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UNITED STATES
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, 2002.                                             
|      |  | or                                                                                       
|     
|[   ] |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Commission File Number: 000-24799

THE CORPORATE EXECUTIVE BOARD COMPANY
(Exact name of registrant as specified in its charter)

|                                         |  |                       
|---------------------------------------- |  | ----------------------
|Delaware                                 |  | 52-2056410            
|(State or other jurisdiction             |  | (I.R.S. Employer      
|of incorporation or organization)        |  | Identification Number)
|                                        
|2000 Pennsylvania Avenue, N.W.           |  |                       
|Washington, D.C.                         |  | 20006                 
|(Address of principal executive offices) |  | (Zip Code)            

(202) 777-5000
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: Not applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 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.   [x]

Indicate
by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).    Yes [x]    No [  ]

Based upon the closing price of the registrants common stock as of
June 28, 2002, the aggregate market value of the common stock held by
non-affiliates of the registrant was $1,077,222,095*.





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As of February 21, 2003, The Corporate Executive Board Company had
outstanding 37,189,630 shares of Common Stock, par value $0.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents incorporated by reference and the
Part of the Form 10-K into which the document is incorporated:

None.



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|* |  | Solely for purposes of this calculation, all executive officers and
directors of the registrant and all shareholders reporting beneficial
ownership of more than 5% of the registrants common stock are
considered to be affiliates.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Form 10-K, including the
sections entitled Managements Discussion and Analysis of Financial Condition
and Results of Operations and Business, that are based on our managements
beliefs and assumptions and on information currently available to our
management. Forward-looking statements include the information concerning our
possible or assumed results of operations, business strategies, financing
plans, competitive position and potential growth opportunities. Forward-looking
statements include all statements that are not historical facts and can be
identified by the use of forward-looking terminology such as the words
believes, expects, anticipates, intends, plans, estimates or
similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. You should not put undue reliance on any
forward-looking statements. We do not have any intention or obligation to
update forward-looking statements after we file this Form 10-K.

You should understand that many important factors could cause our results
to differ materially from those expressed in these forward-looking statements.
Among the factors that could cause our future results to differ from those
reflected in forward-looking statements are the risks discussed in this Form
10-K under the heading Business-Risk Factors.





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PART I

Item 1. Business.

Overview

We provide best practices research and quantitative analysis focusing on
corporate strategy, operations and general management issues. Best practices
research supports senior executive decision making by identifying and analyzing
specific management initiatives, processes and strategies that have been
determined to produce the best results in solving common business problems or
challenges. We are a Delaware corporation formed in October 1997. We maintain our executive offices in Washington, D.C., at 2000
Pennsylvania Avenue, N.W., Washington, D.C. 20006.

We provide research and analysis to a membership of over 1,900 of the worlds
largest and most prestigious corporations. For a fixed annual fee, members of
each research program have access to an integrated set of services, typically including:



| |  |  | best practices research studies,                                              
| | - |  | ------------------------------------------------------------------------------
|
| |  |  | executive education seminars,                                                 
|
| |  |  | customized research briefs and                                                
|
| |  |  | Web-based access to the programs content database and decision support tools.

For each of the last three years, our client renewal rate (defined as the
percentage of member institutions renewed, adjusted to reflect reductions in
member institutions resulting from mergers and acquisitions of members) and our
subscription renewal rate (defined as the percentage of membership
subscriptions renewed, adjusted to reflect reductions in membership
subscriptions resulting from mergers and acquisitions of members) have equaled
or exceeded 90% and 82%, respectively. More than 70% of the Fortune 500
companies are members of The Corporate Executive Board.

Our membership-based model, in which all customers (or members)
participate in our research and analysis, is central to our business strategy.
This model gives us access to the best business practices of our members and
enables us to provide comprehensive analysis on current business issues,
assessing the collective experiences and knowledge of our members on
leading-edge topics. By participating in The Corporate Executive Board, members
can learn about the best practices of the most progressive corporations in the
world at a fraction of the cost of a customized analysis performed by any of
the major consulting firms. We do not believe that in-house research and
analysis departments at individual corporations could obtain, at any price,
similar information from other corporations about their management practices.
In addition, we do not know of any other entity that enables corporations to study a broad range
of the best business practices of hundreds of other business enterprises for fixed annual fees.

We offer 23 research programs,
each focusing on separate business constituencies within the following practice areas:



| |  |  | human resources,                      
| | - |  | --------------------------------------
|
| |  |  | strategy and research and development,
|
| |  |  | information technology,               
|
| |  |  | sales and marketing,                  

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| |  |  | finance and legal,            
| | - |  | ------------------------------
|
| |  |  | operations and procurement and
|
| |  |  | financial services.           

We added seven new research programs during the past two years and
anticipate adding three to four new research programs per year for the next two
to three years. Each research program charges a separate fixed annual fee and
is served by a dedicated staff of analysts and researchers. Memberships
generally are renewable on a 12-month basis. The average price per research
program at December 31, 2002, was approximately $33,600.

Our revenues and costs have grown at compound annual rates of 31.9% and
30.4%, respectively, from December 31, 1999 through December 31, 2002. Because
each research program provides our membership with standardized best practices
research studies and executive education seminars, new members immediately add
to our revenues while only incrementally increasing our operating costs. Our
growth strategy is to cross-sell additional research programs to existing
members, to add new members and to develop new research programs and decision
support tools.

Available Information

The Corporate Executive Boards
Internet address is http://www.executiveboard.com. We have made available
free of charge through our Internet Web site (follow Investor
Relations tab to link to SEC Filings) our annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material was electronically
filed with, or furnished to, the Securities and Exchange Commission (SEC).

Industry Background

Corporations today are experiencing greater competitive demands and facing
increasingly complex strategic and operational issues. In response to these challenges,
companies are exploring new business strategies as well as reevaluating the
performance of individual departments within their organizations in order to
maintain their competitive edge. The pace of change is driving a greater
interest in gaining access to leading management practices and solutions to
common business problems on a cross-industry basis.

Participants in the professional information services industry have
approached the market for business-focused information by offering a variety of
products and services, including market research, strategic planning,
implementation services and educational programs. Services differ by the level
of engagement, with some offering project-driven or long-term consulting
contracts, and others providing continuous research publishing. Other entities,
such as trade associations, non-profit think tanks and research and database
companies, also offer research, consulting and education services.

We offer a distinctive approach that combines many of the benefits of
general management consulting and training and development firms. Our research
and analysis covers the same major business issues generally addressed by
management consulting firms, such as managing growth, reducing costs,
streamlining operations and developing strategy. What makes our approach
distinctive is that we provide the same, standardized product to our entire
membership at a fraction of the cost of consulting services. In common with
training and development firms, we offer education services both on-site at
member institutions and in large multi-company settings. Unlike training and
development firms, which typically invest only periodically in new curriculum
development, our curriculum is updated constantly by our best practices
research organization. Another distinguishing characteristic is the seniority
and breadth of our audiencewe brief executive and senior management staff
drawn from a broad range of industry sectors, business units and departments.
Because of our high-quality research product, unique approach to the market and
network of leading companies, we believe that we offer our customers a superior
value proposition.

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Business Strategy

Our goal is to research and analyze the most pertinent and timely
strategic and operational issues facing our membership, and to distribute the
results of this analysis to our membership in the most efficient, effective and
helpful manner. Our membership model allows us to draw upon a large and growing
universe of issues and solutions of relevance to todays leading corporations.
We actively engage our membership to help focus our research on the most urgent
challenges in the current business environment and to maintain and enhance our
position as the leading provider of best practices research and analysis.



| |  |  | Maintain Membership-Based Model.We believe that our membership-based
model is key to our success. We continually strive to increase our
ties to our members. We encourage members to view us as their
proprietary off-site research facility. Our fixed-fee economic model
promotes frequent use of our products and services. We believe that
member satisfaction grows as members access more of our services, and
that the growing roster of satisfied members validates our business
model and induces new members to join The Corporate Executive Board.                                                                                                                                                                                                                           
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Focus on Best Practices Research.The focus of our work is on
researching best demonstrated business and management practices. Many
large corporations believe that there are research economies and other
benefits that can be realized by learning from the experiences of
similar entities facing common business problems. We believe that
there will be a continuing desire on the part of progressive
corporations to access ever-evolving solutions to these common
business problems. We believe that our success to date has uniquely
positioned us as a leading source for identifying, studying,
evaluating and communicating these evolving solutions.                                                                                                                       
|
| |  |  | Continue Research and Analysis Excellence.We believe that the quality
of our research and analysis has driven our success. We regularly
interact with senior executives at member institutions to identify the
most important strategic and operational issues for research and
analysis. Experienced program directors are responsible for assuring
that our research methodology is applied to all studies and that
research quality is maintained across all research programs. We are
highly selective in our hiring, recruiting only the top graduates of
the leading universities and graduate schools. We emphasize continual
training of all employees in key areas, including industry analysis,
economics, quantitative modeling, root-cause analysis and presentation
skills.
|
| |  |  | Build Membership Network.As our research programs grow in size and
influence, we constantly are expanding our network of executives at
our member companies. We believe that the growth of this network
benefits members by increasing the number of executives they can
contact for information and by providing them with access to a
broader range of companies. We believe that these positive network
effects further strengthen our membership-based business model.                                                                                                                                                                                                                                                                                                           
|
| |  |  | Leverage Economic Model.We
derive most of our revenues from fixed annual fees for our research programs. A large portion of our costs of
delivering our products and services in each research program are
fixed and do not vary with the number of members. We expect to
increase revenues and improve program-operating margins as we add new
members to our research programs.                                                                                                                                                                                                                                                                                                                                                                                                       

Growth Strategy

We believe that demand for our services will continue to grow as
corporations recognize the need to improve their performance
and seek access to other companies solutions to common business problems. Our
growth strategy centers on leveraging the formula that we have developed across
the past decade by cross-selling additional subscriptions to existing members, adding new
members and developing new research programs and decision support tools.



| |  |  | Cross-Sell Additional Subscriptions to Existing Members.On average,
members currently participate in 2.72 research programs. We actively
are cross-selling additional membership subscriptions and believe that
most members are potential participants in up to 15 of the research
programs we currently offer, which are directed at corporate staff
positions maintained by most major companies. We believe that
membership subscription cross-selling opportunities will increase as we develop new research programs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Add New Members.We have targeted approximately 2,300 additional
institutions worldwide as potential new members, including U.S.
companies with revenues greater than $750 million and financial
institutions with assets in excess of $1 billion.                                                                                                                                                                                                                                                                                                                
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Develop New Research Programs.We currently offer research programs
covering 23 business constituencies. We have added seven new research
programs during the past two years. We also have identified more than
50 additional corporate constituencies that we might target as we
develop new research programs. This list includes opportunities to
serve corporate functions beyond the 23 we serve today. We believe
that each is a unique constituency with the potential to support a
tailored research agenda and a suite of educational and other
services.

The Membership Network

Our membership-based model, in which all members participate in our
research and analysis, is central to our business strategy. This model gives us
access to the best business practices of our members and enables us to provide
comprehensive analysis on current business issues, assessing the collective
experiences and knowledge of our members on leading-edge topics. By
participating in The Corporate Executive Board, members can learn about the
best practices and access tools and frameworks of the most progressive
corporations in the world at a fraction of the cost of a customized analysis
performed by any of the major consulting firms. We do not believe that in-house
research and analysis departments at individual corporations could obtain, at
any price, similar information from other corporations about their business
practices. We believe that there is no other entity that enables corporations
to study a broad range of the business practices of hundreds of other business
enterprises for fixed annual fees.

We regularly interact with senior executives at member institutions to
identify the most important strategic and operational issues for research and
analysis and continually strive to increase our ties to our members. Our
products and services are available exclusively to members. Our fixed-fee
economic model promotes frequent use of our products and services. We encourage
members to view us as their proprietary off-site research facility. We believe
that member satisfaction grows as members access more of our services, and that
the growing roster of satisfied members validates our business model and
induces new members to join The Corporate Executive Board.

The following table sets forth information with respect to members,
subscriptions and renewals as of the dates shown:

|                                             |  |              |        |      |  |      |        |      |  |      |         |   |  |   |         |   |  |   |         |   |  |  |  |  |  |  |  |  |  |  |  | 
|-------------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | - |  |  |  |  |  |  |  |  |  |  |  | 
|                                             |  | December 31, |       
|                                             |  |              |       
|                                             |  | 1998         |        | 1999 |  | 2000 |        | 2001 |  | 2002
|                                             |  |              |        |      |  |      |        |      |  |     
|Membership programs(1)                       |  |              | 10     |      |  |      | 12     |      |  |      | 15      |   |  |   | 18      |   |  |   | 22      |  
|Member institutions                          |  |              | 1,333  |      |  |      | 1,480  |      |  |      | 1,745   |   |  |   | 1,802   |   |  |   | 1,930   |  
|Total membership subscriptions               |  |              | 2,263  |      |  |      | 2,790  |      |  |      | 3,543   |   |  |   | 4,364   |   |  |   | 5,257   |  
|Average subscriptions per member
institution |  |              | 1.70   |      |  |      | 1.89   |      |  |      | 2.03    |   |  |   | 2.42    |   |  |   | 2.72    |  
|Client renewal rate(2)                       |  |              | 90     | %    |  |      | 90     | %    |  |      | 90      | % |  |   | 90      | % |  |   | 90      | %
|Subscription renewal rate(3)                 |  |              | 85     | %    |  |      | 84     | %    |  |      | 84      | % |  |   | 82      | % |  |   | 82      | %
|Contract Value (in thousands)(4)             |  | $            | 61,180 |      |  | $    | 80,633 |      |  | $    | 108,542 |   |  | $ | 138,474 |   |  | $ | 176,533 |  



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|(1) |  | In January 2003, we launched the HR Measurement Lab, an extension of our model into the human resource performance management arena,
bringing the current number of membership programs to 23.                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | For the year then ended. Client
renewal rate is defined as the percentage of member institutions renewed, adjusted to reflect reductions
in member institutions resulting from mergers and acquisitions of members.

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|(3) |  | For the year then ended. Subscription renewal rate is defined as the percentage of membership subscriptions renewed, adjusted to reflect
reductions in membership subscriptions resulting from mergers and acquisitions of members.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | For the year then ended. "Contract Value" is defined as the aggregate annualized revenue attributed to all agreements in effect at a given date without regard to the remaining duration of any such
agreement.                    

Products and Services

General

Our research products and services focus on identifying, analyzing and
describing best demonstrated management practices. In general, our research
focuses primarily on identifying best demonstrated management practices, and
secondarily, on critiquing widely followed but ineffective practices. We believe
that we add value by enabling member companies to enhance revenues and reduce
costs by objectively identifying best corporate practices that solve pressing
corporate problems, and developing tools to help members implement these
practices.
In addition, we provide members with support implementing best practices profiled in our research
studies within their own organizations. These implementation support memberships include both management tools and
associated on-site sessions and are delivered over a 12-month period.

Our research programs offer a cost-effective, time-efficient opportunity
for senior executives to learn from the practices and experiences of other
corporations from around the world. Member institutions can participate in one
of our research programs for a fraction of the cost of proceeding independently
either through an internal research effort or through engaging a management
consulting firm.

Our best practice research programs are guided by a 12 to 18-month agenda. These research
programs have a research director who is responsible for applying our research
methodology to produce best practices studies and for maintaining research
quality across all research program services. Using Web and fax polls,
steering sessions, teleconferences and one-on-one interviews, the research
programs director works closely with the membership of that program to
identify agenda topics of shared interest and to set the research programs
priorities. Each research program is staffed by a dedicated team of
researchers, analysts and instructors who collectively research and write the
best practices studies, complete the customized research briefs and present the
findings to the programs membership.

For a fixed annual fee, members of each research program have access to
an integrated set of services, which typically include best practices research studies,
executive education seminars, customized research briefs and Web-based access
to the programs content database and decision support tools. A description of
each service follows.

Best Practices Research Studies

Our research programs generally publish several best practices
research studies annually, each addressing a specific corporate issue or
problem identified in the research agenda. We design each best practices study
to present the conclusions and supporting best practices in a graphical format,
enabling the intended audience quickly to assimilate the 20 to 200 pages of
research content. We create each report using our structured research
methodology: topic selection; root cause analysis; secondary research; primary
interviewing; analysis of findings; and report writing. Each program director
can call upon the support of the Chief Research Officer to
provide assistance in framing arguments, screening best practices, developing
Web-based deliverables and editing studies and their derivative executive
education curriculum content.

In the course of researching a best practices study topic, the research
team typically will review thousands of pages of business and academic
literature to ground their understanding of the issues. The
teams often will create and analyze primary data about members operations and
performance to understand key economic leverage points and direct the research
to areas that offer the highest return on

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member investments. They then will
initiate the research process to identify and evaluate specific business
processes, strategies and management practices, typically conducting hundreds
of in-depth interviews with corporations, industry experts, management
consultants and academic leaders. During the course of its research, a team
generally analyzes and evaluates dozens of specific management practices in an
attempt to isolate the five to 15 most important practices worthy of potential
implementation by members, separating out demonstrated and proven business
practices and disposing of those concepts, whether popular or conventional,
that largely have failed.

Executive Education

We provide our executive education curriculum, which is based on our
proprietary best practices research, to member companies worldwide. We deliver
executive education services through two primary channelsgeneral membership
meetings and, in some programs, tailored on-site seminars. Our executive
education curriculum provides lively, interactive forums for reinforcing our published
best practices research studies.

Research Briefs

Members of most research programs may assign short-answer, customized
research requests. Individual briefs may take the form of a literature search,
vendor profile, data retrieval or original primary and secondary research,
depending upon the need of the requesting member. Once initiated, each
customized research effort takes from one to 20 business days to complete,
depending on the depth of the information request, the type of research product
desired and the time requirements of the member. Researchers typically begin
their inquiry with a review of our proprietary research archives and then
conduct a broad literature search to identify relevant background material and
practices.

Written research briefs generally contain case studies or
profiles of interviewed institutions, highlighting significant trends,
successful practices and comparative responses to a range of questions. After
we have completed and delivered the written brief to the requesting member, we
make the best of these briefs accessible to other members through proprietary
databases. Members are able to search, select, view and print research briefs
directly from the research program Web site at no additional charge.

We believe that the research service of our research programs builds our
proprietary databases, serves as an excellent marketing tool for attracting new
members and encourages members to view us as a reliable and effective resource
for primary research.

Web-Based Proprietary Databases

Each research program maintains a proprietary database of best practices
and, in most cases, quantitative benchmarking and survey data accessible only to members of the
research program. We continually update our growing proprietary databases with
new corporate practices, quantitative performance data and related information
supplied by other members and derived by our researchers. We include all
information and graphics generated in best practices research studies and
customized research briefs in the databases and make them accessible to member
executives and our staff.

Since 1996, we have been offering our members internet access to research
content and other services through password-protected Web-sites. The Internet has become an efficient
and effective means for us to deliver our products and services to our members. Through password
protected Web-sites, members of each program may commission
customized research briefs, browse and access the electronic library of
research studies and graphics, review executive education modules and meeting
schedules and communicate with our staff and other members.

Pricing

Memberships in The Corporate Executive Board research programs are
principally one-year, renewable agreements. Research memberships are generally
payable by members at the beginning of the contract term. At December 31, 2002,
the average price for a program membership was approximately $33,600. The
actual price varies by size of member and by research program, and may be lower
for charter memberships to new research programs. By spreading our costs across
a broad membership and offering a largely

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standardized research product, we are
able to charge fees that are a small fraction of the typical engagement fees of
specialized research or consulting firms.

We offer an unconditional service guarantee to our members. At any time, a
member may request a refund of their membership fee for a research program,
which is provided on a pro rata basis relative to the remaining term of the
membership. In 2002, members requested refunds for 14 memberships out of more
than 4,300.

Sales and Marketing

We market an integrated set of services, typically consisting of best practices
research studies, executive education, customized research briefs and Web-based
access to our content database and decision support tools, for a fixed fee per
research program. We believe that this marketing strategy highlights the value
to members of our range of services and emphasizes the membership nature of our
business model, actively engaging the membership and reinforcing members
commitment to The Corporate Executive Board.

The separation of responsibility for new membership sales and membership
renewals reflects the varying difficulty and cost of the respective functions.
New business development representatives are compensated with a base salary and
variable, goal-based incentive bonuses and travel on average 60% of the time,
conducting face-to-face meetings with senior executives at prospective member
institutions. Member services representatives assume more of an in-house
coordinating role, bringing the resources of programs to bear on pressing
member needs.

Competition

We currently have few direct competitors, and those that do exist
generally compete only against a single research program. We compete indirectly
against other professional information services providers, including management
consulting firms, training and development companies, non-profit think tanks
and research and database companies. We are not aware of any other entity that
enables corporations to study as broad a range of the best corporate management
practices for fixed annual fees.

We believe that the principal competitive factors in our market include
quality and timeliness of research and analysis, reliable delivery, depth and
quality of the membership network, ability to meet changing customer needs,
superior service and affordably priced products. We believe we compete
favorably with respect to each of these factors.

The Advisory Board Company provides products and services to the health
care industry that are similar to the types of products and services that we
generally provide. We have entered into a noncompetition agreement with The
Advisory Board Company and David Bradley, its former sole stockholder. The
noncompetition agreement generally prohibits us from competing with The
Advisory Board Company with respect to health care clients and issues and
prohibits The Advisory Board Company and Mr. Bradley from competing with us
with respect to non-health care clients and issues, other than products and
services relating to advertising, magazines and newspapers, and government
relations and lobbying activities. The agreement was amended in 2001 to extend
through January 1, 2007.

Employees

At December 31, 2002, we employed 997 persons. Of these employees, 927
were located in Washington, D.C. and 70 were located at our
facilities in London, England. None of our employees are represented by a
collective bargaining arrangement. We believe that our relations with our
employees are favorable.

We believe strongly in a culture of meritocracy, rewarding key
contributors with opportunities for rapid professional growth and advancement
as well as competitive compensation. Training is a critical job
component for all of our employees, including industry analysis, economics,
quantitative modeling, root-cause analysis and presentation skills.

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Risk Factors

In addition to the other information contained in this Form 10-K, you
should carefully consider the following risk factors in evaluating us and our
business.

We depend on renewals of our membership-based services.

We derive most of our revenues from annual memberships for our products
and services. Our prospects therefore depend on our ability to achieve and
sustain high renewal rates on existing research programs and to enter into new
membership arrangements. Failure to achieve high membership renewal rate levels
would have a material adverse effect on our operating results. Our ability to
secure membership renewals depends upon our ability to deliver consistent, high
quality and timely research and analysis with respect to issues, developments
and trends that members view as important. We cannot assure you that we will be
able to sustain the necessary level of performance to achieve a high rate of
membership renewals. Although we actively market our research programs
throughout the year, historically, more than 41% of all renewals have taken
place in the fourth quarter of the year. See Managements Discussion and
Analysis of Financial Condition and Results of Operations and Business.

We cannot know in advance if new products will be successful.

Our future success will depend on our ability to develop new research
programs that address specific industry and business constituencies and the
changing needs of our current and prospective members for information, analysis
and advice. We cannot assure you that our efforts to introduce new research
programs will be successful. The process of internally researching, developing,
launching and gaining client acceptance of new research programs is
time-consuming, expensive and inherently risky. Delays or failures during
development or implementation, or lack of market acceptance of new research
programs could have a material adverse effect on our business, financial
condition and results of operations. Our business, financial condition and
results of operations would be materially adversely affected if we were unable
to develop and introduce successful new research programs or other new
products, or to make enhancements to existing research programs in a timely
manner in response to member requirements. See BusinessProducts and
Services.

We may experience difficulties in anticipating market trends.

Our future success will also depend upon our ability to anticipate rapidly
changing market trends and to adapt our research and analysis to meet the
changing information needs of our members. We may fail to continue to provide
helpful and timely research and analysis of developments and trends in a manner
that meets market needs. Any such failure would have a material adverse effect
on our business, financial condition and results of operations. The industry
and business sectors that we analyze undergo frequent and often dramatic
changes, including the introduction of new and the obsolescence of old
products, shifting strategies and market positions of major industry
participants and changing objectives and expectations of users of members
products and services. This environment of rapid and continuous change presents
significant challenges to our ability to provide our members with current and
timely research and analysis on issues of importance. Meeting these challenges
requires the commitment of substantial resources.

We must attract and retain a significant number of highly skilled employees.

Our future success also will depend upon our ability to hire, train,
motivate and retain a significant number of highly skilled employees,
particularly research analysts and sales and marketing staff. Our inability to
do so would have a material adverse effect on our business. We have
experienced, and expect to continue to experience, intense competition for
professional personnel from management consulting firms and other producers of
research and analysis products and services. Many of these firms have
substantially greater financial resources than we do to attract and compensate
qualified personnel. We cannot assure you that we will be successful in
attracting a sufficient number of highly skilled employees in the future, or
that we will be successful in training, motivating and retaining the employees we
are able to hire. See BusinessEmployees.

10



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We are restricted from selling our products and services to the health care industry.

At the time of our initial public offering, we entered into an agreement
with The Advisory Board Company that restricts us from selling our
membership-based products and services to companies principally engaged in the
health care business, although we may sell such products and services to
non-health care divisions or subsidiaries of health care companies. The
agreement has been extended through January 1, 2007. This restriction may limit
our future growth opportunities.

Continued consolidation in the financial institution industry may adversely impact our business.

A number of our research programs are oriented toward companies in the
financial services industry. The financial services industry is continuing to
experience substantial consolidation. This consolidation has resulted, and is
expected to continue to result, in a reduction in the number of our financial
institution members. We cannot assure you that this consolidation will not
materially and adversely affect our results of operations. At December 31,
2002, less than 30% of our Contract Value was attributable to financial
institution members, which include commercial banks, thrifts, credit unions,
credit card issuers, mutual fund companies, consumer credit lenders, brokerage
houses, private and trust banks and insurance companies. We calculate Contract
Value as the aggregate annualized revenue attributed to all agreements in
effect at a given time without regard to the remaining duration of any such
agreement.

We may experience fluctuations in operating results.

Our operating results may fluctuate significantly due to various factors,
including the growth in and timing of new programs, the timing of the
development, introduction and marketing of new products and services, the
timing of executive education seminars, the timing of the hiring of research
analysts and sales and marketing staff, changes in the spending patterns of our
members, our accounts receivable collection experience, changes in market
demand for research and analysis, foreign currency exchange rate fluctuations,
competitive conditions in the industry and general economic conditions. See
Managements Discussion and Analysis of Financial Condition and Results of
Operations.

We may be unable to protect our intellectual property rights.

We rely on copyright laws, as well as nondisclosure and confidentiality
arrangements, to protect our proprietary rights in our products and services.
We cannot assure you that the steps we have taken to protect our intellectual
property rights will be adequate to deter misappropriation of our rights or
that we will be able to detect unauthorized uses and take timely and effective
steps to enforce our rights. If substantial and material unauthorized uses of
our proprietary products and services were to occur, we would be required to
engage in costly and time-consuming litigation to enforce our rights. We cannot
assure you that we would prevail in such litigation. If others were able to use
our intellectual property, our ability to charge our fees for our products and
services would be adversely affected.

We may be exposed to litigation related to content.

As a publisher and distributor of original research and analysis and user
of third party content, we face potential liability for defamation, negligence
and copyright and trademark infringement. Any such litigation, whether or not
resulting in a judgment against us, could have a material adverse effect on our
financial condition and results of operations. Third party content includes
information created or provided by information services organizations and
consultants whom we retain and may be delivered to clients in writing, over the Internet
or orally.

We may be exposed to loss of revenue resulting from our unconditional service
guarantee.

We offer an unconditional service guarantee to our members. At any time, a
member may request a refund of their membership fee for a research program,
which is provided on a pro rata basis relative to the
remaining term of the membership. Requests for refunds of membership fees by a
significant number of our members could have a material adverse effect on our
financial condition and results of operations. See BusinessPricing.

11



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There may be risks related to our use of Arthur Andersen as our independent auditors.

Arthur Andersen LLP (Andersen), our former independent public
accountants that audited our financial statements for the fiscal years ended
December 31, 2000 and 2001, was found guilty by a jury on June 15, 2002 of
federal obstruction of justice in connection with the governments
investigation of Enron Corporation. Andersen ceased practicing before the
SEC effective August 31, 2002. It is
possible that events arising out of the indictment may adversely affect the
ability of Andersen to satisfy any claims arising from its provision of
auditing and other services to us, including claims that may arise out of
Andersens audit of our financial statements. The SEC has said that it will
continue accepting financial statements audited or reviewed by Andersen
provided that we comply with the applicable rules and orders issued by the SEC
in March 2002 for such purpose.

In the future, should we seek to access the public capital markets, the
SECs current rules require the inclusion or incorporation by reference of
three years of audited financial statements in any prospectus. These rules
would require us to present audited financial statements for one or more fiscal
years audited by Andersen until our audited financial statements for the fiscal
year ending December 31, 2004 become available in the first quarter of our
fiscal year 2005. The SEC recently adopted rules exempting certain issuers
filing Securities Act registration statements containing financial statements
audited by Andersen from having to comply with rules that would also require
such issuers to present manually signed reissued accountants reports and
written consents issued by Andersen. Although we believe that we currently meet
the requirements for such exemptions, if the SEC ceases accepting financial
statements audited by Andersen pursuant to such exemptions, it is possible that
our financial statements for the years ended December 31, 2000 and 2001 audited
by Andersen might not satisfy the SECs requirements. If this occurs, we would
not be able to access the public capital markets unless Ernst & Young LLP, our
current independent auditors, or another independent accounting firm is able to
audit the financial statements originally audited by Andersen. Any delay or
inability to access the public capital markets caused by those circumstances
could have a material adverse effect on us.

Item 2. Properties.

Our headquarters are located in approximately 102,000 square
feet of office space in Washington, D.C., which we lease under an agreement that expires in 2009.
We also lease approximately 88,000 square feet in nearby buildings in Washington, D.C., under agreements
with terms expiring in 2003 through 2012. We lease space in London, England, which is used primarily
for our international marketing efforts. Our facilities accommodate research,
marketing and sales, information technology, administration, graphic services
and operations personnel. We believe that our existing and planned facilities
will be adequate for our current needs and that additional facilities are
available for lease to meet future needs.

Item 3. Legal Proceedings.

From time to time, we are subject to ordinary routine litigation
incidental to our normal business operations. We are not currently a party to,
and our property is not subject to, any material legal proceedings.

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

None.

PART II

Item 5. Market for Registrants Common Equity and Related Stockholder Matters.

Our common stock has been quoted on the Nasdaq National Market under the
symbol EXBD since our initial public offering on February 23, 1999. As of
February 21, 2003, there were 32 stockholders of record of the common stock.
The following table sets forth, for the periods indicated, the high and low
sales prices per share of our common stock as reported on the Nasdaq National
Market.

12



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|      |  |                |  |   |        |      |  |     |        |  |  | 
|----- |  | -------------- |  | - | ------ | ---- |  | --- | ------ |  |  | 
|      |  |                |  |   |        | High |  | Low
|      |  |                |  |   |        |      |  |    
|2001: |  |                |  |   |        |      |  |     |        |  |  | 
|      |  | First quarter  |  | $ | 43.000 |      |  | $   | 24.250 | 
|      |  | Second quarter |  |   | 42.240 |      |  |     | 24.625 | 
|      |  | Third quarter  |  |   | 43.600 |      |  |     | 22.850 | 
|      |  | Fourth quarter |  |   | 39.550 |      |  |     | 26.000 | 
|2002: |  |                |  |   |        |      |  |     |        |  |  | 
|      |  | First quarter  |  | $ | 38.100 |      |  | $   | 28.570 | 
|      |  | Second quarter |  |   | 40.200 |      |  |     | 32.600 | 
|      |  | Third quarter  |  |   | 34.680 |      |  |     | 23.600 | 
|      |  | Fourth quarter |  |   | 35.730 |      |  |     | 26.700 | 

We have not declared or paid any cash dividend on our common stock since
the closing of our initial public offering. We do not anticipate declaring or
paying any cash dividends in the foreseeable future. The timing and amount of
future cash dividends, if any, would be determined by our Board of Directors
and would depend upon our earnings, financial condition and cash requirements.

We have adjusted all historical share and per share data in this Form 10-K
to reflect our 2-for-1 stock split in September 2000.

In February 2003, we announced that our Board of Directors authorized a
share repurchase of up to $75 million of our common stock. Repurchases will be
made from time to time in open market and privately negotiated transactions
subject to market conditions. No minimum number of shares has been fixed. We
will fund our share repurchases with cash on hand and cash generated from
operations.

Item 6. Selected Financial Data.

The following table sets forth selected financial and operating data. The
selected financial data presented below as of December 31, 1998, 1999, 2000 and
2001, and for each of the years in the four-year period ended December 31,
2001, have been derived from our financial statements which have been audited
by Arthur Andersen LLP, independent public accountants. See BusinessRisk
Factors. The selected financial
data presented below as of December 31, 2002 and for the year ended December
31, 2002, have been derived from our financial statements which have been
audited by Ernst & Young LLP, independent auditors. You should read the
selected financial data presented below in conjunction with our financial
statements, the notes to our financial statements and Managements Discussion
and Analysis of Financial Condition and Results of Operations appearing elsewhere in this Form 10-K.

|                           |                                           |                          |        |                                          |        |      |        |        |        |      |        |        |        |   |         |        |        |   |         |        |         | 
|-------------------------- | ----------------------------------------- | ------------------------ | ------ | ---------------------------------------- | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------- | 
|                           |                                           |                          |        | Year Ended December 31,                 
|                           |                                           |                          |        |                                         
|                           |                                           |                          |        | 1998                                     |        | 1999 |        | 2000   |        | 2001 |        | 2002  
|                           |                                           |                          |        |                                          |        |      |        |        |        |      |        |       
|                           |                                           |                          |        | (In thousands, except per share amounts)
|Statements of Income Data: |                                           |                          |        |                                          |        |      |        |        |        |      |        |        |        |   |         |        |        |   |         |       
|Revenues                   |                                           | $                        | 53,030 |                                          |        | $    | 70,767 |        |        | $    | 95,491 |        |        | $ | 128,112 |        |        | $ | 162,357 |       
|Costs and expenses:        |                                           |                          |        |                                          |        |      |        |        |        |      |        |        |        |   |         |        |        |   |         |       
|                           | Cost of services                          |                          |        | 25,373                                   |        |      |        | 28,602 |        |      |        | 36,094 |        |   |         | 45,738 |        |   |         | 56,147 |        
|                           | Member relations and marketing            |                          |        | 11,676                                   |        |      |        | 15,525 |        |      |        | 21,236 |        |   |         | 30,219 |        |   |         | 40,768 |        
|                           | General and administrative                |                          |        | 6,920                                    |        |      |        | 8,485  |        |      |        | 12,021 |        |   |         | 15,877 |        |   |         | 17,493 |        
|                           | Depreciation                              |                          |        | 885                                      |        |      |        | 1,318  |        |      |        | 2,573  |        |   |         | 4,412  |        |   |         | 5,456  |        
|                           | Stock option and related expenses (1) (2) |                          |        | 5,342                                    |        |      |        | 383    |        |      |        | 1,371  |        |   |         | 1,260  |        |   |         | 668    |        
|                           |                                           |                          |        |                                          |        |      |        |        |        |      |        |        |        |   |         |        |        |   |         |       
|                           |                                           | Total costs and expenses |        |                                          | 50,196 |      |        |        | 54,313 |      |        |        | 73,295 |   |         |        | 97,506 |   |         |        | 120,532 | 
|                           |                                           |                          |        |                                          |        |      |        |        |        |      |        |        |        |   |         |        |        |   |         |       

13



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##### 



|                                            |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  | 
|------------------------------------------- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | 
|Income from operations                      |  |   | 2,834  |  |  |   | 16,454 |  |  |   | 22,196 |  |  |   | 30,606 |  |  |   | 41,825 | 
|Other income, net                           |  |   | 786    |  |  |   | 1,114  |  |  |   | 2,263  |  |  |   | 4,283  |  |  |   | 6,346  | 
|                                            |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|Income before provision for income taxes    |  |   | 3,620  |  |  |   | 17,568 |  |  |   | 24,459 |  |  |   | 34,889 |  |  |   | 48,171 | 
|Provision for income taxes (3)              |  |   | 361    |  |  |   | 4,322  |  |  |   | 9,539  |  |  |   | 13,257 |  |  |   | 18,570 | 
|                                            |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|Net income                                  |  | $ | 3,259  |  |  | $ | 13,246 |  |  | $ | 14,920 |  |  | $ | 21,632 |  |  | $ | 29,601 | 
|                                            |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|Earnings per sharebasic (3)                |  | $ | 0.13   |  |  | $ | 0.50   |  |  | $ | 0.49   |  |  | $ | 0.64   |  |  | $ | 0.81   | 
|Weighted average shares outstandingbasic   |  |   | 25,009 |  |  |   | 26,446 |  |  |   | 30,321 |  |  |   | 34,003 |  |  |   | 36,722 | 
|Earnings per sharediluted (3)              |  | $ | 0.11   |  |  | $ | 0.41   |  |  | $ | 0.43   |  |  | $ | 0.59   |  |  | $ | 0.79   | 
|Weighted average shares outstandingdiluted |  |   | 29,900 |  |  |   | 32,054 |  |  |   | 34,638 |  |  |   | 36,465 |  |  |   | 37,671 | 

|                                                 |              |                |        |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |         | 
|------------------------------------------------ | ------------ | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                 | December 31,
|                                                 |             
|                                                 |              | 1998           |        | 1999 |  | 2000 |        | 2001 |  | 2002
|                                                 |              |                |        |      |  |      |        |      |  |     
|                                                 |              | (In thousands)
|Balance Sheet Data:                              |              |                |        |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |         | 
|Cash, cash equivalents and marketable
securities |              | $              | 16,104 |      |  | $    | 33,074 |      |  | $    | 69,373  |  |  | $ | 132,469 |  |  | $ | 225,941 | 
|Deferred income taxes                            |              |                | 1,438  |      |  |      | 8,047  |      |  |      | 31,348  |  |  |   | 58,520  |  |  |   | 59,726  | 
|Total assets                                     |              |                | 48,928 |      |  |      | 81,764 |      |  |      | 152,494 |  |  |   | 257,518 |  |  |   | 359,581 | 
|Deferred revenues                                |              |                | 39,061 |      |  |      | 55,436 |      |  |      | 71,281  |  |  |   | 94,683  |  |  |   | 121,415 | 
|Total stockholders equity (deficit)             |              |                | (8,147 | )    |  |      | 10,846 |      |  |      | 65,561  |  |  |   | 143,984 |  |  |   | 213,357 | 

|                                             |              |      |        |      |  |      |        |      |  |      |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------- | ------------ | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                             | December 31,
|                                             |             
|                                             |              | 1998 |        | 1999 |  | 2000 |        | 2001 |  | 2002
|                                             |              |      |        |      |  |      |        |      |  |     
|Other Operating Data (unaudited):            |              |      |        |      |  |      |        |      |  |      |         |   |  |   |         |   |  |   |         |  
|Membership programs (4)                      |              |      | 10     |      |  |      | 12     |      |  |      | 15      |   |  |   | 18      |   |  |   | 22      |  
|Member institutions                          |              |      | 1,333  |      |  |      | 1,480  |      |  |      | 1,745   |   |  |   | 1,802   |   |  |   | 1,930   |  
|Total membership subscriptions               |              |      | 2,263  |      |  |      | 2,790  |      |  |      | 3,543   |   |  |   | 4,364   |   |  |   | 5,257   |  
|Average subscriptions per member
institution |              |      | 1.70   |      |  |      | 1.89   |      |  |      | 2.03    |   |  |   | 2.42    |   |  |   | 2.72    |  
|Client renewal rate (5)                      |              |      | 90     | %    |  |      | 90     | %    |  |      | 90      | % |  |   | 90      | % |  |   | 90      | %
|Subscription renewal rate (6)                |              |      | 85     | %    |  |      | 84     | %    |  |      | 84      | % |  |   | 82      | % |  |   | 82      | %
|Contract Value (in thousands of dollars) (7) |              | $    | 61,180 |      |  | $    | 80,633 |      |  | $    | 108,542 |   |  | $ | 138,474 |   |  | $ | 176,533 |  





|(1) |  | Prior to our spin-off from The Advisory Board Company in October 1997, The Advisory Board Company entered into agreements with certain employees to repurchase outstanding stock options at fixed amounts. We assumed the obligations under these agreements in the spin-off to the extent they were
attributable to our employees. We reflect the charges relating to these agreements as stock option repurchase expenses over the required employment period ended December 31, 1998. In addition, we substituted our stock options for The Advisory Board Company stock options in the spin-off. The
terms of the stock option substitution resulted in compensation expense being charged for the intrinsic value of certain stock options. We reflect these charges as stock option expenses over the vesting period of the options. After calendar year 2001, we recognized no additional compensation
expense related to these substitution agreements. Furthermore, in December 1998, we and our selling stockholder at the time agreed to make certain payments in the aggregate amount of $2.4 million to selected employees under a special bonus plan. We recorded the special bonus plan charge of
$2.4 million at the time of the commitment in December 1998. See Managements Discussion and Analysis of Financial Condition and Results of OperationYears Ended December 31, 2000, 2001 and 2002Stock option and related expenses.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | For the years ended December 31, 2000, 2001 and 2002, we recognized $1.0 million, $1.1 million and $668,000, respectively, in compensation expense reflecting additional Federal Insurance Corporation Act (FICA) taxes as a result of the taxable income that the employees recognized upon the
exercise of non-qualified common stock options, primarily in conjunction with the registered public offerings in February 2000, March and April 2001 and March 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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|(3) |  | Prior to our initial public offering in February 1999, we had elected to be taxed under subchapter S of the Internal Revenue Code. In February 1999, we terminated our S corporation election and became subject to U.S. Federal and state income taxes at prevailing corporate rates. If we had
elected to be taxed under subchapter C of the Internal Revenue Code for U.S. Federal and state income tax purposes beginning January 1, 1998 and recorded income tax expense using an annual effective rate of 41.0%, pro forma net income (unaudited) and basic and diluted earnings per share
(unaudited) would have been $2.1 million, $0.09 and $0.07, respectively, for 1998, and $10.4 million, $0.39 and $0.32, respectively, for 1999.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | In January 2003, we launched the HR Measurement Lab, an extension of our model into the human resource performance management arena, bringing the current number of membership programs to 23.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(5) |  | For the year then ended. Client renewal rate is defined as the percentage of membership institutions renewed, adjusted to reflect reductions in membership institutions resulting from mergers and acquisitions of members.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(6) |  | For the year then ended. Subscription renewal rate is defined as the percentage of membership subscriptions renewed for the year, adjusted to reflect reductions in membership subscriptions resulting from mergers and acquisitions of members.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(7) |  | For the year then ended. Contract Value is defined as the aggregate annualized revenue attributed to all agreements in effect at a given date without regard to the remaining duration of any such agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We provide best practices research and quantitative analysis focusing on
corporate strategy, operations and general management issues. Best practices
research supports senior executive decision making by identifying and analyzing
specific management initiatives, processes and strategies that have been
determined to produce the best results in solving common business problems or
challenges. For a fixed annual fee, members of each of our research programs
have access to an integrated set of services, including best practices research
studies, executive education seminars, customized research briefs and Web-based
access to the programs content database and decision support tools.

Memberships, which are principally annually renewable agreements, are
generally payable by members at the beginning of the contract term. Billings
attributable to memberships in our research programs initially are recorded as
deferred revenues and then recognized pro rata over the membership contract
term, which is typically 12 months. At any time, a member may request a refund
of their membership fee for a research program, which is provided on a pro rata
basis relative to the remaining term of the membership.

Our growth strategy is to cross-sell additional research programs to existing members, to
add new members and to develop new research programs and decision support tools. The
implementation of our growth strategy can be seen in our operating results.
Over the last three years, our revenues have grown at a compound annual
growth rate of 31.9% from $70.8 million in 1999 to $162.4 million in 2002,
while costs have grown at a compound annual growth rate of 30.4% from $54.3
million in 1999 to $120.5 million in 2002. In addition, our Contract Value has grown at a
compound annual growth rate of 29.9% over the past three years and was $176.5 million at December 31,
2002. We calculate Contract Value as the aggregate annualized revenue attributed to all agreements in
effect at a given point in time, without regard to the remaining duration of
any such agreement. Our experience has been that a substantial portion of
members renew subscriptions for an equal or higher level each year. See the table titled Other Operating
Data (unaudited) in Item 6Selected Financial Data, for additional information with respect to members,
subscriptions and renewals.

15



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Our operating costs and expenses consist of cost of services, member relations
and marketing, general and administrative expenses, depreciation, and stock
option and related expenses. Cost of services represents the costs associated
with the production and delivery of our products and services, including
compensation of research personnel and in-house faculty, the production of
published materials, the organization of executive education seminars and all
associated support services. Member relations and marketing expenses include
the costs of acquiring new members, the costs of maintaining and renewing
existing members, compensation expense (including sales commissions), travel
and all associated support services. General and administrative expenses
include the costs of human resources and recruiting, finance and accounting,
management information systems, facilities management, new product development
and other administrative functions. Stock option and related expenses include
non-cash compensation expense related to certain stock option agreements in
existence at the time of the spin-off from The Advisory Board Company and
additional cash payroll taxes for compensation expense relating to the taxable
income recognized by employees upon the exercise of non-qualified common stock
options.

Results of Operations

The following table sets forth certain financial data as a percentage of
total revenues for the periods indicated:

|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |      |      | 
|---------------------------------------- | --------------------------------- | ------------------------ | ----- | ----------------------- | ---- | ---- | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                         |                                   |                          |       | Year Ended December 31,
|                                         |                                   |                          |       |                        
|                                         |                                   |                          |       | 2000                    |      | 2001 |       | 2002
|                                         |                                   |                          |       |                         |      |      |       |     
|Revenues                                 |                                   |                          | 100.0 | %                       |      |      | 100.0 | %    |      |  | 100.0 | %   
|                                         | Cost of services                  |                          |       | 37.8                    |      |      |       | 35.7 |      |  |       | 34.6 |     
|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |     
|Gross profit                             |                                   |                          | 62.2  |                         |      |      | 64.3  |      |      |  | 65.4  |     
|Costs and expenses:                      |                                   |                          |       |                         |      |      |       |      |      |  |       |     
|                                         | Member relations and marketing    |                          |       | 22.2                    |      |      |       | 23.6 |      |  |       | 25.1 |     
|                                         | General and administrative        |                          |       | 12.6                    |      |      |       | 12.4 |      |  |       | 10.8 |     
|                                         | Depreciation                      |                          |       | 2.7                     |      |      |       | 3.4  |      |  |       | 3.4  |     
|                                         | Stock option and related expenses |                          |       | 1.5                     |      |      |       | 1.0  |      |  |       | 0.4  |     
|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |     
|                                         |                                   | Total costs and expenses |       |                         | 39.0 |      |       |      | 40.4 |  |       |      | 39.7 | 
|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |     
|Income from operations                   |                                   |                          | 23.2  |                         |      |      | 23.9  |      |      |  | 25.8  |     
|Other income, net                        |                                   |                          | 2.4   |                         |      |      | 3.3   |      |      |  | 3.9   |     
|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |     
|Income before provision for income taxes |                                   |                          | 25.6  |                         |      |      | 27.2  |      |      |  | 29.7  |     
|Provision for income taxes               |                                   |                          | 10.0  |                         |      |      | 10.3  |      |      |  | 11.4  |     
|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |     
|Net income                               |                                   |                          | 15.6  | %                       |      |      | 16.9  | %    |      |  | 18.2  | %   
|                                         |                                   |                          |       |                         |      |      |       |      |      |  |       |     



Years Ended December 31, 2000, 2001 and 2002

Revenues.Revenues increased 34.2% from $95.5 million for 2000 to $128.1
million for 2001, and 26.7% to $162.4 million for 2002.
The largest driver of the increase in revenues during 2000, 2001 and 2002 was the
cross-selling of additional subscriptions to existing members. Other drivers contributing to
the increase in revenues during 2000, 2001 and 2002 included the introduction of new
research programs, price increases and the addition of new members. The average membership subscription price increased
6.0% in 2000, 3.6% in 2001 and 5.8% in 2002. We introduced three new research
programs within each of the calendar years 2000 and 2001 and four new research
programs in 2002.

Cost of services.Cost of services increased 26.7% from $36.1 million for
2000 to $45.7 million for 2001 and 22.8% to $56.1 million for 2002. The
increase in cost of services was principally due to increased research staffing
and related compensation costs to support

16



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new research programs and an increase
in short answer research and executive education services staffing to serve the
growing membership base. Cost of services as a percentage of revenues decreased
from 37.8% for 2000 to 35.7% for 2001 and to 34.6% for 2002.
The decrease in costs of services as a percentage of revenues over the three-year period ending
December 31, 2002 is due to the nature of our membership-based model. Because each research program
provides our membership with standardized best practices research studies and executive education
seminars, new members immediately add to our revenues while only incrementally increasing our operating
costs. Cost of services as a percentage of revenues may fluctuate due to the timing of
the completion and delivery of best practices research studies, the timing of
executive education seminars, and the fixed nature of a portion of the
production costs of best practices research studies, as these costs are not
significantly affected by growth in the number of membership subscriptions.

Gross profit. Gross profit margin (gross profit as a
percentage of revenues) may fluctuate based upon the growth in revenues offset
by the costs of delivering best practices research studies, the timing of
executive education seminars, the volume of customized research briefs and the
hiring of personnel. Accordingly, the gross margin for the year ended December
31, 2002, may not be indicative of future results.

Member relations and marketing.Member relations and marketing costs
increased 42.3% from $21.2 million for 2000 to $30.2 million for 2001, and
34.9% to $40.8 million for 2002. The increase in member relations and marketing
costs is due to the increase in sales staff and related costs, the
increase in commission expense associated with increased revenues and,
to a lesser extent, the increase in member relations personnel and related costs to support our
expanding membership base. Member relations and marketing costs as a percentage
of revenues have increased from 22.2% for 2000 to 23.6% for 2001, and to 25.1%
for 2002 as we have added member relations and marketing personnel and incurred related
costs to support our expanding membership base.

General and administrative.General and administrative expenses increased
32.1% from $12.0 million for 2000 to $15.9 million for 2001, and 10.2% to $17.5
million for 2002. The increase in general and administrative expenses resulted
principally from staffing increases across all functional areas to support our growth. During
2001, we experienced an increase in consulting and training expenses associated
with the investments in management information systems software. During 2002,
we experienced a decrease in consulting and training expenses as compared to
2001 associated with prior year investments in management information
systems software along with a decrease in costs associated with our reduced use
of external personnel search firms. Although general and administrative
expenses increased during the period 2000 through 2002, general and
administrative expenses as a percentage of revenues decreased from 12.6% in
2000 to 12.4% in 2001 and to 10.8% in 2002 due to the fixed nature
of a portion of these costs, which are not significantly affected by growth in
revenues.

Depreciation.Depreciation expense increased 71.5% from $2.6 million for
2000 to $4.4 million for 2001, and 23.7% to $5.5 million for 2002. The increase
in depreciation expense was principally due to the additional investment in
leasehold improvements for additional office space in Washington, D.C., and the
purchase of computer equipment and management information systems software to
support organizational growth.

Stock option and related expenses.We recognized $0.4 million and $0.2
million in 2000 and 2001, respectively, related to stock option agreements in
existence at the time of the spin-off from The Advisory Board Companys sole
stockholder. Our business was operated as a division of The Advisory Board
Company, a Maryland corporation, until October 31, 1997 when the business was
contributed to us and spun-off to The Advisory Board Companys sole
stockholder. In connection with the spin-off, we executed substitution
agreements with each of our employees participating in The Advisory Board
Company stock option plan. These substitution agreements resulted in
compensation expense being recognized by us over the vesting period.
There are no earnings charges subsequent to December 31, 2001 related
to these substitution agreements. In addition, there are no stock
options available to issue or stock options outstanding under the substitution agreements.

We recognized $1.0 million, $1.1 million and $668,000 in compensation
expense during the years ended December 31, 2000, 2001 and 2002, respectively,
reflecting additional Federal Insurance Corporation Act (FICA) taxes as a
result of the taxable income that our employees recognized upon the exercise of
non-qualified common stock options, primarily in conjunction with the sale of
our common stock in the registered public offerings of common stock in February
2000, March and April 2001 and March 2002. See further discussion of the sale
of our common stock in the registered public offerings of common stock in the
liquidity and capital resources section below.

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Other income, net.Other income, net, consists primarily of interest income
earned on a portfolio of cash and cash equivalents and marketable securities
and the realized gain (loss) on the sale of marketable securities. During 2000,
other income, net, also included the realized loss on the write-off of property
and equipment. Other income increased 89.3% from $2.3 million for 2000 to $4.3
million for 2001, and 48.2% to $6.3 million for 2002. The growth in other
income, net, was due primarily to the increase in interest income associated
with the increased level of cash and cash equivalents and marketable
securities.
However, the lower relative growth in other income, net, as a percentage of revenues for 2002
reflects lower investment returns due to the lower interest rate environment.
Cash and cash equivalents and marketable securities increased as a
result of cash flows from operating activities and cash flows from financing
activities further discussed in the liquidity and capital resources section
below.

Provision for income taxes.We recorded a provision for income taxes of
$9.5 million, $13.3 million and $18.6 million for 2000, 2001 and 2002,
respectively. The reduction in the effective income tax rate from 39.0% for
2000 to 38.0% for 2001 primarily reflects the increase in the amount of
tax-exempt interest income earned on the portfolio of cash and cash equivalents
and marketable securities and the increased benefit from Federal income tax
incentives associated with the location of our office facilities. The increase
in the effective income tax rate from 38.0% for 2001 to 38.6% for 2002
primarily reflects the decreased benefit from Federal income tax incentives
associated with the location of our office facilities.

Liquidity and Capital Resources

Cash flows from operating activities.We have financed our operations to
date through funds generated from operating activities. Membership
subscriptions, which are principally annually renewable agreements, are
generally payable by members at the beginning of the contract term. The
combination of revenue growth and advance payment of membership subscriptions
has historically resulted in net positive cash flows provided by operating
activities. We generated net cash flows from operating activities of $38.7
million, $52.8 million, and $77.9 million for 2000, 2001 and 2002,
respectively. For 2000, 2001 and 2002, operating cash flows were generated
within the period principally by net income, the utilization of tax benefits
created by the exercise of common stock options, and the growth in deferred
revenues, partially offset by the growth in membership fees receivable. As of
December 31, 2001 and 2002, we had cash, cash equivalents and marketable
securities of $132.5 million and $225.9 million, respectively. We expect that
our current cash, cash equivalents and marketable securities balances and
anticipated net positive cash flows from operations will satisfy working
capital, financing, and capital expenditure requirements for the next 12
months.

Cash flows from investing activities.We used net cash flows in investing
activities of $44.5 million, $38.6 million, and $68.3 million during the years
ended December 31, 2000, 2001, and 2002, respectively. During 2000, 2001, and
2002, investing cash flows were used within the period to purchase
available-for-sale marketable securities, net, of $35.2 million, $33.3 million
and $65.2 million, respectively, and to purchase leasehold improvements for
additional office space in Washington, D.C. and computer software and equipment
of $9.3 million, $5.3 million and $3.1 million, respectively.

Cash flows from financing activities.We generated net cash flows from
financing activities of $5.5 million, $14.5 million and $13.5 million during
the years ended December 31, 2000, 2001 and 2002, respectively. Net cash
provided by financing activities during the years ended December 31, 2000,
2001 and 2002, was primarily attributed to the receipt of cash for the exercise
of stock options in conjunction with the sale of our common stock by our employees and directors in registered
public offerings. In February 2000, March and April 2001 and March 2002,
11,023,030 shares, 3,035,000 shares and 2,100,000 shares, respectively, of our
common stock were sold in registered public offerings. We did not directly
receive any proceeds from the sale of our common stock. However, we did receive
cash from the exercise of common stock options in conjunction with the sale of
our common stock.

We previously entered into a $10.0 million, unsecured loan agreement with
a commercial bank that provided for a revolving line of credit facility under
which we could have from time to time borrowed, repaid, and
reborrowed funds. There were no borrowings under the revolving line of credit facility while it
was in effect. The revolving line of credit facility expired in May 2002 and we
elected not to renew the revolving line of credit facility. In addition, we
have entered into $1.3 million and $4.0 million letter of credit
agreements with commercial banks, expiring June 2003 and August 2004, respectively, to provide
security deposits for certain of our office leases. We pledged certain assets as collateral under the
letter of credit agreements. To date, no amounts have been drawn on either agreement.

18



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We lease office facilities in the United States and the United Kingdom
expiring on various dates over the next 17 years. Certain lease agreements
include provisions for rental escalations and require us to pay for executory
costs such as taxes and insurance. Future minimum rental payments under
noncancellable operating leases, excluding executory costs, are $93.8 million.

The following summarizes certain of our operating lease obligations at
December 31, 2002:

|                 |  |                                       |        |         |  |           |       |           |  |          |        |  |  |   |        |  |  |   |        | 
|---------------- |  | ------------------------------------- | ------ | ------- |  | --------- | ----- | --------- |  | -------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                 |  | Payments Due by Period (in thousands)
|                 |  |                                      
|                 |  | Total                                 |        | <1 Year |  | 13 Years |       | 45 Years |  | >5 Years
|                 |  |                                       |        |         |  |           |       |           |  |         
|Operating leases |  | $                                     | 93,807 |         |  | $         | 6,908 |           |  | $        | 17,281 |  |  | $ | 19,276 |  |  | $ | 50,342 | 

We have no other non-cancellable contractual financial obligations
at December 31, 2002.

At December 31, 2001 and 2002, we have no off-balance sheet financing or
other arrangements with unconsolidated entities or financial partnerships (such
as entities often referred to as structured finance or special purpose
entities) established for purposes of facilitating off-balance sheet financing
or other debt arrangements or for other contractually narrow or limited
purposes.

Share Repurchase

In February 2003, we announced that our Board of Directors authorized a
share repurchase of up to $75 million of our common stock. Repurchases will be
made from time to time in open market and privately negotiated transactions
subject to market conditions. No minimum number of shares has been fixed. We
will fund our share repurchases with cash on hand and cash generated from
operations.

Critical Accounting Policies

We have identified the following policies as critical to our business
operations and the understanding of our results of operations. This listing is
not a comprehensive list of all of our accounting policies. In many cases, the
accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the United States, with no need for
managements judgment in their application. There are also areas in which
managements judgment in selecting any available alternative would not produce
a materially different result. However, certain of our accounting policies are
particularly important to the portrayal of our financial position and results
of operations and may require the application of
significant judgment by our management; as a result, they are subject to
an inherent degree of uncertainty. In applying those policies, our management
uses its judgment to determine the appropriate assumptions to be used in the
determination of certain estimates. Those estimates are based on our historical
experience, our observance of trends in the industry, information provided by
our members and information available from other outside sources, as
appropriate. For a more detailed discussion on the application of these and
other accounting policies, see Note 4  Summary of significant account
policies in our financial statements and related notes. Our
critical accounting policies include:

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Deferred tax asset

We have deferred income tax assets consisting primarily of net operating
loss (NOL) carryforwards for regular Federal and state income tax purposes
generated from the exercise of common stock options. In estimating future tax
consequences, Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes(SFAS 109) generally considers all expected future events in
the determination and evaluation of deferred tax assets and liabilities. We
believe that our future taxable income will be sufficient for the full
realization of the deferred income tax assets. However, SFAS 109 does not
consider the effect of future changes in existing tax laws or rates in the
determination and evaluation of deferred tax assets and liabilities until the
new tax laws or rates are enacted. We have established our deferred income tax
assets and liabilities using currently enacted tax law and rates. We will
recognize into income an adjustment for the impact of new tax laws or rates on
the existing deferred tax assets and liabilities when new tax laws or rates are
enacted.

Washington, D.C. income tax incentives

The Office of Tax and Revenue of the Government of the District of
Columbia (the Office of Tax and Revenue) has adopted regulations in
accordance with the New E-Conomy Transformation Act of 2000 (the Act) that
modify the income and franchise tax, sales and use tax, and personal property
tax regulations, effective April 2001. Specifically, the regulations provide
certain credits, exemptions and other benefits to a Qualified High Technology
Company (QHTC).

We have performed an analysis to support our position that we meet the
definition of a QHTC under the provisions of the Act. Accordingly, we will
amend our 2001 Washington, D.C. income tax return and certain sales and use tax
returns, to file as a QHTC. As a QHTC, our Washington, D.C. income tax rate
will be 0.0% and we will be eligible for certain Washington, D.C. income tax
credits. In addition, we will be entitled to relief from certain sales and use
taxes. While we believe we qualify as a QHTC, we have elected not to recognize the
impact of this election within the financial statements for the year ended
December 31, 2002 because of uncertainties inherent in the regulations, as
adopted.

For financial reporting purposes, we have valued our deferred income tax
assets and liabilities using Washington, D.C.s currently enacted income tax
rate of 9.975%. Additionally, we have continued to provide for income, sales and
use taxes as if we were not a QHTC. However, if we had received a determination
that we qualified for QHTC status, we would have recorded a charge to earnings
of approximately $9.5 million, representing the impact on our existing deferred
tax asset of lowering the Washington, D.C. income tax rate to 0.0%, net of any
income tax credits discussed above. When we believe it is more likely than not that
the Office of Tax and Revenue will accept our election as a QHTC, we will record the applicable charge.
Additionally, we would recognize the refund of any previously paid or provided
sales and use taxes at that time.

Revenue recognition

Revenues from membership subscriptions are recognized over the term of the
related subscription, which is generally 12 months. Membership fees are generally
billable, and revenue recognition begins, when the member agrees to the terms
of the membership. Certain membership fees are billed on an
installment basis. Members may request a refund of their membership fees, which
is provided on a pro rata basis relative to the length of the remaining
membership term. Our policy is to record the full amount of membership fees
receivable as an asset and related deferred revenue as a liability when a
member agrees to the terms of a membership. Revenues from membership subscriptions were greater than 95% of total revenues for each of the years ending December 31, 2000, 2001,
and 2002.

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Reserve for uncollectible revenue

We record a reserve for uncollectible revenue based upon managements
analyses and estimates as to the collectability of our accounts receivable. As
part of our analysis, we examine our collections history, the age of the
receivables in question, any specific customer collection issues that we have
identified, general market conditions, customer concentrations and current
economic trends.

Commission expense recognition

Commission expenses related to the negotiation of new memberships and the
renewal of existing memberships are deferred and amortized over the term of the
related memberships.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to interest rate risk primarily through our portfolio of
cash, cash equivalents and marketable securities, which is designed for safety
of principal and liquidity. Cash and cash equivalents consist of highly liquid
U.S. Treasury obligations with maturities of less than three months. Marketable
securities consist primarily of U.S. Treasury notes and bonds and insured
Washington, D.C. tax exempt notes and bonds. We perform periodic evaluations of
the relative credit ratings related to the cash, cash equivalents and
marketable securities. This portfolio is subject to inherent interest rate risk
as investments mature and are reinvested at current market interest rates. We
currently do not use derivative financial instruments to adjust our portfolio
risk or income profile.

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Report of Independent Auditors

The Board of Directors and Stockholders of
The Corporate Executive Board Company:

We have audited the balance sheet of The Corporate Executive Board Company as
of December 31, 2002, and the related statements of income, changes in
stockholders equity and cash flows for the year then ended. 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 audit. The financial statements of The Corporate Executive Board Company
for the years ended December 31, 2000 and 2001, were audited by other auditors
who have ceased operations and whose report dated January 31, 2002 expressed an
unqualified opinion on those statements.

We conducted our audit 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 audit provides a reasonable basis
for our opinion.

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the financial position of The Corporate Executive
Board Company at December 31, 2002, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States.

| |  |                      
| |  | ---------------------
| |  | /s/ Ernst & Young LLP

Washington, D.C.
January 31, 2003

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The following report is a copy of a report previously issued by Arthur
Andersen LLP (Andersen), which report has not been reissued by Andersen.
Certain financial information for each of the two years in the period ended
December 31, 2001 was not reviewed by Andersen and includes additional
disclosures to conform to new accounting pronouncements and SEC rules and
regulations issued during such fiscal year. See Item 1.
Business for
discussion of risks.

Report of Independent Auditors

To the Stockholders of The Corporate Executive Board Company:

We have audited the accompanying balance sheets of The Corporate Executive
Board Company as of December 31, 2000 and 2001, and the related statements of
income, stockholders equity (deficit) and cash flows for each of the three
years in the period ended December 31, 2001. 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 financial position of The Corporate Executive
Board Company as of December 31, 2000 and 2001, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

/s/ Arthur Andersen LLP

Washington, D.C.
January 31, 2002

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THE CORPORATE EXECUTIVE BOARD COMPANY

BALANCE SHEETS
(In thousands, except share amounts)

|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |         | 
|--------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------------ | ------- | ---- | ------- | ------- | ------- | 
|                            |                                                                                                                                                                         |                                            |        | December 31,
|                            |                                                                                                                                                                         |                                            |        |             
|                            |                                                                                                                                                                         |                                            |        | 2001         |         | 2002
|                            |                                                                                                                                                                         |                                            |        |              |         |     
|                            |                                                                                                                                                                         | ASSETS                                     |        |              |         |      |         |         |         | 
|CURRENT ASSETS:             |                                                                                                                                                                         |                                            |        |              |         |      |         |        
|                            | Cash and cash equivalents                                                                                                                                               |                                            | $      | 48,271       |         |      | $       | 71,346  |        
|                            | Marketable securities                                                                                                                                                   |                                            |        | 35,735       |         |      |         | 17,030  |        
|                            | Membership fees receivable, net                                                                                                                                         |                                            |        | 42,011       |         |      |         | 50,356  |        
|                            | Deferred income taxes                                                                                                                                                   |                                            |        | 19,881       |         |      |         | 28,806  |        
|                            | Deferred incentive compensation                                                                                                                                         |                                            |        | 4,216        |         |      |         | 4,974   |        
|                            | Prepaid expenses and other current assets                                                                                                                               |                                            |        | 3,042        |         |      |         | 3,668   |        
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | Total current assets                       |        |              | 153,156 |      |         |         | 176,180 | 
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|DEFERRED INCOME TAXES       |                                                                                                                                                                         |                                            | 38,639 |              |         |      | 30,920  |        
|MARKETABLE SECURITIES       |                                                                                                                                                                         |                                            | 48,463 |              |         |      | 137,565 |        
|PROPERTY AND EQUIPMENT, NET |                                                                                                                                                                         |                                            | 17,260 |              |         |      | 14,916  |        
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | Total assets                               |        | $            | 257,518 |      |         | $       | 359,581 | 
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | LIABILITIES AND STOCKHOLDERS EQUITY       |        |              |         |      |         |         |         | 
|CURRENT LIABILITIES:        |                                                                                                                                                                         |                                            |        |              |         |      |         |        
|                            | Accounts payable and accrued liabilities                                                                                                                                |                                            | $      | 10,683       |         |      | $       | 12,549  |        
|                            | Accrued incentive compensation                                                                                                                                          |                                            |        | 6,387        |         |      |         | 9,660   |        
|                            | Deferred revenues                                                                                                                                                       |                                            |        | 94,683       |         |      |         | 121,415 |        
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | Total current liabilities                  |        |              | 111,753 |      |         |         | 143,624 | 
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|OTHER LIABILITIES           |                                                                                                                                                                         |                                            | 1,781  |              |         |      | 2,600   |        
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | Total liabilities                          |        |              | 113,534 |      |         |         | 146,224 | 
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|STOCKHOLDERS EQUITY:       |                                                                                                                                                                         |                                            |        |              |         |      |         |        
|                            | Preferred stock, par value $0.01; 5,000,000 shares authorized, no shares
issued and outstanding                                                                         |                                            |        |             |         |      |         |        |        
|                            | Common stock, par value $0.01; 100,000,000 shares authorized and 34,898,060
and 37,182,846 shares issued and outstanding as of December 31, 2001 and 2002,
respectively |                                            |        | 349          |         |      |         | 372     |        
|                            | Additional paid-in-capital                                                                                                                                              |                                            |        | 94,221       |         |      |         | 129,846 |        
|                            | Retained earnings                                                                                                                                                       |                                            |        | 48,243       |         |      |         | 77,844  |        
|                            | Accumulated elements of comprehensive income                                                                                                                            |                                            |        | 1,171        |         |      |         | 5,295   |        
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | Total stockholders equity                 |        |              | 143,984 |      |         |         | 213,357 | 
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        
|                            |                                                                                                                                                                         | Total liabilities and stockholders equity |        | $            | 257,518 |      |         | $       | 359,581 | 
|                            |                                                                                                                                                                         |                                            |        |              |         |      |         |         |        

See accompanying notes to financial statements.

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THE CORPORATE EXECUTIVE BOARD COMPANY

STATEMENTS OF INCOME
(In thousands, except per share amounts)

|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |        |        | 
|---------------------------------------------------------------------- | --------------------------------- | ------------------------ | ------ | ----------------------- | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                       |                                   |                          |        | Year ended December 31,
|                                                                       |                                   |                          |        |                        
|                                                                       |                                   |                          |        | 2000                    |        | 2001 |         | 2002  
|                                                                       |                                   |                          |        |                         |        |      |         |       
|REVENUES                                                               |                                   | $                        | 95,491 |                         |        | $    | 128,112 |        |        | $ | 162,357 |       
|                                                                       | Cost of services                  |                          |        | 36,094                  |        |      |         | 45,738 |        |   |         | 56,147 |       
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|GROSS PROFIT                                                           |                                   |                          | 59,397 |                         |        |      | 82,374  |        |        |   | 106,210 |       
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|COSTS AND EXPENSES:                                                    |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|                                                                       | Member relations and marketing    |                          |        | 21,236                  |        |      |         | 30,219 |        |   |         | 40,768 |       
|                                                                       | General and administrative        |                          |        | 12,021                  |        |      |         | 15,877 |        |   |         | 17,493 |       
|                                                                       | Depreciation                      |                          |        | 2,573                   |        |      |         | 4,412  |        |   |         | 5,456  |       
|                                                                       | Stock option and related expenses |                          |        | 1,371                   |        |      |         | 1,260  |        |   |         | 668    |       
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|                                                                       |                                   | Total costs and expenses |        |                         | 37,201 |      |         |        | 51,768 |   |         |        | 64,385 | 
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|INCOME FROM OPERATIONS                                                 |                                   |                          | 22,196 |                         |        |      | 30,606  |        |        |   | 41,825  |       
|OTHER INCOME, NET                                                      |                                   |                          | 2,263  |                         |        |      | 4,283   |        |        |   | 6,346   |       
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|INCOME BEFORE PROVISION FOR INCOME TAXES                               |                                   |                          | 24,459 |                         |        |      | 34,889  |        |        |   | 48,171  |       
|PROVISION FOR INCOME TAXES                                             |                                   |                          | 9,539  |                         |        |      | 13,257  |        |        |   | 18,570  |       
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|NET INCOME                                                             |                                   | $                        | 14,920 |                         |        | $    | 21,632  |        |        | $ | 29,601  |       
|                                                                       |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|EARNINGS PER SHARE:                                                    |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|                                                                       | Basic                             |                          | $      | 0.49                    |        |      | $       | 0.64   |        |   | $       | 0.81   |       
|                                                                       | Diluted                           |                          | $      | 0.43                    |        |      | $       | 0.59   |        |   | $       | 0.79   |       
|WEIGHTED AVERAGE SHARES USED IN THE CALCULATION
OF EARNINGS PER SHARE: |                                   |                          |        |                         |        |      |         |        |        |   |         |       
|                                                                       | Basic                             |                          |        | 30,321                  |        |      |         | 34,003 |        |   |         | 36,722 |       
|                                                                       | Diluted                           |                          |        | 34,638                  |        |      |         | 36,465 |        |   |         | 37,671 |       

See accompanying notes to financial statements.

25



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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY

STATEMENTS OF CASH FLOWS
(In thousands)

|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |        |        |         |  
|---------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ----------------------------------------- | ----------------------------------------------- | ------ | ----------------------- | ------- | ------- | ------ | ------- | ------- | -------- | ------ | ------ | ------- | -
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        | Year ended December 31,
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                        
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        | 2000                    |         | 2001    |        | 2002   
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |         
|                                                     | Net income                                                                       |                                                                                            | $                                         | 14,920                                          |        |                         | $       | 21,632  |        |         | $       | 29,601   |       
|                                                     | Adjustments to reconcile net income to net cash flows from
operating activities: |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|                                                     |                                                                                  | Depreciation                                                                               |                                           |                                                 | 2,573  |                         |         |         | 4,166  |         |         |          | 5,456  |       
|                                                     |                                                                                  | Loss on disposition of property and equipment                                              |                                           |                                                 | 223    |                         |         |         | 246    |         |         |          |       |       
|                                                     |                                                                                  | Deferred income taxes and tax benefits resulting from the exercise of common stock options |                                           |                                                 | 9,065  |                         |         |         | 13,440 |         |         |          | 18,349 |       
|                                                     |                                                                                  | Stock option repurchases                                                                   |                                           |                                                 | (1,570 | )                       |         |         | (3,140 | )       |         |          |       |       
|                                                     |                                                                                  | Stock option and related expenses                                                          |                                           |                                                 | 384    |                         |         |         | 186    |         |         |          |       |       
|                                                     |                                                                                  | Amortization of marketable securities premiums, net                                        |                                           |                                                 | 196    |                         |         |         | 478    |         |         |          | 1,506  |       
|                                                     |                                                                                  | Changes in operating assets and liabilities:                                               |                                           |                                                 |        |                         |         |         |        |         |         |          |        |       
|                                                     |                                                                                  |                                                                                            | Membership fees receivable, net           |                                                 |        | (2,916                  | )       |         |        | (12,492 | )       |          |        | (8,345 | )      
|                                                     |                                                                                  |                                                                                            | Deferred incentive compensation           |                                                 |        | (26                     | )       |         |        | (1,389  | )       |          |        | (758   | )      
|                                                     |                                                                                  |                                                                                            | Prepaid expenses and other current assets |                                                 |        | (1,697                  | )       |         |        | (27     | )       |          |        | (626   | )      
|                                                     |                                                                                  |                                                                                            | Accounts payable and accrued liabilities  |                                                 |        | 2,023                   |         |         |        | 2,581   |         |          |        | 1,866  |        
|                                                     |                                                                                  |                                                                                            | Accrued incentive compensation            |                                                 |        | (864                    | )       |         |        | 3,374   |         |          |        | 3,273  |        
|                                                     |                                                                                  |                                                                                            | Deferred revenues                         |                                                 |        | 15,845                  |         |         |        | 23,402  |         |          |        | 26,732 |        
|                                                     |                                                                                  |                                                                                            | Other liabilities                         |                                                 |        | 584                     |         |         |        | 384     |         |          |        | 819    |        
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |         
|                                                     |                                                                                  |                                                                                            |                                           | Net cash flows provided by operating activities |        |                         | 38,740  |         |        |         | 52,841  |          |        |        | 77,873  |  
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |         
|                                                     | Purchase of property and equipment                                               |                                                                                            |                                           | (9,287                                          | )      |                         |         | (5,260  | )      |         |         | (3,112   | )     
|                                                     | Purchase of marketable securities                                                |                                                                                            |                                           | (89,569                                         | )      |                         |         | (61,022 | )      |         |         | (116,738 | )     
|                                                     | Sales and maturities of marketable securities                                    |                                                                                            |                                           | 54,378                                          |        |                         |         | 27,717  |        |         |         | 51,564   |       
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|                                                     |                                                                                  |                                                                                            |                                           | Net cash flows used in investing activities     |        |                         | (44,478 | )       |        |         | (38,565 | )        |        |        | (68,286 | )
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |         
|                                                     | Proceeds from the exercise of common stock options                               |                                                                                            |                                           | 5,355                                           |        |                         |         | 13,798  |        |         |         | 12,835   |       
|                                                     | Proceeds from issuance of common stock under the employee stock purchase plan    |                                                                                            |                                           | 150                                             |        |                         |         | 704     |        |         |         | 653      |       
|                                                     | Reimbursement of common stock offering costs                                     |                                                                                            |                                           | 650                                             |        |                         |         | 375     |        |         |         | 300      |       
|                                                     | Payment of common stock offering costs                                           |                                                                                            |                                           | (650                                            | )      |                         |         | (375    | )      |         |         | (300     | )     
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|                                                     |                                                                                  |                                                                                            |                                           | Net cash flows provided by financing activities |        |                         | 5,505   |         |        |         | 14,502  |          |        |        | 13,488  |  
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                  |                                                                                            | (233                                      | )                                               |        |                         | 28,778  |         |        |         | 23,075  |         
|Cash and cash equivalents, beginning of period       |                                                                                  |                                                                                            | 19,726                                    |                                                 |        |                         | 19,493  |         |        |         | 48,271  |         
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       
|Cash and cash equivalents, end of period             |                                                                                  | $                                                                                          | 19,493                                    |                                                 |        | $                       | 48,271  |         |        | $       | 71,346  |         
|                                                     |                                                                                  |                                                                                            |                                           |                                                 |        |                         |         |         |        |         |         |          |       

See accompanying notes to financial statements.

26



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##### 



THE CORPORATE EXECUTIVE BOARD COMPANY

STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

For the years ended December 31, 2000, 2001, and 2002
(In thousands, except share amounts)

|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |   |        |        | 
|---------------------------- | ------------------------------------------------------------------------ |  | --------------- | - | ------------ | - | ---------- | - | -------- |  | ---------- | --------- | ------- | - | -------- | -- | ------ | - | ------- | ------ | ------- | - | ---- | --- |  | - | ------ | ------ |  | - | ----------- | ----- |  | - | ------- | ------ | ------ | - | ------ | ------ | 
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   | Accumu-     |       |  |   |         |        |        |   |       
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   | lated       |       |  |   |         |        |        |   |       
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   | elements of |       |  |   |         |        | Annual
|                             |                                                                          |  | Preferred stock |   | Common stock |   | Additional |   | Deferred |  |            |           |         |   | compre-  |    |        |   |         |        | compre-
|                             |                                                                          |  |                 |   |              |   | paid-in-   |   | compen-  |  | Retained   |           | hensive |   |          |    |        |   | hensive
|                             |                                                                          |  | Shares          |   | Amount       |   | Shares     |   | Amount   |  | capital    |           | sation  |   | earnings |    | income |   | Total   |        | income 
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |        
|Balance at December 31, 1999 |                                                                          |  |                |   |              | $ |           |   |          |  | 27,139,920 |           |         | $ | 271      |    |        | $ | 134     |        |         | $ | (570 | )   |  | $ | 11,691 |        |  | $ | (680        | )     |  | $ | 10,846  |        |        |   |        |       
|                             | Issuance of common
stock upon the
exercise of common
stock options       |  |                 |  |              |   |            |  |          |  |            | 3,998,470 |         |   |          | 40 |        |   |         | 5,315  |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 5,355  |        |   |        |       | 
|                             | Issuance of common
stock under the
employee stock
purchase plan          |  |                 |  |              |   |            |  |          |  |            | 5,679     |         |   |          |   |        |   |         | 150    |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 150    |        |   |        |       | 
|                             | Tax benefits
related to the
exercise of stock
options                    |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         | 32,980 |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 32,980 |        |   |        |       | 
|                             | Amortization of
deferred
compensation                                    |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      | 384 |  |   |        |       |  |   |             |      |  |   |         | 384    |        |   |        |       | 
|                             | Unrealized gains on
available-for-sale
marketable
securities, net of
tax |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      |    |  |   |        |       |  |   |             | 926   |  |   |         | 926    |        |   |        | 926    | 
|                             | Net income                                                               |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      |    |  |   |        | 14,920 |  |   |             |      |  |   |         | 14,920 |        |   |        | 14,920 | 
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |  
|Balance at December 31, 2000 |                                                                          |  |                |   |              | $ |           |   |          |  | 31,144,069 |           |         | $ | 311      |    |        | $ | 38,579  |        |         | $ | (186 | )   |  | $ | 26,611 |        |  | $ | 246         |       |  | $ | 65,561  |        |        | $ | 15,846 |       
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |  
|                             | Issuance of common
stock upon the
exercise of common
stock options       |  |                 |  |              |   |            |  |          |  |            | 3,727,682 |         |   |          | 38 |        |   |         | 13,760 |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 13,798 |        |   |        |       | 
|                             | Issuance of common
stock under the
employee stock
purchase plan          |  |                 |  |              |   |            |  |          |  |            | 26,309    |         |   |          |   |        |   |         | 704    |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 704    |        |   |        |       | 
|                             | Tax benefits
related to the
exercise of stock
options                    |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         | 41,178 |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 41,178 |        |   |        |       | 
|                             | Amortization of
deferred
compensation                                    |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      | 186 |  |   |        |       |  |   |             |      |  |   |         | 186    |        |   |        |       | 
|                             | Unrealized gains on
available-for-sale
marketable
securities, net of
tax |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      |    |  |   |        |       |  |   |             | 925   |  |   |         | 925    |        |   |        | 925    | 
|                             | Net income                                                               |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      |    |  |   |        | 21,632 |  |   |             |      |  |   |         | 21,632 |        |   |        | 21,632 | 
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |  
|Balance at December 31, 2001 |                                                                          |  |                |   |              | $ |           |   |          |  | 34,898,060 |           |         | $ | 349      |    |        | $ | 94,221  |        |         | $ |     |     |  | $ | 48,243 |        |  | $ | 1,171       |       |  | $ | 143,984 |        |        | $ | 22,557 |       
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |  
|                             | Issuance of common
stock upon the
exercise of common
stock options       |  |                 |  |              |   |            |  |          |  |            | 2,259,653 |         |   |          | 23 |        |   |         | 12,812 |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 12,835 |        |   |        |       | 
|                             | Issuance of common
stock under the
employee stock
purchase plan          |  |                 |  |              |   |            |  |          |  |            | 25,133    |         |   |          |   |        |   |         | 653    |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 653    |        |   |        |       | 
|                             | Tax benefits
related to the
exercise of stock
options                    |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         | 22,160 |         |   |      |    |  |   |        |       |  |   |             |      |  |   |         | 22,160 |        |   |        |       | 
|                             | Unrealized gains on
available-for-sale
marketable
securities, net of
tax |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      |    |  |   |        |       |  |   |             | 4,124 |  |   |         | 4,124  |        |   |        | 4,124  | 
|                             | Net income                                                               |  |                 |  |              |   |            |  |          |  |            |          |         |   |          |   |        |   |         |       |         |   |      |    |  |   |        | 29,601 |  |   |             |      |  |   |         | 29,601 |        |   |        | 29,601 | 
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |  
|Balance at December 31, 2002 |                                                                          |  |                |   |              | $ |           |   |          |  | 37,182,846 |           |         | $ | 372      |    |        | $ | 129,846 |        |         | $ |     |     |  | $ | 77,844 |        |  | $ | 5,295       |       |  | $ | 213,357 |        |        | $ | 33,725 |       
|                             |                                                                          |  |                 |   |              |   |            |   |          |  |            |           |         |   |          |    |        |   |         |        |         |   |      |     |  |   |        |        |  |   |             |       |  |   |         |        |        |  

See accompanying notes to financial statements.

27



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THE CORPORATE EXECUTIVE BOARD COMPANY

NOTES TO FINANCIAL STATEMENTS

1.     Description of operations

The Corporate Executive Board Company (the Company) provides best
practices research and quantitative analysis focusing on corporate strategy,
operations and general management issues. Best practices research supports
senior executive decision making by identifying and analyzing specific
management initiatives, processes and strategies that have been determined to
produce the best results in solving common business problems or challenges. For
a fixed annual fee, members of each of its research programs have access to an
integrated set of services, including best practices research studies,
executive education seminars, customized research briefs and Web-based access
to the programs content database and decision support tools.

2.     Spin-off

The Company was incorporated on September 11, 1997, under the laws of the
State of Delaware. The Companys business was operated as a division of The
Advisory Board Company, a Maryland corporation, until October 31, 1997, when
the business was contributed to the Company and spun-off to The Advisory Board
Companys sole stockholder (the Spin-off). Subsequent to February 2000, the
former sole stockholder owns no shares of the Companys common stock.

3.     Summary of significant accounting policies

Cash equivalents and marketable securities

Short-term investments and marketable securities that mature within three
months of purchase are classified as cash equivalents. Short-term investments
and marketable securities with maturities of more than three months are
classified as marketable securities. As of December 31, 2001 and 2002, the
Companys marketable securities consisted primarily of United States Treasury
notes and bonds and Washington, D.C. tax exempt notes and bonds. The Company
classifies its marketable securities as available-for-sale, which are carried
at fair value based on quoted market prices. The net unrealized gains and
losses on available-for-sale marketable securities are excluded from net income
and are included within accumulated elements of comprehensive income. The
specific identification method is used to compute the realized gains and losses
on the sale of marketable securities. The Company may elect not to hold these
marketable securities to maturity and may elect to sell these securities at any
time.

Property and equipment

Property and equipment consists of furniture, fixtures and equipment,
capitalized software and Web site development costs, and leasehold
improvements. Property and equipment are stated at cost, less accumulated
depreciation expense. Furniture, fixtures and equipment are depreciated using
the straight-line method over the estimated useful lives of the assets, which
range from three to seven years. Capitalized software and Web site development
costs are depreciated using the straight-line method over the estimated useful
lives of the assets, which range from three to five years. Leasehold
improvements are depreciated using the straight-line method over the shorter of
the estimated useful lives of the assets or the lease term. Replacements and
major improvements are capitalized. Maintenance and repairs are charged to
expense as incurred.

Recovery of long-lived assets

Long-lived assets and identifiable assets to be held and used are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company recognizes an
impairment loss when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the asset. The Company believes that no such
impairment existed as of December 31, 2001 and 2002.

28



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##### 



Revenue recognition

Revenues from membership subscriptions are recognized ratably over the
term of the related subscription, which is generally 12 months. Revenues from
implementation support memberships are recognized as services are performed, limited by the Companys pro rata
refund policy. Membership fees are generally billable, and revenue recognition
begins, when the member agrees to the terms of the membership. Certain
membership fees are billed on an installment basis. Members may request a
refund of their membership fees, which is provided on a pro rata basis relative
to the length of the remaining membership term. The Companys policy is to
record the full amount of membership fees receivable as an asset and related
deferred revenue as a liability when a member agrees to the terms of a
membership. Revenues from membership subscriptions were greater than 95% of total revenues for each of
the years ending December 31, 2000, 2001, and 2002. In addition, as of
December 31, 2001 and 2002, approximately $2.5 million and $1.7 million,
respectively, of deferred revenues were to be recognized beyond the following
12 months.

Commission expense recognition

Commission expenses related to the negotiation of new memberships and the
renewal of existing memberships are deferred and amortized over the term of the
related memberships.

Earnings per share

Basic earnings per share was computed by dividing net income by the number
of weighted average common shares outstanding during the period. Diluted
earnings per share was computed by dividing net income by the number of diluted
weighted average common shares outstanding during the period. The number of
weighted average common share equivalents outstanding has been determined in
accordance with the treasury-stock method. Common share equivalents consist of
common shares issuable upon the exercise of outstanding common stock options. A
reconciliation of basic to diluted weighted average common shares outstanding
is as follows (in thousands):

|                                                      |  |                         |        |      |  |      |        |  |  |  |        | 
|----------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  |  | ------ | 
|                                                      |  | Year Ended December 31,
|                                                      |  |                        
|                                                      |  | 2000                    |        | 2001 |  | 2002
|                                                      |  |                         |        |      |  |     
|Basic weighted average common shares outstanding      |  |                         | 30,321 |      |  |      | 34,003 |  |  |  | 36,722 | 
|Weighted average common share equivalents
outstanding |  |                         | 4,317  |      |  |      | 2,462  |  |  |  | 949    | 
|                                                      |  |                         |        |      |  |      |        |  |  |  |        | 
|Diluted weighted average common shares outstanding    |  |                         | 34,638 |      |  |      | 36,465 |  |  |  | 37,671 | 
|                                                      |  |                         |        |      |  |      |        |  |  |  |        | 

Financial instruments, which potentially expose the Company to
concentration of credit risk, consist primarily of membership fees receivable
and cash, cash equivalents and marketable securities. Concentrations of credit
risk with respect to membership fees receivable are limited due to the large
number of members and their dispersion across many different industries and
countries worldwide. However, the Company may be exposed to a declining
membership base in periods of unforeseen market downturns, severe competition
or international developments. The Company performs periodic evaluations of the
membership base and related membership fees receivable and establishes
allowances for potential credit losses.

The Company generates revenues from members located outside of the United
States. For the years ended December 31, 2000, 2001 and 2002, approximately
29%, 30% and 27% of revenues, respectively, were generated from members located
outside of the United States. Revenues from customers in European countries
were approximately 15%, 16% and 15% for the years ended December 31, 2000, 2001
and 2002, respectively, with no other geographic area representing more than 10% of
revenues in any period. No individual member accounted for more than 2% of
revenues for any period presented.

29



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##### 



The Company maintains a portfolio of cash, cash equivalents and marketable
securities, which is designed for safety of principal and liquidity, with
financial institutions. Cash and cash equivalents consist of highly liquid U.S.
government and U.S. Treasury obligations with original maturities of less than
three months. Marketable securities consist primarily of U.S. Treasury
notes and bonds and Washington, D.C. tax exempt notes and bonds. The Company
performs periodic evaluations of the relative credit ratings related to the
cash, cash equivalents and marketable securities.

Fair value of financial instruments

The fair value of current assets and current liabilities approximates
their carrying value due to their short maturity.

Income taxes

Deferred income taxes are determined on the asset and liability method.
Under this method, temporary differences arise as a result of the difference
between the reported amounts of assets and liabilities and their tax basis.
Deferred tax assets are reduced by a valuation allowance when, in the
managements opinion, it is more likely than not that some or all of the
deferred tax asset will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax law and tax rates on the date of
the enactment of the change. The Company believes that its future taxable
income will be sufficient for the full realization of the deferred income tax
assets.

Research and development costs

Costs related to the research and development of new company programs are
expensed in the year incurred.

Stock-based compensation

At December 31, 2002, the Company had several stock-based employee
compensation plans, which are described more fully in Note 13. The Company
accounts for those plans using the intrinsic value method of expense
recognition and measurement prescribed by APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations (collectively, APB No.
25). In accordance with FASB Statement No. 123, Accounting for Stock-Based
Compensation(SFAS No. 123), as amended by FASB Statement No. 148, Accounting
for Stock-Based CompensationTransition and Disclosure, see Note 13 for a
tabular presentation of the pro-forma stock-based employee compensation cost,
net income and basic and diluted earnings per share as if the fair value based
method of expense recognition and measurement prescribed by SFAS No. 123 had
been applied to all options.

Use of estimates in preparation of financial statements

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

30



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##### 



4.     Marketable securities

The aggregate market value, amortized cost, gross unrealized gains and
gross unrealized losses on available-for-sale marketable securities are as
follows (in thousands):

|                                            |  |                         |        |           |  |            |        |            |  |       |       |       |  |   |    | 
|------------------------------------------- |  | ----------------------- | ------ | --------- |  | ---------- | ------ | ---------- |  | ----- | ----- | ----- |  | - | -- | 
|                                            |  | As of December 31, 2001
|                                            |  |                        
|                                            |  |                         |        |           |  |            |        |            |  | Gross |       | Gross
|                                            |  | Market                  |        | Amortized |  | Unrealized |        | Unrealized
|                                            |  | Value                   |        | Cost      |  | Gains      |        | Losses    
|                                            |  |                         |        |           |  |            |        |           
|U.S. Treasury notes and bonds               |  | $                       | 70,567 |           |  | $          | 69,067 |            |  | $     | 1,500 |       |  | $ |   | 
|Washington, D.C. tax exempt notes and bonds |  |                         | 13,631 |           |  |            | 13,243 |            |  |       | 398   |       |  |   | 10 | 
|                                            |  |                         |        |           |  |            |        |            |  |       |       |       |  |   |    | 
|                                            |  | $                       | 84,198 |           |  | $          | 82,310 |            |  | $     | 1,898 |       |  | $ | 10 | 
|                                            |  |                         |        |           |  |            |        |            |  |       |       |       |  |   |    | 

|                                            |  |                         |         |           |  |            |         |            |  |       |       |       |  |   |   | 
|------------------------------------------- |  | ----------------------- | ------- | --------- |  | ---------- | ------- | ---------- |  | ----- | ----- | ----- |  | - | - | 
|                                            |  | As of December 31, 2002
|                                            |  |                        
|                                            |  |                         |         |           |  |            |         |            |  | Gross |       | Gross
|                                            |  | Market                  |         | Amortized |  | Unrealized |         | Unrealized
|                                            |  | Value                   |         | Cost      |  | Gains      |         | Losses    
|                                            |  |                         |         |           |  |            |         |           
|U.S. Treasury notes and bonds               |  | $                       | 75,307  |           |  | $          | 70,654  |            |  | $     | 4,653 |       |  | $ |  | 
|Washington, D.C. tax exempt notes and bonds |  |                         | 79,288  |           |  |            | 75,324  |            |  |       | 3,964 |       |  |   |  | 
|                                            |  |                         |         |           |  |            |         |            |  |       |       |       |  |   |   | 
|                                            |  | $                       | 154,595 |           |  | $          | 145,978 |            |  | $     | 8,617 |       |  | $ |  | 
|                                            |  |                         |         |           |  |            |         |            |  |       |       |       |  |   |   | 

The following table summarizes marketable securities maturities (in
thousands):

|                         |  |                         |         |           |  |   |         | 
|------------------------ |  | ----------------------- | ------- | --------- |  | - | ------- | 
|                         |  | As of December 31, 2002
|                         |  |                        
|                         |  | Fair Market             |         | Amortized
|                         |  | Value                   |         | Cost     
|                         |  |                         |         |          
|Less than one year       |  | $                       | 17,030  |           |  | $ | 16,734  | 
|Matures in 1 to 5 years  |  |                         | 83,509  |           |  |   | 78,049  | 
|Matures in 6 to 10 years |  |                         | 44,022  |           |  |   | 41,683  | 
|Matures after 10 years   |  |                         | 10,034  |           |  |   | 9,512   | 
|                         |  |                         |         |           |  |   |         | 
|                         |  | $                       | 154,595 |           |  | $ | 145,978 | 
|                         |  |                         |         |           |  |   |         | 

The Company may elect not to hold these marketable securities to maturity
and may elect to sell these securities at any time.

5.     Membership fees receivable

Membership fees receivable consist of the following (in thousands):

|                                    |  |                    |        |      |  |   |        |  
|----------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                    |  | As of December 31,
|                                    |  |                   
|                                    |  | 2001               |        | 2002
|                                    |  |                    |        |     
|Billed membership fees receivable   |  | $                  | 36,431 |      |  | $ | 41,900 |  
|Unbilled membership fees receivable |  |                    | 7,513  |      |  |   | 11,256 |  
|                                    |  |                    |        |      |  |   |        |  
|                                    |  |                    | 43,944 |      |  |   | 53,156 |  
|Reserve for uncollectible revenue   |  |                    | (1,933 | )    |  |   | (2,800 | )
|                                    |  |                    |        |      |  |   |        |  
|Membership fees receivable, net     |  | $                  | 42,011 |      |  | $ | 50,356 |  
|                                    |  |                    |        |      |  |   |        |  

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6.     Property and equipment

Property and equipment consist of the following (in thousands):

|                                        |  |                    |        |      |  |   |         |  
|--------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------- | -
|                                        |  | As of December 31,
|                                        |  |                   
|                                        |  | 2001               |        | 2002
|                                        |  |                    |        |     
|Furniture, fixtures, and equipment      |  | $                  | 10,399 |      |  | $ | 10,763  |  
|Software and Web site development costs |  |                    | 7,839  |      |  |   | 8,783   |  
|Leasehold improvements                  |  |                    | 7,554  |      |  |   | 8,189   |  
|                                        |  |                    |        |      |  |   |         |  
|                                        |  |                    | 25,792 |      |  |   | 27,735  |  
|Accumulated depreciation                |  |                    | (8,532 | )    |  |   | (12,819 | )
|                                        |  |                    |        |      |  |   |         |  
|Property and equipment, net             |  | $                  | 17,260 |      |  | $ | 14,916  |  
|                                        |  |                    |        |      |  |   |         |  

7.     Income taxes

The provision for income taxes consists of the following (in thousands):

|                           |  |                         |       |      |  |      |        |   |  |   |        | 
|-------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                           |  | Year Ended December 31,
|                           |  |                        
|                           |  | 2000                    |       | 2001 |  | 2002
|                           |  |                         |       |      |  |     
|Current                    |  | $                       | 8,582 |      |  | $    | 18,621 |   |  | $ | 18,418 | 
|Deferred                   |  |                         | 957   |      |  |      | (5,364 | ) |  |   | 152    | 
|                           |  |                         |       |      |  |      |        |   |  |   |        | 
|Provision for income taxes |  | $                       | 9,539 |      |  | $    | 13,257 |   |  | $ | 18,570 | 
|                           |  |                         |       |      |  |      |        |   |  |   |        | 

The provision for income taxes differs from the amount of income taxes
determined by applying the U.S. Federal income tax statutory rates to income
before provision for income taxes as follows:

|                                                         |                    |  |                         |      |      |  |      |      |   |  |      |      |  
|-------------------------------------------------------- | ------------------ |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                                         |                    |  | Year Ended December 31,
|                                                         |                    |  |                        
|                                                         |                    |  | 2000                    |      | 2001 |  | 2002
|                                                         |                    |  |                         |      |      |  |     
|Statutory U.S. Federal income tax rate                   |                    |  | 35.0                    | %    |      |  | 35.0 | %    |   |  | 35.0 | %   
|State income tax, net of U.S. Federal income tax benefit |                    |  | 6.5                     |      |      |  | 6.5  |      |   |  | 6.5  |     
|Permanent differences, net                               |                    |  | (2.5                    | )    |      |  | (3.5 | )    |   |  | (2.9 | )   
|                                                         |                    |  |                         |      |      |  |      |      |   |  |      |     
|                                                         | Effective tax rate |  |                         | 39.0 | %    |  |      | 38.0 | % |  |      | 38.6 | %
|                                                         |                    |  |                         |      |      |  |      |      |   |  |      |     

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities consist of the
following (in thousands):

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|                          |                                                   |                                |   |                    |        |      |   |        |        | 
|------------------------- | ------------------------------------------------- | ------------------------------ | - | ------------------ | ------ | ---- | - | ------ | ------ | 
|                          |                                                   |                                |   | As of December 31,
|                          |                                                   |                                |   |                   
|                          |                                                   |                                |   | 2001               |        | 2002
|                          |                                                   |                                |   |                    |        |     
|Deferred tax assets:      |                                                   |                                |   |                    |        |      |   |       
|                          | Deferred compensation agreements                  |                                | $ | 2,649              |        |      | $ | 4,007  |       
|                          | Net operating loss carryforward                   |                                |   | 52,431             |        |      |   | 56,169 |       
|                          | Deferred revenue                                  |                                |   | 4,445              |        |      |   | 2,603  |       
|                          | Financial reporting reserves                      |                                |   | 802                |        |      |   | 1,161  |       
|                          | Employee benefits                                 |                                |   |                   |        |      |   | 79     |       
|                          | Operating leases                                  |                                |   | 737                |        |      |   | 1,092  |       
|                          |                                                   |                                |   |                    |        |      |   |        |       
|                          |                                                   | Total deferred tax assets      |   |                    | 61,064 |      |   |        | 65,111 | 
|                          |                                                   |                                |   |                    |        |      |   |        |       
|Deferred tax liabilities: |                                                   |                                |   |                    |        |      |   |       
|                          | Unrealized gains on available-for-sale securities |                                |   | 717                |        |      |   | 3,322  |       
|                          | Employee benefits                                 |                                |   | 78                 |        |      |   |       |       
|                          | Deferred incentive compensation                   |                                |   | 1,749              |        |      |   | 2,063  |       
|                          |                                                   |                                |   |                    |        |      |   |       
|                          |                                                   | Total deferred tax liabilities |   |                    | 2,544  |      |   |        | 5,385  | 
|                          |                                                   |                                |   |                    |        |      |   |        |       
|                          |                                                   | Deferred tax assets, net       |   | $                  | 58,520 |      |   | $      | 59,726 | 
|                          |                                                   |                                |   |                    |        |      |   |        |       

The Company has deferred income tax assets, consisting primarily of net
operating loss (NOL) carry forwards for regular Federal and state income tax
purposes generated from the exercise of common stock options. In estimating
future tax consequences, Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes(SFAS 109) generally considers all expected
future events in the determination and evaluation of deferred tax assets and
liabilities. The Company believes that its future taxable income will be
sufficient for the full realization of the deferred income tax assets.
However, SFAS 109 does not consider the effect of future changes in existing
tax laws or rates in the determination and evaluation of deferred tax assets
and liabilities until the new tax laws or rates are enacted. We have
established our deferred income tax assets and liabilities using currently
enacted tax law and rates. We will recognize into income an adjustment for the
impact of new tax laws or rates on the existing deferred tax assets and
liabilities when new tax laws or rates are enacted.

The Company has net operating losses which resulted in a deferred tax
asset of $52.4 million and $56.2 million at December 31, 2001 and 2002,
respectively. The net operating losses expire in the years 2019 through 2022.
The Company has realized current tax benefits (reductions of taxes payable)
resulting from the exercise of common stock options of $8.1 million, $18.6
million and $18.4 million in the years ended December 31, 2000, 2001 and 2002,
respectively.

Washington, D.C. income tax incentives

The Office of Tax and Revenue of the Government of the District of
Columbia (the Office of Tax and Revenue) has adopted regulations in
accordance with the New E-Conomy Transformation Act of 2000 (the Act) that
modify the income and franchise tax, sales and use tax, and personal property
tax regulations, effective April 2001. Specifically, the regulations provide
certain credits, exemptions and other benefits to a Qualified High Technology
Company (QHTC). The Company has performed an analysis to support its
position that it meets the definition of a QHTC under the provisions of the
Act. See further discussion of the Washington, D.C. income tax incentives and
the possible impact on the Companys financial statements in Note 16, Commitments and
Contingencies.

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##### 



8.     Comprehensive income (loss)

Comprehensive income (loss) is defined as net income (loss) plus the
net-of-tax impact of foreign currency items, minimum pension liability
adjustments, and unrealized gains and losses on certain investments in debt and
equity securities. Comprehensive income for the years ended December 31, 2000,
2001 and 2002, was $15.8 million, $22.6 million and $33.7 million,
respectively. The accumulated elements of comprehensive income, net of tax,
included within stockholders equity on the balance sheets are comprised solely
of the net change in unrealized gains on available-for-sale marketable
securities. Unrealized gains, net of tax, on available-for-sale marketable
securities amounted to $0.9 million, $0.9 million and $4.1million during the
years ended December 31, 2000, 2001 and 2002, respectively.

9.     Transactions with affiliates

The Company has received services under certain vendor contracts entered
into by The Advisory Board Company for the provision of certain services, such
as telecommunications, travel, mailing and general office services. A Vendor
Contracts Agreement specified that we will pay the vendor directly if costs can
be segregated and billed separately, or we will reimburse The Advisory Board
Company for our reasonably allocated share of commonly billed costs. The Vendor
Contracts Agreement expired on December 31, 2000. However, we continue to
participate in limited vendor contracts entered into by the Advisory Board
Company for the provision of certain services and continue to pay for such
services on a basis consistent with that followed under the Vendor Contracts
Agreement. Payments, net, to (from) affiliates were approximately $(152,000),
$184,000 and $(32,000) for the years ending December 31, 2000, 2001 and 2002,
respectively.

10.     Employee benefit plans

Defined contribution 401(k) plan

The Company sponsors a defined contribution 401(k) Plan (the Plan) in
which the Companys employees participate. Pursuant to the Plan, all employees
who have reached the age of twenty-one are eligible to participate. The
employer provides contributions equal to 25% of an employees contribution up
to a maximum of 4% of base salary. Contributions to the Plan for the
participants were $0.2 million, $0.3 million and $0.4 million during the years
ended December 31, 2000, 2001 and 2002, respectively.

Employee stock purchase plan

In June 2000, the Company established an employee stock purchase plan (the
ESPP). Under the ESPP, employees authorize payroll deductions from 1% to 10%
of their eligible compensation to purchase shares of the Companys common
stock. The ESPP is authorized to issue up to 1,050,000 shares of the Companys
common stock. During the years ended December 31, 2000, 2001 and 2002, 5,679,
26,309 and 25,133 shares of common stock, respectively, were issued under the
ESPP.

11.     Public offerings of common stock

In February 2000, March and April 2001 and March 2002, 11,023,030 shares,
3,035,000 shares and 2,100,000 shares, respectively, of the Companys common
stock were sold in registered public offerings. The Company did not directly
receive any proceeds from the sale of its common stock. All of the shares sold
in the foregoing offerings were sold by stockholders and option holders.
However, the Company did receive cash from the exercise of common stock options
in conjunction with the sale of its common stock.

34



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12.     Stock split

In August 2000, the Companys Board of Directors declared a two-for-one
stock split in the form of a common stock dividend on the Companys common
stock, payable September 15, 2000, to stockholders of record September 1, 2000.
The effect of the stock split is presented retroactively within the statements
of changes in stockholders equity at December 31, 1999 and for the period
ended December 31, 2000, by transferring the par value for the additional
common shares issued from the additional paid-in-capital account to the common
stock account. All references to share and per share amounts in the
accompanying financial statements included herein have been adjusted
retroactively to reflect the two-for-one stock split.

13.     Stock option plans

Liquid Markets Agreements

In January 2000 and 2001, the Company paid $1.6 million and $3.1 million,
respectively, in accordance with the Liquid Markets Agreements, which were
employee stock option agreements created prior to the Spin-off. The Liquid
Markets Agreements were amended by the Company in December 1998. The January
2001 payment represented the final cash commitment related to the amended Liquid
Markets Agreements. In addition, there are no stock options available to issue
or stock options outstanding under the Liquid Markets Agreements.

Stock-Based Incentive Compensation Plan

In October 1997, the Company adopted the Stock-Based Incentive
Compensation Plan (the 1997 Plan). The 1997 Plan provides for the issuance of
options to purchase up to 11,008,000 shares of common stock. Any shares of
common stock which, for any reason, are not issued under the 1997 Plan are
reserved for issuance pursuant to the 1999 Stock Option Plan (the 1999 Plan).
As of December 31, 2002, 10,569,400 options, net of cancellations, to purchase
common stock had been granted under the 1997 Plan and 231,940 options, net of
cancellations, to purchase common stock had been granted under the 1999 Plan.
The Options granted under the 1997 Plan are currently exercisable and expire
April 2003.

In the years ending December 31, 2000 and 2001, the Company recognized
compensation expense of $0.4 million and $0.2 million, respectively, in
accordance with the Substitution Agreements, which were employee stock option
agreements created in conjunction with the Spin-off. The Substitution
Agreements provided for the exchange of The Advisory Board Company stock
options for Company stock options issued under the 1997 Plan. The Substitution
Agreements resulted in compensation expense being recognized by the Company
over the vesting period. There are no earnings charges subsequent to December
31, 2001, related to the Substitution Agreements. In addition, there are no
stock options available to issue or stock options outstanding under the
Substitution Agreements.

1999 Stock Option Plan

In February 1999, the Company adopted the 1999 Plan, which provides for
the issuance of options to purchase up to 3,784,000 shares of common stock plus
any options to purchase shares of common stock which, for any reason, are not
issued under the 1997 Plan. During 2000, the Company granted 1,613,000 options
to purchase common stock under the 1999 Plan at a weighted average exercise
price of $21.78 per share. During 2001, the Company granted 1,358,000 options
to purchase common stock under the 1999 Plan at a weighted average exercise
price of $31.05 per share. During 2002, the Company granted 16,000 options to
purchase common stock under the 1999 Plan at a weighted average exercise price
of $32.86 per share. As of December 31, 2002, 4,015,940 options, net of
cancellations and including 231,940 shares of common stock carried over from
the 1997 Plan, had been granted under the 1999 Plan. The common stock options
granted under the 1999 Plan generally become exercisable 25% per year beginning
one year from the date of grant and expire between February 2009 and March
2012.

35



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##### 



2001 Stock Option Plan

In June 2001, the
Company adopted the 2001 Stock Option Plan (the 2001
Plan), which provides for the issuance of options to purchase up to 2,700,000
shares of common stock. During 2001, the Company granted no options to purchase
common stock under the 2001 Plan. During 2002, the Company granted 940,000
options to purchase common stock under the 2001 Plan at a weighted average
exercise price of $32.37 per share. As of December 31, 2002, 890,000 options,
net of cancellations, had been granted under the 2001 Plan. The common stock
options granted under the 2001 Plan generally become exercisable 25% per year
beginning one year from the date of grant and expire between August 2011 and
July 2012.

2002 Non-Executive Stock Incentive Plan

In March 2002, the
Company adopted the 2002 Non-Executive Stock Incentive Plan, as amended (the 2002
Plan), which provides for the issuance up
to 7,300,000 shares of common stock under stock options or restricted stock grants.
The 2002 Plan is administered by the Compensation Committee of the Companys Board of Directors. Any
person who is an employee or prospective employee of the Company is eligible for the grant of awards
under the 2002 Plan, unless such person is an officer or director of the Company.
The terms of awards granted under the 2002 Plan, including vesting, forfeiture and post-termination
exerciseability  are set by the plan administrator, subject to certain restrictions set forth
in the 2002 Plan. During 2002, the Company granted 1,115,000
options to purchase common stock under the 2002 Plan at a weighted average
exercise price of $32.31 per share. As of December 31, 2002, 1,080,000 options,
net of cancellations, had been granted under the 2002 Plan. The common stock
options granted under the 2002 Plan generally become exercisable 25% per year
beginning one year from the date of grant and expire between March 2012 and
November 2012.

Directors Stock Option Plan

In December 1998, the Company adopted the Directors Stock Plan (the
Directors Plan), which provides for the issuance of options to purchase up
to 860,000 shares of common stock. During 2000, the Company granted 70,000
options to purchase common stock under the Directors Plan at a weighted
average exercise price of $21.19 per share. During 2001, the Company granted
142,240 options to purchase common stock under the Directors Plan at a
weighted average exercise price of $31.46 per share. During 2002, the Company
granted 40,000 options to purchase common stock under the Directors Plan at a
weighted average exercise price of $32.41 per share. As of December 31, 2002,
573,440 options, net of cancellations, to purchase common stock had been
granted under the Directors Plan. The common stock options granted under the
Directors Plan generally become 100% exercisable one year from the date of
grant and expire between December 2008 and March 2012.

Transactions

The following table summarizes the changes in common stock options for the
common stock option plans described above:

|                                 |                   |  |            |            |                |   |                |             |  |   |          |       | 
|-------------------------------- | ----------------- |  | ---------- | ---------- | -------------- | - | -------------- | ----------- |  | - | -------- | ----- | 
|                                 |                   |  |            |            |                |   |                |             |  |   | Weighted
|                                 |                   |  | Number     |            | Exercise Price |   | Average       
|                                 |                   |  | of Options |            | per Share      |   | Exercise Price
|                                 |                   |  |            |            |                |   |               
|Outstanding at December 31, 1999 |                   |  | 10,384,840 |            |                | $ | 0.03-19.07     |             |  | $ | 2.64     |      
|                                 | Options granted   |  |            | 1,683,000  |                |   |                | 21.19-33.11 |  |   |          | 21.75 | 
|                                 | Options cancelled |  |            | (228,234   | )              |   |                | 0.29-21.19  |  |   |          | 8.05  | 
|                                 | Options exercised |  |            | (3,998,470 | )              |   |                | 0.03-13.52  |  |   |          | 1.34  | 
|                                 |                   |  |            |            |                |   |                |             |  |   |          |      
|Outstanding at December 31, 2000 |                   |  | 7,841,136  |            |                |   | 0.03-33.11     |             |  |   | 7.25     |      
|                                 | Options granted   |  |            | 1,514,214  |                |   |                | 26.01-43.10 |  |   |          | 31.09 | 
|                                 | Options cancelled |  |            | (159,500   | )              |   |                | 9.50-41.38  |  |   |          | 22.16 | 
|                                 | Options exercised |  |            | (3,727,882 | )              |   |                | 0.03-30.19  |  |   |          | 3.71  | 
|                                 |                   |  |            |            |                |   |                |             |  |   |          |      
|Outstanding at December 31, 2001 |                   |  | 5,467,968  |            |                |   | 0.03-43.10     |             |  |   | 15.78    |      
|                                 | Options granted   |  |            | 2,111,000  |                |   |                | 27.62-36.81 |  |   |          | 32.34 | 
|                                 | Options cancelled |  |            | (293,474   | )              |   |                | 9.50-33.63  |  |   |          | 27.31 | 
|                                 | Options exercised |  |            | (2,266,091 | )              |   |                | 0.03-31.00  |  |   |          | 5.76  | 
|                                 |                   |  |            |            |                |   |                |             |  |   |          |      
|Outstanding at December 31, 2002 |                   |  | 5,019,403  |            |                | $ | 0.21-43.10     |             |  | $ | 26.61    |      
|                                 |                   |  |            |            |                |   |                |             |  |   |          |      

36



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##### 



Information with respect to the common stock option plans outstanding at
December 31, 2002, is as follows:

|                         |  |                    |           |          |  |             |       |         |  |          |      | 
|------------------------ |  | ------------------ | --------- | -------- |  | ----------- | ----- | ------- |  | -------- | ---- | 
|                         |  |                    |           |          |  |             |       |         |  | Weighted
|                         |  |                    |           |          |  | Weighted    |       | Average
|                         |  | Number Outstanding |           | Average  |  | Remaining  
|                         |  | as of              |           | Exercise |  | Contractual
|Range of Exercise Prices |  | December 31, 2002  |           | Price    |  | Life-Years 
|                         |  |                    |           |          |  |            
|$0.21  $7.12            |  |                    | 141,320   |          |  | $           | 2.94  |         |  |          | 2.22 | 
|9.50  13.52             |  |                    | 579,586   |          |  |             | 9.56  |         |  |          | 6.15 | 
|19.07  21.19            |  |                    | 856,508   |          |  |             | 21.18 |         |  |          | 7.15 | 
|26.01  32.23            |  |                    | 1,465,989 |          |  |             | 30.71 |         |  |          | 8.31 | 
|32.41  43.10            |  |                    | 1,976,000 |          |  |             | 32.61 |         |  |          | 9.16 | 
|                         |  |                    |           |          |  |             |       |         |  |          |      | 
|$0.21$43.10             |  |                    | 5,019,403 |          |  | $           | 26.61 |         |  |          | 8.02 | 
|                         |  |                    |           |          |  |             |       |         |  |          |      | 

As of December 31, 2002, 1,084,903 common stock options with a weighted
average exercise price of $20.15 are exercisable.

Accounting for stock-based compensation

The Company has elected to account for the plans described above under the
recognition and measurement principles of APB No. 25. No stock-based employee
compensation cost is reflected in net income, as all options granted under
those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant. The following table illustrates the effect
on net income and earnings per share if the Company had applied the fair value
recognition provisions of SFAS No. 123 to stock-based employee compensation.

|                                                                                                                                             |                       |   |                         |      |      |   |        |      |  |   |        |      | 
|-------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ----------------------- | ---- | ---- | - | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                             |                       |   | Year Ended December 31,
|                                                                                                                                             |                       |   |                        
|                                                                                                                                             |                       |   | 2000                    |      | 2001 |   | 2002  
|                                                                                                                                             |                       |   |                         |      |      |   |       
|Net income, as reported                                                                                                                      |                       | $ | 14,920                  |      |      | $ | 21,632 |      |  | $ | 29,601 |     
|Deduct: Total stock-based employee
compensation expense determined under
fair value based methods for all
awards, net of related tax effects |                       |   | 6,586                   |      |      |   | 8,842  |      |  |   | 12,990 |     
|                                                                                                                                             |                       |   |                         |      |      |   |        |      |  |   |        |     
|Pro forma net income                                                                                                                         |                       | $ | 8,334                   |      |      | $ | 12,790 |      |  | $ | 16,611 |     
|                                                                                                                                             |                       |   |                         |      |      |   |        |      |  |   |        |     
|Earnings per share:                                                                                                                          |                       |   |                         |      |      |   |        |      |  |   |        |     
|                                                                                                                                             | Basic  as reported   |   | $                       | 0.49 |      |   | $      | 0.64 |  |   | $      | 0.81 | 
|                                                                                                                                             | Basic  pro forma     |   | $                       | 0.27 |      |   | $      | 0.38 |  |   | $      | 0.45 | 
|                                                                                                                                             | Diluted  as reported |   | $                       | 0.43 |      |   | $      | 0.59 |  |   | $      | 0.79 | 
|                                                                                                                                             | Diluted  pro forma   |   | $                       | 0.24 |      |   | $      | 0.35 |  |   | $      | 0.46 | 

37



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##### 



Under the SFAS No. 123 pro forma disclosure provisions, the fair value of
options granted subsequent to December 15, 1995, has been estimated using the
Black-Scholes option valuation model. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions, including
the expected stock price characteristics that are significantly different from
those of traded options. Because changes in the subjective input assumptions
can materially affect the fair value estimate, in managements opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of the Companys stock rights.

The fair value of options granted during the years ended December 31,
2000, 2001 and 2002 was estimated using the Black-Scholes option valuation
model with the following weighted-average assumptions: risk-free interest rate
of 5.0%, 4.4% and 3.1%, respectively; no dividend yield for any year;
expected lives of the option of four years, five years and
five years, respectively; and expected volatility of 92%, 69% and 63%,
respectively.

The weighted-average fair value of Company options granted during the
years ended December 31, 2000, 2001 and 2002 was $14.73 per share, $18.85 per
share and $17.88 per share, respectively. For purposes of pro forma
disclosures, the estimated fair value of options is amortized to expense over
the estimated service period. The provisions of SFAS No. 123 may not
necessarily be indicative of future results.

14.     Supplemental cash flows disclosures

The Company paid no income taxes during the years ended December 31, 2000,
2001 and 2002. For the years ended December 31, 2000, 2001 and 2002, the
Company recognized $33.0 million, $41.2 million and $22.2 million,
respectively, in stockholders equity for tax deductions associated with the
exercise of non-qualified stock options.

15.     Loan agreement

In May 2000, the Company entered into a $10.0 million unsecured loan
agreement with a commercial bank that provides for a revolving line of credit
facility under which the Company could have from time to time borrowed, repaid
and reborrowed funds. The interest rate on any outstanding borrowings under the
loan agreement was the Eurodollar Daily Floating Rate plus 0.75% per annum.
There were no borrowings under the revolving line of credit facility while it
was in effect. The revolving line of credit facility expired May 25, 2002, and
we elected not to renew the revolving line of credit facility.

16.     Commitments and contingencies

Operating Leases

The Company leases office facilities in the United States and the United
Kingdom expiring on various dates over the next 17 years. Certain lease
agreements include provisions for rental escalations and require the Company to
pay for executory costs such as taxes and insurance. Future minimum rental
payments under noncancellable operating leases, excluding executory costs, are
as follows (in thousands):

|                         |  |       |  |   |        |   |        | 
|------------------------ |  | ----- |  | - | ------ | - | ------ | 
|Year Ending December 31, |  |       |  |   |        |   |        | 
|                         |  |       |  |   |        |   |        | 
|2003                     |  |       |  |   |        | $ | 6,908  | 
|2004                     |  |       |  |   |        |   | 7,900  | 
|2005                     |  |       |  |   |        |   | 9,381  | 
|2006                     |  |       |  |   |        |   | 9,503  | 
|2007                     |  |       |  |   |        |   | 9,773  | 
|Thereafter               |  |       |  |   |        |   | 50,342 | 
|                         |  |       |  |   |        |   |        | 
|                         |  | Total |  | $ | 93,807 |  
|                         |  |       |  |   |        |   |        | 

Rent expense charged to operations during the fiscal years ended December
31, 2000, 2001 and 2002, was $3.8 million, $5.7 million and $7.9 million,
respectively. The Company obtained a $1.3 million letter of credit with a
commercial bank, expiring June 2003, to provide a security deposit for its
headquarters office lease. The Companys cash, accounts receivable and property
and equipment collateralize the letter of credit agreement.

38



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##### 



Washington, D.C. income tax incentives

The Office of Tax and Revenue of the Government of the District of
Columbia (the Office of Tax and Revenue) has adopted regulations in
accordance with the New E-Conomy Transformation Act of 2000 (the Act) that
modify the income and franchise tax, sales and use tax, and personal property
tax regulations, effective April 2001. Specifically, the regulations provide
certain credits, exemptions and other benefits to a Qualified High Technology
Company (QHTC).

The Company has performed an analysis to support its position that it
meets the definition of a QHTC under the provisions of the Act. Accordingly,
the Company will amend its 2001 Washington, D.C. income tax return and certain
sales and use tax returns, to file as a QHTC. As a QHTC, the Companys
Washington, D.C. income tax rate will be 0.0% and the Company will be eligible
for certain Washington, D.C. income tax credits. In addition the Company will be
entitled to relief from certain sales and use taxes. While the Company
believes it qualifies as a QHTC, the Company has elected not to recognize the impact of
this election within the financial statements for the year ended December 31,
2002, because of uncertainties inherent in the regulations, as adopted.

For financial reporting purposes, the Company has valued its deferred
income tax assets and liabilities using Washington, D.C.s currently enacted
income tax rate of 9.975%. Additionally, the Company has continued to provide
for income, sales and use taxes as if the Company were not a QHTC. However, if the
Company had received a determination that it qualified for QHTC status, it would
have recorded a charge to earnings of approximately $9.5 million, representing
the impact on its existing deferred tax asset of lowering the Washington, D.C.
income tax rate to 0.0%, net of any income tax credits discussed above. When the Company believes
it is more likely than not that the Office of Tax and Revenue will accept the Companys
election as a QHTC,
the Company will record the applicable charge. Additionally, the Company would
recognize the refund of any previously paid or provided sales and use taxes at
that time. See further discussion of income taxes in Note 7.

17.     Quarterly financial data (unaudited)

Unaudited summarized financial data by quarter for the years ended
December 31, 2001 and 2002 is as follows (in thousands, except per share
amounts):

|                                         |         |   |                    |      |         |   |              |      |             |   |        |      |  |   |        |      | 
|---------------------------------------- | ------- | - | ------------------ | ---- | ------- | - | ------------ | ---- | ----------- | - | ------ | ---- |  | - | ------ | ---- | 
|                                         |         |   | 2001 Quarter Ended
|                                         |         |   |                   
|                                         |         |   | March 31           |      | June 30 |   | September 30 |      | December 31
|                                         |         |   |                    |      |         |   |              |      |            
|Revenues                                 |         | $ | 29,215             |      |         | $ | 31,124       |      |             | $ | 32,625 |      |  | $ | 35,148 |     
|Gross profit                             |         |   | 17,972             |      |         |   | 20,215       |      |             |   | 21,613 |      |  |   | 22,574 |     
|Income before provision for income taxes |         |   | 6,560              |      |         |   | 8,730        |      |             |   | 9,395  |      |  |   | 10,204 |     
|Net income                               |         | $ | 4,067              |      |         | $ | 5,413        |      |             | $ | 5,825  |      |  | $ | 6,327  |     
|Earnings per share:                      |         |   |                    |      |         |   |              |      |             |   |        |      |  |   |        |     
|                                         | Basic   |   | $                  | 0.13 |         |   | $            | 0.16 |             |   | $      | 0.17 |  |   | $      | 0.18 | 
|                                         | Diluted |   | $                  | 0.11 |         |   | $            | 0.15 |             |   | $      | 0.16 |  |   | $      | 0.17 | 

|                                         |         |   |                    |      |         |   |              |      |             |   |        |      |  |   |        |      | 
|---------------------------------------- | ------- | - | ------------------ | ---- | ------- | - | ------------ | ---- | ----------- | - | ------ | ---- |  | - | ------ | ---- | 
|                                         |         |   | 2002 Quarter Ended
|                                         |         |   |                   
|                                         |         |   | March 31           |      | June 30 |   | September 30 |      | December 31
|                                         |         |   |                    |      |         |   |              |      |            
|Revenues                                 |         | $ | 37,023             |      |         | $ | 39,547       |      |             | $ | 41,275 |      |  | $ | 44,512 |     
|Gross profit                             |         |   | 23,506             |      |         |   | 26,531       |      |             |   | 27,149 |      |  |   | 29,024 |     
|Income before provision for income taxes |         |   | 9,567              |      |         |   | 12,241       |      |             |   | 12,848 |      |  |   | 13,515 |     
|Net income                               |         | $ | 5,931              |      |         | $ | 7,589        |      |             | $ | 7,837  |      |  | $ | 8,244  |     
|Earnings per share:                      |         |   |                    |      |         |   |              |      |             |   |        |      |  |   |        |     
|                                         | Basic   |   | $                  | 0.17 |         |   | $            | 0.20 |             |   | $      | 0.21 |  |   | $      | 0.22 | 
|                                         | Diluted |   | $                  | 0.16 |         |   | $            | 0.20 |             |   | $      | 0.21 |  |   | $      | 0.22 | 

18.     Subsequent event

In February 2003, the Company announced that its Board of Directors
authorized a share repurchase of up to $75 million of the Companys common
stock. Repurchases will be made from time to time in open market and privately
negotiated transactions subject to market conditions. No minimum number of
shares has been fixed. The Company will fund its share repurchases with cash
on hand and cash generated from operations.

39



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##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.

On July 8, 2002, upon the recommendation of our Audit Committee, the Board
of Directors dismissed Andersen as the Companys
independent auditors and appointed Ernst & Young LLP (Ernst & Young) to serve
as its independent auditors for the year ending December 31, 2002. The Company
filed a current report on Form 8-K with the SEC on July 10, 2002, which
included a notification that the change was effective on July 8, 2002.

Andersens reports on the Companys financial statements for each
of the two fiscal years ending December 31, 2001 and 2000 did not contain
an adverse opinion or disclaimer of opinion, nor were such reports qualified or
modified as to uncertainty, audit scope or accounting principles.

During each of the Companys two fiscal years ending December
31, 2000 and 2001, there were: (i) no
disagreements with Andersen on any matter of accounting principle or
practice, financial statement disclosure or auditing scope or procedure which,
if not resolved to Andersens satisfaction, would have caused them to
make reference to the subject matter in connection with their report on the
Companys financial statements for such years; and (ii) there were no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

During each of the Companys two fiscal years ending December
31, 2000 and 2001 and through the date of their appointment, the Company did not
consult Ernst & Young with respect to the application of accounting principles
to a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on its financial statements, or any other
matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of
Regulation S-K.

40



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##### 



PART III

Item 10. Directors and Executive Officers of the Registrant.

The following table sets forth the names, ages and positions with The
Corporate Executive Board Company of the persons who serve as our directors and
executive officers as of December 31, 2002:

|                                 |  |  |  |     |  |                                                  
|-------------------------------- |  |  |  | --- |  | -------------------------------------------------
|Directors and
Executive Officers |  |  |  | Age |  | Position                                         
|                                 |  |  |  |     |  |                                                  
|James J. McGonigle               |  |  |  | 39  |  | Chief Executive Officer and Chairman of the Board
|Robert C. Hall                   |  |  |  | 71  |  | Director                                         
|Nancy J. Karch                   |  |  |  | 55  |  | Director                                         
|David W. Kenny                   |  |  |  | 41  |  | Director                                         
|Thomas L. Monahan III            |  |  |  | 36  |  | General Manager, Corporate Practice and Director 
|Harold L. Siebert                |  |  |  | 57  |  | Director                                         
|Michael A. Archer                |  |  |  | 39  |  | Chief Marketing Officer                          
|Derek C. M. van Bever            |  |  |  | 45  |  | Chief Research Officer                           
|Timothy R. Yost                  |  |  |  | 31  |  | Chief Financial Officer                          

James J. McGoniglehas been our Chairman of the Board since March 2001 and
our Chief Executive Officer and a director since July 1998. From the Spin-off
until July 1998, Mr. McGonigle was our General Manager, and from 1995 until the
Spin-off, he was the General Manager of the corporate division of The Advisory
Board Company with responsibility for managing the business assumed by us in
the Spin-off. From 1990 to 1995, Mr. McGonigle was a consultant in the
Financial Institutions Group at McKinsey & Company. Mr. McGonigle serves as a
Director of FactSet, an on-line investment research service. Mr. McGonigle
received a B.A. from the Woodrow Wilson School at Princeton University and a
J.D. from Harvard Law School.

Robert C. Hallhas been a director since February 1999.
Mr. Hall is the President of Harborside Plus, Inc., a financial services company. From 1995 to
January 1999, Mr. Hall served as the Vice President of The Thomson Corporation,
a publicly held information publishing company. From 1990 to 1995, Mr. Hall was
the Chief Executive Officer of Thomson Information and Publishing Group, a
division of The Thomson Corporation involved in professional information and
publishing. From 1985 to 1990, Mr. Hall was the President of Thomson Financial
Services Group, another publishing division of The Thomson Corporation. Mr.
Hall received a B.S. from Iowa State University.

Nancy J. Karchhas been a director since October 2001. Ms. Karch was a
senior partner of McKinsey & Co., an independent consulting firm, from 1988
until her retirement in 2000. She had served in various executive capacities at
McKinsey since 1974. Ms. Karch is a member of The McKinsey Advisory Council,
and serves as a director of Toys R Us, Inc., retail merchants, Liz Claiborne,
Inc., apparel marketers, The Gillette Company, a manufacturer of consumer
products and the Westchester Land Trust. Ms. Karch received a B.A. from Cornell University,
an M.S. from Northeastern University and an M.B.A. from Harvard Business School.

David W. Kennyhas been a director since February 1999. Mr. Kenny is the
Chairman and Chief Executive Officer of Digitas, Inc., a relationship marketing services
firm. Mr. Kenny has been the Chairman of Digitas since December 1998 and Chief Executive Officer
since September 1997. Prior to Digitas, Mr. Kenny held a number of executive
positions with Bain & Company, an independent consulting firm, from 1988
through 1997. Mr. Kenny received a B.S. from the General Motors Institute and an
M.B.A. from Harvard Business School.

Thomas L. Monahan IIIhas been a director since June 2001 and our General
Manager, Corporate Practice, since January 2001. From November 1998 until
January 2001, Mr. Monahan served as one of our Executive Directors, Research,
and from the Spin-off until November 1998, he served as our Managing Director,
Research. Prior to the Spin-off, Mr. Monahan served in similar capacities with
The Advisory Board Company, which he joined in January 1996. Prior to January
1996, Mr. Monahan served as a senior consultant for the Deloitte & Touche
Consulting Group, a Director at the Committee for Economic Development and a
staff consultant at Andersen Consulting. Mr. Monahan received a B.A. from
Harvard University and an M.B.A. from New York University.

Harold L. Sieberthas been a director since July 1998, and served as the
Chairman of the Board from July 1998 until January 2000. From 1996 through July
1998, Mr. Siebert served as Chief Executive Officer and Chairman of Inforum
Inc., a company providing marketing and planning systems for healthcare
clients, and as Executive Vice President of Medstat/Thomson, a healthcare
information company. From 1995 until 1996, Mr. Siebert served as Bureau Chief
of TennCare, the State of Tennessees Medicaid managed care program. From 1993
until 1995, Mr. Siebert was a consultant to Medstat/Thomson. In 1988, Mr.
Siebert founded Inforum, Inc. and served as its President and Chief Executive
Officer from 1988 through 1993. Prior to 1988, he held various senior-level
positions at HBO & Co. and Baxter International. Mr. Siebert received his B.S.
from Miami University in Oxford, Ohio.

Michael A. Archerhas been our Chief Marketing Officer since November
2002. Mr. Archer joined the Company in March 2002 as our General Manager,
Sales and Marketing. From 1989 through March 2002, Mr. Archer held various
positions of increasing responsibility at Dun & Bradstreet, Inc., including
Senior Vice PresidentMajor Markets. Prior to 1989, Mr. Archer served as a sales manager with Inter-Tel, Inc. Mr. Archer received a B.A. and an M.B.A. from the
University of California at Los Angeles.

41



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##### 



Derek C. M. van Beverhas been our Chief Research Officer since the
Spin-off. From 1995 through the date of the Spin-off, he served as the Chief
Research Officer of the business assumed by us in the Spin-off. Prior to that,
he served in various management capacities with The Advisory Board Company,
which he joined in 1981. Mr. van Bever received a B.A. and an M.A. from the
University of Delaware and an M.B.A. from Harvard Business School.

Timothy R. Yosthas been our Chief Financial Officer since September 2002.
Mr. Yost joined the Company in January 1997, and has held a variety of
financial positions of increasing responsibility, including senior director,
finance. Prior to 1997, Mr. Yost served as an equity analyst with Chapin,
Davis. Mr. Yost received a B.B.A. from Loyola College and an M.S. from the
George Washington University.

Section 16(a) Beneficial Ownership Reporting
Compliance

Section
16(a) of the Securities Exchange Act of 1934 requires the
Companys directors, executive officers, and 10% stockholders to
file forms with the SEC to report their ownership of the
Companys stock and any changes in ownership. Anyone required to
file forms with the SEC must also send copies of the forms to the
Company. We have reviewed all forms provided to us. Based on that
review and on written information given to us by our executive
officers and directors, we believe that all Section 16(a) filing
requirements were met during fiscal 2002.

Item 11. Executive Compensation.

The
following table presents certain information concerning compensation
earned for services rendered for 2000, 2001, and 2002 by the Chief Executive
Officer and the five other most highly paid persons, who served as
executive officers during 2002 (the Named
Officers):

|                                                 |  |      |              |        |              |       |          
|------------------------------------------------ |  | ---- | ------------ | ------ | ------------ | ----- | ---------
|                                                 |  |      | Annual       |        | Long-Term    |       |          
|                                                 |  |      | Compensation |        | Compensation |       |          
|                                                 |  |      |              |        |              |       | All Other
|Name and Principal Positions                     |  | Year |              | Salary |              | Bonus |          
|                                                 |  |      |              |        |              |       |          
|James
          J. McGonigle                     |  |      | 2002         |        |              | $     | 541,700  
|Chief
          Executive Officer                |  |      | 2001         |        |              |       | 500,000  
|                                                 |  |      | 2000         |        |              |       | 462,000  
|                                                
|Michael
          A. Archer                      |  |      | 2002         |        |              | $     | 251,300  
|Chief
          Marketing Officer                |  |      | 2001         |        |              |       |         
|                                                 |  |      | 2000         |        |              |       |         
|                                                
|Thomas
          L. Monahan III                  |  |      | 2002         |        |              | $     | 400,000  
|General
          Manager, Corporate Practice    |  |      | 2001         |        |              |       | 385,000  
|                                                 |  |      | 2000         |        |              |       | 310,000  
|                                                 |  |      |              |        |              |       |          
|Derek
          C. M. van Bever                  |  |      | 2002         |        |              | $     | 410,000  
|Chief
          Research Officer                 |  |      | 2001         |        |              |       | 410,000  
|                                                 |  |      | 2000         |        |              |       | 400,000  
|                                                 |  |      |              |        |              |       |          
|Timothy
          R. Yost (4)                    |  |      | 2002         |        |              | $     | 191,700  
|Chief
          Financial Officer                |  |      | 2001         |        |              |       |         
|                                                 |  |      | 2000         |        |              |       |         
|                                                 |  |      |              |        |              |       |          
|Clay
          M. Whitson (4)                    |  |      | 2002         |        |              | $     | 206,300  
|Chief
          Financial Officer, Secretary and |  |      | 2001         |        |              |       | 275,000  
|Treasurer                                        |  |      | 2000         |        |              |       | 265,000  



|(1) |  | Reflects amounts paid to Mr. van Bever in 2000 and 2001 in connection with the repurchase of certain options of The Advisory Board Company
prior to the time of the spin-off.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Reflects a signing bonus of $50,000 paid to Mr. Archer upon the commencement of his employment.                                                                              
|   
|(3) |  | Bonus compensation for the year ended December 31, 2002 had not been determined at the time of the
filing of this Form 10-K.                                                 
|   
|(4) |  | Mr. Whitson was our Chief
Financial Officer, Secretary and Treasurer until August 31, 2002. Effective September 1,
2002, Mr. Yost became the Chief Financial Officer.        

42



---



##### 



Option Grants in Fiscal 2002

The following table shows information about stock option grants to the
Named Officers during fiscal 2002. These options are included in the Summary
Compensation Table above. All options were granted at fair market value under
the 2001 Stock Option Plan (the 2001 Plan) and the 2002 Non-Executive Stock Incentive Plan (the 2002 Plan). The options have 10-year terms. The rules
of the SEC require us to show hypothetical gains
that the Named Officers would have for these options at the end of their
10-year terms. These gains are calculated assuming annual compound stock price
appreciation of 5% and 10% from the date the option was originally granted to
the end of the option term. The 5% and 10% assumed annual compound rates of
stock price appreciation are required by SEC rules. They are not our estimate
or projection of future stock prices.

The following table sets forth certain information concerning grants of
stock options to each of the Named Officers during 2002:

Stock Option Grants in 2002

|                                |  |                      |         |                      |  |             |      |                |  |            |       |    |  |                             |       |  |  |                          |  |                 |           | 
|------------------------------- |  | -------------------- | ------- | -------------------- |  | ----------- | ---- | -------------- |  | ---------- | ----- | -- |  | --------------------------- | ----- |  |  | ------------------------ |  | --------------- | --------- | 
|                                |  | Individual Grants(1) |         | Potential Realizable
|                                |  |                      |         | Value at Assumed    
|                                |  |                      |         |                      |  | % of Total  |      |                |  |            |       |    |  |                             |       |  |  |                          |  | Annual Rates of
|                                |  | Number of            |         | Options              |  |             |      |                |  |            |       |    |  |                             |       |  |  | Stock Price             
|                                |  | SharesUnderlying     |         | Granted toEmployees  |  | Exercise    |      | MarketPrice on |  |            |       |    |  | Appreciation forOption Term
|                                |  | Option               |         | in                   |  | Price       |      | Date of        |  | Expiration |       |   
|Name                            |  | Grants               |         | Fiscal Year          |  | (per share) |      | Grant          |  | Date       |       | 5% |  | 10%                        
|                                |  |                      |         |                      |  |             |      |                |  |            |       |    |  |                            
|James
          J. McGonigle    |  |                      | 350,000 |                      |  |             | 16.6 | %              |  | $          | 32.41 |    |  | $                           | 32.41 |  |  | March
          7, 2012  |  | $               | 7,133,866 | 
|Michael
          A. Archer     |  |                      | 100,000 |                      |  |             | 4.7  |                |  |            | 33.85 |    |  |                             | 33.85 |  |  | March
          20, 2012 |  |                 | 2,128,218 | 
|Thomas
          L. Monahan III |  |                      | 70,000  |                      |  |             | 3.3  |                |  |            | 32.41 |    |  |                             | 32.41 |  |  | March
          7, 2012  |  |                 | 1,426,773 | 
|Derek
          C. M. van Bever |  |                      | 70,000  |                      |  |             | 3.3  |                |  |            | 32.41 |    |  |                             | 32.41 |  |  | March
          7, 2012  |  |                 | 1,426,773 | 
|Timothy
          R. Yost(2)    |  |                      | 50,000  |                      |  |             | 2.4  |                |  |            | 28.83 |    |  |                             | 28.83 |  |  | July 26,
          2012  |  |                 | 906,552   | 
|Timothy
          R. Yost(2)    |  |                      | 15,000  |                      |  |             | 0.7  |                |  |            | 32.41 |    |  |                             | 32.41 |  |  | March
          7, 2012  |  |                 | 305,737   | 
|Clay
          M. Whitson(2)    |  |                      | 50,000  |                      |  |             | 2.4  |                |  |            | 32.41 |    |  |                             | 32.41 |  |  | March
          7, 2012  |  |                 | 1,019,124 | 



|(1) |  | Options granted under the 2001 and 2002 Plans become
exercisable 25% per year beginning one year after the date of grant.                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Mr. Whitson was our Chief
Financial Officer, Secretary and Treasurer until August 31, 2002.
Effective September 1, 2002, Mr. Yost became the Chief Financial
Officer.

Option Exercises in 2002 and Year-End Option Values

The following table shows information about the value realized on option
exercises for each of the Named Officers during fiscal 2002, and the value of
their unexercised options at the end of fiscal 2002. Value realized, or gain,
is measured as the difference between the exercise price and market value or
the price at which the shares were sold on the date of exercise.

Aggregated Option Exercises in 2002
and Year-End Option Values

|                      |  |             |         |          |  |                            |           |                         |  |                      |         |               |  |         |  |  |  |   |           |  |  |   |           |  |  |  |  | 
|--------------------- |  | ----------- | ------- | -------- |  | -------------------------- | --------- | ----------------------- |  | -------------------- | ------- | ------------- |  | ------- |  |  |  | - | --------- |  |  | - | --------- |  |  |  |  | 
|                      |  |             |         |          |  |                            |           | Number of Securities    |  | Value of Unexercised
|                      |  |             |         |          |  | Underlying Unexercised     |           | In-the-Money Options at
|                      |  | Shares      |         |          |  | Options at Fiscal Year-End |           | Fiscal Year-End (1)    
|                      |  | Acquired    |         | Value    |  |                            |           |                        
|Name                  |  | On Exercise |         | Realized |  | Exercisable                |           | Unexercisable           |  | Exercisable          |         | Unexercisable
|                      |  |             |         |          |  |                            |           |                         |  |                      |         |              
|James J. McGonigle    |  |             | 333,026 |          |  | $                          | 9,477,964 |                         |  |                      | 102,822 |               |  | 515,500 |  |  |  | $ | 1,066,369 |  |  | $ | 1,396,610 | 
|Michael A. Archer     |  |             |        |          |  |                            |          |                         |  |                      |        |               |  | 100,000 |  |  |  |   |          |  |  |   |          | 
|Thomas L. Monahan
III |  |             | 81,990  |          |  |                            | 2,152,612 |                         |  |                      | 57,610  |               |  | 160,000 |  |  |  |   | 741,080   |  |  |   | 516,175   | 
|Derek C. M. van
Bever |  |             | 134,042 |          |  |                            | 3,595,536 |                         |  |                      | 14,658  |               |  | 125,000 |  |  |  |   | 71,443    |  |  |   | 434,925   | 
|Timothy
R. Yost(2)    |  |             |        |          |  |                            |          |                         |  |                      | 11,750  |               |  | 84,250  |  |  |  |   | 73,540    |  |  |   | 234,940   | 
|Clay
M. Whitson(2)    |  |             | 170,532 |          |  |                            | 3,416,716 |                         |  |                      |        |               |  |        |  |  |  |   |          |  |  |   |          | 



|(1) |  | Based on the closing price of our
common stock on December 31, 2002 of $31.92 per share.                                                                             
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) |  | Mr. Whitson was our Chief
Financial Officer, Secretary and Treasurer until August 31, 2002. Effective September 1,
2002, Mr. Yost became the Chief Financial Officer.

43



---



##### 



Board of Directors Compensation

The Board of Directors or, to the extent authorized by the Board, the
Compensation Committee, sets directors compensation under The Corporate
Executive Board Company Directors Stock Plan and such other arrangements as
the Compensation Committee determines to be appropriate. Each director who is
not an employee, upon election as a non-employee director, received a one-time
grant of options to purchase 72,240 shares of common stock. For 2002,
non-employee directors also received a grant of options to purchase 10,000
shares of common stock and a $20,000 annual retainer. Directors who are
employees of the Company did not receive additional compensation for their
service on the Board. Compensation paid to Messrs. McGonigle and Monahan for
2002 is described above in Item 11 of this Annual Report on Form 10-K.

Employment Contracts, Termination of Employment and Change of Control
Arrangements

Option Plans

The Corporate Executive Board Company 1999 Stock Option Plan, The Corporate
Executive Board Company 2001 Stock Option Plan
    and The Corporate Executive Board Company 2002 Non-Executive Stock Incentive Plan

In the event that there is any change in the number or kind of the
outstanding shares of common stock of the Company, whether by reason of merger,
consolidation or otherwise, then the plan administrator of the 1999 Plan,
the 2001 Plan and the 2002 Plan (the
Plans) shall, in its sole discretion, determine the appropriate adjustment,
if any. In addition, in the event of such a change, the plan administrator may
accelerate the time or times at which any option may be exercised and may
provide for cancellation of accelerated options that are not exercised within a
time prescribed by the plan administrator in its sole discretion. Options
granted under the Plans generally provide that, if an optionee remains employed
by the Company for one year following a change of control, or if during such
time the optionees employment is terminated for any reason other than for
cause or voluntary resignation, all options granted under the Plans become
immediately exercisable. For this purpose, a change of control includes
acquisition by any person of more than 50% of the Companys stock, a change in
a majority of the Board of Directors to include directors not nominated by the
Company and stockholder approval of certain mergers, asset sales or plans of
liquidation.

The Corporate Executive Board Stock-Based
Incentive Compensation Plan

In the event of a merger or other form of corporate reorganization, any
unexercised options shall be subject to the terms of the agreement or plan of
merger or reorganization effecting such merger or reorganization and shall be
converted, redeemed, exchanged, cancelled or otherwise treated as provided in
such agreement or plan of merger or reorganization. Subject to the foregoing,
if the shares of Company stock are changed into or exchanged for a different
number or kind of shares or securities, as the result of any one or more
reorganizations, recapitalizations, mergers, acquisitions, or similar events,
an appropriate adjustment shall be made (1) in the number and kind of shares or
other securities subject to outstanding options, and (2) to the price for each
share or other unit of any securities subject to the options, in accordance
with this Plan.

Employment Arrangements

Mr. McGonigle is employed by the Company pursuant to the terms of an
employment agreement, which continues in effect until Mr. McGonigles
termination or separation from the Company. Under the terms of the employment
agreement, Mr. McGonigle received an annual salary of $550,000 in 2002, which
is subject to periodic increases at the Companys sole discretion. The
employment agreement requires Mr. McGonigle to devote his efforts and abilities
to the Company on a full-time basis. The employment agreement also provides
that Mr. McGonigle will receive an amount equal to 125% of one years base
salary and that all the options granted to him will vest and become exercisable
immediately if he is terminated without cause.

Mr. Archer is employed by the Company pursuant to the terms of an
employment agreement, which continues in effect until Mr. Archers termination
or separation from the Company. Under the terms of the employment agreement,
Mr. Archer received an annual salary of $251,300 in 2002, which is subject to
periodic increases at the Companys sole discretion. The employment agreement
requires Mr. Archer to devote his efforts and abilities to the Company on a
full-time basis. The employment agreement also provides that Mr. Archer will
receive an amount equal to 100% of one years base salary plus $100,000 and
that all the options granted to him will vest and become exercisable
immediately if he is terminated without cause.

44



---



##### 



Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information regarding the
beneficial ownership of The Corporate Executive Board Companys common stock as
of February 21, 2003, by (i) each stockholder owning 5% or more of the common
stock, (ii) each Named Officer, (iii) each director and (iv) all current
directors and executive officers as a group.

|                                                                   |  |              |  |                       |  |               |           |         |  |  |     |   |  |        |  |         |  |  |           |  |  |  |     |  
|------------------------------------------------------------------ |  | ------------ |  | --------------------- |  | ------------- | --------- | ------- |  |  | --- | - |  | ------ |  | ------- |  |  | --------- |  |  |  | --- | -
|                                                                   |  |              |  |                       |  | Amount        |           |         |  |  |     |   |  |        |  |         |  | 
|                                                                   |  |              |  |                       |  | and Nature    |           |         |  |  |     |   |  |        |  |         |  | 
|                                                                   |  |              |  |                       |  | of Beneficial |           |         |  |  |     |   |  |        |  |         |  | 
|Name of Beneficial Owner                                           |  | Ownership(1) |  | Total Equity Stake(2)
|                                                                   |  |              |  |                      
|                                                                   |  |              |  |                       |  | Number        |           | Percent |  |  |     |   |  | Number |  | Percent
|                                                                   |  |              |  |                       |  |               |           |         |  |  |     |   |  |        |  |        
|James J. McGonigle(3)                                              |  |              |  |                       |  |               | 426,028   |         |  |  | 1.1 | % |  |        |  |         |  |  | 656,028   |  |  |  | 1.7 | %
|Robert C. Hall(4)                                                  |  |              |  |                       |  |               | 42,240    |         |  |  | *   |   |  |        |  |         |  |  | 42,240    |  |  |  | *   |  
|Nancy J. Karch (5)                                                 |  |              |  |                       |  |               | 83,240    |         |  |  | *   |   |  |        |  |         |  |  | 83,240    |  |  |  | *   |  
|David W. Kenny(6)                                                  |  |              |  |                       |  |               | 65,240    |         |  |  | *   |   |  |        |  |         |  |  | 65,240    |  |  |  | *   |  
|Harold L. Siebert(7)                                               |  |              |  |                       |  |               | 217,050   |         |  |  | *   |   |  |        |  |         |  |  | 217,050   |  |  |  | *   |  
|Michael A. Archer (8)                                              |  |              |  |                       |  |               | 25,000    |         |  |  | *   |   |  |        |  |         |  |  | 100,000   |  |  |  | *   |  
|Derek C. M. van Bever(9)                                           |  |              |  |                       |  |               | 89,759    |         |  |  | *   |   |  |        |  |         |  |  | 169,759   |  |  |  | *   |  
|Thomas L. Monahan III(10)                                          |  |              |  |                       |  |               | 115,426   |         |  |  | *   |   |  |        |  |         |  |  | 217,926   |  |  |  | *   |  
|Timothy R. Yost(11)                                                |  |              |  |                       |  |               | 21,750    |         |  |  | *   |   |  |        |  |         |  |  | 96,000    |  |  |  | *   |  
|Clay M. Whitson                                                    |  |              |  |                       |  |               | 7,518     |         |  |  | *   |   |  |        |  |         |  |  | 7,518     |  |  |  | *   |  
|The TCW Group, Inc.(12)                                            |  |              |  |                       |  |               | 2,366,604 |         |  |  | 6.4 | % |  |        |  |         |  |  | 2,366,604 |  |  |  | 6.1 | %
|Pilgrim Baxter & Associates, Ltd.(13)                              |  |              |  |                       |  |               | 1,518,300 |         |  |  | 4.1 | % |  |        |  |         |  |  | 1,518,300 |  |  |  | 3.9 | %
|All current directors and executive
officers as a group (9 people) |  |              |  |                       |  |               | 1,085,733 |         |  |  | 2.8 | % |  |        |  |         |  |  | 1,647,483 |  |  |  | 4.3 | %



|*    |  | Indicates ownership of less than 1%.                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(1)  |  | Unless indicated in the notes, each stockholder has sole voting and investment power for all shares
shown, subject to community property laws that may apply to create shared voting and investment power. We have included in shares owned by each stockholder all
options held by the stockholder that are currently exercisable or exercisable within 60 days of February 21, 2003 (which would be
April 22, 2003).                                          
|    
|(2)  |  | The number column indicates the number of shares owned assuming the exercise of all options, whether vested or unvested, without
regard to whether or not the options are exercisable within 60 days. Percentages in the percent column are calculated on a diluted
basis, assuming that all shares subject to options are deemed to be outstanding, whether vested or unvested and without regard to
whether or not the options are exercisable within 60 days.
|    
|(3)  |  | Beneficial ownership includes 388,322 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                   
|    
|(4)  |  | Beneficial ownership consists of 42,240 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                 
|    
|(5)  |  | Beneficial ownership includes 82,240 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                    
|    
|(6)  |  | Beneficial ownership includes 65,240 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                    
|    
|(7)  |  | Beneficial ownership includes 197,936 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                   
|    
|(8)  |  | Beneficial ownership includes 25,000 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                    
|    
|(9)  |  | Beneficial ownership includes 59,658 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                    
|    
|(10) |  | Beneficial ownership includes 115,110 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                   
|    
|(11) |  | Beneficial ownership includes 21,750 shares issuable upon the exercise of options held by the stockholder that are currently
exercisable or exercisable within 60 days of February 21, 2003 (which would be April 22, 2003).                                                                                                                                                                                                                                    

45



---



##### 



|    
|----
|(12)
|    
|(13)

The following table sets forth
information about the Companys compensation plans at December 31,
2002.

Equity Compensation Plan
Information

|                                                           |  |                   |           |                      |  |                          |       |                     |  |           |           | 
|---------------------------------------------------------- |  | ----------------- | --------- | -------------------- |  | ------------------------ | ----- | ------------------- |  | --------- | --------- | 
|                                                           |  | (A)               |           | (B)                  |  | (C)                     
|                                                           |  |                   |           |                      |  |                         
|                                                           |  |                   |           |                      |  |                          |       |                     |  | Number Of
|                                                           |  | Number Of         |           |                      |  |                          |       | Securities         
|                                                           |  | Securities To Be  |           |                      |  |                          |       | Remaining Available
|                                                           |  | Issued Upon       |           |                      |  |                          |       | For Equity         
|                                                           |  | Exercise Of       |           | Weighted-Average     |  | Compensation Plans      
|                                                           |  | Outstanding       |           | Exercise Price Of    |  | (Excluding              
|                                                           |  | Options, Warrants |           | Outstanding Options, |  | Securities              
|Plan Category                                              |  | And Rights        |           | Warrants And Rights  |  | Reflected
In Column (A))
|                                                           |  |                   |           |                      |  |                         
|Equity compensation
plans approved by
stockholders         |  |                   | 3,939,403 |                      |  | $                        | 25.05 |                     |  |           | 3,281,913 | 
|Equity compensation
plans not approved
by stockholders (1) |  |                   | 1,080,000 |                      |  |                          | 32.31 |                     |  |           | 6,220,000 | 
|                                                           |  |                   |           |                      |  |                          |       |                     |  |           |           | 
|Total                                                      |  |                   | 5,019,403 |                      |  | $                        | 26.61 |                     |  |           | 9,501,913 | 
|                                                           |  |                   |           |                      |  |                          |       |                     |  |           |           | 

|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | See Note 13 to the Companys audited financial statements for the year ended
December 31, 2002 for a narrative description of the
|    | 2002 Plan, which
was not approved by the Companys stockholders.                                                                 

Item 13. Certain Relationships and Related Transactions.

Vendor Contracts Agreements.We have received services under certain
vendor contracts entered into by The Advisory Board Company for the provision
of certain services, such as telecommunications, travel, mailing and general
office services. A Vendor Contracts Agreement specified that we will pay the
vendor directly if costs can be segregated and billed separately, or we will
reimburse The Advisory Board Company for our reasonably allocated share of
commonly billed costs. The Vendor Contracts Agreement expired on December 31,
2000. However, we continue to participate in limited vendor contracts entered
into by the Advisory Board Company for the provision of certain services and
continue to pay for such services on a basis consistent with that followed
under the Vendor Contracts Agreement.

Item 14. Controls and Procedures.

Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including the companys Chief Executive Officer (CEO) and Chief Financial
Officer (CFO), of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.
Management necessarily applied its judgment in assessing the costs and benefits
of such controls and procedures which, by their nature, can provide only
reasonable assurance regarding managements control objectives. It should be
noted that the design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote. Based upon that
evaluation, the CEO and CFO concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
relating to the company required to be included in our periodic SEC
reports. There have been no significant
changes in our internal controls or in other factors that could significantly
affect those controls subsequent to the date of this evaluation.

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

|       |  |                                                                                                                                                                                                                                                                                                                                                                      
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)(1) |  | The following financial statements of the registrant and report of Independent Auditors are included in Item 8 hereof:                                                                                                                                                                                                                                               
|       |  | Report of Independent Auditors                                                                                                                                                                                                                                                                                                                                       
|       |  | Balance Sheets as of December 31, 2001 and 2002,                                                                                                                                                                                                                                                                                                                     
|       |  | Statements of Income for the years ended December 31, 2000, 2001 and 2002,                                                                                                                                                                                                                                                                                           
|       |  | Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002,                                                                                                                                                                                                                                                                                       
|       |  | Statements of Changes in Stockholders Equity for the years ended December 31, 2000, 2001 and
2002, and Notes to Financial Statements.                                                                                                                                                                                                                               
|(a)(2) |  | Except as provided below, all schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission either have
been included in the Financial Statements or are not required under the related instructions, or are not applicable and therefore have been omitted.
Schedule IIValuation and Qualifying Accounts
|(a)(3) |  | The following exhibits are either provided with this Form 10-K or are incorporated herein by reference:                                                                                                                                                                                                                                                              

46



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##### 



|        |  |                                                                                                                                                                                                                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                 
|No.     |  | Description of Exhibit                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                 
|1.1     |  | [Omitted]                                                                                                                                                                                                                       
|3.1     |  | Second Amended and Restated Certificate of Incorporation.*                                                                                                                                                                      
|3.2     |  | Amended and Restated Bylaws.*                                                                                                                                                                                                   
|4.1     |  | Specimen Common Stock Certificate.*                                                                                                                                                                                             
|5.1     |  | [Omitted]                                                                                                                                                                                                                       
|10.1    |  | Employment Agreement, dated January 21, 1999, between the Company and James J. McGonigle.*                                                                                                                                     
|10.2    |  | Employment Agreement, dated November 1, 1998, between the Company and Clay M. Whitson.*                                                                                                                                        
|10.3    |  | Stock Option Agreement Pursuant to The Corporate Advisory Board Company Stock-Based Incentive Compensation Plan, effective as of October
31, 1997, between the Company and James J. McGonigle, as amended on January 21, 1999.*
|10.4    |  | Stock Option Agreement Pursuant to The Corporate Executive Board Company Stock-Based Incentive Compensation Plan, effective as of April
15, 1998, between the Company and Harold L. Siebert.*                                  
|10.5    |  | Stock Option Agreement Pursuant to The Corporate Executive Board Company Stock-Based Incentive Compensation Plan, dated as of November 1,
1998, between the Company and Clay M. Whitson.*                                      
|10.11   |  | Stock Option Agreement Pursuant to The
Corporate Executive Board Company
Stock-Based Incentive Compensation
Plan, effective as of October 31, 1997,
between the Company and Derek C. van
Bever, as amended on July 21, 1998.*  
|10.12   |  | Form of Stock Option Agreement Pursuant
to The Corporate Advisory Board Company
Stock-Based Incentive Compensation
Plan, including form of amendment.*                                                                          
|10.13   |  | Agreement Concerning Exclusive
Services, Confidential Information,
Business Opportunities, Non-Competition, Non-Solicitation and Work
Product, dated January 21, 1999,
between the Company and James J.
McGonigle.*             
|10.14   |  | Agreement Concerning Exclusive
Services, Confidential Information,
Business Opportunities, Non-Competition, Non-Solicitation and Work
Product, effective as of April 15,
1998, between the Company and Harold L.
Siebert.*      
|10.15   |  | Agreement Concerning Exclusive
Services, Confidential Information,
Business Opportunities, Non-Competition, Non-Solicitation and Work
Product, dated November 1, 1998,
between the Company and Clay M.
Whitson.*                
|10.16   |  | Agreement Concerning Exclusive
Services, Confidential Information,
Business Opportunities, Non-Competition, Non-Solicitation and Work
Product, dated October 30, 1997,
between the Company and Michael A.
DAmato.*             
|10.17   |  | Agreement Concerning Exclusive
Services, Confidential Information,
Business Opportunities, Non-Competition, Non-Solicitation and Work
Product, dated October 30, 1997,
between the Company and Jeffrey D.
Zients.*              
|10.18   |  | Form of Agreement Concerning Exclusive
Services, Confidential Information,
Business Opportunities,
Non-Competition, Non-Solicitation and
Work Product.*                                                                         
|10.19   |  | The Corporate Executive Board Company
Stock-Based Incentive Compensation
Plan, adopted on October 31, 1997, as
amended and restated in February 1999.*                                                                          
|10.20   |  | Amended Directors Stock Plan and
Standard Terms and Conditions for
Director Non-Qualified Stock Options.*                                                                                                                      

47



---



##### 



|        |  |                                                                                                                                                                                                     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                     
|No.     |  | Description of Exhibit                                                                                                                                                                              
|        |  |                                                                                                                                                                                                     
|10.21   |  | [omitted]                                                                                                                                                                                           
|10.22   |  | 1999 Stock Option Plan and Standard
Terms and Conditions for 1999 Stock
Option Plan Incentive Stock Options.*                                                                                       
|10.23   |  | 2001 Stock Option Plan. ##                                                                                                                                                                          
|10.24   |  | 2002 Non-Executive Stock Incentive Plan.                                                                                                                                                            
|10.25   |  | [omitted]                                                                                                                                                                                           
|10.26   |  | Cross-Indemnification Agreement, dated
as of January 21, 1999, between David
G. Bradley and The Corporate Executive
Board Company.*                                                                 
|10.27   |  | Administrative Services Agreement,
dated as of October 31, 1997, as
amended and restated on July 21, 1998,
between The Advisory Board Company and
The Corporate Executive Board Company.*           
|10.28   |  | Member Contracts Agreement, dated as of
October 31, 1997, between The Advisory
Board Company and The Corporate
Executive Board Company.*                                                            
|10.29   |  | Vendor Contracts Agreement, dated as of
October 31, 1997, as amended and
restated on July 21, 1998, between The
Advisory Board Company and The
Corporate Executive Board Company.*                  
|10.30   |  | Non-Competition Agreement, effective as
of January 1, 1999, as amended
effective October 25, 2001, among The
Advisory Board Company, The Corporate
Executive Board Company and David G.
Bradley. * #
|10.31   |  | Distribution Agreement, dated as of October 31, 1997, between The Corporate Executive Board Company and The
Advisory Board Company.*                                                                
|10.32   |  | Agreement of Lease, dated June 25, 1998, between The Corporate Executive Board Company and The George Washington
University.*                                                                       
|10.33   |  | License Agreement, effective as of October 31, 1997, between The Corporate Executive Board Company and The
Advisory Board Company.*                                                                 
|10.34   |  | Letter agreement regarding the special bonus plan.*                                                                                                                                                
|10.35   |  | Amended and Restated Liquid Markets Agreement, dated August 20, 1997, between The Corporate Executive Board
Company and Derek C. van Bever, as amended on December 28, 1998.*                   
|10.36   |  | Form of term sheet for director non-qualified stock options.                                                                                                                                        
|10.37   |  | Employee Stock Purchase Plan dated June 23, 2000.**                                                                                                                                                
|10.38   |  | Loan Agreement by and between Bank of America, N.A. and the Corporate Executive Board dated May 25, 2000.***                                                                                        
|10.39   |  | Employment Agreement, dated March 20, 2002, between the Company and Michael A.
Archer.ä                                                                                                            
|21.1    |  | List of the Subsidiaries of The Corporate Executive Board Company: None.                                                                                                                            
|23.1    |  | Consent of Ernst and Young LLP.                                                                                                                                                                     

|    |  |                                                                                                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   |  | Incorporated by reference to the registrants registration statement on Form S-1, declared effective by the Securities and Exchange Commission on February
22, 1999 (Registration No. 333-5983).                 
|**  |  | Incorporated by reference to exhibit 10.1 from the Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June
30, 2000.                         
|*** |  | Incorporated by reference to exhibit 10.2 from the Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June
30, 2000.                         
|#   |  | Amendments incorporated by reference to exhibit 10.1 and 10.2 from the Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
quarterly period ended September 30, 2001.
|##  |  | Incorporated by reference to Exhibit 10.1 to the registrant's
registration statement on Form S-8 filed with the Securities and Exchange Commission on August 10, 2001 (Registration No. 333-67238).              
|   |  | Compensation arrangement.                                                                                                                                                                                        
|ä   |  | Incorporated by reference to exhibit 10.1 from the Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
September 30, 2002.                    



|(b) |  | Reports on Form 8-K.                                                                                                                                                                                                                                                                                                                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | None.                                                                                                                                                                                                                                                                                                                                                                          
|   
|(c) |  | Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this annual report.                                                                                                                                                                                                                                      
|   
|(d) |  | Financial statements schedules: The financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange
Commission are either not required under the related instructions or are inapplicable, and therefore have been omitted, except for Schedule IIValuation and Qualifying
Accounts which is provided below.

48



---



##### 



REPORT OF INDEPENDENT AUDITORS

We have audited, in accordance with auditing standards generally accepted
in the United States, the financial statements of The Corporate Executive Board
Company as of December 31, 2002, and for the year then ended and have issued
our report thereon dated January 31, 2003. Our audit also included the
financial statement schedule listed in Item 15 of this Form 10-K. This schedule
is the responsibility of the Companys management. Our responsibility is to
express an opinion based on our audit. The financial statements of The
Corporate Executive Board Company and the financial statement schedule referred
to above for the year ended December 31, 2001, were audited by other auditors
who have ceased operations and whose report dated January 31, 2002 expressed an
unqualified opinion.

In our opinion, the 2002 financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young

Washington, D.C.
January 31, 2003

49



---



##### 



The following report is a copy of a report previously issued by Arthur
Andersen LLP (Andersen), which report has not been reissued by Andersen.
Certain financial information for each of the two years in the period ended
December 31, 2001 was not reviewed by Andersen and includes additional
disclosures to conform to new accounting pronouncements and SEC rules and
regulations issued during such fiscal year. See Item 1. Business for
discussion of risks.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of The Corporate Executive Board Company:

We have audited in accordance with auditing standards generally accepted
in the United States, the financial statements of The Corporate Executive Board
Company included in this Form 10-K and have issued our report thereon dated
January 31, 2002. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The Schedule IIValuation and
Qualifying Accounts is the responsibility of the Companys management and is
presented for purposes of complying with the Securities and Exchange
Commissions rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Washington, D.C.
January 31, 2002

50



---



##### 



THE CORPORATE EXECUTIVE BOARD COMPANY

Schedule IIValuation and Qualifying Accounts
(In thousands)

|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 
|----------------------------- | --------------------------------- | - | ---------- | ----- | ---------- | - | ---------- | ----- | ---------- | - | ----------- | - |  | - | ----- | ----- |  | - | ----- | ----- | 
|                              |                                   |   |            |       |            |   |            |       |            |   | Additions   |   |  |   |       |       |  |   |      
|                              |                                   |   | Balance at |       | Additions  |   | Charged to |       | Deductions |   |             |   | 
|                              |                                   |   | Beginning  |       | Charged to |   | Other      |       | from       |   | Balance at 
|                              |                                   |   | of Year    |       | Revenue    |   | Accounts   |       | Reserve    |   | End of Year
|                              |                                   |   |            |       |            |   |            |       |            |   |            
|Year ending December 31, 2000 |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |      
|                              | Reserve for uncollectible revenue |   | $          | 1,341 |            |   | $          | 3,590 |            |   | $           |  |  |   | $     | 3,303 |  |   | $     | 1,628 | 
|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 
|                              |                                   | $ | 1,341      |       |            | $ | 3,590      |       |            | $ |            |   |  | $ | 3,303 |       |  | $ | 1,628 |      
|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 
|Year ending December 31, 2001 |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |      
|                              | Reserve for uncollectible revenue |   | $          | 1,628 |            |   | $          | 4,725 |            |   | $           |  |  |   | $     | 4,420 |  |   | $     | 1,933 | 
|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 
|                              |                                   | $ | 1,628      |       |            | $ | 4,725      |       |            | $ |            |   |  | $ | 4,420 |       |  | $ | 1,933 |      
|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 
|Year ending December 31, 2002 |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |      
|                              | Reserve for uncollectible revenue |   | $          | 1,933 |            |   | $          | 3,798 |            |   | $           |  |  |   | $     | 2,931 |  |   | $     | 2,800 | 
|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 
|                              |                                   | $ | 1,933      |       |            | $ | 3,798      |       |            | $ |            |   |  | $ | 2,931 |       |  | $ | 2,800 |      
|                              |                                   |   |            |       |            |   |            |       |            |   |             |   |  |   |       |       |  |   |       |       | 

51



---



##### 



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 dated as of
February 27, 2003.

|                                                                                                          
|----------------------------------------------------------------------------------------------------------
|The Corporate Executive Board Company
By: /s/ James J. McGonigleJames J. McGonigle
Chief Executive Officer

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

|                                                |  |                                                                                           |  |                  
|----------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | -----------------
|Signature                                       |  | Title                                                                                     |  | Date             
|                                                |  |                                                                                           |  |                  
|                                               
|/s/ James J. McGonigle
James J. McGonigle       |  | Chief Executive Officer and
Director, Chairman of the Board
(Principal Executive Officer) |  | February 27, 2003
|                                               
|/s/ Timothy R. Yost
Timothy R. Yost             |  | Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)    |  | February 27, 2003
|                                               
|/s/ Robert C. Hall
Robert C. Hall               |  | Director                                                                                  |  | February 27, 2003
|                                               
|/s/ Nancy J. Karch
Nancy J. Karch               |  | Director                                                                                  |  | February 27, 2003
|                                               
|/s/ David W. Kenny
David W. Kenny               |  | Director                                                                                  |  | February 27, 2003
|                                               
|/s/ Thomas L. Monahan III
Thomas L. Monahan III |  | Director                                                                                  |  | February 27, 2003
|                                               
|/s/ Harold L. Siebert
Harold L. Siebert         |  | Director                                                                                  |  | February 27, 2003

52



---



##### 



CERTIFICATIONS

I, James J. McGonigle, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of The Corporate Executive Board Company;                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:                                                                                                   



| | a) |  | designed such disclosure
controls and procedures to
ensure that material
information relating to the
registrant, including its
consolidated subsidiaries, is
made known to us by others
within those entities,
particularly during the
period in which this annual
report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness
of the registrants
disclosure controls and
procedures as of a date
within 90 days prior to the
filing date of this annual
report (the Evaluation
Date); and                                                                                                  
|
| | c) |  | presented in this annual
report our conclusions about
the effectiveness of the
disclosure controls and
procedures based on our
evaluation as of the
Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation,
to the registrants auditors and the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies
in the design or operation of
internal controls which could
adversely affect the
registrants ability to
record, process, summarize
and report financial data and
have identified for the
registrants auditors any
material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not
material, that involves
management or other employees
who have a significant role
in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this annual report whether
there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: February 21, 2003

|                                                                                                       
|-------------------------------------------------------------------------------------------------------
|/s/ James J. McGonigleJames J. McGonigle
Chairman of the Board of Directors and Chief
Executive Officer

53



---



##### 



I, Timothy R. Yost, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of The Corporate Executive Board Company;                                                                                                                                                                                                                               
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this annual report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:                                                                                                   



| | a) |  | designed such disclosure
controls and procedures to
ensure that material
information relating to the
registrant, including its
consolidated subsidiaries, is
made known to us by others
within those entities,
particularly during the
period in which this annual
report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness
of the registrants
disclosure controls and
procedures as of a date
within 90 days prior to the
filing date of this annual
report (the Evaluation
Date); and                                                                                                  
|
| | c) |  | presented in this annual
report our conclusions about
the effectiveness of the
disclosure controls and
procedures based on our
evaluation as of the
Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation,
to the registrants auditors and the audit committee of registrants board of directors (or persons
performing the equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies
in the design or operation of
internal controls which could
adversely affect the
registrants ability to
record, process, summarize
and report financial data and
have identified for the
registrants auditors any
material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not
material, that involves
management or other employees
who have a significant role
in the registrants internal
controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this annual report whether
there were significant changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material weaknesses.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: February 21, 2003

|                                                          
|----------------------------------------------------------
|/s/ Timothy R. YostTimothy R. Yost
Chief Financial Officer

54