0.6%
          % of revenue     3.1%     3.0%      3.1%    3.3%    (4.1)%
                        -------  -------   -------     ---     ----
          Total......    16,525   12,106     5,559    36.5%   117.8%
Operating income.....   $ 6,194  $ 3,621   $ 4,038    71.1%   (10.3)%
          % of revenue     15.4%    11.8%     13.8%   31.1%   (14.5)%

     The major component of the Banking Practice  Division is Bank  Compensation
Strategies.  Operating  income was up 71.1% or $2.6 million over 1999 because of
several factors;

   o first year revenue increased 32.1% or $6.9 million

   o renewal revenue was up 26.7% or $2.5 million

   o  gross profit  increased 44.5% or $7.0 million,  to more than offset a $4.4
      million or 36.5% increase in operating expenses.

   The year 1999 was a particularly  difficult year for the banking  division as
operating  expense  increases of $5.9 million offset a $6.2 million gross profit
improvement over 1998.

Healthcare Group


                             Year Ended December 31,
                           Operating Results   Variances-
                            2000       1999   Inc. (Dec.)
  Revenue
    First year.........   $16,870    $12,516     34.8%
    Renewal............     5,269      3,932     34.0%
                          -------    -------     ----
            Total......    22,139     16,448     34.6%
  Commission expense...     2,811      1,893     48.5%
                          -------    -------     ----
  Gross profit.........    19,328     14,555     32.8%
            % of revenue     87.3%      88.5%    (1.3)%
                          -------    -------     ----
  Expenses
    General and
    administrative.......  16,932     12,571     34.7%
            % of revenue     76.5%      76.4%     0.1%
    Amortization of
    intangibles..........   1,795      1,361     31.9%
            % of revenue      8.1%       8.3%    (2.0)%
                          -------    -------     ----
            Total......    18,727     13,932     34.4%
  Operating income.....   $   601    $   623     (3.5)%
            % of revenue      2.7%       3.8%   (28.3)%

   The Healthcare Group is the result of our acquiring  MCG/Healthcare  in April
1999,  consequently,   1999  results  only  reflect  nine  months  of  operating
performance.  On an operating basis,  this Division  continued to experience the
difficulties  of healthcare  providers,  in general.  Until the outlook for this
industry  stabilizes,  we do not  foresee  an  appreciable  improvement  in this
Division's financial performance.

Compensation Consulting

                             Year Ended
                            December 31,
                               2000
    Revenue
      First year.........      $6,027
      Renewal............         --
                               -----
              Total......      6,027
    Commission expense...         --
                               -----
    Gross profit.........      6,027
              % of revenue      100.0%
                               ------
    Expenses
      General and
      administrative.......     4,095
              % of revenue       67.9%
      Amortization of
      intangibles..........       626
              % of revenue       10.4%
                               ------
              Total......       4,721
    Operating income.....      $1,306
              % of revenue       21.7%
                                ------

   Although other  divisions  offer  compensation  consulting in connection with
their benefit plan activities, the acquisition of Pearl Meyer & Partners in June
2000 represented our major  initiative into this vital and logical  extension of
our business.

Results Attributable to Acquisitions

   As an acquirer,  our operating  results are  significantly  influenced by the
contributions of our acquired  businesses.  For reporting purposes,  we consider
the operating  results from any business not appearing in four complete quarters
as being from  acquisitions.  After that, they become part of existing business.
An analysis of our  operating  results,  separating  acquisitions  from existing
business is as follows:

<TABLE>
               <S>                <C>      <C>       <C>                  <C>      <C>       <C>

                                    Twelve Months Ended                     Twelve Months Ended
                                     December 31, 2000                       December 31, 1999
                               Existing AcquisitionCombined            Existing AcquisitionsCombined
       Revenue
         First year........    $68,484    $14,816  $83,300             $55,162    $12,516   $67,678
         Renewal...........     60,135     4,178    64,313              49,223     3,859     53,082
                               -------    ------   -------             -------    ------    -------
                 Total.....    128,619    18,994   147,613             104,385    16,375    120,760
       Commission expense..     44,656     6,148    50,804              57,575    (4,467)    53,108
                               -------    ------   -------             -------    ------    -------
       Gross profit........     83,963    12,846    96,809              46,810    20,842     67,652
       General            and
       administrative           59,594     9,113    68,707              31,324    13,829     45,153
                               -------    ------   -------             -------    ------    -------
         expense...........
       Operating       income
       before                   24,369     3,733    28,102              15,486     7,013     22,499
         amortization......
       Amortization        of    5,373     1,765     7,138               1,907     2,463      4,370
                               -------    ------   -------             -------    ------    -------
       intangibles.........
       Operating income....    $18,996    $1,968   $20,964             $13,579    $4,550    $18,129
                               -------    ------   -------             -------    ------    -------
</TABLE>

   In 2000,  approximately  12.9% of gross revenue and 9.4% of operating  income
came from  acquisitions  while 13.6% of revenue and 25.1% of operating were from
acquisitions  in 1999. We do not attribute a great deal of significance to these
statistics for several reasons:

   o  an acquisition's contribution to operating performance in any given period
      is considerably  dependent on the timing of the transaction;

   o  as stated, an acquisition,  by our definition for this purpose,  is one in
      which it has not yet appeared in four quarters'  operating results. As the
      value of these additions adds to our existing  business base, the relative
      contribution of any subsequent acquisition may diminish; and

   o  acquisitions   have  made,  and  will  continue  to  make,  a  substantial
      contribution  to  our  operating  performance  and  growth,  however,  the
      resources dedicated to our acquisition program could have had an impact on
      the  performance of the existing  business had the  acquisitions  not been
      made.

Corporate General and Administrative Expenses

   In 1999, we established a corporate  executive and  administrative  office in
North Barrington,  Illinois to house the offices of our Chief Executive Officer,
our Chief Operating  Officer and to provide  direction and  coordination for our
financial,  strategic planning and acquisition activities.  This operation began
in mid-year 1999 and total expenses for 1999 were $5.9 million. During 2000, the
total cost of our  Corporate  Headquarters  amounted to $9.1  million  including
$518,000 of reorganization  expenses,  and over $500,000 of expenses relating to
acquisitions  that were not  consummated.  Results  also include the net loss of
$617,000  from the  Insurance  Alliance  Group  acquisition,  which we expect to
eventually  become our  estate  planning  division.  Excluding  this  component,
Corporate overhead would have been $8.5 million for the year 2000.

Non-Recurring Operating Expense

   In 1998, we recognized a $4.8 million expense for the increased  market value
of certain put warrants.  Other than our employee stock option plans,  we do not
have any other convertible securities outstanding.

Non-operating Income

   In the fourth  quarter of 2000,  we received  $1.0 million of life  insurance
proceeds as the result of the death of one of our employees.

Interest Expense -- Net

   Net interest expense was $4.7 million in 2000, a 46.9% increase from the $3.2
million net expense in 1999.  Although we enjoyed a favorable  $17.9  million of
cash flow from  operations and received $25.1 million  proceeds from the sale of
our stock in a private  placement,  our average net borrowings  increased  $21.8
million in 2000, which at today's  interest rates,  accounts for the full amount
of the interest expense increase.

   Borrowing increased to support our acquisition program. During 2000, our cash
outlays for acquisitions  were $59.2 million and $3.5 million for new equipment.
In addition,  on March 12, 2001 we acquired all the assets and business of Rich,
Florin/Solutions,  Inc.  for a cash  payment of $11.3  million  all of which was
borrowed under our line of credit.

Income Taxes

   Income  taxes in 2000 were $5.8  million  or an  effective  tax rate of 33.7%
compared with $6.1 million or an effective tax rate of 40.8% in 1999.

   Tax expense in 2000 was reduced by two non-recurring factors:

   o The receipt of $500,000 of state tax refunds -- a direct  reduction  of our
state income tax expense.

   o  The receipt of $1.0 million of non-taxable  life  insurance  proceeds as a
      result of the death of one of our employees.

   Our  statutory  tax rate is 38%-35% for the federal rate and 4.6% overall for
the states,  which,  when  reduced by the federal  benefit,  is 3%.  There are a
number of factors that  influence our tax rates,  the most important of which is
the effect of non-deductible  amortization arising from our acquisition program.
While we make every  effort to assure  that our tax expense is the lowest we can
legally incur, we can give no assurance that our overall  effective tax rate can
be held to 38%.

Liquidity and Capital Resources

Selected Measures of Liquidity and Capital Resources.

                                     2000     1999     1998
                                   -------- -------- ------
  Cash and cash equivalents.....   $7,598   $4,832   $12,102
  Working capital...............   $(2,317) $(1,821) $ 7,155
  Current ratio-- to one........       .95      .93      1.55
  Shareholders'  equity per common $  8.88  $  6.47  $   3.62
  share(1)......................
  Debt to total capitalization(2)     36.5%    40.7%    49.5%
----------

(1) total stockholders' equity divided by actual shares outstanding at year end
    excluding shares on option

(2) current debt plus long term debt divided by current debt plus long term debt
    plus stockholders' equity

   In addition to our recognized  balance sheet assets and liabilities,  we have
an on going renewal revenue  stream,  estimated to be $636 million over the next
ten years.  Discounting these renewals to net present value,  adjusted for a 95%
persistency  rate,  at the U.S.  Treasury ten year note yield was as follows for
the last three years:

                                             2000  $457 million
                                             1999  $312 million
                                             1998  $211 million

   Our balance sheet currently  reflects $86.0 million of renewals,  in the form
of  intangible  assets  attributed  to the net present  value of  renewals  from
acquired companies purchased through acquisitions. Other than these intangibles,
renewals are not reflected on our balance sheet.

   As a financial  company with strong  operating cash flow, we have little need
to  retain  substantial  cash  balances.  We use the  net  cash  from  operating
activities  to pay down existing  debt,  fund capital  expenditures  and finance
small  acquisitions.  We expect that large future  acquisitions will be financed
primarily through externally available funds. However, we can offer no assurance
that such funds will be available and, if so, on terms acceptable to us.

                                                 Year Ended December 31,
                                                    2000       1999      Change
                           Cash flows from (used in):
                             Operations........    $17,918    $12,552    $5,366
                             Investing.........   (62,655)   (40,282)   (22,373)
                             Financing.........    47,503     20,460     27,043

Cash Flows from Operating Activities

   Our cash flow from  operations for the twelve months ended December 31, 2000,
improved significantly over that of the comparable  twelve-month period in 1999.
The components were:

                                     Year Ended
                                    December 31,
                                                            Increase/(Decrease)
                                    2000     1999             in Cash flow
                                  -------- --------           ------------
 Net income  (loss) plus non-cash  $19,860  $14,016             $5,844
 expenses......................
 Changes in operating assets and
   liabilities.................    (1,942)  (1,464)               (478)
                                   ------   ------              ------
 Cash   flow    from    operating  $17,918  $12,552             $5,366
 activities....................

   Our working  capital  ratio at December 31, 2000 was .95 to 1 compared to the
ratio of .93 to 1 at December 31, 1999. As an acquiring  company,  a significant
amount of borrowing is done to finance our acquisitions. Because of this and the
strong cash generated by  operations,  management has determined to dedicate all
excess cash to the reduction of bank borrowings and, as a result,  only cash for
reasonably  foreseeable needs and expenses is retained.  It should be noted that
our loan  agreements do not impose a working  capital  covenant or  restriction.
This is because of the value of our renewal revenue.

   The following table represents the estimated gross renewal revenue associated
with our inforce business owned life insurance policies as of December 31, 2000.
The  projected  gross  revenue is not  adjusted  for  mortality,  lapse or other
factors that may impair realization. We cannot assure you that commissions under
these policies will be received. These projected gross revenues are based on the
beliefs and assumptions of management and are not necessarily  indicative of the
revenue that may actually be achieved in the future.

                    Clark/ Bardes
                    Consulting
                   Compensation   Banking  HealthCare
                   Resource Group Practice   Group    Total
                   ------------------------------- -------
  2001...........     $71,124    $11,251   $6,084  $ 88,459
  2002...........      68,287      8,546    6,016    82,849
  2003...........      60,917      5,085    5,944    71,946
  2004...........      52,071      5,167    5,810    63,048
  2005...........      50,226      5,206    5,436    60,868
  2006...........      47,418      5,259    5,155    57,832
  2007...........      44,389      5,318    4,901    54,608
  2008...........      42,637      5,368    4,629    52,634
  2009...........      42,744      5,406    4,141    52,291
  2010...........      42,939      5,349    3,605    51,893
                      -------    -------   ------  --------
            Total     $522,752   $61,955   $51,721 $636,428
  December     31,    $322,450   $49,390   $65,406 $437,246
  1999...........

Cash used in Investing Activities

   Acquisitions  accounted  for  $59.2  million  of the  $62.7  million  used in
investing activities. The balance was comprised of $3.5 million for purchases of
equipment.

   Cash spending for acquisitions included:

                                    The   Wamberg   Organization $  4.8
                                    earn out..................
                                    Insurance Alliances Group.      2.9
                                    Pearl Meyer & Partners....     22.0
                                    Compensation Resource Group    25.1
                                    Forrest, Wagner & Associates    3.5
                                    All Others................       .9
                                                                 ------
                                                                 $ 59.2

   Because of the income tax  structure of the  companies we seek to acquire,  a
substantial  amount of the purchase price is paid in cash.  This is also due, in
part,  to our desire to avoid  diluting  our  existing  shareholders.  We expect
acquisitions to continue and be financed  primarily from available  credit lines
and possible additional equity. However, we can offer no assurances such will be
the case.

Cash Flows from Financing Activities

   On December 28, 1999, we expanded the credit  facility  negotiated in January
1999 to $100  million  with  the  same  group of bank  lenders.  The new  credit
facility  provided for a revolving  credit line and a term loan.  The  revolving
credit portion terminates on December 31, 2002 and it converts to a term loan at
the end of each year.  The term loan is payable  quarterly  at the rate of 5% of
the year-end balance and $1,250,000 per quarter so the term portion is repaid by
December 31, 2004.

   On August 23,  2000,  we expanded  the credit  facility  from $100 million to
$114.3  million and added  another bank to the group of lenders.  The  principal
changes in the structure of the facility are the increase of the working capital
limit from $5 million to $10 million and an expansion of the borrowing base. The
credit facility contains restrictive  covenants requiring mandatory  prepayments
under  certain  conditions,  financial  reporting and  compliance  certificates,
maintenance  of financial  ratios,  restrictions  on guarantees  and  additional
indebtedness,  limitations  on mergers  and  acquisitions,  prohibition  of cash
dividends,  limitation  on  investments,  loans,  and  advances,  and changes in
control.

   The restrictive covenants under the loan agreement provide for:

   o the maintenance of a minimum ratio of fixed charges;

   o a maximum allowable leverage ratio;

   o a minimum amount of stockholders' equity; and,

   o a maximum ratio of debt to capitalization.

   We were in compliance with all restrictive covenants as of December 31, 2000.

   In an effort to reduce interest costs, all cash beyond reasonably foreseeable
needs is used to pay down debt. In September, we sold 1,888,887 shares of common
stock to for $25.1 million in a private placement.  Approximately  $22.0 million
was used to pay the debt on our acquisition credit facility.

   Depending upon  adherence to the criteria in our loan  agreements at the time
of draw down, we had $57.8 million  available under our credit lines at December
31, 2000.

   We believe that our net cash flow from  operations  will  continue to provide
sufficient funds to service our debt obligations. We estimate renewal revenue in
future  periods,  which is not  reflected  on our balance  sheet,  to  represent
approximately  $367 million over the next five years.  However,  renewal revenue
can be adversely  affected by policy surrenders or exchanges,  material contract
changes, asset growth and case mortality rates.

   As  our  business  grows,  our  working  capital  and  capital   expenditures
requirements will also continue to increase. There can be no assurance, that the
net cash  flows  from  operations  will be  sufficient  to meet our  anticipated
requirements  or that we will not require  additional  debt or equity  financing
within  this time  frame.  We may  continue  to issue  stock to  finance  future
acquisitions.

Market Risk

   Our primary  market risk exposure is to changes in interest  rates related to
of  our  line  of  credit.  At  December  31,  2000,  we had  total  outstanding
indebtedness  of  $64.6  million,   or  approximately   36.5%  of  total  market
capitalization.  Our  interest  rate risk  objective  is to limit the  impact of
interest  rate  fluctuations  on  earnings  and cash flows and to lower  overall
borrowing  costs.  To  achieve  this  objective,   we  manage  our  exposure  to
fluctuations  in interest rates for borrowings  through the use of interest rate
swaps to mitigate  interest rate risk and to effectively  lock the interest rate
on a portion of our variable debt.

   Interest  on  borrowings  under  our  line of  credit  is based on one of two
factors, at our option, at the time the funds are borrowed:

   o  U.S. prime rate,  published in the Wall Street Journal, which will float,
      as adjusted, for as long as this segment of borrowing is outstanding; or,

   o  London InterBank offered rate, which is based on the published rate at the
      time of the  borrowing  and remains fixed at that rate for as long as this
      segment, or any part of it, is outstanding.

   We do not enter into derivative or interest rate transactions for speculative
purposes. Approximately 12.5% of our outstanding debt was subject to fixed rates
with a weighted  average of 10.0% at December 31, 2000. An  additional  79.2% of
our outstanding debt at December 31, 2000, was effectively locked at an interest
rate of 6.5% plus a spread based on our leverage ratio, through an interest rate
swap  agreement  for a notional  amount of $44.8  million.  We regularly  review
interest  rate exposure on  outstanding  borrowings in an effort to minimize the
risk of interest rate fluctuations.

   The following table provides  information about our debt obligations that are
sensitive to changes in interest rates. The table presents  principal cash flows
and related weighted average interest rates by expected  maturity dates totaling
$64.6 million.

<TABLE>
<S>                   <C>       <C>      <C>     <C>       <C>       <C>      <C>      <C>

                                                    Expected Maturity Date
                     2001      2002     2003     2004      2005   Thereafter Total  Fair Value
                   --------  -------- -------- --------  -------- ----------------- ----------
Liabilities
Long term debt
  Fixed rate.....   $   948   $ 1,046  $ 1,154  $ 1,274    $1,407   $2,244   $8,073   $ 8,073
  Average interest
    rate.........     10.0%     10.0%    10.0%    10.0%     10.0%     10.0%
  Variable rate:
  U.S. Prime.....   $ 1,400   $ 1,400  $ 1,400  $ 1,400    $1,400   $   --   $7,000   $ 7,000
  London Interbank
    Offered......   $14,900   $12,920  $11,336  $10,069    $ 275    $   --   $49,500  $49,500
  Average interest
    rate.........      8.9%      8.9%     8.9%     8.9%      8.9%      0.0%
Interest Rate
  Derivatives
Interest rate swaps
  Variable to fixed $36,500   $26,500  $16,500  $ 6,500    $1,000   $   --
  Notional amount
  Average pay rate     6.29%     6.29%    6.29%    6.29%    6.29%     0.00%
  Average  receive     6.32%     6.37%    6.46%    6.84%    7.24%
rate.............
</TABLE>

   The table  incorporates  only those  exposures  that exist as of December 31,
2000,  and does not consider  exposures or positions that could arise after that
date. In addition,  because firm  commitments  are not  represented in the table
above,  the information  presented  therein has limited  predictive  value. As a
result,  our  ultimate  realized  gain or loss with  respect  to  interest  rate
fluctuations  would depend on the exposures  that arise during  future  periods,
prevailing  interest rates,  and our hedging  strategies at that time.  There is
inherent  rollover risk for borrowings as they mature and are renewed at current
market rates. The extent of this risk is not quantifiable or predictable because
of the variability of future interest rates and our financing requirements.

Inflation

   Inflation has not had a material effect on our results of operations. Certain
of our expenses, such as compensation, benefits and capital equipment costs, are
subject to normal inflationary  pressures.  However, the majority of our service
and administrative  agreements with clients,  which generate fee income,  have a
cost of living adjustment tied to the consumer price index.  Management believes
that  future  inflationary  pressures  will  continue  to be offset,  because as
inflation increases,  investment returns will also increase, resulting in higher
cash values and higher commission rates.

Impact of Year 2000

   In late 1999,  we completed our  remediation  and testing of systems for year
2000 compliance.  As a result of past planning and  implementation  efforts,  we
experienced  no  significant   disruptions  in  mission   critical   information
technology and non-information  technology systems, and we believe those systems
successfully  responded to the year 2000 date change. We expensed  approximately
$400,000  during 1999 in connection  with  remediating  our systems.  We did not
experience any material  problems  resulting from year 2000 issues,  either with
products, internal systems, or the products and services of third parties.

Recent Accounting Pronouncements

Securities and Exchange  Commission Staff Accounting Bulletin No. 101 -- Revenue
Recognition in Financial Statements

   SAB No. 101 became effective in 2000. SAB 101 gives the SEC's guidance on the
applicability of generally accepted accounting principles to revenue recognition
on financial  statements.  We have been in  compliance  with SAB No. 101 and its
adoption did not to have any impact on our net income or stockholders' equity.

FASB Accounting Standard -- Derivatives and Hedging Activities

   As of January 1, 2001, CBH will adopt  Financial  Accounting  Standards Board
Statement No. 133, Accounting for Derivative  Instruments and Hedging Activities
(Statement  133)  which was  issued in June 1998  together  with its  amendments
Statements 137, Accounting for Derivative  Instruments and Hedging Activities --
Deferral of the Effective Date of FASB Statement No. 133 and 138, Accounting for
Derivative  Instruments and Certain Hedging  Activities (issued in June 1999 and
June 2000, respectively are collectively referred to as Statement 133).

   Because of our minimal use of  derivatives,  management  does not  anticipate
that the adoption of the new  Statement  will have a  significant  effect on our
earnings or financial  position.  The Statement will require us to recognize all
derivatives on the balance sheet at fair value.  Derivatives that are not hedges
must be adjusted to fair value  through  income.  If the  derivative is a hedge,
depending on the nature of the hedge,  changes in the fair value of  derivatives
will  either be offset  against  the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings  or  recognized  in  other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a derivative's  change in fair value will be immediately
recognized in earnings.

   Prior to January 1,  2001,  we also used  interest  rate swap  contracts  for
hedging  purposes.  The net amount  paid or  received  and net  amounts  accrued
through the end of the accounting period were included in interest expense.

                                  RISK FACTORS

Risks Related to Our Industry

   The  risks  described  below  are not the  only  risks  we  face.  Any of the
following risks could have a material adverse effect on our business,  financial
condition and operating results.  Additional risks and uncertainties of which we
are unaware or currently  believe may be immaterial may also impair our business
operations.  You should  carefully  consider  these risks in reviewing this Form
10-K, and these risks qualify, in their entirety, each forward looking statement
herein.

Unfavorable federal tax legislation.

   Many of the compensation and benefit programs we design and implement for our
clients are funded by specifically  designed life insurance  products.  The life
insurance products  underlying these compensation and benefit programs currently
offer a number of tax advantages, such as:

   Previous  administrations  have sought to reduce the income tax advantages of
life insurance  funded benefit plans.  Although we believe such proposals do not
have  widespread  support in  Congress,  we cannot  predict  the effect that any
amendments will have on our future revenue.

   If any changes in federal tax laws reduce or eliminate these advantages, many
policies could be surrendered.  As a result, we could lose a substantial  amount
of renewal income and our ability to write new business could be curtailed.

Federal and state regulations.

   State governments extensively regulate life insurance activities. We sell our
insurance  products  in all  50  states  through  licensed  insurance  producers
operating as independent  agents as well as Company owned  offices.  States have
broad powers over licensing, payments of commissions, business practices, policy
forms  and  premium  rates.  Insurance  laws  related  to  licensing,  marketing
activities  and the receipt of  commissions  vary from state to state.  While we
have not encountered  regulatory problems in the past, we cannot assure you that
we and the  consultants  through whom we sell, will always be in compliance with
all applicable regulatory requirements of each state.

   While the federal government does not directly regulate the marketing of most
insurance  products,  some products,  such as variable life  insurance,  must be
registered  under the federal  securities  laws.  As a result,  our  consultants
selling these  products must be registered  representatives  of a  broker-dealer
registered with the National  Association of Securities  Dealers.  While we have
not had any regulatory problems in the past related to these products, we cannot
be sure that we or our  consultants  will not have  regulatory  problems  in the
future.

U.S. Treasury and Internal Revenue Service policies

   During the past two years, the Internal Revenue Service ("IRS") has begun two
major enforcement initiatives:

   (1) To disallow the interest  deduction on certain  leveraged  COLI  programs
       sold prior to 1995.  To our  knowledge,  the IRS has  prevailed  on every
       issue it has litigated.

   While we stopped  selling  leveraged  COLI products  since 1995 and we do not
   expect any adverse  impact on our revenue,  it is impossible to determine the
   impact of this  enforcement  initiated or a client's  decision to continue or
   surrender an existing policy.

   (2) Under a  recently  issued  Treasury  Notice,  the  IRS  and the  Treasury
       Department  are  advising  companies  of their  intent to recant  the tax
       treatment accorded so called "equity split dollar  arrangements"  wherein
       the  individual  insured  would be taxed  on the  increase  in his or her
       equity in the underlying policy.

   We are working with a number of industry  groups in an effort to mitigate the
   impact of this Treasury Notice. It is impossible to assess the impact of this
   enforcement initiated on our business, at this time.

A small number of insurance companies.

   We depend heavily on a select group of insurance  companies to underwrite the
insurance  policies  underlying  the  programs  we sell.  During  2000,  20 life
insurance  companies  underwrote  substantially  all of the  insurance  policies
underlying  our  clients'  programs.  Seven of  these  companies  accounted  for
approximately 53.6% of 1999 first year commission revenue and 66.3% of our first
year  commission  revenue for the year ended  December  31,  2000.  While we are
confident they will, we cannot be sure that these relationships will continue or
if we will be able to develop relationships with other insurance companies.

Changes in the market and the economy.

   General economic  conditions and market factors,  such as changes in interest
rates and stock prices,  affect our  commission and fee income and the extent to
which clients keep a policy inforce year after year.  Interest rate fluctuations
can have a  significant  effect on the sale and  profitability  of many employee
benefit  programs whether they are financed by life insurance or other financial
instruments.  For example,  if interest  rates rise,  competing  products  could
become  more  attractive  to  potential  purchasers  of the  programs we market.
Further,  a prolonged  decrease in stock prices can have a significant effect on
the sale and  profitability  of our clients'  programs  that are linked to stock
market  indices.  We  cannot  be sure  that we  will  be  able to  compete  with
alternative   products  if  these  market  forces  make  our  clients'  programs
unattractive.

Risks Related to Our Company

Competition.

   Our  business  is highly  competitive.  We  compete  with  consulting  firms,
insurance  agents,  brokers,  third party  administrators,  producer  groups and
insurance  companies.  A number of our competitors offer attractive  alternative
programs. The direct competitors of our Clark/Bardes  Consulting -- Compensation
Resource Group division include;  Management  Compensation Group, Newport Group,
TBG Financial, and The Todd Organization.

   The  competitors  of  our  Banking  Practice  division  include  The  Benefit
Marketing Group; Harris,  Crouch,  Miller,  Scott, Long and Mann; and individual
insurance agents where community banks are located.  Additionally, the community
banking  industry is  constantly  consolidating,  which may reduce the number of
potential  bank  clients  for our  division.  The  primary  competition  for our
Healthcare  Group  division  is  Hewitt  Associates,   Towers,   Perrin;  Mercer
Consulting Group and Hay Group Inc.

   Although Pearl Meyer & Partners is one of the best  established  firms in the
high level executive compensation consulting market, there are a number of firms
that offer this service.

   We also face  competition  from  either  from  large,  diversified  financial
services  firms willing and able to expend the resources to gain market share or
from  large  direct   competitors  that  choose  to  pursue  an  acquisition  or
consolidation strategy similar to ours.

Key consultants.

   Before  our  acquisition  of The  Wamberg  Organization,  it was our  largest
independent consultant organization and accounted for approximately 17.5% of our
total  revenue in 1998 and 15.2% of our total revenue for the eight month period
ended August 31, 1999.  The offices  operated by our three  largest  consultants
collectively  accounted for approximately 22.3% of our total revenue in 1999 and
10.8% of our  total  revenue  for  2000.  We enter  agency  agreements  with our
consultants  in which they agree not to compete with us for a period of time and
after  their  relationship  with us  terminates.  From  time to time,  we or our
consultants  have  terminated  relationships.  We cannot be sure if a consultant
relationship  will be  terminated  in the  future.  We  cannot  be sure that the
non-competition provisions in the agreements will be honored or enforceable.

Policy persistency.

   We derive a  substantial  portion of our  revenue  from  business  owned life
insurance   and  other   financial   instruments   that  underlie  our  clients'
compensation   and  benefit   programs  and  are  maintained  year  after  year.
Persistency  is the extent to which the premium and commission on a given policy
repeat year after year. High persistency  rates are especially  important to our
Clark/Bardes  Consulting --  Compensation  Resource  Group and Banking  Practice
divisions  since we derive a  substantial  portion of our revenue from these two
divisions in the form of renewal  commissions and fees. If a business  purchaser
chooses to let a policy lapse,  we will stop  receiving any renewal  commissions
and fees. In the past, we have had high persistency  rates, but we cannot assure
you that we will continue to have them in the future.

Key personnel.

   Our performance  depends largely on the performance of our executive officers
and key  employees.  It is  important  to us to keep and  motivate  high quality
personnel, especially our management, consultants and program development teams.
The loss of the services of any of our key employees particularly W. T. Wamberg,
chairman  of our board of  directors  and chief  executive  officer,  William L.
MacDonald,  president of Clark/Bardes Consulting -- Compensation Resource Group,
Richard  C.  Chapman,  president  of  Banking  Practice,  Donald  C.  Wegmiller,
president  of  Healthcare  Group and Pearl  Meyer,  president  of Pearl  Meyer &
Partners  division,  could  have a  material  adverse  effect  on our  business,
financial  condition and operating results. We cannot assure you that we will be
successful in retaining our key personnel.

Our acquisition strategy.

   Since September 1997, we have completed fourteen  acquisitions.  At any point
in time, we may also be considering several other potential acquisitions. Future
acquisitions may require substantial  expenditures that will be financed through
cash from operations,  bank debt as well as future debt and/or equity offerings.
We cannot  assure you that funds will be available  through the capital  markets
and, if so, on terms acceptable to us.

   Acquisitions involve numerous risks, including:

   o  the diversion of our  management's  time and attention to the negotiation
      of the acquisition and to the assimilation of the businesses acquired;

   o the possible need to modify financial and other systems and add management
     resources;

   o the potential liabilities of the acquired businesses; and,

   o unforeseen difficulties in the acquired operations.

   An  acquisition  may not produce the revenue and profits we expect.  Thus, an
acquisition  that fails to meet our  expectations  could have a material adverse
effect on our business, financial condition and operating results.

Intangible assets.

   When we acquire a company,  we normally acquire little in the way of tangible
assets such as  receivables,  furniture and the like.  Therefore,  virtually the
entire purchase price is allocated to intangible  assets. Two important elements
of our intangible assets affect our cash flow:

   o  the present value of inforce  revenue is the net discounted cash flow form
      the book of business of those  companies  having future renewal revenue at
      the time we acquired them; and

   o  a potential future tax benefit over the next fifteen years.  Approximately
      $141.1  million  of our gross  intangible  assets are  expected  to be tax
      deductible.

   Net intangible  assets arising from our purchased  businesses  consist of the
following:

                                                            2000     1999
                               Present  value of inforce $ 85,962  $59,284
                               revenue.................
                               Goodwill................    78,419   34,440
                               Non-competition                992    1,267
                                                         --------  -------
                               agreements..............
                                                         $165,373  $94,991
                               Total assets............      75.2%    76.1%
                               Stockholders' equity....     146.9%   152.3%

   The amounts  allocated to inforce revenue are determined using the discounted
cash flow of future commission adjusted for expected persistency,  mortality and
associated  costs.  The  balance  of the  excess  purchased  price  over the net
tangible assets is allocated to goodwill.  The inforce revenue is amortized over
its period of duration,  which is normally twenty to thirty years.  Many factors
outside our control  determine the  persistency  of our inforce  business and we
cannot be sure that the value we allocated will ultimately be realized.

   Goodwill  is  being   amortized  over  periods  of  twenty  to  forty  years.
Non-competition  agreements are amortized  over five to ten years,  according to
the terms of the agreements.

   We  have  adopted  Statement  of  Financial   Accounting   Standard  No.  121
"Accounting  for  Impairment  of Long Lived  Assets and Long Lived  Assets To Be
Disposed Of." On an annual  basis,  we review the  components of our  intangible
assets  and  make  appropriate  adjustments  if it  becomes  apparent  that  the
undiscounted  cash flow is less than its unamortized  carrying amount. No growth
rates are used in the  projection  of renewal  revenue  and,  in the  opinion of
management,  projections are consistent in all respects. If any component of the
inforce  revenue  base  should  become  unrealizable  or  accounting  regulatory
agencies impose shorter amortization periods, this could have a material adverse
effect on our business,  financial  condition and operating  results.  We cannot
assure  you that a  component  of the  inforce  revenue  base  will  not  become
unrealizable  or that  accounting  regulatory  bodies  will not  impose  shorter
amortization periods.

Fluctuations in revenues and operating results.

   Our operating results can fluctuate considerably, especially when compared on
a  consecutive  quarterly  basis.  Because  many of our  clients'  programs  are
implemented  late in the year, we can experience  large  increases in both first
year and  renewal  revenue in the fourth  quarter.  Operating  results  are also
affected by a number of other factors, including:

   o new or enhanced programs and services by us or our competitors and client
     acceptance or rejection;

   o program development expenses;

   o timing of significant sales;

   o demand for our administrative services;

   o competitive, legislative and regulatory conditions in our industry; and,

   o general economic conditions.

   Many of these  factors  are  beyond  our  control.  The  sales  cycles of our
programs and services usually last between twelve to eighteen months, with first
year  revenue  often  coming  from a few large  cases and subject to a number of
factors beyond our control.  Our revenue is thus  difficult to forecast,  and we
believe that comparing our  consecutive  quarterly  results of operations is not
necessarily  meaningful,  nor does it indicate  what results we will achieve for
any subsequent period. In our business,  past operating results are not reliable
indicators of future performance.

W.T. Wamberg ownership.

   W.T.  Wamberg,  our Chairman and Chief Executive  Officer,  owns 18.5% of our
outstanding  common  stock.  As a  result,  Mr.  Wamberg  is  able  to  exercise
significant influence over all matters requiring stockholder approval, including
the election of directors and approval of  significant  corporate  transactions.
This concentration of ownership may also have the effect of delaying, preventing
or deterring a change in control of Clark/Bardes  Holdings that may otherwise be
beneficial to you.

Delaware law and our charter documents could prevent an unsolicited takeover.

   Delaware law, as well as provisions of our certificate of  incorporation  and
bylaws, could discourage unsolicited proposals to acquire us, even though such a
proposal may be beneficial to you. These provisions include:

   o  a board of directors  classified  into three classes of directors with the
      directors of each class having staggered, three-year terms;

   o  our Board's authority to issue shares of preferred stock without
      shareholder approval; and

   o  provisions of Delaware law that restrict  many business  combinations  and
      provide that directors  serving on staggered boards of directors,  such as
      ours, may be removed only for cause.

   In addition,  we have adopted a  stockholder  rights plan that could  further
discourage   attempts  to  acquire  control  of  us.  These  provisions  of  our
certificate of  incorporation,  bylaws and Delaware law could discourage  tender
offers or other  transactions  that might  otherwise  result in your receiving a
premium over the market price for our common stock.

Failure to achieve projected operating results.

   In our press release of February 28, 2001,  announcing the operating  results
for the fourth quarter and full year of 2000, we published a quarterly, revenue,
net revenue and earnings per share projection.  This projection was based on our
best and most informed  estimate at the time of its preparation but we can offer
no assurance that it will be achieved.

   Failure to achieve the projected results could have a severely adverse impact
on the market price of our common stock.

Litigation.

   During the past year,  three  lawsuits were filed against us. While we intend
to contest  these  actions and are  confident we will  prevail,  we can offer no
assurance that we will.

   In addition,  while our insurance carriers have acknowledged  coverage in one
of the cases, a loss of this case could damage our business reputation.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Information  required  by this item is  incorporated  by  reference  from the
Liquidity and Capital Resources  section of Item 7. Management's  Discussion and
Analysis of Financial Condition and Results of Operations in pages 46 through 47
of this Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   Our financial statements begin on page F-1 of this Form 10-K.

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

   There has been no change in our independent  accountants  during the past two
fiscal years.  There have been no material  disagreements  with our  independent
accountants  on our  accounting  or financial  reporting  that would require our
independent  accountants  to qualify or disclaim  their report on our  financial
statements, or otherwise require disclosure in this Form 10-K.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   The information  required by Item 10 is hereby incorporated by reference from
our proxy  statement for the 2001 annual meeting of our  stockholders  under the
captions  "Proposal One -- Election of Directors,"  and "Directors and Executive
Officers."

ITEM 11. EXECUTIVE COMPENSATION

   The information  required by Item 11 is hereby incorporated by reference from
our 2001 proxy statement under the caption "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information  required by Item 12 is hereby incorporated by reference from
our 2001  proxy  statement  under the  caption  "Security  Ownership  of Certain
Beneficial Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information  required by Item 13 is hereby incorporated by reference from
our 2001 proxy statement under the caption  "Certain  Relationships  and Related
Transactions."

                                     PART IV

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

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

   (1) Financial Statements

        Report of Independent Auditors

        Consolidated Balance Sheets as of December 31, 2000 and 1999

        Consolidated Statements of Operations for each of the years ended

        December 31, 2000, 1999, and 1998

        Consolidated Statements of Stockholders' Equity for each of
        the years ended December 31, 2000, 1999, and 1998

        Consolidated Statements of Cash Flows for each of the years
        ended December 31, 1999, 1998, and 1997

        Notes to the Consolidated Financial Statements

   (2)  Financial Statement Schedules

         None.


Schedules not listed above have been omitted because they are
not required,  are not  applicable,  are shown in the related
financial  statement  or notes  thereto  or the  amounts  are
immaterial.

   (3)  Exhibits


The  information  required by this Item 14(a)(3) is set forth
in the Exhibit  Index  immediately  following  our  financial
statements. The exhibits listed herein will be furnished upon
written request to "Director of Investor  Relations"  located
at our headquarters and payment of a reasonable fee that will
be  limited to our  reasonable  expense  in  furnishing  such
exhibits.



<PAGE>



                           CLARK/BARDES HOLDINGS, INC.
                                AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS

                                                        Page
            Report of Independent Auditors............   F-2
            Consolidated  Balance  Sheets as of December
            31, 2000 and 1999........................    F-3
            Consolidated  Statements of  Operations  for
            the years ended December 31, 2000,
            1999, and 1998............................   F-4
            Consolidated   Statements  of  Stockholders'
            Equity for the years ended December 31, 2000,
            1999 and 1998............................... F-5
            Consolidated  Statements  of Cash  Flows for
            the years ended December 31, 2000, 1999,
            and 1998...................................  F-6
            Notes to Consolidated Financial Statements   F-7


<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Clark/Bardes Holdings, Inc.

   We have audited the accompanying  consolidated balance sheets of Clark/Bardes
Holdings,  Inc.  and  subsidiaries  as of December  31,  2000 and 1999,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for each of the three years in the period ended  December 31, 2000.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

   In our opinion, the financial statements referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of  Clark/Bardes
Holdings,  Inc.  and  subsidiaries  at  December  31,  2000  and  1999,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.

                                                         ERNST & YOUNG LLP

Dallas, Texas
February 23, 2001


<PAGE>


                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                         December 31,
                                                        2000      1999
                                                     --------- -------
                                                     (dollars in thousands
                                                     except share amounts)
                                       ASSETS

 Current Assets
   Cash and cash equivalents......................    $ 7,598   $ 4,832
   Accounts and notes receivable,  net of allowances
 of $555                                               31,134    18,295
      and $347, respectively......................
   Deposits, advances and prepayments.............      2,809     1,123
   Deferred tax asset.............................      1,861       947
                                                      -------   -------
           Total current assets...................     43,402    25,197
 Intangible Assets-- net
   Present value of in force revenue..............     85,962    59,284
   Goodwill.......................................     78,419    34,440
   Non competition agreements.....................        992     1,267
                                                      -------   -------
                                                      165,373    94,991
 Equipment and Leasehold Improvements-- Net.......      8,376     4,505
 Other Assets.....................................      2,704       831
                                                      -------   -------
           Total assets...........................    $219,855  $125,524
                                                      ========  ========

                        LIABILITIES AND STOCKHOLDERS' EQUITY

 Current Liabilities
   Accounts payable...............................    $10,786   $ 4,100
   Commissions and fees...........................      7,541     3,475
   Income taxes...................................      4,121     4,350
   Accrued liabilities............................     10,123     7,841
   Deferred income................................      1,180        --
   Debt maturing within one year..................     11,968     7,252
                                                      -------   -------
           Total current liabilities..............     45,719    27,018
 Deferred Tax Liability...........................      7,228       665
 Deferred Compensation............................      1,745        --
 Long Term Debt...................................     52,605    35,473
 Stockholders' Equity
   Preferred stock
      Authorized --  1,000,000   shares;   $.01  par
 value, none                                               --        --
       issued.....................................
   Common stock
      Authorized-- 20,000,000 shares; $.01 par value
      Issued and  outstanding -- 12,675,309  in 2000
 and                                                      127        96
       9,629,999 in 1999..........................
   Paid in capital................................     88,810    50,099
   Retained earnings..............................     23,621    12,173
                                                      -------   -------
           Total stockholders' equity.............    112,558    62,368
                                                      -------   -------
           Total   Liabilities   and   Stockholders'  $219,855  $125,524
                                                      ========  ========
 Equity...........................................
 Related  party  balances   included  in  the  above
 accounts                                             $    64   $    20
   Accounts receivable -- officers and directors...
   Accounts receivable-- affiliates...............    $    --   $   461
   Commissions and fees payable...................    $    25   $    26

See accompanying notes to financial statements


<PAGE>


                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                    Year Ended December 31,
                                                 2000        1999         1998
                                             ----------- -----------  --------
                                              (dollars in thousands except share
                                                           amounts)
REVENUES
  Commissions and service fees.............   $ 147,021    $119,158     $ 72,264
  Other....................................         592       1,602        2,502
                                              ---------    --------     --------
                                                147,613     120,760       74,766
Commission and fee expenses................      50,804      53,108       46,111
                                              ---------    --------     --------
Gross profit...............................      96,809      67,652       28,655
                                              ---------    --------     --------
OPERATING EXPENSES
  General and administrative...............      68,189      45,153       19,616
  Amortization of intangibles..............       7,138       4,370        1,232
  Put warrants.............................          --          --        4,800
  Acquisition integration and reorganization        518          --           --
                                              ---------    --------     --------
                                                 75,845      49,523       25,648
                                              ---------    --------     --------
OPERATING INCOME...........................      20,964      18,129        3,007
NON-OPERATING INCOME.......................       1,001          --           --
INTEREST
  Income...................................         278         329          565
  Expense..................................      (4,970)     (3,548)     (3,166)
                                              ---------    --------     --------
                                                 (4,692)     (3,219)     (2,601)
                                              ---------    --------     --------
Income before taxes........................      17,273      14,910          406
Income taxes...............................       5,825       6,079          817
                                              ---------    --------     --------
NET INCOME (LOSS)..........................   $  11,448    $  8,831     $  (411)
                                              =========    ========     ========
BASIC NET INCOME (LOSS) PER COMMON SHARE
Net income (loss)..........................   $     1.07   $    0.97    $ (0.08)
                                              ==========   =========   =========
Weighted average shares....................   10,744,718   9,077,775   5,006,009
                                              ==========   =========   =========
DILUTED NET INCOME (LOSS) PER COMMON SHARE
Net income (loss)..........................   $     1.05   $    0.95    $ (0.08)
                                              ==========   =========   =========
Weighted average shares....................   10,880,093   9,328,939   5,006,009
                                              ==========   =========   =========
Transactions with related parties
  Commissions and service fees.............   $      --    $  1,434     $  1,585
  Commission and fee expenses..............   $      25    $  8,071     $  8,068
  General and administrative expense.......   $     154    $     45     $     --

    See accompanying notes to financial statements


<PAGE>



                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<S>                                   <C>     <C>         <C>     <C>          <C>      <C>           <C>

                                                                    Common Stock
                                     Common Stock                    in Treasury                    Total
                                                        Paid in                       Retained  Stockholders'
                                   Shares    Amount     Capital   Shares     Amount   Earnings  Equity (Deficit)
                                 --------- ---------  -------------------  --------- ---------------------------
                                                 (dollars in thousands except share amounts)
Balance at January 1, 1998....   5,959,140   $5,162         --  (2,737,130)  $(14,031) $3,189      $(5,680)
  Decrease  in  note receivable
   from related party for treasury
   stock purchased.................                                               471                  471
  Distribution to S Corp.
    shareholders..............                                                         (3,346)      (3,346)
  Redemption   of  common  stock
   warrants......................                        (100)                                       (100)
  Issuance  of  common  stock in
   initial public offering (net of
   expenses).................... 4,000,000       40     31,707                                      31,747
  Retirement of treasury  shares
   and S Corp. conversion.......(2,737,130) (5,346)   (12,124) 2,737,130    13,560     3,910           --
  Issuance of common stock....    166,965       218      1,999                                       2,217
  Conversion of 8.5% subordinated
   note.........................   813,560         8      4,792                                       4,800
  Net (loss)..................                                                           (411)        (411)
                                  -------    ------    -------   -------     ------    ------      -------
Balance at December 31, 1998..   8,202,535       82     26,274        --         --     3,342       29,698
  Decrease in note receivable
   from related party for treasury
   stock purchased................                          89                                          89
  Issuance  of  common  stock in
   connection with acquisitions..  426,214        4      6,857                                       6,861
  Sale of stock in a private
    placement.................   1,000,000       10     16,868                                      16,878
  Exercise of stock options...      1,250        --         11                                          11
  Net income..................                                                          8,831        8,831
                                  -------    ------    -------   -------     ------    ------      -------
Balance at December 31, 1999..   9,629,999       96     50,099        --         --    12,173       62,368
  Issuance of common stock in
   connection with acquisitions. 1,035,433       10     12,947                                      12,957
  Sale  of  stock  in a  private
   placement net of expenses.... 1,888,887       19     25,098                                      25,117
  Exercise  of stock  options --
   net of redemptions...........   120,990        2        666                                         668
  Net income..................                                                         11,448       11,448
                                  -------    ------    -------   -------     ------    ------      -------
Balance at December 31, 2000..  12,675,309   $  127    $88,810        --     $   --    $23,621     $112,558
                                ==========   ======    =======   =======     ======    =======     ========
</TABLE>

                 See accompanying notes to financial statements


<PAGE>



                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                           Year Ended December 31,
                                           2000      1999      1998
                                        --------- --------- -------
                                           (dollars in thousands)
OPERATING ACTIVITIES
  Net income (loss)..................    $11,448   $ 8,831   $  (411)
  Adjustments  to reconcile  net income
  (loss) to cash provided by operating
  activities:
     Depreciation and amortization...      8,898     5,232     1,571
     Allowance  for losses on  interest
      and notes.........................    (486)      (47)      316
     Changes  in  operating  assets and
     liabilities
       Accounts receivable...........     (9,855)   (6,576)     (300)
       Deposits and advances.........       (265)     (542)      (59)
       Deferred tax asset-- current..        731      (588)     (607)
       Other assets..................       (741)     (201)     (203)
       Accounts payable..............      5,940    (3,522)    1,783
       Commissions and fees payable..      2,753        40       689
       Income taxes payable..........       (229)    3,822       528
       Accrued liabilities...........     (3,689)    5,190       654
       Deferred income...............        797        --        --
       Deferred tax liability........        871       913        --
       Deferred compensation.........      1,745        --        --
                                         -------   -------   -------
Cash provided by operating activities     17,918    12,552     3,961
                                         -------   -------   -------
INVESTING ACTIVITIES
  Purchase of businesses.............    (59,158)  (38,470)  (18,353)
  Purchases of equipment.............     (3,497)   (1,812)     (801)
                                         -------   -------   -------
Cash used in investing activities....    (62,655)  (40,282)  (19,154)
                                         -------   -------   -------
FINANCING ACTIVITIES
  Proceeds from borrowings...........     63,100    57,000        31
  Repayment of borrowings............    (41,251)  (53,507)  (10,137)
  Issuance of common stock...........     25,117    16,878    37,135
  Exercise of stock options..........        530        --        --
  Notes receivable...................          7        89       163
  Dividends..........................         --        --    (3,680)
                                         -------   -------   -------
Cash provided by financing activities     47,503    20,460    23,512
                                         -------   -------   -------
INCREASE (DECREASE) IN CASH..........      2,766    (7,270)    8,319
Cash and Cash  Equivalents at Beginning
of the Year..........................      4,832    12,102     3,783
                                          -------   -------   -------
Cash  and  Cash  Equivalents  at End of
the Year.............................    $ 7,598   $ 4,832   $12,102
                                         =======   =======   =======

                 See accompanying notes to financial statements


<PAGE>



                  CLARK/BARDES HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2000

        (Tables shown in thousands of dollars, except per share amounts)

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The consolidated  financial  statements  include the accounts of Clark/Bardes
Holdings,  Inc.  (CBH)  and its  wholly  owned  subsidiaries.  Through  its four
operating  divisions,   Clark/Bardes   Consulting-Compensation  Resource  Group,
Banking  Practice,  Healthcare  Group and Pearl Meyer & Partners,  CBH  designs,
markets and  administers  life  insurance  products,  compensation,  and benefit
programs to U.S. corporations,  banks and healthcare organizations.  CBH assists
its clients in using  customized  life insurance  products to generate  capital,
finance  long-term benefit  liabilities,  and supplement and secure benefits for
key employees.  In addition, CBH provides long-term  administrative services for
executive benefits and insurance and provides compensation consulting services.

   Basis  of  Presentation  --  The  preparation  of  financial   statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.  In the opinion of  management,  all  adjustments,  including  normal
recurring  accruals,  considered  necessary for a fair  presentation,  have been
included.  All intercompany amounts and transactions have been eliminated in the
accompanying consolidated financial statements.

   A summary of the significant  accounting policies consistently applied in the
preparation of the accompanying financial statements follows.

   Cash and Cash Equivalents -- CBH considers all highly liquid debt instruments
purchased  with a maturity of three months or less to be cash  equivalents.  CBH
has cash  balances at financial  institutions  in excess of the  $100,000  limit
insured by the Federal  Deposit  Insurance  Corporation.  Uninsured cash in bank
balances aggregated  approximately $7.0 million and $4.3 million at December 31,
2000 and 1999, respectively. CBI has not experienced any losses in such accounts
and believes it is not exposed to any  significant  credit risk on cash and cash
equivalents.

   Fair  Value of  Financial  Instruments  -- The book  values  of cash and cash
equivalents,  accounts and notes receivable,  accounts payable,  commissions and
fees  payable  and other  financial  instruments  approximate  their fair values
principally because of the short-term nature of these instruments.  The carrying
value of CBH's long-term debt does not differ significantly from its fair value.

   Equipment and Leasehold  Improvements -- Equipment and leasehold improvements
are  carried  at cost less  accumulated  depreciation.  Depreciation  expense is
provided in amounts  sufficient to relate the cost of assets to operations  over
the  estimated  service  lives  using an  accelerated  method.  CBH  depreciates
furniture,  equipment and computer software over periods of three to seven years
while leasehold improvements are amortized over the lease period.

   Intangible Assets -- CBH has intangible assets representing the excess of the
costs of acquired  businesses  over the fair values of the  tangible  net assets
associated with the  acquisition.  Intangible  assets consist of the net present
value of future  cash flows from  existing  business  at the  acquisition  date,
non-compete  agreements  with the former owners and goodwill.  The  amortization
periods for the non-compete agreements are 5 years and 10 years. The net present
value of  future  cash  flows is  amortized  over 20 to 30 years  (the  expected
average  policy  duration).  Goodwill  is being  amortized  over a 20 to 40 year
period on a straight-line basis.  Amortization expense was $7.1 million in 2000,
$4.4 million in 1999 and $1.2 million in 1998,  respectively.  CBH's policy,  in
accordance with Statement of Financial  Accounting Standards ("SFAS") No. 121 --
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be  Disposed  Of,  is to  review  intangible  and other  long-lived  assets  for
impairment on an annual basis or whenever changes in circumstances indicate that
an  impairment  might exist.  When any  indicators  are present,  the  estimated
undiscounted  cash flows are compared to the carrying  amount of the assets.  If
the  undiscounted  cash flows are less than the carrying  amount,  an impairment
loss is recorded.  Any  write-downs  are treated as permanent  reductions in the
carrying amount of the asset.

   Revenue -- First year  commissions  are recognized as revenue at the time the
policy  application  is  substantially  completed,  the  premium is paid and the
insured  party is  contractually  committed  to purchase the  insurance  policy.
Renewal  commission  revenue is recognized when the premium or commission is due
or paid.  CBH is  notified  in  advance  if a  client  plans  to  surrender,  so
adjustments in subsequent periods due to cancellations are infrequent and minor.
Revenue   associated   with  policies  to  be  surrendered  is  not  recognized.
Cancellations  or other  adjustments  are  accounted  for in the period where an
adjustment is determined to be necessary and are not  significant.  Service fees
are received  annually on the policy  anniversary  date.  Fees related to future
services to be provided are recognized as the services are rendered and fees for
program  design  and  placement  are  recognized  in a  manner  consistent  with
commissions.  Fees for compensation and benefit consulting services are based on
an agreed hourly rate over the period  services are  rendered.  Fees for benefit
consulting  services are  recognized  on a  percentage  of  completion  basis as
related costs are incurred over the duration of the project.

   CBH  generated  in excess of 25% of its revenue in 2000 from 17  clients,  in
1999  from 8  clients,  and in 1998 from 8  clients,  respectively,  creating  a
concentration of credit risk.  Approximately 15.2% and 17.5% of CBI's commission
and fee revenue for the years ended December 31, 1999 and 1998 respectively, was
generated by The Wamberg Organization,  which was wholly owned by CBH's Chairman
and  Chief  Executive  Officer  and  acquired  by  CBH  on  September  1,  1999.
Substantially,  all of the policies  underlying the programs marketed by CBH are
underwritten  by 20 life  insurance  companies,  of which  seven  accounted  for
approximately 66.3%, 63.1% and 76.3% of CBI's first-year  commission revenue for
the years ended December 31, 2000, 1999 and 1998, respectively.

   Commissions  and Fee  Expense --  Commissions  and fee expense  comprise  the
portion  of the  total  commission  revenue  that is  earned by and paid to both
Company and independent sales consultants.

   Advertising -- Advertising  and marketing costs provided to third parties are
charged to operations when incurred. Total expenses for 2000, 1999 and 1998 were
$803,000, $1,080,000 and $289,000, respectively.

   Income Taxes -- In connection with its initial public offering, CBH ceased to
be taxed as an S  corporation  and became  subject to federal  and state  income
taxation as a C corporation.  As an S corporation,  CBH's income, whether or not
distributed,  was taxed  directly  to the  stockholders  for federal and certain
state income tax purposes.  On August 1, 1998,  the effective  date of change in
tax status,  CBH recorded the deferred tax effect of the difference  between the
tax bases and book bases of its assets and liabilities on its balance sheet.

     Securities  and Exchange  Commission  Staff  Accounting  Bulletin No. 101--
Revenue  Recognition in Financial  Statements--  SAB No. 101 became effective in
the  first  quarter  of  2000.  CBH's  revenue  recognition  policy  has been in
accordance  with SAB No. 101 and  therefore its adoption did not have any impact
on CBH's revenue recognition policies.

   Derivatives  Financial  Instruments  -- As of January 1, 2001, CBH will adopt
Financial   Accounting   Standards  Board  Statement  No.  133,  Accounting  for
Derivative  Instruments and Hedging Activities  (Statement 133) which was issued
in June  1998 and its  amendments  Statements  137,  Accounting  for  Derivative
Instruments  and Hedging  Activities -- Deferral of the  Effective  Date of FASB
Statement No. 133 and 138,  Accounting  for Derivative  Instruments  and Certain
Hedging  Activities  (issued  in June  1999  and  June  2000,  respectively  and
collectively referred to as Statement 133).

   Because of our minimal use of  derivatives,  management  does not  anticipate
that the adoption of the new  Statement  will have a  significant  effect on our
earnings or financial  position.  The Statement will require us to recognize all
derivatives on the balance sheet at fair value.  Derivatives that are not hedges
must be adjusted to fair value  through  income.  If the  derivative is a hedge,
depending on the nature of the hedge,  changes in the fair value of  derivatives
will  either be offset  against  the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings  or  recognized  in  other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion of a derivative's  change in fair value will be immediately
recognized in earnings.

   Prior to January 1, 2001,  the Company used interest rate swap  contracts for
hedging  purposes.  The net amount  paid or  received  and net  amounts  accrued
through the end of the accounting period were included in interest expense.

   Reclassifications  -- CBH has made minor  reclassifications  of certain prior
years' amounts to conform to the current year's presentation.

2. ACQUISITIONS

   Following is a description  of the Company's  acquisitions  made during 2000,
1999 and 1998.  The results of  operations  for each  acquired  entity have been
included in the  accompanying  statements of operations as of the effective date
of the respective acquisition.

   Forrest,  Wagner & Associates -- On October 23, 2000, CBH acquired all of the
outstanding stock of Forrest,  Wagner & Associates,  Inc. ("FWA") for a purchase
price of $4.2  million,  including  expenses,  of which $3.5 million was paid in
cash at the closing.  The remaining  $750,000 is payable upon the achievement of
certain financial criteria by December 31, 2004.

   FWA  is  a  Phoenix,   Arizona  based  firm  specializing  in  marketing  and
administering  non-qualified executive benefit plans funded primarily by Company
owned life insurance. FWA was affiliated with Compensation Resource Group, Inc.

   The acquisition has been accounted for as a purchase with $2.7 million of the
purchase  price  amortized  based on the net  present  value of  future  renewal
revenue over twenty years. The balance of the purchase price, when made, will be
accounted  for as  goodwill  and  amortized  over the  remainder  of the initial
twenty-year period.

   Compensation  Resource Group,  Inc. -- On September 6, 2000, CBH acquired all
the issued and outstanding capital stock of Compensation  Resource Group ("CRG")
for a total purchase price of $30.5 million, not including acquisition expenses,
consisting of the following:

(i)    a cash payment to the CRG selling shareholders of $11.4 million;


(ii)   the  issuance by CBH of 596,463  shares of its common  stock,
       having  an  aggregate  value  of $6.1  million  based  on the
       closing price on September 5, 2000; and


(iii)  the repayment of approximately $13.0 million of CRG's long-term debt.


   Acquisition expenses were $735,000.

   CRG is an executive  compensation and benefits organization that provides the
design,  marketing and  administration  of  non-qualified  benefit plans. CRG is
headquartered  in Los Angeles,  California and has  affiliated  offices in seven
other  cities.  Prior to the  acquisition,  there was no  material  relationship
between CRG and CBH.

   The $25.1 million cash portion of the purchase price was borrowed under CBH's
credit facility with Bank One.

   Coincident with this  acquisition,  CBH entered into a bonus  arrangement for
certain key executives and employees of CRG. This  arrangement  will provide for
the  payment  of bonuses of up to $20  million if certain  stipulated  financial
objectives are achieved during the years ended December 31, 2003 to 2005.

   The  acquisition  of CRG has been  accounted  for as a  purchase  with  $26.7
million of the purchase price allocated to the present value of in-force revenue
and  amortized  over a period of thirty  years and $11.4  million  allocated  to
goodwill which will be amortized over twenty years.

   The unaudited financial information below presents the results of CBH and CRG
as if the acquisition had occurred on January 1, 1999.

                                                         Twelve Months Ended
                                                            December 31,
                                                           2000      1999
                                 Pro Forma
                                   Revenue............   $181,787  $148,487
                                   Net income.........      9,500     5,957
                                   Diluted     earnings
                                    per share............     .84      .60

   Pearl Meyer & Partners,  Inc. -- On June 21,  2000,  CBH  acquired all of the
issued and outstanding capital stock of Pearl Meyer & Partners, Inc. for a total
purchase  price of $25.9  million,  not including  expenses.  The purchase price
consisted of a cash payment of $21.9 million and the issuance of 250,000  shares
of CBH common  stock with a value of $4.0  million.  Acquisition  expenses  were
$720,000.  The $22.6  million cash  portion of the  purchase  price was borrowed
under CBH's line of credit.

   The  acquisition  has been  accounted for as a purchase and goodwill of $23.5
million will be amortized over a twenty-year period.

   In addition to the initial  purchase  price,  $2.0 million of additional cash
consideration  will be paid in the first quarter of 2002 upon the achievement of
a defined  performance  objective  during the eighteen months  subsequent to the
purchase.  This  payment,  when  earned,  will be  accounted  for as  additional
purchase  price to be amortized  over the remainder of the original  twenty-year
period.

   Pearl  Meyer  is a New  York  City  based  consulting  firm  specializing  in
executive  compensation  and retention  programs.  The Pearl Meyer  organization
became CBH's fourth operating division.  Prior to the acquisition,  there was no
material relationship between CBH and Pearl Meyer.

   The unaudited  pro forma  information  below  presents the results of CBH and
Pearl Meyer & Partners as if the acquisition had occurred on January 1, 1999.

                                                         Twelve Months Ended
                                                            December 31,
                                                           2000      1999
                                 Pro Forma
                                   Revenue............   $154,557  $133,339
                                   Net income.........     12,143     7,562
                                   Diluted     earnings
                                   per share............     1.10       .79

     W.M.  Sheehan & Company,  Inc.-- On June 13,  2000,  CBH  acquired  certain
assets,   principally  working  capital  and  equipment,   and  assumed  certain
liabilities of W. M. Sheehan & Company, Inc. ("Sheehan"). The purchase price was
$367,000  cash.  The  acquisition  has been  accounted for as a purchase and the
goodwill will be amortized over twenty years.

   In addition to the purchase  price paid at closing,  an  additional  $650,000
will be paid upon the  achievement  of certain  revenue and earnings  objectives
during the years ended June 30, 2001 through 2004. The payments will be made 23%
in cash and 77% in CBH common  stock  based on values at time of  issuance.  The
additional  payments will be accounted  for as goodwill and  amortized  over the
remaining twenty-year period.

     Insurance Alliances Group, Inc.-- On May 5, 2000, CBH acquired the business
of Insurance Alliances Group, Inc. ("IAG").  There were no assets or liabilities
acquired or assumed. IAG is a Stamford,  Connecticut insurance firm specializing
in executive estate planning.

   The  purchase  price for the business  was $3.5  million  consisting  of $2.8
million  cash and 49,143  shares of CBH common stock having a value of $713,000.
The cash portion of the purchase  price was borrowed under CBH's line of credit.
The  acquisition  will be accounted  for as a purchase  and the entire  purchase
price has been  allocated  to the net  present  value of  renewal  revenue  from
insurance in force at the time of the  acquisition  and will be amortized over a
period of thirty years.

   Christiansen  &  Associates  -- Effective  January 1, 2000,  CBH acquired the
stock and  business of  Christiansen  & Associates  for 43,714  shares of common
stock at a value of $694,000 and cash and expenses of $128,913.  Christiansen is
a former BCS consultant organization.  The acquisition has been accounted for as
a purchase and the goodwill will be amortized over twenty years.

   In addition to the purchase  price,  $167,000 cash and 171,632  shares of CBH
common stock are issuable to the former  principals of Christiansen & Associates
on the  attainment of stipulated  financial  objectives.  These  payments,  when
earned,  will be accounted for as additional purchase price to be amortized over
the remainder of the original twenty year period.

   The Watson  Company -- On February 1, 2000,  CBH  acquired  the assets of The
Watson  Company  for  $328,000  cash and  expenses as an  expansion  of the Bank
Compensation  Consulting practice of BCS. The acquisition has been accounted for
as a purchase and the purchase price will be amortized over twenty years.

   Upon reaching certain stipulated  financial goals, former shareholders of The
Watson Company will earn the right to receive up to $900,000 of CBH common stock
based on market values at the time of achievement.  These payments, when earned,
will be accounted  for as  additional  purchase  price to be amortized  over the
remainder of the original twenty year period.

   Banking  Consultants  of America  (BCA) --  Effective  October  1, 1999,  CBH
purchased  certain assets and the  businesses of Banking  Consultants of America
and Financial  Institution  Services,  Inc. for a purchase price of $1.4 million
and expenses of $28,000.  BCA is a regional  provider of  insurance  products to
banks  and was  absorbed  by  CBH's  Banking  Practice  division.  BCA has  been
accounted for as a purchase and the entire  purchase  price was allocated to the
net present value of the future cash flows of BCA's projected renewal revenues.

   The Wamberg Organization and Wamberg Financial Corporation -- On September 1,
1999,  CBH  purchased  certain  assets and assumed  certain  liabilities  of The
Wamberg  Organization  and  purchased  all of the  outstanding  stock of Wamberg
Financial Corporation for a total purchase price of $18.0 million consisting of:

(i)   a cash payment to The Wamberg Organization of $12.4 million;

(ii)  a cash  payment to W. T. Wamberg of $50,000 for his shares of Wamberg
      Financial Corporation;

(iii) a direct payment of $1.5 million for two outstanding loans;

(iv)  assumption of a $3.8 million note for the purchase of a corporate
      aircraft; and,

(v)   expenses of approximately $265,000.


   The $14.2  million cash  portion of the purchase  price was funded from CBH's
existing cash balances.  In addition,  the asset purchase agreement provides for
the  payment of an  additional  $11.9  million  upon the  attainment  of certain
stipulated annual financial  objectives  starting with the period ended December
31, 1999  through  December  31,  2002.  As of December  31, 1999 and 2000,  the
financial  objectives  for those years have been met and a total cash payment of
$5.0  million was made to W. T.  Wamberg and  recorded  as  additional  purchase
price.  In accordance  with the asset purchase  agreement,  all renewal  revenue
acquired as of September 1, 1999,  remaining  inforce on December 31, 2018, will
revert to Mr. Wamberg.

     The sole  shareholder  of The Wamberg  Organization  and Wamberg  Financial
Corporation  was W. T. Wamberg,  Chairman of CBH. The Wamberg  Organization  has
historically  been CBH's  largest  single  consultant,  accounting  for 17.5% of
revenue in 1998 and 15.2% in 1999.  Upon  consummation  of the September 1, 1999
acquisition,  Mr.  Wamberg  became  President  and Chief  Executive  Officer  of
Clark/Bardes Holdings, Inc.

   The tangible assets acquired consisted  primarily of receivables,  equipment,
and an aircraft. Subsequent to the acquisition, the Company sold the aircraft to
an  unaffiliated  leasing  company  for a gain of  $502,000  -- net of tax,  and
simultaneously leased it back for a ten year period. The gain was not recognized
in income and has been  recorded  as a  reduction  of the  purchase  price.  The
proceeds from the sale were applied to a full repayment of the related note. The
monthly  rental  under the lease is $27,924 or  $335,000  per year.  In the five
years ended December 31, 2004, total rental will be $1,675,000.

   The Wamberg  Organization  leases its 11,085 square feet of office space from
an entity  controlled by Mr.  Wamberg for an annual rental of $150,000,  under a
lease expiring on February 21, 2009.

   On January 4, 1999, CBH purchased the right to receive approximately 27.5% of
the  commissions on renewal revenue from certain  inforce  policies  existing on
June 30, 1998, due The Wamberg Organization, for a cash payment of $7.5 million.
Concurrent  with the  acquisition  of the assets and  liabilities of The Wamberg
Organization,  CBH  purchased  all of the renewal  revenue not  acquired and the
original January 4, 1999 agreement was superseded.  Accordingly,  an unamortized
balance of $6.9 million at September 1, 1999 under that  agreement  was combined
with the purchase price under the acquisition  agreement.  The combined purchase
price was  allocated to the net present  value of future  revenue to be received
until  September 1, 2018.  Excluding  any payments that may be made by virtue of
achieving the stipulated  annual  financial  objectives,  the total price of The
Wamberg  Organization  and  Wamberg  Financial  Corporation  was $24.9  million,
including the $6.9 million unamortized balance of the January 4 purchase.

   The acquisition of The Wamberg Organization and Wamberg Financial Corporation
has been accounted for as a purchase.  The pro forma  information below presents
the results of  operations  including  those of the  Wamberg  entities as if the
acquisition occurred on January 1, 1998.

                                                             Year Ended
                                                            December 31,
                                                           1999      1998
                                  Pro Forma:
                                    Revenues...........  $120,760  $74,766
                                    Net income.........     6,751      725
                                    Diluted earnings
                                     per share.............   .72      .13

   National Institute for Community Banking -- On May 18, 1999, CBH acquired all
of the issued and outstanding  capital stock of National Institute for Community
Banking  (NICB)  by  merging  it with and into  CBH in  exchange  for a total of
484,303 shares of CBH common stock. By agreement, the effective date of the NICB
acquisition was January 1, 1999. NICB was an independent  consultant  affiliated
with Bank Compensation Strategies.

   Of the total, 99,851 shares were issued at the closing and 384,452 shares are
issuable upon attaining  stipulated  revenue and income goals over the four-year
period 1999 to 2002. No other  consideration  was given. The value of the shares
received by the selling  shareholders  was $1.6 million  based on CBH's  closing
price on May 18, 1999.  Any  subsequent  shares  issued will be accounted for as
additional  consideration  based on their value at the time of issuance and will
increase future amortization  expense. The selling  shareholders  achieved their
financial  performance  goals for 1999 and, on January  26,  2000 an  additional
96,113 shares  having a value of $1.4 million were issued to them.  They did not
meet their performance goal for 2000.

   The acquisition of NICB has been accounted for as a purchase. The entire cost
of the NICB  acquisition  has been allocated to goodwill and is being  amortized
over twenty-five years.

   MCG/Healthcare -- On April 5, 1999, CBH purchased the assets and business and
assumed certain  liabilities of Phynque,  Inc.,  d/b/a  Management  Compensation
Group/HealthCare, a Minnesota corporation, for a purchase price of $35.9 million
consisting of:

(i)   a cash payment of $13.8 million;

(ii)  a promissory note for $8.7 million;

(iii) 326,363 shares of CBH common stock, having an aggregate value of $5.3
      million based on the closing price on April 5, 1999;

(iv)  the direct payment of $3.6 million for outstanding loans;

(v)   the assumption of $4.2 million of liabilities; and,

(vi)  $372,000 of closing costs.

   The assets acquired  included cash,  receivables and equipment in addition to
all  intellectual  property,  customer  files,  computer  software  and  related
licenses.  The liabilities  assumed include  commissions,  employee benefits and
operating  expenses.  The $17.7  million cash portion of the purchase  price was
funded by a borrowing  under  CBH's  credit  facility.  The  promissory  note is
payable in thirty-two equal quarterly  installments of principal and interest at
10% per annum  commencing  on April 5, 2000.  The  promissory  note is partially
secured by a personal  guarantee of W. T. Wamberg,  Chairman and Chief Executive
Office of Clark/ Bardes Holdings.

   MCG/HealthCare is a 161 employee  executive benefit  consulting  organization
servicing  the  healthcare   industry.   MCG/HealthCare   is   headquartered  in
Minneapolis,  Minnesota.  Prior to the acquisition described above, there was no
material relationship between CBH and MCG/HealthCare.

   The acquisition of MCG/HealthCare  has been accounted for as a purchase.  The
pro forma information below presents the results of CBH and MCG/HealthCare as if
the acquisition had occurred on January 1, 1999.

                                                        Year Ended December 31,
                                                           1999        1998
                             Pro Forma:
                               Revenues...............    $126,518    $100,876
                               Net income (loss)......      7,464      (1,826)
                               Diluted  earnings (loss)
                                per share.................    .79        (.34)

   Schoenke Companies -- On September 1, 1998, CBH acquired substantially all of
the assets,  and the book of business of Schoenke & Associates  Corporation  and
Schoenke & Associates Securities Corporation based in Germantown,  Maryland. The
Schoenke  Companies  specialize in designing and administering  benefit programs
for companies.

   The purchase price was $17.0 million plus related  expenses of  approximately
$98,000.  The  purchase  price  was  comprised  of $15.0  million  in cash and a
promissory  note  in  the  principal  amount  of  $2.0  million.  CBH  allocated
approximately $768,000 of the purchase price to tangible assets acquired and the
remaining  $16  million was  allocated  to the net  present  value of  estimated
realizable  future cash flows embedded in the existing inforce book of business.
This intangible  asset is being  amortized over thirty years which  approximates
the average  policy  duration  based on the terms of the policies and prevailing
practices for such benefit programs.

   The pro forma  information  below  presents  the results of CBI and  Schoenke
combined as if the acquisition had occurred January 1, 1998:

                                                             Year Ended
                                                          December 31, 1998
                                   Pro Forma:
                                     Revenues...........      $79,744
                                     Net income.........           96
                                     Diluted earnings
                                      per share............       .01

   Wiedemann  &  Johnson   Company  --  On  November  1,  1998,   CBH   acquired
substantially  all of the assets and 75% of the book of business of  Wiedemann &
Johnson  Company  based in  Dallas,  Texas.  The  Wiedemann  &  Johnson  Company
specializes in designing,  and administering benefit programs for companies. CBH
accounted  for the  acquisition  as a purchase and has  included  the  operating
results  of the  Wiedemann  &  Johnson  Companies  in the  financial  statements
commencing from the acquisition date.

   The purchase  price was $6.0 million plus related  expenses of  approximately
$54,000.  The  purchase  price was  comprised  of $4.0  million in cash and $2.0
million in common stock  represented  by 142,857  shares at an agreed upon price
per share. CBH allocated approximately $40,000 of the purchase price to tangible
assets  acquired  and  $6.0  million  to the  net  present  value  of  estimated
realizable  future cash flow  embedded in the in-force  book of  business.  This
intangible  asset is being amortized over thirty years,  which  approximates the
average policy duration based on the terms of the policies.

   Bank   Compensation   Strategies  --  On  September  1,  1997,  CBI  acquired
substantially  all of the assets and the book of business  of Bank  Compensation
Strategies  Group (BCS), a Minneapolis,  Minnesota  based life insurance  agency
engaged  in  designing  and  marketing  life  insurance   policies  and  related
compensation,  salary and benefit  plans.  The purchase price was $24.4 million.
The purchase price was comprised of $13.5 million in cash and  promissory  notes
for  $10.5  million.  CBH  allocated  $1.2  million  of the  purchase  price  to
non-compete  agreements,  $19.1  million to goodwill and $4.1 million to the net
present  value of the  realizable  cash flows  embedded in the  inforce  book of
business.

3. INTANGIBLES

   Intangible  assets  represent the excess of the purchase  price over the fair
values of the tangible assets of acquired businesses.  The classification of the
amounts determined and allocated to the respective intangible assets are:

                                               December 31,
                                              2000     1999
 Present  value of future  cash  flows from $ 94,328 $ 62,711
 in force revenue........................
 Goodwill................................     82,330   36,427
 Non competition agreements..............      1,750    1,750
                                            -------- --------
                                             178,408  100,888
 Accumulated amortization................    (13,035)  (5,897)
                                            -------- --------
 Net.....................................   $165,373 $ 94,991
                                            ======== ========

   The amortization periods for these assets are:

   o  present  value of future cash flows from inforce  revenues  are  amortized
      over 20 to 30 years, a period representative of the policy duration;

   o goodwill is amortized over periods of 20 to 40 years; and

   o non competition  agreements are amortized over 5 to 10 years,  the terms of
the agreements.

4. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

   Major classifications of equipment and leasehold improvements are as follows:

                                                                   December 31,
                                                                   2000    1999
                          Computer  software,  office  furniture  $10,938 $6,458
                          and equipment.......................
                          Leasehold improvements..............     1,655     503
                                                                  ------  ------
                                                                  12,593   6,961
                          Accumulated depreciation and
                          amortization........................   (4,217) (2,456)
                                                                  ------  ------
                                                                  $8,376  $4,505

   Depreciation  expense was  $1,760,000,  $862,000  and  $338,000 for the years
2000, 1999 and 1998, respectively.

5. TAXES

   Prior to July 31,  1998,  CBH elected to be taxed under  subchapter  S of the
Internal Revenue Code. Under this election, CBH did not pay federal income taxes
on its taxable  income.  Instead,  the  stockholders  were liable for individual
federal  income tax on CBH's taxable  income as determined  under the cash basis
method of  accounting.  Income  taxes,  as shown in the  accompanying  financial
statements  for  periods  prior to July 31,  1998,  consist  primarily  of state
franchise and income taxes.

   In  connection  with its Initial  Public  Offering,  on August 19, 1998,  CBH
ceased to be an S corporation and became subject to federal income taxation as a
C  corporation.  At July  31,  1998  the tax  bases  of  CBH's  net  assets  was
approximately $1.8 million higher than the financial  statement bases because of
cash to accrual basis  conversion  balances and the accumulated  amortization of
intangible assets.

   In the period ended July 31, 1998, CBH had a pre Initial Public Offering loss
of $3.8 million, which was passed on to the S corporation shareholders.

   Income tax expense (benefit) consists of the following components:

                                                   Year Ended December 31,
                                                   2000    1999     1998
                                                 ------- -------  ------
                                  Current:
                                    Federal....   $3,941  $4,848   $1,230
                                    State    and
                                  local........      289     856      194
                                  Deferred:
                                    Federal....    1,458     319     (524)
                                    State    and
                                  local........      137      56      (83)
                                                  ------  ------   ------
                                                  $5,825  $6,079   $  817
                                                  ======  ======   ======

   A reconciliation of the 2000 and 1999 income tax expense computed by applying
the  statutory  rate to income  before  income  taxes to the actual  taxes is as
follows:

                                                                 Year Ended
                                                                December 31,
                                                                2000   1999
                              U.S. Federal statutory rate...   $6,046  $5,069
                              State   income   tax --  net  of
                              federal benefit...............      518     895
                              Non-taxable    life    insurance
                              proceed.......................     (350)    --
                              Tax liability adjustment......     (411)    --
                              Other-- net...................       22    115
                                                               ------  -----
                                                               $5,825  $6,079

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

                                                              Year Ended
                                                             December 31,
                                                             2000     1999
                                Deferred tax liabilities:
                                  Intangible assets......  $ 7,883    $ 912
                                                            ------    -----
                                Deferred tax assets:
                                  Cash     to      accrual
                                adjustment...............     235      495
                                  Accrued  liabilities and
                                other....................   1,529      699
                                  Net operating loss.....     752       --
                                                           ------    -----
                                                            2,516     1,194
                                Net  deferred  tax  assets
                                (liabilities)............  $(5,367)  $ 282
                                                            =======   =====

   In assessing the realizability of deferred tax assets,  management  considers
the  likelihood  that some  portion or all of the deferred tax assets may not be
realized.  The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those  temporary
differences  become deductible.  Management  considers the scheduled reversal of
deferred  tax  liabilities,  projected  future  taxable  income and tax planning
strategies in making this assessment. Based upon the level of historical taxable
income and  projections  for future taxable income over the periods with respect
to which the deferred tax assets are deductible,  management believes it is more
likely  than not  that  CBH  will  realize  the  benefits  of  these  deductible
differences. Accordingly, no valuation allowance is deemed necessary.

6. LONG TERM DEBT

                                                      December 31,
                                                    2000     1999
             Term loan payable to banks.........   $49,500  $28,000
             Revolving  credit  loan  payable  to
             banks..............................     7,000    5,000
             Notes payable to former  shareholder
             of acquired businesses..............    8,073    9,725
                                                     ------   ------
                                                    64,573   42,725
             Less current maturities............    11,968    7,252
                                                    ------   ------
                                                   $52,605  $35,473

   Credit  Facility -- On December  28, 1999,  CBH expanded the credit  facility
negotiated  in January 1999 to $100 million with the same group of bank lenders.
The new credit facility  provided for a revolving credit and a term loan. At the
end of each year,  borrowings  under the  revolving  credit are  converted  to a
five-year  term loan. The revolving  credit  portion  terminates on December 31,
2002.  The  term  loan is  payable  quarterly  at the rate of 5% of the year end
balance and $1,250,000 per quarter so the term portion is repaid by December 31,
2004.

   On August 23, 2000,  CBH expanded the December 28, 1999 credit  facility from
$100 million to $114.3  million and added another bank to the existing  group of
lenders. The principal changes in the structure of the facility are the increase
of the working  capital limit from $5 million to $10 million and an expansion of
the borrowing base. The credit facility contains restrictive covenants requiring
mandatory   prepayments  under  certain  conditions,   financial  reporting  and
compliance  certificates,  maintenance  of  financial  ratios,  restrictions  on
guarantees and additional indebtedness, limitations on mergers and acquisitions,
prohibition of cash dividends,  limitation on investments,  loans, and advances,
and changes in control.  All of the assets of CBI, including the CBI stock owned
by CBH, are pledged as collateral under this Agreement.

   The restrictive covenants under the loan agreement provide for:

a.    the maintenance of a minimum ratio of fixed charges;


b.    a maximum allowable leverage ratio;


c.    a minimum amount of net worth (stockholders' equity); and,


d.    a maximum ratio of debt to capitalization.


   CBH was in compliance with all its  restrictive  covenants as of December 31,
2000.

   CBH is  obligated  to pay a  commitment  fee  based on the daily  average  of
undrawn  funds  under the credit  agreement.  The fee is a minimum of .25% and a
maximum of .50% based on the ratio of consolidated indebtedness to income before
interest, taxes, depreciation and amortization for the most recent four quarters
on a rolling  quarterly basis. A ratio of one to one produces the lowest fee and
three to one, or more, produces the highest.

   CBH capitalized $522,000 of costs in connection with the refinancing as Other
Assets  on the  balance  sheet at  December  31,  1999.  These  costs  are being
amortized over the life of the agreements.

   Interest on the  outstanding  indebtedness is at a spread over the Eurodollar
(London  InterBank  Offered)  rate or a base rate  equal to the prime  rate plus
1/2%, at CBH's  choice.  The  Eurodollar  rate remains fixed for the period that
portion of the loan is outstanding  and the base rate floats with changes in the
prime rate.

   Coincident with the credit facility,  CBH entered into two interest rate swap
agreements  with a bank  affiliated  with the lending  group to set the interest
rates.  The  first  agreement  went  into  effect  on July 6,  1999 and sets the
underlying  LIBOR-based  interest rate at 5.76% on $15 million of the debt.  The
second  agreement  went into effect on January 18, 2000 and sets the  underlying
LIBOR-based  rate at 5.29% on $15 million of the debt. On June 29, 2000, a third
interest  rate swap went into  effect,  setting  the  underlying  LIBOR based at
interest rate 7.24% on $20.0 million of debt.  The combined  notional  amount of
the  underlying  swap  agreements  was $44.8  million at  December  31, 2000 and
declines at the rate of $2.5 million, per quarter, until December 31, 2004.

     Phynque, Inc. Notes. In connection with the purchase of Phynque, Inc. d/b/a
Management  Compensation  Group/HealthCare,  CBI issued an $8,724,000 promissory
note  payable in  thirty-two  equal  quarterly  installments  of  principal  and
interest at 10%. A portion of the promissory note is guaranteed personally by W.
T. Wamberg, Chairman and Chief Executive Officer of CBI and CBH.

   At December 31, 2000, future payments under all financing arrangements are as
follows:

                                2001.... $  8,772
                                2002....    8,480
                                2003....    8,216
                                2004....    7,983
                                2005....    7,630
                                Thereafter 23,492

7. STOCKHOLDERS' EQUITY

   In June  1998,  Clark/Bardes,  Inc.,  a Texas  corporation  (the  Predecessor
Company) was merged with Clark/Bardes,  Inc., a Delaware  corporation,  a wholly
owned subsidiary of Clark/Bardes Holdings, Inc. Each existing shareholder of the
Predecessor  Company received one-half share of Clark/Bardes  Holdings,  Inc. in
exchange  for each share held and a return of capital  distribution  was made to
them. In accounting  for this  distribution,  all of the existing  shareholders'
investment,  treasury shares and retained  earnings were  transferred to paid in
capital.

   All of the foregoing was done in connection with an initial public  offering.
As part of the initial public offering,  CBH redeemed previously issued warrants
to purchase  1,525,424  shares of the Company's  stock for $4.9 million of which
$4.8 million was charged to expense during 1998.

   In August  1998,  CBH sold 4 million  shares  of common  stock in an  initial
public offering for net proceeds of $31.7 million.

   Other significant equity transactions in 1998 were:

   o  The conversion of $4.8 million of 8.5% convertible subordinated notes into
      813,559 shares at $5.90 per share;

   o  The  issuance  of 24,108  shares to the  former  President  of the  former
      Clark/Bardes division under a bonus arrangement; and

   o  The issuance of 142,857  shares,  having a market value of $2 million,  to
      the  controlling  shareholders  of Wiedemann & Johnson  Company in partial
      payment for the purchased assets of that Company.

   In July 1998, the Board of Directors  approved the authorization of 1,000,000
shares of $.01 par value junior  participating  preferred  stock. No shares have
been issued as of December 31, 2000.

   On June 7,  1999,  CBH sold  1,000,000  shares  of  common  stock to  Conning
Insurance  Capital  Partnership V, L.P. for $16.9 million in a private placement
transaction.  The  proceeds  from this sale  were  used for debt  reduction  and
acquisitions.

   During 1999,  CBH also issued shares of its common stock in  connection  with
certain acquisitions:

   o  326,363  shares,  having a market value of $5.3 million were issued to the
      controlling  shareholders  of  Phynque,  Inc.  in partial  payment for the
      purchase of the assets of that Company.

   o  99,851  shares,  having a market  value of $1.6 million were issued to the
      shareholders of National  Institute for Community  Banking in exchange for
      all of the outstanding  shares of that Company.  Up to 384,452  additional
      shares are issuable upon attainment of stipulated performance objectives.

   On September 11, 2000, CBH sold  1,888,887  shares of common stock to a group
of  investors  for  $25.1  million,  net of  expenses,  in a  private  placement
transaction.  The proceeds  from this sale were used for debt  reduction  and an
acquisition. The shares were sold to the investors for $13.50 per share and have
been registered for resale by the investors.

   During  2000,  CBH also  issued  shares of common  stock in  connection  with
acquisitions:

   o  96,113  shares,  having a market  value of $1.4 million were issued to the
      shareholders of National Institute of Community Banking in connection with
      the attainment of certain stipulated performance objectives at the time of
      the acquisition.

   o  43,714 shares,  having a market value of $694,000 were issued in acquiring
      the business of Christiansen & Associates,  producing consultants for Bank
      Compensation Strategies.

   o  49,143 shares, having a market value of $713,000 were issued in connection
      with the  acquisition of Insurance  Alliances Group as partial payment for
      the assets and business of that company.

   o  250,000 shares,  having a market value of $4.0 million, as partial payment
      for the acquisition of all the issued stock of Pearl Meyer & Partners.

   o  596,463 shares,  having a market value of $6.1 million, as partial payment
      for the  acquisition  of all  the  issued  common  stock  of  Compensation
      Resource Group, Inc.

   A number of option holders exercised their options to purchase 120,990 net of
shares  exchanged in payment  during the year. The excess of the market value of
the shares issued over the shares received in exchange was $405,000 and produced
a federal income tax benefit of $245,000.

8. FINANCIAL INSTRUMENTS

   Derivative  Financial  Instruments.  The Company  uses  derivatives  only for
hedging  purposes.  The following is a summary of the Company's risk  management
strategies  and the effect of these  strategies  on the  Company's  consolidated
financial statements.

   Cash Flow Hedging  Strategy.  CBH has entered into three  interest-rate  sway
agreements   for   interest-rate   risk  exposure   management   purposes.   The
interest-rate swap agreement utilized by CBH effectively modifies CBH's exposure
to interest  rate risk by  converting  CBH's  floating rate debt to a fixed rate
based on LIBOR. The notional amounts of the swaps at December 31, 2000 was $45.5
million and is scheduled to decline as the debt matures. This agreement involves
the  receipt of  floating  rate  amounts  in  exchange  for fixed rate  interest
payments  over the life of the agreement  without an exchange of the  underlying
principal amount.

   During the year,  CBH had a net gain of  $160,000  as a result of its hedging
activities.  In addition,  CBH had hedged $44.8 million of its long term debt as
of December 31, 2000 under its swap agreements. The fair value of the net hedged
position was $7,000.

   Concentrations of credit risk. Financial instruments that potentially subject
CBH to significant  concentrations  of credit risk consist  principally of cash,
trade accounts receivable, and derivatives.

   CBH maintains cash and cash  equivalents and short term investments only with
financial institutions having the highest ratings of liquidity. Concentration of
credit risk with respect to accounts  receivable are limited because of the high
quality of the carriers' credit ratings. CBH's revenue recognition policy, among
other things,  precludes  recognition of first year revenue until the client has
paid the premium.  CBH is exposed to credit risk in the event of non-performance
by  counterparties  to  derivative  instruments.  CBH limits  this  exposure  by
entering  into its  swap  arrangements  by one of the  members  of its  group of
lending banks.

   The following  methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:

      Cash and cash  equivalents:  The carrying  amount  reported in the balance
   sheet for cash and cash equivalents approximates its fair value.

      Accounts receivable and accounts payable: The carrying amounts reported in
   the balance sheet for accounts  receivable and accounts  payable  approximate
   their fair value.

      Long- and short-term debt: The carrying amounts of the Company's borrowing
   under its short-term  revolving credit  arrangements  approximate  their fair
   value.  The fair values of the Company's  long-term debt are estimated  using
   discounted  cash flow analyses,  based on the Company's  current  incremental
   borrowing rates for similar types of borrowing arrangements.

      Interest Rate Swaps: The fair values of the Company's  interest rate swaps
   are  estimated  based  on  the  net  present  value  of the  net  pay/receive
   differences on swaps in place as of December 31, 2000.

   The carrying amounts and fair values of the Company's  financial  instruments
at December 31 are as follows:

                                                          December 31,
                                                      2000             1999
                                                ---------------- ---------------
                                                Carrying  Fair   Carrying  Fair
                                                 Amount   Value   Amount   Value
                           Cash     and    cash
                           equivalent.........   $7,598  $7,598   $4,832  $4,832
                           Accounts receivable   31,134  31,134   18,695  18,695
                           Accounts payable...   10,786  10,786    4,100   4,100
                           Short-term debt....   11,968  11,968    7,252   7,252
                           Long-term debt.....   52,605  52,605   35,473  35,473
                           Interest rate swaps       --       7       --      --

9. BENEFIT PLANS

   Incentive Stock Option Plan. The Incentive Stock Option Plan provided certain
employees  options to  purchase  shares  for $4.80 and $7.00 per share;  540,830
shares of common stock were  reserved  for issuance  under this plan and 190,832
shares were granted.  No  additional  options may be granted under this program.
The $4.80 and  $7.00  options  became  fully  vested at the date of the  Initial
Public Offering. The options expire ten years from the grant date and are voided
within 90 days of the employee's termination or one year from date of death.

   Director  Option.  On April 2, 1997, CBH granted stock options to a member of
the Board of Directors for 100,000 shares at an exercise  price of $4.80.  These
options were issued in conjunction  with services  provided to CBH as an advisor
to the Board of  Directors  and for  future  participation  as a member of CBH's
Board of  Directors.  These  options  vest at the rate of 2,776 shares per month
beginning  July 1, 1998. The fair value of the common stock at the date of grant
was $4.80 as  determined  by CBH's Board of  Directors  based on a recent  stock
transaction; accordingly, no compensation expense has been recorded.

   1998 Stock Option  Plan.  In 1998,  the Board of  Directors  approved a stock
option plan  providing  for certain  employees,  directors  and  consultants  to
purchase shares at the fair market value at the time the option is granted.  The
Plan is  administered  by a committee of  non-employee  directors  who have full
discretion to determine  participation,  vesting and term of the option,  at the
time of the grant  providing  that no option  may have a term  greater  than ten
years from the date of the grant to purchase  shares at the fair market value at
the time the option is granted.  A total of  2,000,000  shares are  reserved for
issuance under this plan.

   The  following  table  summarizes  the combined  status of all three of CBH's
stock options plans.

                                                   Weighted Average
                                        Options    Exercise Price
      Outstanding  at  January 1,
      1998.....................         290,832       $ 5.93
        Granted................         380,689       $ 9.00
        Exercised..............             --
        Forfeited..............             --
                                        -------
      Outstanding   at   December
      31, 1998.................         671,521       $ 7.67
        Granted................         586,323       $15.52
        Exercised..............         (1,250)       $ 9.00
        Forfeited..............         (18,750)      $16.30
                                        -------
      Outstanding   at   December
      31, 1999.................       1,237,842       $11.51
        Granted................         338,100       $12.89
        Exercised..............         (167,866)     $ 6.35
        Forfeited..............         (30,800)      $12.51
                                        -------
      Outstanding   at   December
      31, 2000.................         1,377,276     $12.56
      Exercisable   at   December
      31, 2000.................           770,741     $11.91

   The  options  granted  in 1999  include  276,600  issued  to  executives  and
employees of the Healthcare Group division in connection with the acquisition of
Phynque, Inc. d/b/a Management Compensation Group HealthCare. These options vest
at the  rate of 20% per  year  beginning  in 1999  but are  subject  to  certain
forfeiture  provisions  if  the  division  fails  to  attain  certain  financial
performance goals.

   The following table summarizes the stock options outstanding and exercisable:

                Options Outstanding                  Options Exercisable
                             Weighted    Weighted               Weighted
                              Average     Average                Average
   Range of      Number      Remaining   Exercise    Number     Exercise
Exercise PricesOutstandingContractual Life Price   Exercisable    Price
                                        (years)
 $      4.80     68,799        6.2        $  4.80    52,124      $  4.80
 $      7.00     79,167        6.2        $  7.00    79,167      $  7.00
 $      9.00    340,689        6.2        $  9.00   222,789      $  9.00
 $10.06-$10.19  150,800        7.5        $ 10.13    52,000      $ 10.13
 $14.25-$14.75  201,000        7.0        $ 14.65   124,772      $ 14.65
 $15.00-$15.93   87,000        8.3        $ 15.19    13,263      $ 15.19
 $16.63-$16.94  375,044        8.2        $ 16.64   204,349      $ 16.64
 $     17.00     37,500        7.6        $ 17.00     2,500      $ 17.00
 $     18.13     37,277        4.8        $ 18.13    19,777      $ 18.13
                 ------                              ------
               1,377,276                            770,741

   The Company accounts for stock-based  compensation  using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees."  Compensation  cost for stock options is measured as
the excess,  if any, of the quoted  market price of the  Company's  stock at the
date of grant over the amount an employee must pay to acquire the stock.

   Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based  Compensation,"  established accounting and disclosure  requirements
using  a fair  value  based  method  of  accounting  for  stock  based  employee
compensation  plans.  The Company has elected to remain on its current method of
accounting as described  above,  and has adopted the disclosure  requirements of
SFAS No. 123.

   The pro  forma  information  regarding  net  income  and  earnings  per share
required by SFAS 123 has been  determined  as if CBH had accounted for its stock
based  compensation  plans under the fair value  method.  The fair value of each
option grant was estimated at the date of grant using the  Black-Scholes  option
pricing model with the following weighted average assumptions used for grants in
2000, 1999 and 1998, respectively:

                                                      2000   1999   1998
                                                     ------------- -----
                                  Dividend yield...   None    None  None
                                  Volatility.......   64.3%  185.0% 73.0%
                                  Risk-free
                                  interest rates...    5.1%   6.3%   4.7%
                                  Expected      life
                                  (years)..........     6      6      6

   The estimated  average fair values of options  outstanding in 2000, 1999, and
1998 were $9.03, $9.88 and $4.59  respectively.  Had compensation cost for CBH's
stock-based  compensation plans been determined in accordance with SFAS No. 123,
CBH's net income (loss) and earnings (loss) per share would have been reduced to
the pro forma amounts indicated below:

           Year Ended December 31,              2000   1999   1998
-------------------------------------------   ------- ------ -----
Net income (loss)
  As reported..............................   $11,448 $8,831 $(411)
  Pro forma................................   $10,668 $7,777 $(977)
Diluted   earnings   (loss)  per  common  and
common equivalent
  share                                       $   1.05$   .95$ (.08)
  As reported..............................
  Pro forma................................   $    .98$   .83$ (.20)

   These pro forma amounts are not likely to be  representative of the effect on
reported net income for future years.

   Savings   Investment   Plan.  The  Savings   Investment  Plan  is  a  defined
contribution  profit  sharing  plan,  qualifying  under  Section  401(k)  of the
Internal Revenue Code, covering  substantially all eligible employees.  At CBH's
discretion,  CBH  may  contribute  up  to  100%  of  an  eligible  participant's
contributions to the Plan up to a maximum of 3% of salary. Company contributions
to the Plan were $746,000,  $388,000,  and $214,000 for the years ended December
31, 2000, 1999, and 1998 respectively.

   Stock  Purchase  Plan. On July 10, 1998,  the Board of Directors  adopted the
Stock Purchase Plan,  under which a total of 200,000 shares of common stock have
been  reserved for  issuance.  Any employee who has been  employed by CBH for 90
days is eligible to participate in offerings under the Stock Purchase Plan.

   The Stock  Purchase  Plan consists of eight  semi-annual  offerings of common
stock  beginning on each  January 1 and July 1 in each of the years 1999,  2000,
2001 and 2002, and terminating on June 30 and December 31 of each such year. The
maximum number of shares issued in such years will be 50,000 in 1999, and 50,000
plus the number of unissued  shares from prior  offerings for each of 2000, 2001
and 2002.  The price of the  shares  under each  offering  segment is 85% of the
lower of the closing  market price on the day before the offering  period begins
or on the day the offering period ends.

   CBH has, for the four expired periods prior to December 31, 2000,  determined
that it will purchase the requisite shares on the open market and has not issued
any additional shares to fulfill this obligation.  Future fulfillment under this
Plan may be made through  open market  purchases  or unissued  shares,  at CBH's
discretion.

   CBH employees purchased 49,780 shares of CBH common stock at an average cost,
to them,  of  $10.34.  CBH's  open  market  purchases  of these  shares  for the
employees  were made at an average  cost of $12.78.  Accordingly,  CBH's cost of
this program was $95,000 including administrative expenses.

   Key Executive Life Insurance.  CBH maintains key man life insurance  policies
of $22.0  million on its  Chairman  and Chief  Executive  Officer  and  policies
ranging from $4.0 to $8.5 million on certain other key executives.

10. COMMITMENTS

   Leases -- CBH conducts  operations from leased office facilities.  Management
expects  that,  in the normal  course of  business,  leases  that expire will be
renewed or replaced by other leases;  thus it is anticipated that future minimum
lease  commitments  will not be less than the  amount  shown for the year  ended
December 31, 2000.

   Rental  expense for the years ended  December 31, 2000,  1999,  and, 1998 was
$4.1 million, $2.0 million, and $916,000, respectively.

   At December  31,  2000,  approximate  minimum  rental  commitments  under all
non-cancelable leases having terms in excess of a year are as follows:

                                             2001....   $5,426
                                             2002....    5,042
                                             2003....    4,717
                                             2004....    4,448
                                             2005....    3,858
                                             Thereafter  8,915

11. RELATED PARTY TRANSACTIONS

   A summary of CBH's related party  balances and  transactions  at December 31,
2000, 1999 and 1998 and for the years then ended are:

                                            2000  1999   1998
                                           ------------ -----
      Balances:
        Accounts  receivable --  officers
      and directors....................   $  64 $   20     --
        Accounts receivable-- affiliates     -- $  461 $  872
        Commissions and fees payable...   $  25 $   26     --
        Debt maturing within one year..      --     -- $  425
        Long term debt.................      --     -- $6,113
      Transactions:
        Commissions and service fees...      -- $1,434 $1,585
        Commission and fee expense.....   $  25 $8,071 $8,068
        General    and     administrative
         expense........................  $ 154 $   45     --

   CBH has entered into compensation and employment  agreements with certain key
employees.   The  agreements   provide  for  an  indefinite   employment   term,
compensation, stock bonuses, expense reimbursements and participation in benefit
plans and are subject to the employees'  compliance with certain provisions.  In
addition,  nine administrative  employees of the Company's  Healthcare Group are
entitled to a severance  payment in the event they  voluntarily  terminate their
employment.  This  was an  obligation  of  MCG/  HealthCare  at the  time of its
acquisition and was $1.1 million at December 31, 2000.

   CBH and its Chairman and Chief Executive Officer,  Mr. Wamberg,  were parties
to a  Principal  Office  Agreement  dated July 29,  1993,  pursuant to which The
Wamberg Organization marketed,  life insurance and administrative and consulting
services  on  behalf  of  CBH,  and  CBH   furnished   support  to  The  Wamberg
Organization.  Pursuant  to the terms of the  Principal  Office  Agreement,  The
Wamberg  Organization  was paid  approximately  $8.1 million and $8.1 million in
1999, 1998,  respectively,  for commissions and fees earned.  This agreement was
subsequently  terminated on September 1, 1999, as a result of the acquisition of
The Wamberg Organization.

   CBH has  transactions  with affiliated  entities.  CBH provides  services for
these  affiliates  and  is  reimbursed  for  these  services  at  the  Company's
respective  costs.  Among these affiliates is Clark/Bardes  Financial  Services,
Inc.  a  registered  broker-dealer  through  which CBH sells all its  securities
products and receives a commission.

12. EARNINGS PER SHARE

   The  following  table  sets forth the  computation  of  historical  basic and
diluted earnings per share:

                                          2000       1999      1998
                                       ---------- --------- -------
                                           (dollars in thousands)
 Numerator:
   Net   income   (loss)   for   basic
    earnings per share..............   $   11,448  $  8,831 $    (411)
                                        ----------  -------- ---------
   Numerator for diluted  earnings per
    share...........................   $   11,448  $  8,831 $    (411)
                                        ==========  ======== =========
 Denominator:
   Basic    earnings   per   share  --
    weighted average shares...........  10,744,719 9,077,775 5,006,009
  Effect of dilutive securities:
   Stock options....................      135,375   251,164         *
                                       ----------  -------- ---------
   Diluted   earnings   per   share --
    weighted average shares plus
    assumed conversions                10,880,094  9,328,939 5,006,009
                                       ==========  ========= =========
 Per share:
   Basic earnings (loss)............   $      1.07 $    0.97$    (0.08)
                                       =========== ===================
   Diluted earnings (loss)..........   $      1.05 $    0.95$    (0.08)
                                       =========== ===================
----------

* The effects of options  and  convertible  debt have not been  included as such
effects would be antidilutive.

13. SIGNIFICANT RISKS AND UNCERTAINTIES

   Federal tax laws create certain advantages for the purchase of life insurance
products by individuals and corporations;  therefore the life insurance products
underlying  the benefit  programs  marketed by the  Company  are  vulnerable  to
adverse  changes in tax  legislation  and policy.  Amendments to the federal tax
laws enacted in 1996 and 1997 reduced the  advantages of certain  business owned
life insurance programs.

   During the past two years, a number of U.S. corporations have been faced with
a  significant  income tax  liability  as a result of Internal  Revenue  Service
challenges  and court  rulings  disallowing  interest  deductions  related  to a
program known as a leveraged COLI.  Although CBH stopped selling  leveraged COLI
programs  in June  1997,  this  development  may cause some  current  holders of
leveraged COLI policies to elect to surrender their policies, which could reduce
the  amount  of  commissions  that CBH  would  realize  from the  total  pool of
leveraged COLI policies.

   In addition,  the Internal  Revenue  Service has begun a new initiative  with
respect  to  certain  aspects  of   split-dollar   insurance  known  as  "equity
split-dollar."  Under this  initiative,  the  individual  insured  could  suffer
adverse income tax consequences over the term of the policy.

14. SEGMENTS AND RELATED INFORMATION

   CBH has four reportable segments:

Clark/Bardes Consulting -- Compensation Resources Group
Clark/Bardes Consulting -- Banking Practice
Clark/Bardes Consulting -- Healthcare Group
Compensation Consulting

   On  September  6,  CBH  acquired  all  of the  outstanding  common  stock  of
Compensation  Resource Group, Inc. (CRG) an independent company  specializing in
the design, marketing and administration of non-qualified executive compensation
plans using company owned life insurance (COLI) products.  In acquiring CRG, CBH
reorganized this divisions as follows:

   o  The  division  formerly  known as  Clark/Bardes  was renamed  Clark/Bardes
      Consulting  --  Compensation  Resource  Group  and will  consist  of a Los
      Angeles, California headquarters with service centers in Dallas, Texas and
      Bethesda, Maryland.

   o  In 1999, CBH reported Clark/Bardes of Washington,  D.C. (formerly Schoenke
      & Associates)  as a segment.  During 1999,  this segment was combined with
      the operations of the Clark/Bardes division and was no longer a separately
      reportable segment.

   o  All  of   these   divisions   are   now   grouped   in  the   Clark/Bardes
      Consulting-Compensation Resources Group segment.

   o  The bank owned life insurance  product sold by the  Clark/Bardes  division
      will be transferred to the Banking Practice thus placing all of CBH's bank
      owned life  insurance  business in one division,  commencing in 2001.  The
      effect of this  transfer is not yet  reflected  in the  operations  of the
      affected segments.

   Healthcare  Group became a segment with the  acquisition of MCG HealthCare on
April 5, 1999.  Compensation Consulting became a segment with the acquisition of
Pearl Meyer & Partners, Inc. on June 21, 2000.

   The four reportable  segments operate as independent and autonomous  business
units  with  a  central  corporate  staff  responsible  for  finance,  strategic
planning, and human resources.  CBH's segments are in the business of designing,
marketing and  administering  employee benefit programs for large  corporations;
community,  regional  and  money  center  banks;  healthcare  organizations  and
executive  compensation  consulting.  The distinction  between these segments is
each has its own client base as well as its own  marketing,  administration  and
management.

   CBH evaluates  performance  and allocates  resources based on profit and loss
from  operations  before  income  taxes,  interest or  corporate  administrative
expenses.  The  accounting  policies of the  reporting  segments are the same as
those  described  in  the  summary  of  significant   policies.   There  are  no
inter-segment revenues or expenses.

                                           For the Years Ended December 31,
                                              2000       1999      1998
                                           ---------  --------- -------
     Revenues from External Customers
Clark/Bardes Consulting -- Compensation Resource
Group.......................................$.78,588...$ 73,528   $45,408
Clark/Bardes Consulting-- Banking Practice...40,172.... 30,784    29,358
Clark/Bardes Consulting-- Healthcare Group...22,139.... 16,448      --
Compensation Consulting.......................6,027.......--        --
----------------------------------------------------------------------
Total segments-- reported....................146,926    120,760   74,766
Reconciling items..............................687........--        --
----------------------------------------------------------------------
Total consolidated-- reported...............$147,613   $120,760   $74,766
                                            -----------------------------
Operating Income and Income Before Taxes
  Clark/Bardes  Consulting --  Compensation
Resource                                    $21,997    $19,750    $5,811
     Group...............................
  Clark/Bardes    Consulting  --   Banking    6,194      3,621     4,038
Practice.................................
  Clark/Bardes   Consulting --  Healthcare      601        623        --
Group....................................
  Compensation Consulting................     1,306         --        --
                                            -------    -------    ------
          Total segments-- reported......    30,098     23,994     9,849
  Corporate overhead.....................    (9,134)    (5,865)   (2,042)
  Put warrants...........................        --         --    (4,800)
  Non-operating income...................     1,001         --        --
  Interest-- net.........................    (4,692)    (3,219)   (2,601)
                                            -------    -------    ------
          Income before taxes............   $17,273    $14,910    $  406
                                            =======    =======    ======
Depreciation and Amortization
  Clark/Bardes  Consulting --  Compensation
Resource                                    $ 3,904    $ 2,481    $  503
     Group...............................
  Clark/Bardes    Consulting  --   Banking    1,562      1,151     1,067
Practice.................................
  Clark/Bardes   Consulting --  Healthcare    2,479      1,600        --
Group....................................
  Compensation Consulting................       783         --        --
                                            -------    -------    ------
          Total segments-- reported......     8,728      5,232     1,570
  Reconciling items......................       149         --        --
                                            -------    -------    ------
          Total consolidated-- reported..   $ 8,579    $ 5,232    $1,570
                                            =======    =======    ======
Identifiable Assets
  Clark/Bardes  Consulting --  Compensation
Resource                                    $112,505   $58,280    $38,232
     Group...............................
  Clark/Bardes    Consulting  --   Banking   36,615     30,841    28,654
Practice.................................
  Clark/Bardes   Consulting --  Healthcare   33,768     35,456        --
Group....................................
  Compensation Consulting................    29,627         --        --
                                            -------    -------    ------
          Total segments-- reported......   212,515    124,577    66,886
  Deferred tax asset.....................     1,861        947       607
  Holding company assets-- non operating.     5,479         --        --
                                            -------    -------    ------
          Total consolidated-- reported..   $219,855   $125,524   $67,493
                                            ========   ========   =======
Capital Expenditures
  Clark/Bardes  Consulting --  Compensation
Resource                                    $ 1,091    $   878    $  310
     Group...............................
  Clark/Bardes    Consulting  --   Banking    1,161        498       330
Practice.................................
  Clark/Bardes   Consulting --  Healthcare      663      2,812        --
Group....................................
  Compensation Consulting................       550         --        --
                                            -------    -------    ------
          Total segments-- reported......     3,465      4,188       640
  Reconciling items......................        32         --        --
                                            -------    -------    ------
          Total consolidated-- reported..   $ 3,497    $ 4,188    $  640
                                            =======    =======    ======

   Geographic Information -- All the Company's revenues are derived from clients
located in the United States.

   Major  Customers and Clients -- CBH derives its revenues from the commissions
it earns from the carriers it represents,  based on sales of benefit programs on
behalf of those carriers,  to its clients. CBH generated in excess of 25% of its
revenue  in 2000 from 17  clients,  in 1999 from 8  clients,  and in 1998 from 8
clients,  respectively.  None of Banking  Practice or Healthcare  Group carriers
accounted for more than 10% of revenue.  Approximately  15.2% and 17.5% of CBH's
commission and fee revenue for the years ended 1999 and 1998  respectively,  was
generated by The Wamberg Organization,  which was wholly owned by CBH's Chairman
and Chief Executive  Officer.  Substantially all of the policies  underlying the
programs  marketed by CBH are  underwritten by 20 life insurance  companies,  of
which eleven accounted for approximately 80% of CBH's first year revenue for the
year ended December 31, 2000 and eleven  accounted for  approximately  76.1% for
the year ended December 31, 1999, and seven  accounted for  approximately  63.1%
for the year ended December 31, 1998.

15. ADDITIONAL FINANCIAL INFORMATION

   The table that follows provides additional  financial  information related to
the consolidated financial statements.

Cash Flow Information

                                     Years Ended December 31,
                                       2000     1999    1998
                                     -------  ------- ------
                                          (in thousands)
Cash paid for:
  Interest.........................   $3,965   $3,125  $3,323
  Taxes............................   $4,213   $2,335  $  896
Financing Activities:
  Notes  issued in  connection  with
   acquisition.....................   $   --   $8,724  $2,000
  Reduction    of    borrowing    on
   conversion of notes.............   $   --   $   --  $4,800

   Statement of  Operations -- Non  operating  income  includes $1 million death
benefit  proceeds under a key person insurance policy as the result of the death
of an executive of the Banking Practice division.

16. LITIGATION

   From time to time, CBH is involved in various claims and lawsuits  incidental
to its business.

M Financial Holdings, Incorporated, et al. v. Clark/Bardes Holdings, Inc.

   On June 3, 2000, M Financial Holdings, Incorporated ("M") commenced an action
seeking to enjoin one of its former  executives  from being employed by CBH, and
other  relief.   The  complaint   alleges  breach  of  fiduciary  duty,   unfair
competition, civil conspiracy, misappropriation of trade secrets and charges CBH
with intentional interference with contract.

   The complaint  requests an injunction  barring the executive's  employment by
CBH for  two  years,  barring  disclosure  of M  confidential  information,  and
requiring the return of all documents. In addition, M seeks a constructive trust
with respect to CBH's gross profits from its new reinsurance  operations for two
years,  compensatory  damages,  punitive  damages of $1.5 million plus attorneys
fees and costs.  Both the  executive and CBH deny any  wrongdoing  and intend to
vigorously defend these claims.

Constellations Energy Group, Inc. and Baltimore Gas and Electric Company, et al.
v. Clark/Bardes, Inc.

   On July 25, 2000,  Constellation  Energy Group,  Inc.  ("Constellation")  and
related  entities filed a civil action against  Clark/Bardes,  Inc.  ("CBI"),  a
wholly owned  subsidiary of CBH, in the U.S.  District Court for the District of
Maryland.  Constellation  claims  that  CBH  failed  to take  proper  action  in
connection with the administration of an employee benefit life insurance program
for  certain  employees,  resulting  in  claimed  damages  of $7.5  million  and
pre-judgment interest, post-judgment interest, costs and expenses.

   Agreement has been reached with Plaintiffs to stay the matter until April 16,
2001 to facilitate ongoing discussions and a potential  nonbinding  mediation of
the issues. CBI believes it has meritorious defenses to these claims, intends to
deny all  allegations  and to vigorously  defend these claims.  CBI's  insurance
carrier has acknowledged coverage for this action.

Madge A. Kunkel,  individually and as Personal  Representative  of the Estate of
Donald B. Kunkel, M.D., deceased vs. Banner Health System, et al.

   On February 2, 2001,  this action was commenced  against  various  defendants
including the Health Care Compensation Strategies Division of Clark/Bardes, Inc.
("HCS").  Ms.  Kunkel  alleges that her deceased  husband was entitled to a life
insurance  policy in the face amount of  $525,000 to be issued by the  defendant
insurance  company  under a split dollar life  insurance  plan  sponsored by his
defendant  employer and  administered  by HCS.  According to the complaint,  Dr.
Kunkel died before the initial  premium was paid by his  employer and before the
policy was issued.  The matter has been submitted to CBH's  insurance  carriers.
CBH believes it has meritorious defenses to this claim and intends to vigorously
defend the matter.

17. SUBSEQUENT EVENTS (UNAUDITED)

   On March 12, 2001,  CBH acquired  certain  assets,  all of the business,  and
assumed  certain  liabilities  of  Rich,   Florin/Solutions,   Inc.,  a  Boston,
Massachusetts  compensation  consulting  company.  The assets  acquired  include
accounts  receivable,  copyrights and office equipment.  The liabilities assumed
were for employee benefit obligations.

   The purchase price is $20.8 million,  before  expenses,  consisting of a cash
payment at closing of $11.3 million and $9.5 million of contingent payments over
the next four years based on the attainment of established financial performance
criteria.  When earned, the contingent payments will consist of 60% cash and 40%
CBH common stock.

   The  transaction  will be funded  from CBH's  existing  line of  credit.  The
initial  amount of goodwill of  approximately  $9.0 million will be  amortizable
over twenty years.

   On March 23, 2001 CBH acquired the business of Partners  First, a division of
Ascension Health and a provider of consulting  services to Ascension Health's 79
hospitals and physician  practices.  Partners  First will become a part of CBH's
Healthcare Group and will be based in St. Louis, Missouri.

   The  purchase  price was $1.1  million  cash at the  closing  and  contingent
payments  of  up to  $1.7  million  based  on  achievement  of  certain  revenue
objectives.  This  acquisition will be accounted for as a purchase with goodwill
of  approximately  $1.1 million  amortized over 20 years.  The allocation of the
purchase price is preliminary.

18. INTERIM FINANCIAL DATA (UNAUDITED)

                                                  Quarter
                                    First Second   Third  Fourth   Total
                                 (in millions except per share data)
 Summary    of     Quarterly
 Results:
   Revenue................   2000  $ 31.1 $ 24.4  $ 34.6  $ 57.5  $147.6
                             1999    24.1   29.7    25.7    41.3   120.8
                             1998    13.8   15.2    17.6    28.2    74.8
   Gross profit...........   2000  $ 20.3 $ 16.3  $ 22.9  $ 37.3  $ 96.8
                             1999     9.9   16.7    15.2    25.9    67.7
                             1998     4.6    6.2     6.6    11.3    28.7
   Pre-tax income (loss)..   2000  $  3.1 $  --   $  1.7  $ 12.5  $ 17.3
                             1999     2.5    2.4     1.8     8.2    14.9
                             1998     0.2   (5.2)    1.6     3.8     0.4
   Net income (loss)......   2000  $  1.8 $  0.2  $  1.2  $  8.3  $ 11.5
                             1999     1.5    1.4     1.0     4.9     8.8
                             1998     0.2   (5.2)    2.4     2.2    (0.4)
   Basic   earnings   (loss) 2000  $ 0.18 $ 0.02  $ 0.11  $ 0.66  $ 1.07
    per share................
                             1999    0.18   0.16    0.11    0.52    0.97
                             1998    0.06  (1.61)   0.44    0.27   (0.08)
   Diluted  earnings  (loss) 2000  $ 0.18 $ 0.02  $ 0.11  $ 0.65  $ 1.05
    per share................
                             1999    0.17   0.16    0.11    0.50    0.95
                             1998    0.06  (1.61)   0.39    0.27   (0.08)


<PAGE>



                                   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.

CLARK/BARDES HOLDINGS, INC.

By:  /s/ W. T. WAMBERG
---------------------------
W. T. Wamberg
President and Chief Executive Officer

Date: March 28, 2001

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


  /s/ W. T. WAMBERG          Chairman of the Board,          March 28, 2001
-------------------          President, Chief Executive
  W. T. Wamberg              Officer and Director

  /s/ THOMAS M. PYRA         Vice   President and            March 28, 2001
--------------------         Chief Financial Officer,
  Thomas M. Pyra             Principal Accounting Officer
                             and Chief Operating Officer

  /s/ RANDOLPH A. POHLMAN    Director                        March 28, 2001
-------------------------
  Randolph A. Pohlman

  /s/ L. WILLIAM SEIDMAN     Director                        March 28, 2001
------------------------
  L. William Seidman

  /s/ GEORGE D. DALTON       Director                        March 28, 2001
-----------------------
  George D. Dalton

  /s/ STEVEN F. PIAKER       Director                        March 28, 2001
  --------------------
  Steven F. Piaker

  /s/ BILL ARCHER            Director                        March 28, 2001
  ---------------
  Bill Archer